SUNRICH TRADERS LTD AND ANOTHER v. KUMAR VASWANI AND OTHERS

HCA 139/2022

[2023] HKCFI 1559

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 13 OF 2022

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REASONS FOR DECISION

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1.  On 7 December 2022, Master Connie Lee dismissed the plaintiffs’ (“Ps” collectively, and “P1” and “P2” respectively) summons for summary judgment filed on 14 June 2022 (“the Order 14 Summons”) with costs to the defendants (“Ds” collectively, “D1”, “D2” and “D3” respectively).

2.  This is Ps’ appeal against the Master’s decision.  At the end of the hearing, I dismissed the appeal, with costs to Ds forthwith on a party and party basis.  Those costs be summarily assessed at HK$200,000.  These are my reasons for the decision.

3.  In the hearing before me, Ps are represented by Mr Joshua Chan, and Ds are represented by Mr Jose D’Almada Remedios.

4.  It is trite that an appeal from a master’s decision to a judge in chambers is a de novo hearing.  Subject to the restriction in Order 58 rule 1(5), the hearing before me is an actual rehearing as if the application came before me for the first time.^[1]

5.  In the hearing before me, Ps sought summary judgment in terms of the following:

(1)  As against D1, for the following sums (“the Debts”):

(a)  the balance of a running account (“Running Account”) in the total sum of HK$7,152,019.05; and

(b)  a personal loan (“Personal Loan”) with total outstanding sum of HK$890,591.88.

(2)  As against D2, for enforcement of a Guarantee and Indemnity dated 31 March 2016 (“Guarantee and Indemnity”) executed by D2 guaranteeing the Debts.

6.  Ps are no longer seeking summary judgment against D3.  Accordingly, for the purpose of the application for summary judgment before me, D3 is not material.

7.  At the beginning of the appeal hearing, I disallowed Ds to rely upon some defences based upon ss.18, 22 and 23 of the Money Lenders Ordinance (“the MLO”).  These points were raised for the first time by Mr Remedios in his written submissions dated 1 June 2023, ie just a few days before the appeal hearing.  In my view, the matters raised by Mr Remedios are not purely questions of law.  These matters involve both facts and law.  Even assuming that Ps have not complied with the sections in the MLO identified by Mr Remedios, I have to consider whether it would be inequitable to deprive Ps from having the judgment in all the circumstances.[2] By only raising these matters a few days before the appeal hearing, Ds have not given Ps reasonable time to adduce evidence to meet these points.  In my view, it would not be fair to Ps if Ds are allowed to rely upon these points in the appeal hearing.

A. The parties’ respective cases

A1. The parties

8.  Ps are companies used to carry on the family trading business led by Mr Jairam Gidwani (“Jairam”).  Both P1 and P2 are incorporated in Hong Kong.

9.  Mr Dinesh Gidwani (“Dino”) is Jairman’s son.  Mr Baby Shibu Daniel (“Shibu”) is the accountant of P1 and P2.

10.  D1 first met Dino in 1985 in a school in Hong Kong. They gradually became close friends because they shared the same cultural background. After D1 graduated from high school, D1 continued to maintain close contact with the Gidwani family.

11.  In or around 1996, D1 began running his own jewellery business as a sole proprietor, selling premium jewellery under the business name “KV Jewellery”.

12.  D1 married his wife in 2000.  Her name was originally Krishti Vaswani, but Ds’ case is that she changed her name to Reyna Vaswani by a deed poll in July 2015.

13.  D1 and his wife both attended Dino’s wedding in 2002, at which D1 was the best man.

14.  In 2006, D1 established another line of business (also as sole proprietor) under the trade name “Italian Steel Company” (“ISC”) which involved selling low price jewellery items made from stainless steel.

15.  D2 is owned by D1’s wife.  It is a SPV used to hold three properties in Hong Kong.

A2. The Business Arrangement

16.  Since 2008, the Gidwani family and D1 have engaged in business collaboration.  The undisputed aspects of their arrangement (“Business Arrangement”) are as follows:

(1)  The arrangement arose after both sides realised that they could potentially provide the other with commercial benefits. D1 could source jewellery and other goods at low prices from his suppliers in Mainland China. The Gidwani family had (1) an established customer base, and (2) the financial capability to finance the business and offer credit terms.

(2)  The Gidwani family had customers who could be introduced to D1. 

(3)  D1 (trading as ISC) would be responsible for sourcing goods from the suppliers in Mainland China.

(4)  If a customer decided to proceed with a purchase order, ISC would request funds from P2.  P2 would then transfer the requested funds to ISC, and ISC would use such funds to pay the suppliers.

(5)  Upon delivery of the goods to storage, ISC would conduct quality control checks on the goods.

(6)  Thereafter, P2 would arrange for shipping of the goods to the customer.

(7)  P2 would then issue an invoice to the customer, and the customer would then make payment to P2’s bank account.

(8)  The purchase price paid by the customers to P2 (after deduction of the amounts advanced by P2 to ICS) would be entered as a credit in the Running Account.

(9)  In the event that customers complained about damaged or missing items, ISC would be responsible for delivery of the missing items or undamaged replacements. If this was not possible, P2 would reimburse the customer and issue a debit note to ISC for the relevant amount. The amount would be entered as a debit in the Running Account.

(10)  Upon completion of the transaction, P2 would issue a debit note covering (inter alia) its profit from the transaction.  The amount would be entered as a debit in the Running Account.

17.  The material differences between the parties regarding the Business Arrangement are as follows:

(1)  whether Ps paid business costs and expenses on behalf of ISC, and whether such amounts would be treated as debits in the Running Account; and

(2)  whether funds advanced by P2 to ICS above would be entered as debits in the Running Account and would be repayable if not set off against the purchase price paid by end-customers to P2.

18.  Ps’ case is that the answer to the two issues set out in the above are in the affirmative, and as of 31 March 2016, the total outstanding sum under the Running Account was HK$7,152,019.05, consisting of:

(1)  funds advanced to pay suppliers for goods delivered and other business expenses pursuant to the “Italian Steel Agreement” as pleaded in [6] of the Amended Statement of Claim in the total amount of HK$5,802,236.97 (“the HK$5.8 million”); and

(2)  sums which D1 agreed to repay in respect of (a) claims by customers in respect of defective goods, and (b) sums which customers failed to pay to P2 pursuant to the “Goods Sales Agreement” as pleaded in [11] of the Amended Statement of Claim in the total amount of HK$1,349,782.08 (“the HK$1.3 million”).

Ps claim that D1 is liable to repay these amounts to them.

19.  Ps are in fact saying that ISC was conducting trading activities on its own account, which were financed by Ps.

20.  Ds’ case is that although the Business Arrangement existed, the exact relationship between the parties was not the one contended by Ps.  Put it simply, Ds’ case is that ISC was a mere service provide providing a service (sourcing goods from suppliers and checking the goods), and in return ISC would get a service charge or commission.

A3. The Personal Loan

21.  This is a claim by P1 against D1 and D2.

22.  It is P1’s case that on the following dates, P1 transferred a total of HK$1.6 million to D1 (“Personal Loan”):

Date	Amount
30 January 2012	HK$800,000
3 July 2012	HK$400,000
12 July 2012	HK$200,000
20 July 2012	HK$200,000

23.  P1’s case is that the outstanding balance of the Personal Loan is HK$890,591.88.  D1 is liable to repay the same to P1.  By virtue of the guarantee provided by D2 in the Guarantee and Indemnity, D2 is also liable to repay the sum to P1.

24.  There is no dispute that the aforesaid sums are personal loans to D1. The issue is the identity of the lender (“the Identity Issue”).  Ps’ case is that the lender is P1, while D1 says that the lender is Jairam.  There is also a dispute as to the correct amount of the outstanding sum of the Personal Loan.

A4. The Guarantee and Indemnity

25.  Ps’ case is by the Guarantee and Indemnity executed by D2, D2 has guaranteed the Debts owed by D1 to Ps.  D2 is therefore liable to repay the same to Ps under the Guarantee and Indemnity.

26.  Ds’ case is that the Guarantee and Indemnity is a forgery.  D2 has never executed the Guarantee and Indemnity.

B.  The principles

27.  The principles concerning summary judgment have been succinctly summarized by DHCJ Wilson Chan (as he then was) in Li Chuen Kwai v Po Lam Construction Development Limited[3]. In that case, the learned judge said:

“11. As far as the plaintiff’s claim is concerned:

(1) An application for summary judgment must be supported by an affidavit verifying the facts on which the claim is based [Order 14, rule 2(1), Rules of the High Court].

(2) The Statement of Claim must be good and complete in itself; any defect or omission in the Statement of Claim cannot be corrected or supplemented by the plaintiff’s affidavit. If the defect is one of substance, the application for summary judgment will be dismissed [see: Hong Kong Civil Procedure 2014 at Practice Note 14/1/5].

(3) This means that an Order 14 application has to proceed on the case as pleaded, and it is those facts (as pleaded) which have to be verified on affidavit.

(4) Where the assertions in the plaintiff’s affirmation constitute a material deviation from the plaintiff’s pleaded case, the plaintiff will have failed to verify his claim as pleaded, and summary judgment should not be granted [Lin Jan v Long Xiaobo, HCA 1516/2012 (Judgment dated 4/09/2013)].

(5) Equally, summary judgment will not be granted where the plaintiff’s affidavit evidence is materially different from and inherently inconsistent with his/her case in the Statement of Claim [see: Sin Yuk Hung v Sin Tung San, HCA 474/2013 (Judgment dated 18/12/2013)].

12. As far as the defendant’s defence is concerned:

(1) The defendant shoulders the burden to satisfy the court that he has a real or bona fide defence (ie that there are triable issues), or that there ought for some reason to be a trial of the plaintiff’s claim.

(2) However, a complete defence need not be shown. The defence set up need only show that there is a triable issue or question or that for some other reason there ought to be a trial; and leave to defend ought to be given unless there is clearly no defence in law and no possibility of a real defence on the question of fact.

(3) Although the mere assertion in an affidavit does not, ipso facto, provide leave to defend, the court will not embark upon a mini trial of the action on paper and leave to defend will be granted unless the defence raised is so incredible or so contradicted by contemporaneous documents or circumstances that it becomes clear that the defence is a sham.

(4) The test is not whether the defendant’s assertions are to be believed, rather it is whether those assertions are believable, ie capable of being believed. If so, the defendant must have leave to defend.

(5) Whether the defendant’s assertions are believable is a question that should be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as either undisputed or beyond reasonable dispute.

13. Where there are unexplained features in both the claim and the defence, no tentative assessment of strengths should be made, but unconditional leave to defend should be given [see: Hong Kong Civil Procedure 2014 at Practice Note 14/4/9].

14. Further, where (as here) an oral contract is sued on and its terms are in dispute, summary judgment must be refused unless the plaintiff can satisfy the court either that on the defendant’s version he is entitled to judgment, or that the defendant’s version is not truthful or capable of belief [see: Hong Kong Civil Procedure 2014 at Practice Note 14/4/11].”

28.  Time and again, the court has emphasized that summary judgment must only be given on the case pleaded by the plaintiff.

(1)  Nearly 30 years ago, in Super Electric Motor Ltd v Pai Chung Ying[4], the Court of Appeal has already said:

“Summary judgment, if it is to be given, is to be given on the pleaded case.”

(2)  Recently, in Tan Khay Chuen v Ko Ping Shun Benson[5], the Court of Appeal restated the same principle:

“It is trite that in an application for summary judgment, the statement of claim must be good and complete in itself; any defect or omission cannot be corrected or supplemented by the affidavit supporting the application……”

(3)  See also Full Ying Holdings Ltd v Active Access Holdings Ltd[6], per Cheng J at [16].

C. Discussion

29.  In my view, Ps’ application for summary judgment ought to be refused, and Ps’ appeal must be dismissed.

C1. Guarantee and Indemnity – whether a forgery?

30.  Ds say that the Guarantee and Indemnity is a forgery (“the Forgery Defence”).  No doubt, this is a very serious allegation.  Having examined the evidence, I come to the conclusion that the Forgery Defence is a triable issue, and ought to be investigated in the trial.

31.  The Guarantee and Indemnity is an important document in this case.  Recital (A) reads as follows:

“(A) By Mutual agreement the Lender [ie P1] has granted to

(1) [ISC] for the purposes of business amounts from time to time. Interest was calculated at 6% per annum on clients. The total outstanding amount including interest as at 31/03/2016 amounts to HKD 5,802,236.97.

(2) The Outstanding to be received from the client’s overdue payments amounts to HKD 1,349,782.08 as at 31/03/2016. This being, the actual value without calculation of interest. The Lender reserves the right to charge overdue payments at its discretion.

(3) [D1] personal loan of HKD 1,600,000 in 2012 and the amount outstanding as at 31/03/2016 with interest at 6% per annum, is HKD 1,195,991.88.”

32.  Clauses 2.2 and 5.1 of the Guarantee and Indemnity provide for a guarantee by D2 of all amounts due and owing to P1 from D1 with interest at the rate of 6% per annum on all sums demanded under the Guarantee and Indemnity from the date of the demand under the Guarantee and Indemnity.

33.  Ps’ case is that D1 and D1’s wife signed the Guarantee and Indemnity on behalf of D2, and caused D2’s company chop to be affixed on the Guarantee and Indemnity.  Ds’ case is that D1 and D2 have never signed the Guarantee and Indemnity, and they have not affixed D2’s company chop on the document.

34.  On its face, the Guarantee and Indemnity has provided clear support to Ps’ case.  This document is genuine or not would have a significant impact on the outcome of this case.

35.  Based upon the evidence before me, I am of the view that the Forgery Defence is a triable issue.

36.  First, it is triable whether D1 and D1’s wife did execute the Guarantee and Indemnity on 31 March 2016.

(1)  Initially, it is Ps’ case that the Guarantee and Indemnity was signed by D1 and D1’s wife on behalf of D2 on 31 March 2016.  It was also signed by Dino on behalf of P1 on the same day.

(a)  At the beginning of the Guarantee and Indemnity, it is stated:

“THE GUARANTEE AND INDEMNITY is Made the 31^st day of March 2016.” (Emphasis added)

(b)  At the bottom of page immediately preceding the execution page, it is stated:

“IN Witness whereof the Guarantor [ie D2] has executed this as a deed by applying his seal hereunder the date first above written.” (Emphasis added)

(c)  According to Shibu, D1 and D1’s wife signed the Guarantee and Indemnity in Ps’ office in Tsim Sha Tsui.  In the 1^st Affirmation of Shibu, Shibu said:

“12.   …… I witnessed [D1]’s and [D1’s wife]’s signatures on the Guarantee and Indemnity.  As [Dino] was not present when [D1 and D1’s wife] executed the document, he executed the Guarantee and Indemnity on behalf of [P1] and [P2] at a later time on the same day after he returned to the office.  [Dino]’s signature was witnessed by Ms Jyothi Lakshmi Sathish [“Jyothi”].” (Emphasis added)

(d)  At [10] of his 1^st Affirmation, Dino also confirmed that he signed the Guarantee and Indemnity in Ps’ office “on the same day”.

(2)  In support of the Forgery Defence, D1 has adduced evidence showing that according to some activities published by Dino in the internet, Dino could not be in Hong Kong on 31 March 2016.  In response to this, Shibu in his 3^rd Affirmation produced the Travel Records of Dino issued by the Immigration Department (“the Travel Records”).  As shown in the Travel Records, Dino was not in Hong from 28 March 2016 to 11 April 2016.  He was in Hong Kong thereafter until 1 May 2016.

(3)  The Travel Records in fact have confirmed that Dino was not in Hong Kong on 31 March 2016.  Facing the Travel Records, at [9] of his 2^nd Affirmation, Dino said that “the Guarantee and Indemnity was more likely signed shortly after 31 March 2016 and fell within one of the days between 11 April 2016 (ie shortly after 31 March 2016) and 1 May 2016”.

(4)  Shibu and Dino have been forced to reconsider the evidence initially given by them, after being confronted by the evidence produced by D1, showing that Dino in fact was not in Hong Kong on 31 March 2016.  The new version put forward by Dino, ie the Guarantee and Indemnity was signed by him at a time between 11 April 2016 and 1 May 2016, is not supported by any documentary evidence.  It is Ps’ case that Dino’s signature on the Guarantee and Indemnity was witnessed by Jyothi. However, Ps has not filed any affirmation of Jyothi to clarify when Dino put his signature on the Guarantee and Indemnity.

(5)  In fact, on 6 April 2023, Ds’ solicitors have written to Jyothi, requesting Jyothi to provide a written statement setting out her version of events in relation to the execution of the Guarantee and Indemnity.  On 18 April 2023, Ps’ solicitors, acting on behalf of Jyothi, replied and said that Jyothi did not want to be contacted personally by D1, D1’s wife or Ds’ solicitors.  Any correspondence to Jyothi should be addressed to Ps’ solicitors.  In the circumstances, Ps are fully aware that Ds are requesting for evidence from Jyothi explaining the matters relating to the execution of the Guarantee and Indemnity.  However, no such evidence has been provided.

(6)  The version put forward in [12] of Shibu’s 1^st Affirmation and confirmed in [10] of Dino’s 1^st Affirmation, ie the Guarantee and Indemnity was signed by D1, D1’s wife and Dino on the 31 March 2016, cannot be easily brushed aside.  As to whether the Guarantee and Indemnity has indeed been signed by D1 and D1’s wife on 31 March 2016 or at any other time, this is a matter to be investigated in the trial.

37.  Second, as per Recital (D) of the Guarantee and Indemnity, D2 has to create a second mortgage over a property owned by D2 (“the Second Mortgage”) for securing the debts owed by D1 “in a period of one year from the date of this Guarantee”.  As a matter of fact, the Second Mortgage has never been executed.  D2’s failure to execute the Second Mortgage is one of the claims made by P1 in these proceedings.  However, there is no evidence showing that P1 have taken any action to demand D2 to execute the Second Mortgage prior to the commencement of these proceedings.

38.  In accordance with the Guarantee and Indemnity, the Second Mortgage should be executed by D2 on or before 31 March 2017.  Naturally, if the Guarantee and Indemnity is a genuine commercial document, there should be some reminders, or even some demands, from P1 before 31 March 2017, urging D2 to execute the Second Mortgage by the deadline.  The total absence of any demand from P1 in relation to the Second Mortgage before 31 March 2017 would lend support to the Forgery Defence.  Mr Chan submitted that since this point had not been raised by Ds but was only raised by the court in the appeal hearing, Ps did not have the opportunity to put in evidence to meet this point, and hence the point should not be taken as a matter against Ps.  With respect, I am unable to accept this submission.  By putting in evidence to show that Dino was not in Hong Kong on 31 March 2016 in support of the Forgery Defence (see [36] above), Ds had put the genuineness of the Guarantee and Indemnity in issue.  In response to Ds’ challenge, if Ps had any evidence which might show that the Forgery Defence would be unbelievable, Ps should put in that evidence.  In my view, evidence showing that P1 had reminded or demanded D2 to execute the Second Mortgage at any time before 31 March 2017 (if any) would be evidence of that kind.

39.  Third, the Guarantee and Indemnity is a serious legal document. Naturally the parties would have some discussion on the terms of the document before execution.  Ps’ evidence concerning the discussion is that (a) the Guarantee and Indemnity was drawn up and provided in draft to D1 at Ps’ office in late March 2016[7]; (b) Jairam and Dino discussed the draft Guarantee and Indemnity with D1.  After D1 confirmed his agreement to the contents of the document, the Guarantee and Indemnity was arranged to be signed on or about 31 March 2016.[8] I am of the view that whether Ps’ case is true is a matter to be further explored in the trial.

(1)  The Guarantee and Indemnity would not be there out of the blue.  Naturally, the Gidwani family on the one hand, and D1 and D1’s wife on the other hand, would have some preliminary discussion, and after having some consensus, the Gidwani family would then proceed to prepare the draft Guarantee and Indemnity.  In particular, in respect the various amounts as at 31 March 2016 stated in Recital (A) of the Guarantee and Indemnity, ie the amount owed by D1 under the Italian Steel Agreement, the amount owed by D1 under the Goods Sales Agreement, and the outstanding amount of the Personal Loan, there must be some preliminary discussion and consensus on these figures before proceeding to prepare the draft Guarantee and Indemnity.  However, there is no evidence showing any preliminary discussion leading to the Guarantee and Indemnity.

(2)  According to Ps’ case, the discussion concerning the draft Guarantee and Indemnity took place in late March 2016.  In the discussion, it was agreed that the Guarantee and Indemnity would be signed on or about 31 March 2016.  It is worth to note that:

(a)  In respect of the time for signing a document, naturally the parties would agree on a specific date and a specific time.  If no specific time has been agreed, the parties would have some further discussion to fix the time for signing the document. Ps’ case is that Jairam, Dino and D1 agreed that the Guarantee and Indemnity would be signed on or before 31 March 2016, and then nothing further.  It is difficult to understand why there was no further discussion to fix the exact date and time for the execution of the Guarantee and Indemnity.

(b)  By now, there is indisputable evidence showing that Dino was not in Hong Kong from 28 March 2016 to 11 April 2016.  If prior to the discussion on the draft Guarantee and Indemnity in late March 2016, Dino had already planned to leave Hong Kong on 28 March 2016 and stay outside for a period of time, Jairam, Dino and D1 would not arrange to execute the Guarantee and Indemnity on or about 31 March 2016.  If at the time of the discussion, Dino did not have any plan to go out, but subsequently Dino was suddenly required to leave Hong Kong on 28 March 2016 for a while, naturally there would be some further discussion between the parties to re-fix the execution date of the Guarantee and Indemnity.   However, there is no evidence showing that the parties have ever had any discussion concerning re-fixing the execution date.

40.  Ps claim that due to a change to Ps’ computer and document server system in or around October 2018, Ps have lost access to certain documents and emails stored in the previous server which included most of the electronic communication documentation relevant to these proceedings.  In my view, this explanation cannot be taken on its face value.  Whether the assertion is true should be investigated at the trial.

41.  With all the aforesaid in mind, I come to the conclusion that the Forgery Defence is a triable issue.  While the Forgery Defence is triable, the Guarantee and Indemnity cannot be a document in support of Ps’ application for summary judgment, for the genuineness of the document is subject to further investigations.  On the other hand, the fact that the Forgery Defence is triable would have an impact on the overall assessment of the evidence before the court in this application for summary judgment.  Simply put, if the evidence given by Shibu, Jairam and Dino in their respective affirmations concerning the genuineness of the Guarantee and Indemnity is found to be untrue at the trial, this would have an adverse impact on the credibility of Ps’ case as a whole.  In considering whether Ds have shown any arguable defence in this hearing, this point would need to be borne in mind.

42.  For avoidance of doubt, as to whether the Guarantee and Indemnity is really a forgery as alleged by Ds, I have no final view on this issue at this stage.  After all, there should be no mini-trial on papers.  All I say is that the Forgery Defence raised by Ds is triable and cannot be summarily dismissed at this stage.  The matter has to be investigated at the trial.

C2.  Italian Steel Agreement

43.  Ps’ claim for the HK$5.8 million is based upon the Italian Steel Agreement pleaded by Ps.

(1)  In the Amended Statement of Claim, it is pleaded:

“6. By an agreement evidenced in writing and/or formed in the course of conduct and/or concluded through oral discussions commencing in or around May 2008, [P1] and/or [P2] (on behalf of [P1]) agreed to advance funds to pay [D1]’s suppliers for goods delivered and other business expenses, and [D1], trading as Italian Steel Company (the “Italian Steel Agreement”) agreed to repay to [P1] and/or [P2] the funds advanced plus a percentage margin to [P1] and/or [P2] interest at 6% per annum.

7. Pursuant to the Italian Steel Agreement from around May 2008 onwards:

7.1. [P2], on instructions from [P1], advanced funds in some cases to [D1] and/or [D3] for the purpose of paying [D1]’s suppliers, or for other business expenses for the benefit of [D1] and in other cases to [D1]’s suppliers directly;

7.2. [D1] repaid some of those funds to [P2]; and

7.3. The parties maintained a running account between them.

8.  By signing the Guarantee and Indemnity …… [D1] acknowledged that he was indebted to [P1] and/or [P2] for [the HK$5.3 million] under the Italian Steel Agreement as at 31 March 2016.”

(2)  In the prayer in the Amended Statement of Claim, it is stated:

“WHEREOF [P1] AND/OR [P2] CLAIM

(D) AGAINST [D1] AND/OR [D2]:

(6) [the HK$5.8 million] ……” (Emphasis added)

(3) In Ps’ Further and Better Particulars (“the FBP”), it is stated:

“ANSWER TO REQUEST 1

The Italian Steel Agreement was not a written agreement. At the outset of the relationship between [Ps] and [D1] in or around May 2008, the Italian Steel Agreement originated as an oral agreement formed between [Jairam] on behalf of [Ps] and [D1]. The Italian Steel Agreement was then further developed throughout the course of conduct between the parties. The Italian Steel Agreement is partially evidenced in writing in the Guarantee and Indemnity, and other documentations that [Ps] no longer have access to.

……

ANSWER TO REQUEST 2

[P1] and/or [P2] entered into the Italian Steel Agreement.” (Emphasis added)

44.  According to Ps’ pleadings, Ps’ case concerning the Italian Steel Agreement is as follows:

(1)  The Italian Steel Agreement was an oral agreement between Jairam on behalf of Ps on the one hand and D1 on the other hand. That oral agreement was concluded in around May 2008.

(2)  Pursuant to that oral agreement, the matters stated in [7] of the Amended Statement of Claim had been carried out.

(3)  After May 2008, the Italian Steel Agreement “was then further developed throughout the course of the conduct between the parties”.  In my view, the fair reading of this sentence is that there has been development in the Italian Steel Agreement after May 2008.  In other words, there have/has been subsequent developed version(s) of the Italian Steel Agreement.  As to what is/are the subsequent developed version(s), and when this/these subsequent version(s) became effective, all these have not been made clear in Ps’ pleaded case.

(4)  According to Ps’ pleaded case, the version of the Italian Steel Agreement as stated in [6] of the Amended Statement of Claim may well have been superseded by some subsequent developed version(s).

45.  Further, the Italian Steel Agreement is now being relied upon as the basis for seeking judgment against D1 for the HK$5.8 million.  That being the case, it must be made clear in Ps’ pleaded case, who are the parties to the Italian Steel Agreement.  Ps have pleaded that P1 and/or P2 is/are parties to the Italian Steel Agreement, and P1 and/or P2 is/are claiming for the HK$5.8 million.  With respect, this is embarrassing and problematic.  Obviously, if the court is prepared to give judgment, the court has to specify exactly which plaintiff would get the judgment of the HK$5.8 million.  The court certainly cannot order D1 to pay the HK$5.8 million to P1 and/or P2.  The lack of preciseness on the parties to the Italian Steel Agreement in Ps’ pleaded case shows that the agreement as pleaded by Ps lacks certainty.  The court cannot grant summary judgment based upon an agreement with no sufficient certainty.

46.  For the reasons above, I am of the view that in relation to the Italian Steel Agreement, Ps’ pleadings are not in order.  Further, there is no admission or concession in Ds’ case by which Ps would be entitled to have the HK$5.8 million.  For these reasons, Ps’ application for summary judgment on the HK$5.8 million must be refused.

C3.  Goods Sales Agreement

47.  Ps’ claim for the HK$1.3 million is based upon the Goods Sales Agreement pleaded by Ps.

(1)  In the Amended Statement of Claim, it is pleaded: 

“11.  By an agreement evidenced in writing and/or formed in the course of conduct and/or concluded through oral discussions in or around May 2008, [P1] and/or [P2] (on behalf of [P1]) agreed with [D1] regarding the business model between [P1] and/or [P2] and [D1]/ISC. Under the business model, D1/ISC was responsible for (i) sourcing and/or production of goods for sale by [ISC], (ii) determining the price of the goods to be sold to the customers of [ISC] and (iii) conducting quality control checks on the goods to be sold to the customers of [ISC] to ensure the goods met the contractual standards and specifications.  [P2], on behalf of [P1], was responsible for paying for the goods sourced or produced by [D1]/ISC for the customers of [ISC] as pleaded in paragraph 6 above.  [P2], under the instructions of [D1], would issue invoices to the customers of [ISC] under the letterhead of [P2], and assist with shipping for selling the goods to the customers of [ISC] if necessary. [D1] agreed with [P1] and/or [P2] that [P1] and/or [P2] would have a right of recourse against [D1] in respect of (i) any claims by customers in respect of such goods due to [D1]/ISC’s failure to deliver goods which complied with the relevant contractual standards and specifications; and (ii) any sums that the customers of [ISC] failed to pay into [P2]’s bank account under invoices issued by [P2] under the instructions of [D1]/ISC (the “Goods Sales Agreement”).

12.  As at 31 March 2016, [D1] owed and had failed to pay [P1] and/or [P2] [the HK$1.3 million] in respect of goods sold to customers of [ISC] with assistance of [P1] and/or [P2] pursuant to the Goods Sales Agreement.

13. By signing the Guarantee and Indemnity …… [D1] acknowledged that he was indebted to [P1] and/or [P2] for [the HK$1.3 million] under the Goods Sales Agreement as at 31 March 2016.  No further payments were made by [D1] in respect of the Goods Sales Agreement after 31 March 2016.”

(2)  In the prayer in the Amended Statement of Claim, it is stated:

“WHEREOF [P1] AND/OR [P2] CLAIM

(D) AGAINST [D1] AND/OR [D2]:

(6) …… [the HK1.3 million]” (Emphasis added)

(3) In the FBP, it is stated:

“ANSWER TO REQUEST 18

The Goods Sales Agreement was not a written agreement. At the outset of the relationship between [Ps] and [D1] in or around May 2008, the Goods Sales Agreement originated as an oral agreement formed between [Jairam] on behalf of [Ps] and [D1]. The Goods Sales Agreement was then further developed throughout the course of conduct between the parties. The Goods Sales Agreement is partially evidenced in writing in the Guarantee and Indemnity, and other documentations that the Plaintiffs no longer have access to.

……

ANSWER TO REQUEST 19

[P1] and/or [P2] entered into the Goods Sales Agreement.” (Emphasis added)

48.  The points concerning the Italian Steel Agreement as stated in the above also apply to the Goods Sales Agreement.  For the same reasons, I am of the view that Ps should not be given summary judgment on the HK$1.3 million.

C4. Personal Loan

49.  As said in the above, the Forgery Defence is triable.   Accordingly, P1 cannot rely upon the Guarantee and Indemnity in support of its claim for the Personal Loan.  Since P1’s claim against D2 is based upon the Guarantee and Indemnity, P1 cannot have summary judgment against D2 on the Personal Loan in any event.

50.  As to the claim against D1, I am of the view that the Identity Issue is a triable issue.  P1 is saying that P1 itself is the true lender, while D1 is saying that the true lender is Jairam himself, not P1.

51.  P1 have produced documentary evidence to show the following:

(a)  Bank documents showing that the transfers on 30 January 2012, 3 July 2012 and 20 July 2012 were transferred from P1’s account to D1.

(b)  D1 has made some repayments by some cheques.  In respect of the repayments made by cheques, on each cheque, the payee was P1.

(c)  D1 has also made some repayments by cash to Jairam.  P1’ case is that Jairam would deposit the cash into P1’s account.  P1 has produced the relevant bank document to show one of repayments made by D1 in cash had been deposited into P1’s account.

(d)  There are records in P1’s ledgers (“the Ledgers”) showing that these sums are loans from P1 to D1.

52.  D1, at [58] of his 1^st Affirmation, said that in late 2011, he needed funds to renovate a property, which was purchased in mid-2011.  He therefore asked Jairam to provide him a loan for renovation purposes. Jairam agreed to provide him a “friends and family loan” in the sum of HK$1.6 million.  Jairam had never mentioned that the loan was from P1.  D1’s understanding was that the loan was a personal matter between Jairam and himself.  D1 also said that although the payee on the repayment cheques was P1, he did so in accordance with Jairam’s instruction.

53.  In my view, D1’s version is believable.

(1)  As said in the above, the fact that the Forgery Defence is triable has an impact on the overall credibility of the witnesses in this case.

(2)  There was a close relationship between the Gidwani family and D1 in 2011.

(3)  D1 said that the Personal Loan was provided to him to facilitate the renovation of his new property.  This is not disputed by Ps.  In other words, the Personal Loan is not related to the business between Ps and D1 at all, and is solely for D1’s personal purpose.

(4)  Although P1 have produced some documents in support of its case, as submitted by Mr Remedios, what is missing is the audited accounts of P1.  As a company limited incorporated in Hong Kong, P1 must have audited accounts.  Without seeing the audited accounts, one would not know the true nature of the money from P1 to D1, the true nature of the sums represented by the cheques drawn by D1 and deposited into P1’s account, and the true nature of the money deposited by Jairam into P1’s account.  For the sake of discussion, the money from P1 to D1 can be personal drawings by Jairam from P1, and the money from D1 (either by cheque or by cash) to P1 can be repayment of those personal drawings by Jairam to P1.  The documents produced by P1 (save and except the Ledgers) does not necessarily contradict D1’s case.

(5)  In respect of the Ledgers, those ledgers are the printout of a document stored in a computer, and that document was created on 28 March 2022, ie after the commencement of these proceedings on 31 January 2022.  Since Shibu is the accountant of P1, Shibu would be the one preparing the Ledgers.  The sources of information of the matters stated in the Ledgers would be some vouchers.  In respect of the items in support of the P1’s case in the Ledgers, the relevant vouchers have not been produced.  In the absence of the source documents (ie the relevant vouchers), and Shibu’s credibility would need to be tested in the trial (by reason that the Forgery Defence would be investigated at the trial), the Ledgers cannot be taken as indisputable documentary evidence contradicting D1’s case.

(6)  With all the aforesaid in mind, in respect of the Personal Loan, I am of the view that D1’s version is believable.

54.  Since the Identity Issue is triable, there should be no summary judgment on P1’s claim for the Personal Loan.

55.  Mr Chan has put forward a fallback position in his oral submissions.  Mr Chan submitted that if P1 could not succeed in having summary judgment on the Personal Loan, P1 asked that D1 should only be given conditional leave to defend, and the condition would be requiring D1 to pay the outstanding balance of the Personal Loan into court.  With respect, I am unable to accept this alternative position.  Since I am of the view that D1 has shown a triable issue on the true identity of the lender, I would dismiss the appeal and affirm the Master’s decision.

C5.  Other matters

56.  Ps also rely on two demand letters sent out by P1’s then solicitors in 2017 (“the 2017 Demand Letters”).   On 16 May 2017, the solicitors issued two letters to (1) D1 and D1’s wife, and (2) D2, demanding repayment of the sums owed to P1.  In the letter to D1 and D1’s wife, it is stated that:

“On 31^st March 2016, [D2] had executed [the Guarantee and Indemnity] in favour of [P1] as security for the said loan(s). Pursuant to [the Guarantee and Indemnity] entered into between [D2] as the guarantor and [P1] as the lender, it was acknowledged that you and [ISC] were indebted to [P1] for the following sums……”

57.  It is not in dispute that D1 received and read the 2017 Demand Letters.

58.  Ds’ case is that after receiving the 2017 Demand Letters, D1 had oral discussions with Jairam and Shibu concerning the said demand letters on 20 and 22 May 2017 respectively.  He was told by Jairam that he should discuss the matter with Shibu.  D1 spoke to Shibu.  Shibu told D1 that Jairam was issuing demand letters to the people owing him money, and Jairam was just trying to threaten them.  Shibu further told D1 not to worry about the 2017 Demand Letters, and D1 could just ignore them.  Since no further action was taken by the Gidwani family, D1 took no further action in respect of the 2017 Demand Letters.  D1 said that he continued to repay the Personal Loan to Jairam, for it was his personal obligation to do so.

59.  Mr Chan submitted that after receiving the 2017 Demand Letters, D1 did not suggest that he raised any dispute concerning the outstanding balance under the Running Account, any allegation of forgery, or any dispute over the identity of the lender of the Personal Loan during these two meetings.  D1 had never suggested that he was a mere service provider who did not owe any debts to P1 as alleged.  Instead, D1 repaid more than HK$300,000 which was due under the Personal Loan.  All these show that the matters stated in the 2017 Letters are true.

60.  With respect, I am unable to agree with Mr Chan.  As a matter of fact, after the 2017 Demand Letters, the next demand letter from P1 to D1 was issued on or before 24 September 2021.  In other words, after the 2017 Demand Letters, there had not been any demand from the Gidwani family for a few years.  In view of this, D1’s explanation as to why there was no response from him in respect of the matters in the 2017 Demand Letters is believable.  As to the repayments of the Personal Loan made by D1 after the 2017 Demand Letters, D1’s explanation is also believable.  In my view, the fact that D1 had not replied to the 2017 Demand Letters cannot be said as conclusively indicating the truthfulness of the matters stated therein.

C6.  Costs

61.  Costs should follow the event.  Those costs should be paid by Ps to Ds forthwith.

62.  Mr Remedios submitted that indemnity costs should be ordered against Ps, for Ps’ appeal is unmeritorious.  Further, before Ps taking out the Order 14 Summons, Ds have already filed and served the Defence.  In view of the matters raised in the Defence, the Order 14 Summons should not be taken out at all.

63.  With respect, I am of the view that the matters submitted by Mr Remedios could not sufficiently justify indemnity costs.  It is true that, in my judgment, there is no merit in Ps’ appeal.  That is why the appeal is dismissed.  It is also true that before Ps taking out the Order 14 Summons, Ds have already filed and served the Defence.  That is why the Master ordered that the Order 14 Summons be dismissed.  I agree with the Master and affirmed her decision.  I am also of the view that costs of the appeal should be paid by Ps to Ds forthwith in the circumstances.  However, adding all these together, without anything more, would not be sufficient to demonstrate “special or unusual feature”, taking this case out of the norm and justifying indemnity costs.[9]

64.  Having considered Ds’ bill of costs and the parties’ respective submissions on the said bill, taking a broad brush approach, I summarily assessed the costs payable by Ps to Ds at HK$200,000.

D.  Conclusion

65.  For the reasons above, I dismissed the plaintiffs’ appeal with costs forthwith, on a party and party basis.  I thank counsel for the helpful assistance provided to the court.