JIN HAI AN CONSTRUCTION ENGINEERING LTD v. GOLDEN ROCK BEACH INC AND ANOTHER
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1995 No. A2787
IN THE SUPREME COURT OF HONG KONG
HIGH COURT
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BETWEEN |
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| JIN HAI AN CONSTRUCTION ENGINEERING LIMITED | Plaintiff |
| and |
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| GOLDEN ROCK BEACH INC. | 1st Defendant |
| NG CHUN WAH trading as WAI WAH COMPANY | 2nd Defendant |
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Coram: The Hon. Mr. Justice Leonard in Chambers
Date of Hearing: 26th October 1995
Date of Delivery of Judgment: 26th October 1995
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JUDGMENT
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1. The Plaintiff, a company registered in Hong Kong, applies under Order 14 of the Rules of the Supreme Court for summary judgment against the 2nd Defendant, Mr. Ng Chun Wah trading as Wai Wah company. Mr. Ng, a Hong Kong resident who is described as trading as Wai Wah Company, according to the Plaintiff, is liable under a guarantee for a debt due from the 1st Defendant, which is a company incorporated in the United States of America. It being inconvenient to proceed against the 1st Defendant which is out of the jurisdiction, the Plaintiff seeks to enforce the guarantee against the 2nd Defendant.
2. On the 31st December 1987, the Plaintiff entered into an agreement with the 1st Defendant whereby the Plaintiff would in March 1988 remit to the 1st Defendant through the 2nd Defendant’s bank account, a sum of US$500,000.00 for use in a building project in the United States of America. Within 22 months thereafter, the 1st Defendant was to repay to the Plaintiff the sum advanced, that is to say US$500,000.00, plus what was described as “a profit after tax” of US$150,000.00. In the event of delay in payment, interest was to accrue at 15% per annum.
3. Clause 4 of the agreement reads as follows:
“4. Repayment guarantee: both Party A (the 1st Defendant) and Party B (the Plaintiff) agreed to invite Wai Wah company to be the credit guarantee of repayment, guarantee is that Party A shall perform the agreement, if Party A cannot repay on time guarantor shall be responsible for repayment. Guarantor fee is 5%, that is US$32,500.00. Party A is responsible to pay it.”
The Plaintiff, it is common ground, has received payments from the 2nd Defendant as follows:
25th October 1990
US$100,000.00
29th January 1991
51,282.00
8th April 1993
32,051.00
Total:
US$183,333.00
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For the purpose of the action, the Plaintiff has treated the payments as payments of principal so that its claim for interest is less than it might otherwise have been. Thus the sum of principal now claimed is:
US$650,000.00
- 183,323.00
US$466,667.00
A claim for interest up to 8th March 1995 at 15% per annum was particularised in the Statement of Claim and the sum is quantified as US$385,106.43. There is a further claim for interest at 15% per annum from 9th March 1995 until judgment or earlier payment.
4. The 2nd Defendant, in resisting the application for judgment , says that there have been substantial variations in the agreement between the Plaintiff and the 1st Defendant and that he is, as a result, no longer liable as guarantor.
5. The first alleged variation is that whereas according to the agreement the Plaintiff was to remit $500,000 in March, it only remitted that sum on the 22nd April 1988. The second alleged variation is that the Plaintiff agreed to an extension of time for payment. In connection with the question of the effect of a variation of a contract upon the liability of the guarantor my attention has been drawn to the passage at paragraph 42-039 of Chitty on Contracts 27th ed. Vol. II.
6. The money, according to the agreement, was to be paid into the 2nd Defendant’s bank account and it was in due course paid into the 2nd Defendant’s bank account. It is not suggested on behalf of the 2nd Defendant that he was unaware of the lateness of the payment. Moreover, on 19th April 1988 the 2nd Defendant made a statutory declaration, identifying himself as being the signatory as guarantor of the agreement and I note that it was very shortly after that, on the 22nd that the money was advanced to the 1st Defendant. It is difficult to see any purpose in making that statutory declaration other than to give comfort to the Plaintiff in order that the Plaintiff would advance the money.
7. Taking into account the circumstances, I hold that the 2nd Defendant fails on this point. I am satisfied that as a matter of law the delay in the advance was not a variation of the contract such as to relieve the 2nd Defendant of his liability as guarantor. Moreover, since the payment was made he has repeatedly over the years described himself as guarantor and the suggestion that this alleged variation has released him from liability comes very late indeed.
8. The evidence that there was an agreement to postpone payment by the 1st Defendant is shadowy and the 2nd Defendant has not suggested that if there was such an agreement, it was without his knowledge and consent. The letter he relies on, written by the 1st Defendant to the Plaintiff submitting a suggested fresh repayment schedule for approval, indicates, on the face of it, that the 2nd Defendant was a party to discussions leading to the writing of the letter and that a copy of the letter was sent to him. There is no evidence that the suggested schedule was agreed to and there is ample evidence in the correspondence that the Plaintiff was pressing for payment.
9. A point has been taken as to the significance of the phrase “ cannot repay on time” in the translation of clause 4 of the agreement. It is common ground that the Chinese term can also be translated as “is unable to repay on time” but there does not seem to be any significance in the difference between the two possible translations. It is submitted on behalf of the 2nd Defendant that the Plaintiff must show not only that the 1st Defendant has failed to pay but also that the 1st Defendant is unable to pay before the 2nd Defendant can become liable as guarantor to pay the sum claimed.
10. This is a matter of construction. I hold that the words used were clearly intended to deal with a failure to pay whether or not the 1st Defendant was able to pay. As a matter of business common sense, one can say that nobody in the Plaintiff’s position could have intended the guarantee to be limited in the manner suggested by the 2nd Defendant. Moreover, the Defendant himself is on record as telling the Plaintiff in correspondence that the 1st Defendant is unable to pay as a result of business difficulties.
11. It is submitted on behalf of the 2nd Defendant that there is a triable issue as to the exact sum due and my attention has been drawn to certain letters written by the Plaintiff’s solicitors setting out certain claims. But the fact is that the sum claimed is clearly stated in the Statement of Claim and it is upon the Statement of Claim that the Plaintiff is proceeding. There has been no suggestion that there is any inaccuracy in the calculation of the sum allegedly due.
12. It is submitted on behalf of the 2nd Defendant that there ought to be a trial on the basis that the proper law governing the agreement is Chinese law, the reasons put forward for this proposition are as follows:
“(a) The agreement was made in Mainland China.
(b) It was in the Chinese language.
(c) The signing parties made a special trip to China to sign the agreement.
(d) The Plaintiff was a mere subsidiary of a Mainland Chinese Company which owns 99.9% of its shares.
(e) The Plaintiff’s director who signed the agreement is a Chinese national residing in Guangxi.
13. Assuming for the purpose of argument that all the signing parties made a special trip to China to sign the agreement (and the 2nd Defendant's affidavit in this regard is somewhat ambiguous), I find that no good ground has been made out here for giving leave to defend.
14. The fact is that the parties arranged for the money to be advanced by a Hong Kong company, by payment in Hong Kong into the Hong Kong bank account of a Hong Kong resident so that he presumably would transmit the money to the 1st Defendant in the United States of America. So far as the guarantee was concerned, clearly the parties all realised that not only was the money to be advanced in Hong Kong but also that the guarantor was going to be in Hong Kong and the Plaintiff would be able to take action against him to enforce the guarantee in Hong Kong. The business activity for the purpose of which the money was advanced was to take place in United States of America. It seems to me that there is no ground for supposing that the people responsible for this arrangement had any intention other than that the agreement should be regarded as being most closely connected with Hong Kong, so that Hong Kong Law, in the absence of any specific provision in the agreement, will apply.
15. It is asserted by the 2nd Defendant that before the agreement was signed, he was told by the Plaintiff that he was only to be a guarantor for the principal sum. It is submitted on his behalf that there was a collateral agreement and that when the two agreements are read together, he should not be held to be a guarantor of the interest or at least that there is an arguable case that that is his position. So far as the material before me is concerned, this assertion was made by the 2nd Defendant for the first time in an affidavit made on the 13th June 1995. It is inconsistent with the wording of the written agreement; it is inconsistent with the correspondence which has taken place between the 2nd Defendant and the Plaintiff over the years up to now, and I am satisfied that this late assertion is a late invention and wholly incredible. One cannot imagine why if there had been such an agreement the Defendant would have put his name to the written agreement or proceeded over the years on the basis that he was a guarantor simpliciter without ever mentioning that he only regarded himself as liable to guarantee the repayment of principal.
16. In Bhagwandas Kewaleram Murjani and Others v. Bank of India [1990] HKLR, 586, the Court of Appeal held that:
“The mere assertion of a fact in an affidavit does not necessarily give leave to defend, Order14, r.3 puts an onus upon a Defendant. It might be described as a threshold onus to show that there is a triable issue in the case. That onus can only be satisfied on the balance of probabilities. The Court will test the credibility of an affidavit asserting a triable issue against the conduct of the Defendant and contemporary documents.”
17. The Defendant here has failed to discharge that threshold onus: He has failed to show that there is a triable issue in the case. I find that there is no fair or reasonable probability of the Defendant having a real and bona fide defence. Apart from what appears to be the late invention of allegations of fact, the points taken are clearly an attempt to delay recovery by the Plaintiff of money due to it under the guarantee. Having regard to the great patience displayed by the Plaintiff before bringing proceeding, it seems to me that it is time for the delay to end. There will be judgment for the Plaintiff for the sums claimed. There will be an order that the Plaintiff’s costs of and occasioned by this application be taxed if not agreed and paid by the 2nd Defendant.
| (D.J. Leonard) |
Mr. Au-Yeung Kwan instructed by M/s. Gary Mak & Co. for the Plaintiff.
Mr. Albert Tsang instructed by M/s. Y.C. Lee & Pang for the 2nd Defendant.