CLASSIC STAR INVESTMENTS LTD v. CHINA LAND HOLDINGS INTERNATIONAL LTD AND OTHERS

HCA 1917/2015
[2019] HKCFI 141

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1917 OF 2015

_________________

_________________

_________________

J U D G M E N T

_________________

I.   THE APPEAL

1.  This is the appeal by the defendants against the Order of Master M Wong dated 1 August 2016 granting summary judgment to the plaintiff in relation to sums owed by each of the defendants to the plaintiff.

II.   THE CLAIM AND THE BACKGROUND FACTS

2.  The respective sums represent debts owed to the plaintiff by the 1^st defendant for the outstanding principal sum of HK$19,400,000 plus interest pursuant to a loan agreement dated 30 November 2012 (“the Loan Agreement”),  by the 2^nd defendant who agreed to guarantee the repayment of 45% of the loan, and the 3^rd defendant who agreed to guarantee the repayment of 55% of the loan, pursuant to two Deeds of Guarantee both dated the same date as the Loan Agreement.

3.  The Loan Agreement was originally for the advancement of a loan in the sum of $24,800,000 to fund the rental deposit payable under the lease of the retail premises for the purpose of the investment project between the plaintiff and the 1^st defendant.   By a Supplemental Loan Agreement dated September 2013, time for repayment of the loan was extended, such that the last of the 5 instalments was to be due on 5 June 2015.

4.  On 23 April 2014, the plaintiff, the 1^st defendant and its Mainland subsidiary China Land Shanghai entered into a Deed of Settlement which had the effect of unwinding the investment project.

5.  Clauses 3 and 5 of the Deed of Settlement provided that the Loan Settlement Amount (defined as $24,800.000 plus interest) was to be paid on or before 16 June 2014 in full and final discharge of all amounts due and under the Loan Agreement.  Clause 7 thereof provides that nothing should affect or prejudice the plaintiff’s rights under the Loan Agreement or the two Deeds of Guarantee until the Loan Settlement Amount was received in full.

6.  Clauses 9 of the Deed of Settlement also provided for Transfer Agreements in the forms annexed to the Deed to be executed immediately following the execution of the Deed of Settlement for the transfer of the 49% interest in the shareholding held by the plaintiff in the Project Company and the Management Company.

7.  Clause 10 of the Deed of Settlement Agreement provides that subject to all the Conditions Precedent as set out in the Transfer Agreements being fulfilled by 23 April 2014 (or such other dates if any as set out therein), the 1^st defendant would pay to the plaintiff the Transfer Price and Reimbursement Amount as defined therein on or before 30 April 2014.

8.  Clause 2 of both the Transfer Agreements provide that transfer of the plaintiff’s shareholding in the Project Company and the Management Company to the 1^st defendant should take place only upon the Conditions Precedent being fulfilled, unless the transferee waives the requirements. The Conditions Precedent stipulates the plaintiff will have to have obtained the resolution of the board of directors of the Company the shares of which are being transferred and the authorisation in writing of the signatory to the Transfer Agreements.

9.  All the Conditions Precedent under the Transfer Agreements were satisfied by the date of 23 April 2014, and the Transfer Price and Reimbursement Amount as defined under the Transfer Agreements became payable by 30 April 2014 under Clause 10 of the Settlement Agreement.  The 1^st defendant however requested for a deferment of payment till the end of May 2014, while promising a sum of HK$3,000,000 to be paid within a few days after 29 April 2014.  For the extra time to pay the outstanding Transfer Price and Reimbursement Amount, the 1^st defendant offered to pay default interest at 20% per annum.  The plaintiff agreed.

10.  Clause 13 of the Deed of Settlement provided that the Deed of Settlement would terminate and cease to have any effect if the plaintiff failed to receive the entire sums of the Loan Settlement Amount, the Transfer Price and the Reimbursement Amount together with any accrued interest on or before 16 June 2014.  Clause 14 provides that the Termination of the Deed of Settlement does not affect any previously accrued obligations or rights of the parties.

11.  By 16 June 2014, only a partial payment of HK$2,000,000 towards the Transfer Price had been paid.  The Reimbursement Amount and default interest remained outstanding.  No part of the Loan Settlement Amount was repaid by 16 June 2014.  The Deed of Settlement was therefore terminated by operation of its Clause 13.   Written demands were made of the outstanding sums against the defendants respectively.

12.  Under cover of a letter dated 21 November 2014, the 1^st defendant made payment by way of 3 cheques, and instructed the plaintiff to apply two of them towards satisfaction of the Transfer Price and the Reimbursement Amount and interest at the default rate.   The third cheque was instructed to be applied towards partial repayment of the Loan principal, which had the effect of reducing the outstanding Loan principal to HK$19,400,000. This sum together with interests calculated at the agreed rates remained outstanding at the date of the writ.

13.  In the meantime, the 1^st defendant appeared to have taken further steps to source for funds to pay the plaintiff under the outstanding loans.  By an email of 23 December 2014, the 1^st defendant requested the plaintiff to execute documents giving up its right of first refusal to purchase the shares in order to facilitate the transfer of the 51% shareholding of the two companies held in its own name to a third party.  The intended transfer was said to be for the purpose of securing funding from a lender to enable the 1^st defendant to repay the outstanding loans to the plaintiff.  The plaintiff agreed to oblige, while reminding the 1^st defendant that it had only agreed to do so on the express assurance of the 1^st defendant that the funding secured would be applied towards repaying the outstanding loans.  As matters transpired, no further part of the loans was repaid after the plaintiff entertained the 1^st defendant’s request.

14.  On 16 March 2015, the 1^st defendant requested the plaintiff to consider their proposal for the plaintiff to transfer all the 49% shareholding in the two companies to the 1^st defendant to enable the latter to arrange for a share pledge against a short term loan. Again, the 1^st defendant assured the plaintiff that the funds to be obtained would be applied towards “payment of all outstanding liabilities due” to the plaintiff.

15.  By an email dated 8 April 2015, the 1^st plaintiff declined to make the transfer, and requested for payment of all outstanding sums by the end of April failing which they would issue proceedings.   In response by email 15 April 2015, the 1^st defendant emphasized the need for the 49% shares as security for the funding but did not assert any right to have the shares transferred.  The 1^st defendant only stated that they had been looking for alternative source of funding and pleaded for more time to negotiate with the lender.

16.  After months of no further repayments being made, the 1^st defendant wrote again by email dated 18 August 2015, and apologised for the delay in paying the outstanding loans. They author of the email outlined the challenges  faced by the 1^st defendant in securing funds, and pleaded for understanding that any funds were not being withheld from the plaintiff, but they in fact had no funds in the past.  There was no mention of transfer of the 49% shareholding in the plaintiff’s hands.

17.  3 days after the above email on 21 August 2015, the writ in this action was issued.

18.  Following a course of correspondence between October and December 2015, the shares of the two companies representing 49% interest were transferred by the plaintiff “as a gesture of goodwill” to the 1^st defendant on 25 December 2015, expressly without prejudice to the plaintiff’s position that the 1^st defendant was not entitled to the transfers under the lapsed Deed of Settlement.

19.  There is no dispute of the 2^nd and 3^rd defendants’ continuing liability to indemnify the plaintiff for the respective sums claimed under the Personal Guarantee and Corporate Guarantee.

III.   THE DEFENDANTS’ CONTENTIONS

20.  In this appeal, the defendants contend that they have the following arguable defences on the merits -

   (1)   That as a matter of proper construction of the Deed of Settlement, the obligation to repay the principal loan did not arise until after the transfer of the shares of the two companies was effected.  Since the shares were only transferred well after the issuance of the writ, the action was premature. (“the Construction Defence”);

   (2)   The 1^st defendant has a claim of equitable set-off in respect of the monetary damages it has suffered by reason of the plaintiff’s failure to transfer the shares following full payment of the Transfer Price made by 21 November 2014 (“the Set-off Defence”).   At the time of the hearing of the appeal, this defence has yet to be raised in pleadings or affirmation, and there were no particulars of the claim put before court.

IV.   APPLICABLE PRINCIPLES IN SUMMARY JUDGMENT APPLICATIONS

21.  The principles governing summary judgment applications are well-established. These are summarized below –

   (1)   The defendant bears the burden of showing the existence of a triable issue or an arguable defence.

   (2)   A defendant responding to an application for summary judgment must condescend to particulars.  The mere assertion of a defence does not, ipso facto, justify leave to defend.  The defendant must satisfy the court that his evidence is capable of being believed and that on the basis of such evidence, there is a fair or reasonable probability of the defendant having a real or bona fide defence.  In assessing the credibility of the defendant’s factual case, while the court will not embark on a mini-trial on affidavit evidence, the court is not obliged to suspend its critical faculties and assume that the defendant’s evidence is accurate, if having regard to inherent plausibility, inconsistency with contemporaneous documents and other compelling evidence, the defence is not credible, the court must say so.  If the defendant’s defence is incredible in any material respect, it cannot be said that there is a fair or reasonable probability that the defendant has a real or bona fide defence: see Ontone Finance Co Ltd v Leung Siu Kee & Ors. HCA 408/2011 28/2/2012 (unrep) per DHCJ Lisa Wong SC (at §23).

 V.   ARGUMENTS AND ANALYSIS

(A)   The Construction Defence    

22.  I would first deal with the Construction Defence.  The defendants argue that the agreement under the Deed of Settlement must be looked at as a whole in construing its terms. In particular, they rely on the chronological order of the following obligations under the Deed of Settlement –

   (1)   Transfer Price was to be paid on 30 April 2014;

   (2)   The 49% shareholding was to be transferred by 5 June 2014;

   (3)   The Principal Loan would be due on 16 June 2014.

23.  The defendants argue that in view of the order of the deadlines set out above, it is observed that the date of repayment of the Principal Loan of 16 June 2014 was not referable to any event other than as a date subsequent to the deadline for the transfer of the shares.  It is argued that this arrangement is in line with the defendants’ contention that the transfer of the shares is to precede the repayment of the Principal Loan, such that the obligation to repay the Principal Loan does not even arise until the shares have been transferred. Based on this construction, the defendants argue that the cause of action had not accrued at the date of the Writ.  The defendants contend that the above construction constitutes at least an arguable defence to the plaintiff’s claim.

24.  The defendants further contend that it is a “practical object” of the Settlement Agreement that the 49% shareholding as a valuable asset be available to the 1^st defendant to enable the 1^st defendant to raise finance to repay the Principal Loan.  The defendants rely on the presence of evidence that the 1^st defendant did attempt to utilize the 49% shareholding and requested it to be transferred from the plaintiff in order to secure finance for the repayment of the Principal Loan (see §14 above).

25.  In oral submissions, the position of the plaintiff’s counsel was that under the Transfer Agreements, the shares were to be transferred within a reasonable time, say one month, after full payment under the Share Transfer Agreements, albeit nearly 7 months after the original deadline.  It would appear that in the absence of a clearly stipulated timing for transfer of the shares with sufficient margin for logistics to be complied with, the arrangement as envisaged in the Deed of Settlement and the Transfer Agreements might not even serve the purpose of the alleged object of security for a new loan to meet deadline for the payment of the outstanding loans.  The window of opportunity, purportedly intended for the 1^st defendant to secure a loan with the transferred shares, was only 11 days according to the timetable set out above.   It would be surprising, and indeed counter-productive to the purported intent to say the least, for the sequential arrangement, if intended, not to have been expressly correlated one step with the other, and the dates carefully set out to ensure a sufficient period of time for transfer, registration and pledge.

26.  On the other hand, the plaintiff contends that the express terms of the Deed of Settlement show that the repayment of the Principal Loan and the performance of the Transfer Agreement were two sets of separate and independent obligations.  They have different subject matters, and different considerations[1], different methods of performance and different deadlines[2].  Their respective consequences for default were different[3], and they have different methods of formal discharge of obligations[4].  The plaintiff points out that there is nothing in the terms of the Deed of Settlement that would suggest that the performance of one set of obligations was in any way dependent on the performance of the other.

27.  I note that the two sets of obligations are set out in two distinct sections of the Deed of Settlement under different headings.  They are both needed to achieve the unwinding of the joint venture project between the parties to achieve the plaintiff’s exit, ie the repayment of loans borrowed in the sums pursuant to the settlement agreement, and the buying back of the 49% shareholding interest in the two companies.

28.  Clause 9 stipulates that the Transfer Agreement in the annexed forms were to be immediately entered into following the execution of the Deed of Settlement, which ensured the two sets of obligations were created to run parallel to each other, though each with its own mechanism and timeline.  Under the heading “Termination”, Clause 13 stipulates a deadline for the unwinding exercise to be completed failing which the agreement will automatically terminate while preserving accrued rights and obligations.

29.  Reading the Deed of Settlement as a whole, there is nothing that suggests that the exercise of buying back shares was contemplated or designed to enable the shares, upon successful transfer to the 1^st defendant, to be utilized as security for raising funds to repay the loans.  I note that the term “Conditions Precedent” was employed under the heading “Amended JV Agreement” in clause 10, and in the context of the Transfer Agreement.  Yet, no such comparable terms appear in the elaborately drafted provisions governing the repayment of the loans under this Deed of Settlement.

30.  The plaintiff points out that under the Deed of Settlement the loan was to be repaid by the 1^st defendant “on or before 16 June 2014”[5]. If the time for the repayment of the loan by the 1^st defendant is to be subject to the shares being first transferred back to the 1^st Defendant (and this would only be after the 1^st defendant having paid the substantial Transfer Price and Reimbursement Amount), one would expect the terms of this elaborate agreement to include such an express stipulation.

31.  Applying established principles on the construction of contract, I do not find the argument of the 1^st defendant supportable.   As much as I should take the factual matrix into account, it would not be permissible for me to write into the contract what is not there, even if the contract terms appear to be unexpected, unreasonable, or commercially not very wise: see Sinoearn International Ltd v Hyundai-CCECC Joint Venture (2013) 16 HKCFAR 632 per Tang PJ (citing Neuberger J) at §78. Neither is there room for construing into the agreement conditions that do not exist, or any term that would not have been obvious, or fair to any party.

32.  The construction proposed by the 1^st defendant could be seen as a condition that might be helpful to the 1^st defendant to include, particularly if the 1^st defendant had envisaged the need to pledge the transferred shares immediately after having paid for the completion of their transfer.   However I do not see how it would be fair to the plaintiff to so construe the agreement, where the object of the Deed of Settlement appear to be to achieve the unwinding of the joint venture afterthought recuperating the substantial sums it has invested by way of loan or otherwise against the giving of the shareholding in its hands. It would be concerned with the fulfilment of both of the two set of parallel obligations, with clear terms providing for automatic termination unless both sets of payment obligations are fulfilled completely by a certain date[6].

33.  I am unable to find any evidential basis in the proposition that it was a practical object of the Deed of Settlement that the 49% shareholding as a valuable asset be available to the 1^st defendant to enable the 1^st defendant to raise finance to repay the Principal Loan.  If that were the intention of the defendants and the shared object of the parties, there was no evidence that could form the basis of any inference of a consensus on such a “practical object”.  The reliance on the subsequent conduct of the 1^st defendant (some 9 months after the 16 June 2014 deadline for fulfilling all payment obligations) in attempting to procure the plaintiff to transfer the 49% shareholding interest to help it secure a loan from a lender, is irrelevant for the purpose of construction, and does not help the defence case at all.    In any event, the said attempts, being late in the day and not by way of assertion of any right under the agreement, is equally consistent with a construction opposite to that proposed by the defendants.

34.  In oral submissions, counsel for the defendants Mr Wong valiantly advanced various submissions to demonstrate how it would have made much better commercial sense for the 2^nd and 3^rd defendants’ interest not to have the Share Transfer money applied towards buying back the shares unless the shares were to be transferred to 1^st defendant ahead of repayment of the loan, and how it makes sense for the 1^st defendant that it should first secure the 49% interest in the companies before it becomes liable for the repayment of the full share of the loan.  The 2^nd and 3^rd Defendants, being guarantors, were not parties to the Deed of Settlement.  I do not accept the submission of the defendants’ counsel that their commercial interest must be taken into account because they are “in the same camp” as the 1^st defendant.   On the basis of the principles stated above, I am not satisfied any of those theories would assist in making the defendants’ proposed construction arguable.

35.  The plaintiff raises an additional point: the payment obligations under the Transfer Agreement were not complied with even after an agreement for deferment of payment from the end of April 2014 to the end of May 2014, in consideration for agreed interest at the increased rate of 20% per annum on the outstanding amounts payable.  No payment was in fact made under the Transfer Agreement by 16 June 2014, the deadline stipulated under Clause 13 of the Deed of Settlement.  As a result of the default, the Deed of Settlement was terminated, and the plaintiff was entitled to sue on the strength of the Loan Agreement, the Personal Guarantee and the Corporate Guarantee as if the Deed of Settlement never existed, subject to accrued rights and obligations thereunder.   Clause 22 of the Deed of Settlement also provides that time is of the essence of the Deed.

36.  Against this argument the defendants’ case was that the Deed of Settlement did not lapse by reason of the plaintiff accepting the 20% punitive interest on outstanding sums upon late payment under the Transfer Agreements (see §12 above).  I am unable to accept the argument.  The higher interest rate was agreed to as a result of default upon the payment deadline under Clause 10 of the Deed of Settlement.  In the event, even the one-month extension for payment was defaulted upon, and the deadline of 16 June 2014 under the Deed of Settlement expired thereafter.   The payments made in November 2014, even upon acceptance, did not have the effect of affirming the Deed of Settlement.  Indeed, the plaintiff and the 1^st defendant has thereafter by their respective conduct treated the Deed of Settlement as being no longer in force (see §§48-54 below).

37.  The plaintiff further argues that even if the 1^st defendant’s obligation to repay the loan was conditional upon the transfer of the shares upon all payments having been made under the Transfer Agreements, which is denied, the 1^st Defendant has waived the compliance of such condition, or it was estopped from relying on such condition.  On this point, the plaintiff relies on the events and correspondence exchanged between the parties, which are set out in §§12 to 18 above.  These are discussed in greater detail in the next sub-section (§§48-52).  In view of my ruling on the Construction Defence, it is unnecessary for me to rule on this point.

38.  However, if I were wrong on the Construction Defence, I would also go on to rule that the defendant has on the basis of the above irrefutable evidence waived the condition of transfer of the shares as a prerequisite of the loans becoming repayable.  Alternatively, it is estopped from asserting such a right by reason of its conduct, which the plaintiff has relied on to its detriment by not transferring the shares until a much later date.  I find that the defendants have not raised any triable issue on waiver and estoppel.

39.  Accordingly, I find that the Construction Defence is unarguable, and does not constitute any bona fide defence.

(B)   The Set-off Defence

40.  This defence is said to only relate to the claim for interest and not the principal sum, making it a partial defence to the plaintiff’s claim.  It is contended that the plaintiff was in breach of the Transfer Agreement by failing to transfer the shares to the 1^st defendant within a reasonable time after the full payment of the two batches of Share Price, the Reimbursement Amount and agreed interest. As a result of such alleged failure, it was contended that the 1^st defendant was unable to secure a loan from a third party lender, causing unspecified loss to the 1^st defendant.

41.  The factual basis purports to come from §13 of the Defence, where it is alleged that –

“since the plaintiff has acknowledge (sic) receipt of full payment of the Transfer Price and the Reimbursement Amount, the plaintiff is legally oblige (sic) to perform the Transfer Agreements. However, despite repeated demands and requests made by the 1^st defendant has failed or refused to perform the terms of the Transfer Agreement up to the date hereof.”

42.  At the hearing, Counsel for the defendants had had to accept that the evidence before the court did not support any repeated requests or demands having been made.  In any event, there was not a single demand that was made in assertion of contractual right under the Deed of Agreement; only a request for the plaintiff to consider a proposal to transfer the shares in March 2015 in order to help it obtain financing to repay the loan.  When the plaintiff declined to do so, there was no assertion of any right or entitlement, nor any further request or demand (see §14 and 15 above). With that concession being made on unequivocal contemporaneous correspondence, this defence is further weakened.

43.  It is pertinent to point out at the outset that this defence was never raised in pleadings or evidence filed, but only in skeleton argument filed by counsel for the defendants prior to the hearing before this court.  This was not a point raised for argument before Master M Wong either.  As no draft pleading has been presented before the court, the defence remains totally unparticularised.

44.  As such, this argument can fairly be treated as an afterthought.  I shall approach this newly raised and unpleaded defence with circumspection, bearing in mind that the facts relied on that purport to support this defence were at all material time within the knowledge of the defendants and deployed in the defence: see AVC Property Development Company Limited v Joyful Grace Tradings Limited & Anor HCA 529/2013, 21/2014 (unrep) per DHCJ M Ng (at §75).

45.  The defendants’ case is advanced on the basis that the transfer of shares and the repayment of the loans arise out of one global settlement, and therefore equitable set-off applies.

46.  The plaintiff’s response to the Set-Off Defence may be succinctly summarized as follows –

   (1)   It has not been raised properly in pleadings and it is not supported by evidence.

   (2)   The claim for set-off remains unparticularized even up to the date of hearing, and no evidence of any loss was put before the court by way of affidavit evidence or otherwise.

   (3)   There was no breach of the Transfer Agreements as the agreement has lapsed together with the Deed of Settlement.  Parties referred to the lapsed agreement as “previous agreement”.

   (4)   The alleged defence of set-off was contradicted by the 1^st defendant’s own conduct. Both parties conducted themselves according to the clear understanding that shares were not to be transferred until there was full repayment of the loan.

   (5)   Even if there was a right to demand for transfer of the shares, which is denied, the conduct on the part of the 1^st Defendant amounted to waiver and/or estoppel.

47.  On the lack of pleading and particularization, the defendants replied with an undertaking to provide proper pleadings once leave to defence is given.  However, the lack of particularization is itself an issue.  As stated at the outset, it is a cardinal principle that a party resisting summary judgment application has the responsibility of condescending to particulars in its alleged defences.  The complete lack of particularization puts the court in an impossible position in trying to assess the merits of the defence, if it has been necessary to do so in the absence of other reasons to reject the defence case.  I would have rejected this defence as an arguable defence on this ground alone.

48.  On the question of whether the Transfer Agreement has lapsed, my view is in line with that in relation to the Construction Defence (see §35-36 above).  More importantly, it is pertinent to note from contemporaneous correspondence that the parties have conducted themselves on the basis that the Transfer Agreements had indeed lapsed.

49.  From the letter of 21 November 2014, under cover of which the 1^st defendant tendered the only substantial payment throughout the material time, it is apparent that the 1^st defendant was not making payment pursuant to the stipulation of any extant settlement agreement, but was simply doing what it could to settle any unsettled amount that remained outstanding as a result of its default of the Deed of Settlement. In particular, the way in which the 1^st defendant requested the funds to be applied was most telling.  The excess amount after paying for the Share Price, the Reimbursement Amount and the default interest were to be directly applied to pay off as much of the outstanding loan as the money could cover.  There was thus a clear acknowledgement that the loan was outstanding and payable before the shares were due to be transferred.  Further, without raising the question of transfer of the shares, the 1^st defendant was apologetic about the partial loan payment and attempted to assure the plaintiff as follows –

“… we will arrange for the rest of the loan and interest payments as soon as possible. Please rest assured that we will honour to pay Classic Star any unsettled sum and overdue interest at default rate until all outstanding liabilities are cleared.”

50.  When the 1^st defendant failed to continue to make repayments to the loan, and before there was any evidence of any mention of share transfer, the 1^st defendant by a further email of 23 December 2014 only requested the plaintiff to execute a document waiving its right of first refusal to purchase the 1^st defendant’s 51% shareholding, so as to enable them to pledge their own shareholding for a loan to raise funds to repay the outstanding loan.  Not only there was no mention of the alleged obligation to transfer shares, the loan was referred to as “outstanding liability” with the understanding that “immediate … repayment” was required, which the 1^st defendant was prepared to show evidence in order to give assurance to the plaintiff.  The plaintiff’s response on 19 January 2015 further confirms the parties understanding above.

51.  The defendants rely on the email of 16 March 2015 from the 1^st defendant to the plaintiff putting forward a proposal that the plaintiff transfers the 49% shareholding to it to enable funds to be raised from a Shenzhen lender as a request or demand for the transfer of shares.   I do not accept that the nature of the communication accords with a request based on an assertion of legal right, less still a demand.  The email was clearly a proposal asking for the indulgence of the plaintiff rather than asserting any right under any agreement.  The tone was one of a persuasive and pleading nature, asking for help or indulgence, as evidenced in the use of the words “if you find this arrangement appropriate …” and “subject to your consent …”.  Again it was emphasized that the proposed transfer “would not alter [the plaintiff’s] legal position against all outstanding payments owed by [the 1^st defendant].”  Significantly, the Share Transfer Agreements were referred to as the “previous equity transfer agreements”, signifying a clear understanding that those agreements have lapsed through the 1^st defendant’s own default[7].

52.  When the plaintiff declined the 1^st defendant’s proposal in an email of 8 April 2015 and demanded full repayment of the loans within the same month, the 1^st defendant’s response puts any argument against waiver and estoppel to rest, in so far as they are needed to defeat the Set-Off Defence.  In the last paragraph of the email, the 1^st defendant requested the plaintiff to –

“spare a bit more time allowance for [the 1^st defendant] to negotiate further. Please rest assured that we would endeavour to have the share transfer agreement completed in shortest timeframe by settling all outstanding liabilities due to [the plaintiff].” (Emphasis added)

53.  The above clearly demonstrates that the 1^st defendant did not assert any right to transfer upon satisfaction of payment of the share transfer sums in November 2014.  Instead, it continued to consider it would not be entitled to share transfer, and hence the share transfer was yet to be completed, until the outstanding loan, which was due and payable, was fully paid.  I consider the expression in the correspondence set out above clear and unequivocal.

54.  The conduct demonstrates a clear understanding between the parties that is repugnant to both the Construction Defence and the Set-off Defence.  For the purpose of the latter, the defendants have no credible argument to advance against the allegation of estoppel and waiver. I therefore rule that there is no arguable defence in set-off.

(C)   Disposition

55.  I dismiss the appeal.

56.  Leading Counsel for the plaintiff submits that costs of the appeal should be awarded to the plaintiff to be taxed on an indemnity basis if not agreed.  Counsel for the defendants accepts that if they were to lose the appeal, they cannot resist such an order.

57.  Accordingly, I make an order that the plaintiff do have the costs of the appeal, to be taxed on an indemnity basis if not agreed.  The plaintiff in making its submissions on costs did not make any request for a certificate for two counsel.  I make no order in that regard.

58.  It remains for me to thank counsel for both parties for their able assistance, and to offer my sincere apology for the time it has taken for this judgment to be delivered.