LI KWAN FUNG YEE, BRENDA AND ANOTHER v. HKSC FOODS LTD AND ANOTHER

HCA 1683/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1683 OF 2008

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REASONS FOR JUDGMENT

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1. As can be seen from the title of this action, four parties were involved when this action was first commenced, namely, the 1^st and 2^nd plaintiffs on the one hand and the 1^st and 2^nd defendants on the other. However, following the winding up of the 1^st defendant in July 2009 (which I shall refer to below), the outstanding dispute was solely between the 1^st plaintiff and the 2^nd defendant. The plaintiffs did not pursue their claim against the 1^st defendant in this trial.

2. When the trial took place, the 2^nd defendant did not turn up.  Having considered the evidence of service (including the Affirmation of Mak Chi Kin filed on 7 June 2011, as well as the Supplemental Affirmation of Mak Chi Kin filed on 9 June 2011 pursuant to an undertaking given by the 1^st plaintiff to this court at this trial), this court was satisfied that the 2^nd defendant had due notice of the trial date.  Accordingly, the trial proceeded and the 1^st plaintiff adduced evidence to prove her case.  After trial, this court made an order in favour of the 1^st plaintiff and indicated that reasons would be given later.

The dispute

3. The 1^st plaintiff’s claim can be seen from the Amended Statement of Claim filed in November 2009 and her Witness Statement dated 14 September 2010.  For the present purpose, the 1^st plaintiff’s claim can be outlined as follows.

4. The 1^st plaintiff had been a teacher for 34 years during the period from around 1970 to 2004.  During all those years, she had not been involved in any business.  Unfortunately, her husband passed away in 2000 and the 1^st plaintiff inherited the oriental sauce business of her late husband under the business name of “Lee Seng Heng”.  Having no business experience, the 1^st plaintiff turned to her sister, Mrs. Christine Barros (“Christine” or “sister”), for help.  Christine and her husband came to live in Hong Kong in 2001.  Christine became the Chief Executive Office of Lee Seng Heng and ran the business until the 1^st plaintiff’s retirement as a teacher in 2004.  Upon retirement, the 1^st plaintiff became a director of Lee Seng Heng.

5. In around July 2005, the 1^st plaintiff met the 2^nd defendant for the first time when she accompanied her sister to attend a conference in Sydney, Australia.  The conference was organized for potential cruise ship suppliers.  The 2^nd defendant requested Christine’s presence at the conference to get an insight into the cruise ship supply business and to meet the potential suppliers.  The 1^st plaintiff happened to be in Sydney at the time and agreed to accompany Christine to attend the conference.

6. In 2006, the 2^nd defendant started supplying cruise ships in Hong Kong.  Following discussions, an oral joint venture agreement (“JV Agreement”) was made between the plaintiffs and the defendants in around September 2006 in Hong Kong. By this JV Agreement, the parties agreed to enter into a business arrangement whereby the 2^nd plaintiff would assist the 1^st defendant in fulfilling orders received from cruise ship companies for food supplies and that the 1^st plaintiff would provide bridging finance to the 1^st defendant to enable it to settle outstanding accounts from food suppliers.  The detailed terms of the JV Agreement were pleaded in paragraph 6 of the Amended Statement of Claim.  Of particular relevance for the present purpose is the term that the 2^nd defendant agreed to act as a personal guarantor guaranteeing the payment of all sums due by the 1^st defendant to the 1^st plaintiff in respect of the bridging finance.  The personal guarantee was the very subject‑matter of this trial.

7. The Amended Statement of Claim has pleaded various sums owed by the defendants as a result of the parties’ business arrangement mentioned above.  For the present purpose, only the sums in respect of the bridging finance are relevant.  This comprise the principal sum of A$280,000, together with interest incurred up to 15 July 2009 in the amount of A$29,421.27.  At the beginning of this trial, counsel for the 1^st plaintiff confirmed that the only sum the 1^st plaintiff intended to claim at this trial is this total sum of A$309,421.27 (i.e. A$280,000 plus A$29,421.27), together with further interest at the agreed rate of 11% per annum.

8. After the Statement of Claim was filed on 6 September 2008, the 2^nd defendant (then still represented by solicitors) filed a Defence on 5 November 2008.  However, it is a Defence containing no more than bare denials of the plaintiffs’ claim.  No positive case was put forward.  After the plaintiffs filed their Amended Statement of Claim and despite having full opportunity to do so, the 2^nd defendant did not amend his Defence.  Nor has the 2^nd defendant filed any witness statement, be it witness statement by himself or by other persons, despite an unless order made in October 2010.  In other words, the 2^nd defendant had not put up any positive defence to the 1^st plaintiff’s claim.

The 1^st plaintiff’s case credible

9. As noted above, the 2^nd defendant did not attend the trial and the 1^st plaintiff adduced evidence to prove her case.

10. The 1^st plaintiff testified to support of her own claim.  She confirmed the contents of her Witness Statement. She also produced the email of 8 April 2008 sent by her to the 2^nd defendant (Exhibit P1), which was referred to in paragraph 22 of her Witness Statement.  Apart from herself, the 1^st plaintiff also called her sister as a witness, who confirmed the contents of her Witness Statement dated 14 September 2010.  Her sister’s evidence supported the 1^st plaintiff’s case, and gave details as to the amounts advanced by way of bridging finance as stated above.

11. Having heard the 1^st plaintiff and her sister and having considered their testimonies against the documentary evidence adduced, this court has no difficulty in accepting the entirety of their testimonies.  I find as a fact that the JV Agreement was made, and that the 2^nd defendant had agreed to be a guarantor of the 1^st defendant’s liability under the JV Agreement.  Unlike the position in England, a guarantee as the one in question did not have to be in writing.  I also find as a fact that the total sum of A$309,421.27 was at the time of the trial owing and due from the 2^nd defendant to the 1^st plaintiff.

12. First, the 1^st plaintiff’s case is well supported by contemporaneous documents.

13. Amongst others, there is the letter dated 29 August 2008 sent by the 1^st plaintiff and her sister to the 2^nd defendant.  In this letter, the terms of the JV Agreement was reiterated, the principle amount of the bridging finance (A$280,000) as well as the interest rate of 11% per annum were mentioned in no uncertain terms.  Both the 1^st plaintiff and her sister confirmed during their testimonies that the 2^nd defendant did not put in any reply to deny the assertions contained in this letter.

14. There is also the email mentioned above (Exhibit P1), which stated the interest rate of 11% and contained a table setting out the calculation of the interests accrued as a result of the bridging finance.  Both the 1^st plaintiff and her sister also confirmed that the 2^nd defendant has never disputed the amount of the sums advanced and the accuracy of the interest calculation.

15. Second, as noted above, the 2^nd defendant’s Defence contains only bare denial.  No positive case has been put forward by the 2^nd defendant.  In view of the detailed and solid allegations made against him, the complete absence of a positive case (especially at a time when the 2^nd defendant was legally represented) is telling.  Considering all the circumstances of this case, I am of the view that an adverse inference can be drawn against the 2^nd defendant.

16. Third, as also noted above, the 1^st defendant was wound up in July 2009.  That was a result of the winding up petition lodged by the 1^st plaintiff in HCCW 456/2008.  In the Judgment delivered on 15 July 2009 in that winding up proceedings, Kwan J (as she then was) found that there could not be any serious dispute as to the debt owed by the 1^st defendant to the 1^st plaintiff as a result of the bridging finance.  Bearing in mind the 2^nd defendant is sued in this action as a guarantor and in the absence of any positive defence by the 2^nd defendant, it follows that the 1^st plaintiff’s claim against the 2^nd defendant in this action must likewise be upheld.

17. In view of the aforesaid, I ordered at the trial that there be judgment entered against the 2^nd defendant in terms of paragraphs (1) and (2) of the prayer set out in the Amended Statement of Claim, plus an order that the 2^nd defendant do pay to the 1^st plaintiff all the costs of and occasioned by this action (including any costs previously reserved, if any).  The formal Order has since been drawn up and sealed.

18. It remains for me to thank counsel for the 1^st plaintiff for his assistance at this trial.