WONG LIN YAU v. MARCOSTAR LTD.

1996, No.HCA5093

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. This is an appeal against the decision of Master O'Donnell on 25th October 1996 dismissing the appellant's application for summary judgment with costs to the respondent.

2. The respondent is a limited company incorporated in Hong Kong with share capital of HK$10,000.00, being the total value of 10,000 ordinary class shares at HK$1.00 each. The appellant, a Mr Li and a Mr Ip are the only shareholders and Mr Li and Mr Ip together with another are the directors of the respondent. The appellant was a director of the company from the 30th of April 1991 to the 1st of November 1991. Mr Li and the appellant each hold 25% of the issued shares while Mr Ip holds 50% of the issued shares.

3. The appellant claimed against the respondent for the sum of HK$634,925.00 being the balance of "loans" advanced by the appellant to the respondent.

4. The respondent admitted having received the said sum from the appellant. The respondent's case was that all the shareholders of the respondent agreed to increase their respective contribution to the respondent's capital according to their shareholding so as to make up a total working capital of HK$6,000,000.00. According to the agreement, the appellant was to pay HK$1,500,000.00 as contribution. She had only paid HK$637,425.00. Accordingly, the respondent counterclaimed the sum of HK$862,575.00 being balance of the outstanding contribution.

5. On hearing the appeal, I confine myself to the evidence before me and.I deal with the appeal by way of an actual rehearing of the application. The test as applied by the Hong Kong Court of Appeal in Ng Shou Chun v. Hung Chan Sam [1994]1 HKC 155 at 158 is simply "Is what the defendant says credible?"

6. Mr Sakhrani submitted on behalf of the appellant that there was no evidence showing an agreement to increase the nominal share capital of the company or any other adjustment of the amount of share capital as alleged by the respondent. Further, as is evidenced from the shareholder's accounts in the account ledgers exhibited to the appellant's affirmations, different sums of money were shown to be frequently deposited in and withdrawn from the respondent by each of the shareholders. These ledgers were not challenged by the respondent as false. It was admitted that these ledgers were part of the accounts of the respondent. One of the deposits of the appellant in the ledger is classified as "Deposit by Wong [the appellant] as capital". No other deposits were classified as such. The same applies to certain sums of money deposited by the other shareholders. The sums classified as "Deposit by ... [name of the shareholder] as capital" amount to a total of HK$10,000.00 which equals to the issued share capital of the respondent.

7. In reply the respondent argued that at about the time the company commenced to trade an agreement was reached between the shareholders, including the appellant, to increase the nominal capital of the company firstly to $4,000,000 and later to $6,000,000 and for each to contribute to the capital of the company by the purchase of those shares in the proportion of their original shareholdings. These assertions were not supported by any resolutions of the company nor by any documentary evidence. It was accepted by Miss Wong that nothing had ever been done to implement that agreement.

8. My attention was drawn to the decision of the Hong Kong Court of Appeal in Re Safe Rich Industries Limited, (unreported) Civil Appeal No.81 of 1994, in which Bokhary, J.A. pointed out at p.4:-

"... that whether the defendant's assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as is either undisputed or beyond reasonable dispute."

9. Having considered the all evidence before me, I am satisfied that the assertions put forward by the respondent are not believable.

10. In my judgment, the respondent has no defence to the appellant's claim and the appeal is allowed. Final judgment in the sum of HK$634,925.00 is entered for the appellant against the respondent together with interest thereon from the 8th day of May 1996 at the statutory rate. The costs of this appeal and the hearing before Master O'Donnell to be for the appellant to be taxed if not agreed.

(T.M. Gall)

Judge of the High Court