GLYNHILL INTERNATIONAL LTD v. BELFORD PACIFIC LTD AND ANOTHER

HCA2937/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2937 OF 2002

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J U D G M E N T

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1. This is a third party action.  In the main action the plaintiff has secured a judgment against the 2^nd defendant dated 13 May 2003 for the repayment of a loan in the sum of US$195,387.27 lent by the plaintiff’s predecessor in title to the 1^st and 2^nd defendants in November 1997.

2. The 2^nd defendant has alleged in the third party proceedings that the third party, Chau Hong Ming Peter (“Chau”), entered into an agreement, as evidenced by a memorandum dated 9 October 1998, whereby he agreed to be liable for 75% of the loan.  The terms of the memorandum, signed by the 2^nd defendant and Chau, are :

“	A.	Pursuant to Promissory Note dated 5 November 1997, Belford Pacific Limited and Tse jointly and severally promise to pay to Abbeydale Investments Limited the outstanding loan of US$195,387.27 (the ‘Loan’) and the interest thereon.
	B.	By a letter dated 29 September 1998 from Boughton Peterson Yang Anderson, Solicitors, to Tse and countersigned by Tse on 29 September 1998 (the ‘Settlement Agreement’), Tse agreed to pay Lai Sun Hotels International Limited and the Loan by various instalments as scheduled therein.
	NOW IT IS AGREED that in consideration of Tse entering into the Settlement Agreement for repayment of the Loan, the parties hereto covenant and agree as follows :
	1.	Chau shall personally be liable for three-fourths of the Loan which is approximately HK$1,465,402.70 (‘Chau’s liability’) and Tse shall personally be liable for one-fourth of the Loan which is approximately HK$488,470.00 (‘Tse’s liability’).
	2.	Tse shall on or before 30 September 1998 deliver to Lai Sun Hotels International Limited 2 cheques for the amounts of US$25,687.27 and US$12,800.00.
	3.	The sum of the amounts referred to in Clause 2 above for US$38,487.27 shall be taken into account as credit in discharging Tse’s liability and Tse shall pay the balance of US$10,359.73 so as to discharge the balance of Tse’s liability.
	4.	Chau shall reimburse Tse in respect of any sum which Tse pays in excess of Tse’s liability.”

3. Mr Jonathan Wong, counsel for the 2^nd defendant, rightly observes that it is possible to construe this document against the 2^nd defendant in the sense that the primary obligation to repay the debt to the plaintiff remains with the 2^nd defendant and Chau’s liability only arises if the 2^nd defendant discharges his liability to pay 25%.  In fact, the 2^nd defendant has only paid a sum approximately US$10,000 short of 25%.

4. With this in mind and bearing in mind also that Chau has made no appearance in this action, the 2^nd defendant, out of an excess of caution, relies on a subsequent variation to the agreement between himself and Chau.

5. He relies on a fax dated 26 April 1999 in which Chau replied to a proposal from the plaintiff’s solicitors in which he said :

“	Enclosed please find the signed copies of the Lai Sun document.  I have counter-termed the proposal to the level I can manage.  I don’t think it is right for you to carry on with the liabilities.”

6. His “counter-terms” deleted the 2^nd defendant’s name from the proposal altogether and re-dated the proposed schedule of repayments (which fully paid off the outstanding principal) to give himself an extra six months to repay.

7. On 30 June 1999 the plaintiff’s solicitors wrote to Chau setting out the same proposals which Chau duly accepted and signed.

8. In these circumstances I am satisfied that the Memorandum of Agreement, as varied by subsequent correspondence, binds Chau in the terms as sought by the 2^nd defendant in this action.

9. The plaintiff commenced proceedings against the defendants in July 2002.  The 2^nd defendant issued the Third Party Notice on 2 September 2002.  On 6 September 2003, the 2^nd defendant and the plaintiff agreed, by a consent order, that judgment having been entered against the 2^nd defendant all further proceedings be stayed upon terms set out in a schedule which included the following paragraph :

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Subject to paragraph 4 hereinafter, the Judgment Sum and costs be paid by equal consecutive monthly instalments each in the sum of HK$14,000.00, the first of such instalments to commence on 25th July 2003 and subsequent instalments to be due and payable on the 25th day of each and every succeeding calendar month, to be paid by way of cheques to the Plaintiff through the Plaintiff’s Solicitors all drawn on a licensed bank in Hong Kong and in favour of the Plaintiff, until the entire Judgment Sum and costs shall have been repaid in full.”

10. Prior to this consent order the 2^nd defendant had issued 24 post-dated cheques to the plaintiff, each for HK$14,000.

11. Finally, by virtue of the contents of the Affirmation of Cheung Wing Kit affirmed on 25 July 2007, I am satisfied that the attempted service of these proceedings on Chau has been sufficient.

12. In all the circumstances, I make the following order :

(1)	The court declares that the Memorandum of Agreement dated 9 October 1998 made between the 2nd defendant and the third party in the pleadings mentioned ought to be rectified such that Clause 1 shall read as follows :
	“	Chau shall personally be liable for three-fourths of the Loan which is approximately US$146,540.27 (‘Chau’s liability’) and Tse shall personally be liable for one-fourth of the Loan which is approximately US$48,847.00 (‘Tse’s Liability’).”
(2)	It is ordered that the said Memorandum of Agreement be rectified in the manner set out in paragraph (1) above and it is further declared that the said Memorandum of Agreement so rectified as aforesaid ought to take effect in like manner as if the said rectification had been made in the said Memorandum of Agreement at the time of execution thereof by the parties thereto.
(3)	The court declares that :
	(i)		the 2nd defendant is entitled to be indemnified by the third party of any sums paid pursuant to the Consent Order in this action between the plaintiff and the 2nd defendant dated 6 September 2003 amounting to US$244,972.79 (“Settlement Sum”) to be paid by the 2nd defendant in equal consecutive monthly installments each in the sum of HK$14,000.00, the first of such installments to commence on 25 July 2003 and subsequent installments to be due and payable on the 25th day of each succeeding calendar month until the entire Settlement Sum shall have been repaid in full; and
	(ii)		upon the 2nd defendant making such payment(s) as set out in paragraph 3(i) above, the third party do pay to the 2nd defendant the equivalent amounts in respect of such payment(s).
(4)	It is further ordered that the third party do pay interest on the sums paid by the 2nd defendant pursuant to and/or as set out in paragraph 3(i) above at half the judgment rate from the date of the issuance of the Third Party Notice until judgment and thereafter at the judgment rate and that the third party do pay the 2nd defendant’s costs of this action, to be taxed if not agreed.