LIMING CAPITAL LTD AND ANOTHER v. YEUNG HEI KWAN, JACKIE

HCA 1818/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1818 OF 2008

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J U D G M E N T

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I.       INTRODUCTION

1.  The Plaintiffs provide financial advice and help raise venture capital.

2.  In June 2007 Mr Ng Man Sun of A-Max Entertainment Holdings Ltd. (a listed company) engaged Ms Yeung to help place A-Max shares with investors.  Ms Yeung was promised a commission of 3% on the capital raised by A-Max through the placement exercise.  Mr Ng may have unilaterally reduced the promised commission to 1.5% at a later stage.

3.  The Plaintiffs claim that in June 2006 Mr Weber (either acting on his own or on behalf of Liming) orally agreed with Ms Yeung to share equally all profits and commissions deriving from business deals and projects that they successfully procured through their joint efforts.  The Plaintiffs further contend that in June 2007 Mr Weber (again either acting on his own or on behalf of Liming) orally agreed to help place A-Max shares with investors.  It is the Plaintiffs’ case that, in return for Mr Weber’s assistance, Ms Yeung would pay half of the commission which A-Max would pay to her.

4.  Mr Weber having assisted Ms Yeung in the placement of A-Max shares and A-Max having raised $2 billion through that exercise, the Plaintiffs sought payment of $30 million ($2 billion x 3% x 0.5) commission from Ms Yeung.  Ms Yeung did not pay that amount to the Plaintiffs.  The Plaintiffs accordingly claim some $30 million in total in this action.

5.  After persistent enquiries from Mr Weber, Ms Yeung deposited a Citibank cheque dated 15 July 2008 for $6,917,074 into Mr Weber’s HSBC bank account as part payment of the requested commission.  However, she countermanded the cheque and no money was paid.

6.  The Plaintiffs pressed for payment.  As a result, on 8 August 2008 Ms Yeung entered into an “Ancillary Agreement” with Mr Weber (acting on his own or on behalf of Liming).  By that document, Ms Yeung agreed to pay $7,917,074 to the Plaintiffs by 12 August 2008.  The Ancillary Agreement stated that the agreed amount represented $11 million (half of the $22 million which Ms Yeung then claimed to have so far received as commission for the placement of A-Max shares) less $3,082,926 (an amount which Mr Weber acknowledged was due from him to Ms Yeung).  Ms Yeung failed to pay the $7,917,074.

7.  The Plaintiffs now seek partial judgment for the $7,917,074 stipulated in the Ancillary Agreement or, alternatively, for the $6,917,074 due under the cheque.  The Plaintiffs failed to obtain judgment before the Master.  They appeal against the Master to this Court.

II.      DISCUSSION

8.  Mr Francis Haddon-Cave (appearing for Ms Yeung) submits that the Plaintiffs are not entitled to summary judgment for the following reasons:-

(1)     Mr Weber and Ms Yeung were lovers.  Their relationship militates against their having entered into a legally binding contract to share commission.

(2)     After Mr Ng apparently reduced Ms Yeung’s commission to 1.5%, Mr Weber ended his intimate relationship with Ms Yeung.  Ms Yeung delivered the cheque to Mr Weber “in escrow,” that is, on the condition that the cheque would only be payable if Mr Weber were to “return to her”.  When Ms Yeung realised that the condition precedent would never materialise, she cancelled the cheque as she was entitled to do.

(3)     The Ancillary Agreement was signed by Ms Yeung under pressure from Mr Weber and under the mistaken impression on Ms Yeung’s part that Mr Weber would be returning to her.  Thus, Ms Yeung having entered into the Ancillary Agreement in reliance upon Mr Weber’s false representation that he would return to her, the Ancillary Agreement is void or voidable.

9.  I do not think that the reasons advanced by Mr Haddon-Cave constitute arguable defences.

A.      1^st Ground: Mr Weber and Ms Yeung were lovers

10.  Assume that Mr Weber and Ms Yeung were previously lovers.

11.  I do not see why such a relationship means that they did not enter into any legally binding contract to share commission.  On the contrary, Ms Yeung’s denials of a contractual relationship for the sharing of commission between herself and Mr Weber are not credible.  The denials fly in the face of e-mails passing from Ms Yeung to Mr Weber explicitly acknowledging the existence of an agreement to share commission and promising to transfer monies to Mr Weber accordingly.

12.  For instance, there is the following exchange of e-mails between Ms Yeung and Mr Weber on 24 September 2008:-

(1)     From Ms Yeung:-

“I never said that I’m not paying you but I will pay half of what I received from Mr Ng.  You are creating too much work for everyone.”

(2)     From Mr Weber:-

“What have you received? And when?”

(3)     From Ms Yeung:-

“I have only received 28 m from Mr Ng and that supposed to be split 50/50.  I don’t understand why you are claiming me 30m just for yourself.  I will be paying you what you should get latest on next Thursday but if you are insisted to take court action it will be much more work for us.”

(4)     From Mr Weber:-

“[U]nfortunately can’t believe anything you’re saying anymore.  would have been easier if you cooperated.”

(5)     From Ms Yeung:-

“If you insist to claim me 30 m then I will fight til the end but again I will pay you what you should be getting which is 50% of what I received from Mr Ng.”

13.  Ms Yeung in her affidavit evidence suggests that, far from being an admission of liability, all the exchange of e-mails shows is that:-

“I was prepared to share some of the proceeds of my business dealings and/or gambling proceeds with him because I valued our personal relationship.  However, when it came clear to me after the signing of the Ancillary Agreement that he was not interested in myself or our relationship but only the money I had no reason to wish to continue doing so.”

14.  But I do not accept Ms Yeung’s gloss of the e-mails which I have quoted.  Having read through her e-mail exchanges with Mr Weber, I do not think that what she says is believable.  In particular, someone who “values a personal relationship” does not normally talk about “fighting until the end” if the other person goes to Court and claims $30 million.  Nor does a person who is simply “sharing” proceeds out of deep affection for some other usually refer to an intention only “to pay you what you should be getting which is 50% of what I received from Mr Ng”.

15.  In my view, in her e-mail correspondence, Ms Yeung unequivocally confirmed the existence of an agreement at least to share commission received by her from A-Max with Mr Weber on a 50-50 basis.

B.      2^nd Ground: Cheque subject to condition precedent

16.  The amount of the cheque was calculated on the basis of an assumed total receipt by Ms Yeung from A-Max at the relevant time of $20 million commission.  Half of $20 million gives $10 million.  Subtracting $3,082,926 (acknowledged by Mr Weber as owing from him to Ms Yeung) gives the amount of the cheque.

17.  Given such precise calculation (including the set-off of the amount owing from the Plaintiffs to Ms Yeung), I agree with Mr Norman Nip (appearing for the Plaintiffs) that it is hard to see how the cheque could only have been delivered in escrow subject to the alleged condition precedent.

18.  There is no reference to the alleged condition in the parties’ e-mail correspondence.  Indeed the delivery of the cheque subject to a condition is not pleaded in Ms Yeung’s Defence and is not mentioned in her affidavit evidence in these proceedings.  Mr Haddon-Cave’s submission is thus unsupported by anything.

19.  In actuality, the parties’ e-mail correspondence suggests the opposite, namely, that the cheque was not delivered to Mr Weber subject to any condition.

20.  Ms Yeung paid the cheque into Mr Weber’s HSBC account in Hong Kong, Mr Weber being in Switzerland at the time.  But Ms Yeung countermanded the cheque on the same day as when it was issued.  Accordingly, no money was credited to Mr Weber’s HSBC account.  When Mr Weber asked why the cheque bounced, Ms Yeung claimed that there must have been been some mix-up between HSBC and Citibank.  Mr Weber then asked that Ms Yeung transfer the money directly to his account.  Ms Yeung e-mailed back to say that she would investigate.  She wrote: “Don’t worry will find out reason and sure you will get your money.”

21.  Not only does Ms Yeung fail to mention the alleged condition precedent in her e-mails, but following the dishonour of her cheque she agrees to transfer the money directly and unconditionally to Mr Weber’s account once she clears the supposed bank mix-up.  This is odd.  Surely, if payment of the cheque amount was only subject to certain terms, Ms Yeung would have refused any direct transfer unless the alleged condition were met.

22.  No attempt is made by Ms Yeung to explain in her affidavit evidence why she was apparently prepared to transfer money directly and immediately, if (as she maintains) payment was all along subject to some condition.  Ms Yeung simply does not condescend to any particulars as to how, when and where the alleged condition precedent was communicated to Mr Weber.

23.  I therefore find the suggestion that the cheque was only payable subject to some condition to be incredible.

24.  Mr Weber was the payee of the cheque.  He is in possession of the same because HSBC forwarded the cheque to him following dishonour.  It follows that Mr Weber is a “holder” of the cheque.  See Bills of Exchange Ordinance (Cap. 19) (BEO), s. 2.

25.  There is a suggestion that Mr Weber’s claim under the cheque is not supported by sufficient consideration.  There is nothing in such suggestion.  The cheque was made out in part payment of a debt arising from the agreement between Mr Weber and Ms Yeung to share commission.  That is valid consideration for the cheque.  See BEO s. 27(1).  In relation to the cheque, as against Ms Yeung, Mr Weber must be a “holder for value”.  See BEO s. 27(2).

26.  For the foregoing reasons, Ms Yeung’s defence against the cheque fails.

C.      3^rd Ground: Ancillary Agreement subject to condition precedent

27.  The Ancillary Agreement does not refer to any condition precedent.

28.  On the contrary, it recites that Mr Weber and Ms Yeung “agreed to share all Revenues and Commissions from the various transactions and deals they work on together in an equal way i.e. 50% for each party”.  It declares that Ms Yeung has “so far received 22 million hk$ from Mr Ng Man Sun in cash at a rate of about $2 million hk$ every time [Ms Yeung] visits Macau since the beginning of 2008”.  It then states that Ms Yeung will transfer the agreed amount of $7,917,074 by 12 August at the latest.  The manner in which the agreed amount has been arrived at is also set out.

29.  Finally, the Ancillary Agreement provides in cl. 9 that:-

“This Agreement represents the entire understanding of the parties with respect to the subject matter hereof and supersedes all previous understandings, written or oral.  This Agreement may only be amended with the written consent of the parties hereto, or the successors or assigns of the foregoing, and no oral waiver or amendment shall be effective under any circumstances whatsoever.”

30.  In light of the entire agreement provision in cl. 9, it is difficult to see how Ms Yeung can rely on an allegation that her performance of the Ancillary Agreement was somehow predicated on Mr Weber’s returning to her.

31.  Again nowhere in the e-mail correspondence between the parties at the time of the Ancillary Agreement does Ms Yeung refer to payment of the agreed amount being conditional upon Mr Weber’s return.  Again nowhere does Ms Yeung condescend to particulars as to how, when and where the alleged misrepresentation by Mr Weber as to his return was made.  Again Ms Yeung’s allegation strikes me as incredible.

32.  There are other difficulties.

33.  Assume that there was some representation by Mr Weber that he would return.  Even on that assumption, I agree with Mr Nip that such representation could not be actionable at law.

34.  First, what does it mean?  It is far too vague.

35.  Second, it relates to future intention, not to present fact.  Only representations as to a present state of affairs are actionable.

36.  Third, even if the representation were construed as a representation that at the time of its making Mr Weber had grounds for believing that he would “return” (whatever that might mean), Ms Yeung has put forward no basis for suggesting that Mr Weber in fact had no such grounds for so believing.

37.  It is difficult to classify the nature of such alleged representation of a present state of affairs.

38.  If it is being suggested that Mr Weber fraudulently (that is, deliberately) deceived Ms Yeung, no evidential or other basis for an allegation of fraud has been adduced.  One cannot make an allegation of fraud without some sound basis.

39.  Mr Haddon-Cave does not go so far as to allege deliberate fraud.  But he faintly suggests that Mr Weber may have been reckless as to whether he had grounds for believing he would return.  Recklessness is not specifically pleaded.  But, in any case, it is hard to see how one can have been “reckless” as to whether there were grounds for believing that one would return.  One either believes that there are grounds for saying one will return or one does not.

40.  For similar reason, it does not really make sense (conceptually or linguistically) to say that Mr Weber negligently or innocently (albeit wrongly) took the view that there were presently existing grounds for saying he would return.  Given what is said to be the misrepresentation of a present state of affairs, this cannot be a case of negligent or innocent misrepresentation.

41.  On analysis, Ms Yeung’s real allegation must (if it is to make sense) be simply that Mr Weber deliberately misled Ms Yeung into believing he would return.  But (as I have noted) there is no evidential or other basis for such allegation of fraud and Mr Haddon-Cave fairly acknowledged that he could not go so far.

42.  At the end, all Ms Yeung appears to be saying then is that, since Mr Weber did not return by 12 August 2008, she did not pay by 12 August 2008 or at all, contrary to her contractual promise.  That, however, is no basis at law for avoiding a contract.

43.  It is suggested that Ms Yeung acted under a unilateral mistake (that is, her belief that Mr Weber would return) when entering into the Ancillary Agreement.  However, such a mistake would not be sufficient to set aside a contract.

44.  For the doctrine of unilateral mistake to operate, there must be a mistake by one party in relation to an essential term of the contract.  Further, it must be shown that the other party knew or ought to have known about the mistaken party’s error.

45.  Assume that the latter condition is met.  There would still be a problem in meeting the first condition.  Here the alleged mistake does not relate at all to a term of the contract.  The Ancillary Agreement nowhere refers to Mr Weber returning or not returning to Hong Kong or Ms Yeung.  The question of return is not a term of the Ancillary Agreement.  Nor can it be regarded as a supplemental term (although only tacitly expressed) in light of the entire agreement provision in cl. 9.

46.  For the foregoing reasons, Ms Yeung’s defences against the Ancillary Agreement also fail.

III.     CONCLUSION

47.  The Plaintiffs’ appeal succeeds.  There will be partial judgment in favour of the Plaintiffs for $7,917,074 (that is, the greater of the amounts due under the Ancillary Agreement and the cheque).  Interest will run on that amount at 1% over prime from 8 December 2008 (the date when Mr Weber was joined as 2^nd Plaintiff) to today.  Thereafter, interest will accrue at the judgment rate until payment.  I will now hear the parties on costs and consequential orders.

HCA1818/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1818 OF 2008

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R U L I N G

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1.  In this matter Mr Haddon-Cave who appears on behalf of the defendant is applying to discharge an ex-parte injunction made by Chu J. on the basis that the plaintiff through its principal witness Mr Weber has been guilty of material non-disclosure.

2.  The fact of the matter is that Mr Weber has failed to disclose in his ex-parte affidavit that he has had a sexual relationship with the defendant and it is said on the defendant’s behalf that this liaison informed very much of their relationship which, of course, spread into their business relationship which has resulted in this action being brought by the plaintiff which employed Mr Weber as its agent.

3.   Against that, it is submitted by Mr Arthur, on behalf of the plaintiff, that whilst Mr Weber accepts that he had a sexual relationship with the defendant it was not as serious as she has suggested and that somehow they were able to keep that side of things quite separate from their business dealings.  I do not think that is a point that can run in these circumstances, even putting aside the fact that their personal relationship may not have been quite as strong as the defendant has suggested, where she indicates in her affirmation that he was allowed to live with her and did live with her for a number of months whilst all of this was going on.  The fact is that this was a very significant piece of evidence which should have been placed before the judge. It is not for the plaintiff to say what is and what is not important.  In these circumstances it is for the ex-parte judge to be informed of all these matters and it is then for that judge to decide what weight to put on that particular evidence.  The fact that it may not have made any difference in the event is also not a matter which really ought to concern me at this stage.  I take the view that this was a material feature of the evidence which ought to have been placed before the ex-parte judge and in these circumstances I propose to discharge the injunction made by Chu J.

4.  This then brings me to the very important issue of whether I should now reinstate the injunction having discharged it in these circumstances.  Mr Haddon-Cave says the matter is so serious that really the plaintiff is not to be indulged again.  Nevertheless, it strikes me that given the whole history of this matter and they were talking about a vast amount of money where there is quite a lot of evidence to indicate that this money has come into the hands of the defendant, a substantial proportion of which should have been passed over to the plaintiff.  Therefore I think that in all the circumstances, I ought to exercise my discretion in the plaintiff’s favour and reinstate this injunction.

5.  I am perfectly satisfied that there is a serious issue to be tried here on all of these matters.   There is a question as to whether -- of course the fundamental question is whether the right plaintiff is before the court, whether it ought to be Mr Weber who is plaintiff  instead of the present plaintiff on whose behalf he is said to have acted.  But be that as it may, on the present material there is a perfectly good case that has been made out that the present plaintiff is the appropriate plaintiff.  It may be that on further consideration those advising the plaintiff may decide that to be on the safe side Mr Weber ought to be joined as second plaintiff, but that is for the future.  There is an agreement, something of a homemade agreement, in writing which is said to be between Mr Weber and the defendant herself.  That will no doubt all come into play at the trial.  The significance of this is that so far as I am concerned today there are a number of admissions, if I can put it in that way, which are contained in that agreement to which the defendant has signed up, and I think these are all significant matters which I ought to take into account in weighing up the evidence as it is currently presented, and so I think it is right that this injunction should be restored until trial or further order. 

6.  That then brings me to a number of exceptions and one of them is the fortification of the injunction.  The plaintiff, which of course is an overseas plaintiff with no assets here at all, has given an undertaking in damages.  But I think there is a real risk that it may turn out to be worthless and so it ought to be fortified.   As matters presently stand, it may need to be looked at again in the future, I would have thought that $250,000 should be sufficient and this fortification ought to be provided within the next seven days.  There is already a substantial amount with the plaintiff’s solicitors and I am told by Mr Arthur, who appears for the plaintiff today, that further amounts have also been remitted to his firm, but $250,000 is to be held by Laracy Gall to the court’s order until further order.

7.  The next matter relates to legal expenses.  There is an issue here which would also bear on the question of fortification, but I think it perhaps has more of a bearing on what I am now coming to which is how much, if anything, should be released to the defendant to pay for her legal expenses.  It is submitted on behalf of the plaintiff that this is very much a proprietary claim.  I think that would need further investigation.  There may well be something in the argument, but I take the view that the more usual course ought to apply in this case which is that the defendant should be at liberty to withdraw as from 1 November, that is from tomorrow, the monthly sum of $25,000 up to a maximum of $250,000.  So what I have in mind therefore is that for the next ten months, she will be able to withdraw $25,000 each month.  I also give her liberty to apply to vary this part of the order upon her showing cause for such variation and that would need to be supported by affidavit and bills of costs and so forth.

8.  I think that is all I need to say save for two other matters, firstly, the very important question of the consequences of my having discharged the ex-parte injunction.  “Mr Arthur, the usual course is that the defendant ought to have her costs; and then there is a question of the committal proceedings. As the injunction has gone, I daresay that those proceedings will have to go as well because they were made under that injunction.  But of course the statement that she has already provided can stand in this injunction, so we do not have to have a repetition of all of that.  Now, did you want to say anything about it because, as you know, the usual course is that the defendant ought to have her costs on the discharge of the injunction.”

(Discussions on costs)

9.  The usual order, and I can see no reason to depart from it,  is that she will have to have her costs in respect of that.  And as to today’s costs which will of course include the bulk of today’s costs, up to the time when I returned to court to deliver my judgment will also be to the Defendant, and then the rest of costs will be costs in the cause which includes the restoration of the injunction.