CHEN ZHIXUAN v. FUNG MAN KWONG

HCA 172/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 172 OF 2013

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D E C I S I O N

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1. This is an appeal against the judgment of Master K. Lo dated the 20 August 2013. The application which was before the Master was an Order 14 application by the Plaintiff for summary judgment.

2. The Master has helpfully set out the main facts and the background.

3. After giving the application careful consideration she ordered that as the Defendant had not succeeded in discharging the burden placed upon him of demonstrating that there was a triable issue she entered judgment for the Plaintiff.

4. I propose confining myself to the main issues which were the subject matter of the appeal.

5. I do not propose setting out all the history of the case as this has been done in a satisfactory manner by the Master.

6. Suffice it to say that the Plaintiff is the sole shareholder of a company trading as Good Moral International Ltd. (“Good Moral”) and the Defendant is a 60% shareholder in Kind Yield (China) Ltd. (“KindYield”).

7. Good Moral which is a producer of knitwear has a factory in China.

8. Kind Yield purchased knitwear from Good Moral.

9. Kind Yield got into financial difficulties and was unable to meet its commitments to Good Moral timeously.

10. The Plaintiff requested the Defendant to attend at its factory premises in China.  It appears that the main purpose of the meeting was to have a discussion concerning Kind Yield’s indebtedness to Good Moral.

11. The Defendant and Mr. Wu Kam Cheung attended at the factory.  This is all common ground.

12. There were discussions between the parties.

13. According to the Defendant he was subjected to duress and undue influence and told that unless he agreed to sign an agreement in Chinese characters (“the Chinese Agreement”), agreeing to become personally liable to discharge Kind Yield’s indebtedness, he would not be allowed to leave the factory and return to Hong Kong.

14. This version of event is hotly disputed by the Plaintiff.

15. The Plaintiff’s version was that there was a peaceful and quiet meeting and the Plaintiff voluntarily agreed to assume personal liability.  Although perhaps not put into exact words but supported by what subsequently transpired the advantage which the Defendant would derive from the Chinese Agreement was that Good Moral would forbear from immediately commencing legal proceedings for the recovery of the money due and owing.

16. Mr. Wu’s affirmation was much more supportive of the contentions being advanced by the Plaintiff than the case being run by the Defendant.

17. What must be made clear at this juncture is that no attempt whatever must be made on an Order 14 application to make findings of fact on affidavit evidence.  Where there are factual differences between the parties leave to defend must be given so that the differences between the parties can be resolved after the affidavit evidence has been tested by cross examination.

18. The position is otherwise when it is clear having regard to relevant legal principles that even on the uncontested evidence the Plaintiff is entitled to have judgment entered for it.

19. Two main issues are outstanding. 

20. The first is that it is common ground that a period of almost 9 months elapsed between the alleged undue influence and the first occasion when the Defendant saw fit to plead the undue influence in his defence and this was only after the Plaintiff had instituted the instant action.

21. During this time the Defendant had made 2 substantial payments in accordance with the terms contained in the Chinese Agreement.  When doing so he did not make any attempt to raise the issue that he had only entered into the Chinese Agreement as a result of his being subjected to undue influence.

22. Also the Defendant admits that he did not see fit to lodge any complaint concerning the Plaintiff’s conduct either in the People’s Republic of China or in Hong Kong.

23. The excuse he gave for not doing so was that he thought that it was unlikely that lodging a complaint would lead to his obtaining some form of redress.

24. This however overlooks the fact that had such complaints been made there would at least be some evidence in support of the defence he is now seeing to advance.

25. In this context what has to be considered is whether on the undisputed evidence of the Plaintiff, it can be demonstrated that the Defendant by his actions has affirmed the terms of the Chinese Agreement.

26. Assistance on this issue can be derived from the judgment of Fok J.A. (as he then was) at paragraphs 59 and 60 of Mir Abdul Rehman v Mir Heena being CACV 10/2012 [unreported]:

“59. As Chitty (supra) states at §7-054:

“Contract under duress is voidable.  Despite earlier doubts,  it now seems clearly established that a contract entered into under duress is voidable and not void; consequently a person who has entered into a contract under duress may either affirm or avoid such contract after the duress has ceased; and if he has voluntarily acted under it with a full knowledge of all the circumstances he may be held bound on the ground of ratification, or if, after escaping from the duress, he takes no steps to set aside the transaction, he may be found to have affirm it.”

60. However, in the case of an innocent party having a choice as to whether to accept a repudiation and treat the contract at an end or to affirm the contract, affirmation requires an unequivocal act from which it may be inferred that he intends to go on with the contract regardless of the breach or that he will not exercise his right to treat the contract as repudiated: see Chitty (supra) at §24-003. It was not disputed that this principle also applies in respect of affirmation of a contract procured by duress.”

27. I am satisfied even having regard to the principles relevant to Order 14 application that the Plaintiff has established that by his conduct the Defendant has affirmed the Chinese Agreement.

28. There was also consideration supporting the Chinese Agreement.

29. The second issue raised by Mr. Wilfred Tsui for the Defendant is a pleading point.  Mr. Tsui referred to paragraphs 15 and 16 of the Statement of Claim.  These read:

“15. In essence, the agreement provided inter alia that:

(1) The Defendant acknowledged he owed the Plaintiff the debt of US$318,861.62 and HK$63,002.50.

(2) The Defendant agreed to pay the Plaintiff HK$200,000.00 by 7^th October 2012.

(3) Thereafter, the Defendant agreed to pay the Plaintiff HK$150,000.00 at the end of each month until the entire debt was repaid.

(4) Payment would be made into the Plaintiff’s bank account with the Nanyang Commercial Bank account.

16.   The Plaintiff provided consideration for the agreement by procuring Good Moral to forbear from pursuing the debt owed by Kind Yield of US$318,861.62 and HK$63,002.50.”

30. It was his contention that these paragraphs were clearly inadequate to provide particulars of the relationship between the parties and indicate how the present claim came about.

31. With respect to Mr. Tsui if these principles are read in conjunction with the rest of the Statement of Claim it is abundantly clear that the Defendant would have sufficient material before him to formulate a defence to the claim if he had one.

32. The requirements of a pleading were considered by me at paragraph 77 of Aktieselskabet Dansk Skibsfinansiering v Wheelock Marden & Company Limited [unreported] being CACV 24/1994 on 17 November 1994 being unreported:

“77. In considering the approach to be adopted in deciding the extent to which it is necessary to provide particulars, it is desirable to take cognisance of the principals referred to on p.8 of this Court’s judgment dated the 13th July 1994, when it was dealing with the first limb of these appeals.

‘What those things are is to be gathered from the decided cases. That exercise has been performed by the learned editors of the 1993 Supreme Court Practice. And, as one sees from note 18/12/2 at pp 307-308 of volume 1 thereof, the things which properly particularised pleadings must do are to:

(1) inform the other side of the nature of the case they have to meet as distinguished from the mode in which that case is to be proved;

(2) prevent the other side from being taken by surprise at the trial;

(3) enable the other side to know what evidence they ought to be prepared with and to prepare for trial;

(4) limit the generality of the pleadings, the claim and the evidence;

(5) limit and define the issues to be tried, and as to which discovery is required; and

(6) tie the hands of the party so that he cannot without leave go into any matters not included (although if the opponent omits to ask for particulars, evidence may be given which supports any material allegation in the pleadings).’ ”

33. I am satisfied that this is an accurate statement of the law.

34. This being the case the appeal is dismissed.

35. I make an Order Nisi that the Plaintiff is to have the costs of the appeal with a certificate for counsel.