PENTA INVESTMENT ADVISERS LTD v. ALLIED WELI DEVELOPMENT LTD (formerly known as HENNABUN CAPITAL GROUP LTD)

HCA 1656/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1656 OF 2012

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DECISION
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INTRODUCTION

1. I have before me an application by the defendant (“Hennabun”) by summons dated 13 February 2015 seeking a stay of execution and suspension of the operative effect of my earlier judgment dated 21 January 2015 (“the Quantum Judgment”) pending the determination of its appeal against that judgment to the Court of Appeal.

History of proceedings

2. The basic facts of this case are set out in my reasoned judgment on the issue of liability handed down on 14 October 2014 (“the Liability Judgment”) and I shall not repeat them here.  In that judgment, I granted a declaration that the deed of guarantee dated 24 June 2011 (“the Deed”) entered into between the plaintiff (“Penta”) and Hennabun was binding on Hennabun and enforceable against it by Penta.  I also directed that the amount due to Penta from Hennabun under the Deed, or by way of damages for repudiatory breach thereof, be assessed at a further hearing.

3. On 7 November 2014, Hennabun filed a notice of appeal against the Liability Judgment (CACV 222/2014).  That appeal has been fixed to be heard on 23 and 24 July 2015.

4. The quantum hearing took place on 12 January 2015.

5. On 21 January 2015, I handed down the Quantum Judgment, in which I assessed Penta’s damages for Hennabun’s repudiatory breach of the Deed at HK$210,336,448, and ordered Hennabun to pay that amount to Penta together with interest thereon and costs.

6. On 12 February 2015, Hennabun filed a notice of appeal against the Quantum Judgment (CACV 35/2015).  The date for the hearing of that appeal has not yet been fixed.

7. As earlier mentioned, on 13 February 2015 Hennabun applied for a stay of execution and suspension of the operative effect of the Quantum Judgment pending the determination of its appeal to the Court of Appeal against the Quantum Judgment.

Applicable principles

8. The principles governing an application for a stay of execution of a judgment pending appeal are well established.  The applicant is required to demonstrate a “good reason” for a stay of execution. Generally speaking, the existence of merely an arguable appeal cannot by itself amount to a sufficient reason to justify a stay.  It is the minimum requirement before a court would even begin to consider granting a stay.  In other words, if the court is not convinced that there exist arguable grounds of appeal, no stay will be granted however exceptional the circumstances may otherwise be justifying a stay of execution.  On the other hand, the existence of a strong appeal or a strong likelihood of success will usually by itself enable a stay to be granted because this would constitute a good reason for a stay.  In most cases, where the court is faced with simply the existence of an arguable appeal, it becomes necessary for the applicant to provide additional reasons as to why a stay is justified.  Commonly, this is done by demonstrating that without a stay the appeal would be rendered nugatory, for example, because of an appreciable risk that the respondent to the appeal would not be able to repay in the event of a successful appeal against a money judgment, or because the failure to grant a stay would have a serious deleterious effect on the applicant.  In considering an application for a stay pending appeal, it would be impractical and even undesirable for the court to go deeply into the merits or strengths of the appeal, although the court must still form a preliminary view of these aspects.  For the above principles, see the judgment of Ma J (as he then was) in Stay Play Development Ltd v Bess Fashion Management Co Ltd [2007] 5 HKC 84.

Discussion

9. In what follows, I shall adopt the expressions and abbreviations as defined in the Liability Judgment and Quantum Judgment.

10. Hennabun has not filed any affidavit in support of the present application.  Mr Adrian Bell SC’s has made it clear in his submissions that Hennabun’s stay application is advanced on the sole basis that it has strong grounds of appeal against the Quantum Judgment and a high likelihood of success in the appeal, and the court is not concerned with the question of whether the appeal may be rendered nugatory should it refuse to grant the stay of execution sought.

11. Hennabun’s grounds of appeal against the Quantum Judgment are set out in its notice of appeal dated 12 February 2015. As stated in paragraph 12 of Mr Bell’s skeleton submissions dated 10 April 2015, Hennabun’s argument is that ultimately Penta has suffered no loss.  Two grounds of appeal have been advanced by Hennabun in support of this contention.

12. First, it is said that Penta was able to and did procure a disposal of the Disposal Shares without the need for any prior instruction from Hennabun.  Accordingly, the absence of any such instruction from Hennabun caused no loss to Penta.

13. Second, it is said that even if it were correct that Penta is entitled to claim damages to reflect any difference between the placement price and the ultimate sale price of any Shares, on the true construction of the Deed, Penta was only entitled to claim the Guarantee Amount (as defined in clause 6 of the Deed) if and to the extent that it had suffered some economic loss as a result of itself acquiring and still holding some Disposal Shares as at the Confirmation Date whose value had fallen below the placement price under the Share Placement.  However, as Penta had not acquired any Shares, it had suffered no loss.

14. As for the first ground of appeal, the short answer, it seems to me, is that the failure of Hennabun to give instruction to Penta to dispose of the Disposal Shares pursuant to clause 5 of the Deed led, directly, to Penta’s inability to recover the Guarantee Amount as calculated under clause 6 of the Deed.  I am unable to see how it can be said that the absence of such instruction from Hennabun caused no loss to Penta.

15. As for the second ground of appeal, which is more substantial, Mr Charles Manzoni SC complains that Hennabun’s argument, in the way in which it is now being put, namely, that Penta has not suffered any economic loss, is a new point, and that had Hennabun properly raised this argument at the trial Penta would have adduced evidence as to the nature of the loss that Penta had suffered.  Whether this ground raises a new point is debatable. In any event, whether Hennabun should be permitted to raise this ground in the appeal is a matter for the Court of Appeal to decide.

16. In so far as the merits of this ground is concerned, Mr Manzoni relies on clauses 1, 4 and 7 of the Deed which seem to me to clearly indicate that, objectively speaking, it was contemplated by the parties that the Shares would, or might, be subscribed by Penta for or on behalf of “funds” that it managed instead of by Penta itself as principal.  Mr Manzoni submits that Hennabun has, at best, an “arguable” appeal, ie one with a reasonable prospect of success as explained in paragraph 9(6) of Ma J’s judgment in Stay Play Development Ltd.  For the purpose of the present application, I am content to proceed on the basis that Hennabun’s appeal is “arguable” in the above sense, but I am unable to accept that Hennabun has strong grounds of appeal against the Quantum Judgment or a high likelihood of success in the appeal.

17. In all, I do not consider that any good reason has been shown for a stay of execution.  Accordingly, I dismiss Hennabun’s summons dated 13 February 2015 with costs to Penta.

HCA 1656/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1656 OF 2012

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J U D G M E N T

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1.  On 14 October 2014, I handed down my judgment on liability (“the Judgment”). I granted a declaration that the deed of guarantee dated 24 June 2011 (“the Deed”) was binding on the defendant (“Hennabun”) and enforceable against it by the plaintiff (“Penta”), and I directed that the amount due to Penta from Hennabun under the Deed, or by way of damages for repudiatory breach thereof, be assessed at a further hearing (“the quantum hearing”).

2.  The basic facts of this case were set out in the Judgment and I shall not repeat them here. 

3.  Subsequent to handing down of the Judgment, I gave directions to the parties for the quantum hearing, including the filing of witness statements by the parties.  Pursuant to those directions, Penta filed a witness statement of Vui Ling Leong dated 27 November 2014, and Hennabun filed a supplemental witness statement of William Pak dated 3 December 2014. 

4.  The quantum hearing took place on 12 January 2015. At the commencement of that hearing, I was informed by counsel that the parties agreed that the witness statements could be adduced as evidence without cross examination.  On that basis, the parties made submissions on the issue of quantum based on the uncontested evidence, in particular that of Vui Ling Leong. 

5.  Penta’s primary case is that it is entitled to be paid the sum of HK$210,366,448 by Hennabun, which sum represents the guarantee amount as calculated pursuant to clause 6 of the Deed. Penta’s alternative case is that the damages for Hennabun’s breach of the Deed should be assessed at HK$210,366,448.  

6.  On the other hand, Hennabun argues that it repudiated the Deed by refusing to comply with any of its obligations under the Deed as from 6 February 2012, and Penta’s decision to procure the disposal of the “Remaining Shares” amounted to an unequivocal election to accept the repudiation.  The consequence, according to Hennabun, is that Penta is not entitled to any remedy under the Deed, but is limited only to a remedy in damages (if any).  Hennabun further argues that, on the facts of the present case, Penta has suffered no loss whatsoever, and thus it is not entitled to any award of damages. 

7.  This is my judgment on the issue of quantum. 

Penta’s claim for amount due under the Deed

8.  To put Penta’s evidence on quantum in context, it is necessary first to refer to certain relevant provisions of the Deed. 

9.  Clause 5 of the Deed states as follows:-

“After the Confirmation Date, [Hennabun] can instruct [Penta] to dispose of the Remaining Shares either on the stock exchange maintained by The Stock Exchange of Hong Kong Limited or to a designated party or parties (including giving instructions on the price or price range at which to dispose), provided that [Hennabun] must ensure that [Penta] will have disposed of all the Remaining Shares by the 30^th day after the Confirmation Date (including that date) (the ‘Final Disposal Date’). [Penta] shall use its reasonable endeavours to follow the instructions given by [Hennabun] under this Clause.”

10.  Clause 6 of the Deed goes on to state as follows:-

“The guarantee amount (the ‘Guarantee Amount’) will be calculated using the following formula:-

(Disposal Shares*A) – B

where:-

A = placement price per Mascotte share under the Share Placement + HK$0.10

B = gross disposal proceeds (before deducting brokerage, stamp duty and other expenses in connection with the disposal) from disposing the Disposal Shares pursuant to Clause 5 of this Deed

provided that if, on or prior to the Final Disposal Date, Mascotte consolidates or sub-divides its shares, the above-mentioned formula shall if necessary be adjusted so that the economic benefit enuring to [Penta] pursuant to the guarantee of investment return under this Deed shall remain the same had no such consolidation or sub-division in fact occurred.”

11.  Clause 7 of the Deed provides that Hennabun shall pay the Guarantee Amount to Penta, or pursuant to payment instructions provided by Penta designating the funds and managed accounts advised by Penta, within 5 business days (excluding Saturdays and public holidays in Hong Kong) from the Final Disposal Date, provided that Hennabun will not have any payment obligation to Penta under this clause if the Guarantee Amount calculated pursuant to the formula in clause 6 is zero or negative. 

12.  The following facts and matters appear from the witness statement of Vui Ling Leong:-

(1) Penta did not itself subscribe for any of the 550 million Mascotte shares pursuant to the Placing Commitment Letter dated 24 June 2011.  Instead, the shares were subscribed for by various “funds” managed by Penta, and were deposited into a number of custodian accounts maintained with Goldman Scahs International and UBS.

(2) The placement price per Mascotte share under the share placement was HK$0.404032.

(3) It follows that Amount A under clause 6 of the Deed shall be (HK$0.404032 + HK$0.10) = HK$0.504032.

(4) By a letter dated 10 January 2012, being the 180^th day after the completion of the share placement (ie the “Confirmation Date” as defined in clause 4 of the Deed), Penta informed Hennabun that:-

(a) the number of “Remaining Shares” (as defined in clause 4 of the Deed) still held in the “Designated Account” (as defined in clause 1 of the Deed) was 481,564,000, and

(b) it elected not to hold onto any of the 481,564,000 Remaining Shares.

Accordingly, those 481,564,000 Remaining Shares constituted the “Disposal Shares” for the purpose of clause 4 of the Deed.

(5) In the said letter of 10 January 2012 (as well as in a further letter dated 10 February 2012), Penta requested Hennabun to give instruction for the disposal of the Disposal Shares pursuant to clause 5 of the Deed.

(6) Hennabun did not give any instruction to Penta regarding the disposal of the Disposal Shares.  By letters dated 6 February 2012, 13 February 2012 and 28 February 2012 respectively, Hennabun denied that it was bound by the Deed.

(7) Given Hennabun’s refusal to give instruction for the disposal of the Disposal Shares, during the period from 17 February 2012 to 2 April 2012, Penta proceeded with the sale of the 481,564,000 Disposal Shares, which yielded a total gross consideration of HK$32,357,218.40 (“the Sale Proceeds”).

13.  The evidence of William Pak confirms that Penta was not the actual subscriber of the Mascotte shares. 

14.  Penta claims that, applying the formula in clause 6 of the Deed, the Guarantee Amount shall be:

  (481,564,000 x HK$0.504032) - HK$32,357,218.40

  = HK$210,366,448

15.  It may be noted that in the above calculation, Penta has treated the amount of the Sale Proceeds arising from the disposal of the Disposal Shares carried out by Penta during the period from 17 February 2012 to 2 April 2012 as Amount B in the formula set out in clause 6 of the Deed. 

16.  However:-

(1) “Amount B” is defined to mean the gross disposal proceeds from disposing the Disposal Shares “pursuant to Clause 5 of the Deed”; and

(2) clause 5 envisages that the Disposal Shares would be sold pursuant to instruction given by Hennabun within a period of 30 days after the Confirmation Date (ie 10 January 2012).

17.  As a matter of fact, the Disposal Shares were not sold pursuant to any instruction given by Hennabun.  Neither were they sold within the period of 30 days after the Confirmation Date. 

18.  Mr Charles Manzoni SC (for Penta) argues, nevertheless, that the amount of the Sale Proceeds should be treated as Amount B for the purpose of clause 6 of the Deed, because:-

(1) The word “can” in clause 5 of the Deed is “permissive”, in that it allows Hennabun, once notified of Penta’s wish not to retain all or part of the Remaining Shares, to provide instruction as to the manner of disposal of those shares, but does not mandate that Hennabun must do so.

(2) As a corollary of this, in the event that (as here) Hennabun decides not to give instruction, Penta is at liberty to dispose of the Remaining Shares in respect of which it has notified Hennabun of its election not to retain, with the effect that the shares so disposed of by Penta would constitute the Disposal Shares, and the gross proceeds from such disposal would constitute the Gross Disposal Proceeds for the purpose of clause 6 of the Deed.

19.  I am unable to accept Mr Manzoni’s submission that the word “can” should be read in the “permissive” sense, such that Hennabun is given a choice of whether to give instruction to Penta to dispose of the Disposal Shares in accordance with clause 5 of Deed.  It seems to me that clauses 5 and 6 of the Deed are intended to lay down an agreed mechanism for the disposal of the Disposal Shares and, more importantly, the ascertainment of the amount payable by Hennabun to Penta under the Deed.  Hence, it would be unreasonable, and contrary to the commercial purpose of the Deed, to regard clause 5 as giving Hennabun a choice whether to give instruction to dispose of the Disposal Shares. 

20.  In my view, clause 5 of the Deed should be read as imposing a contractual obligation on Hennabun to give instruction for the disposal of the Disposal Shares in accordance with the provisions of that clause.  As it happened, Hennabun refused to do so, thereby committing a repudiatory breach of the Deed and entitling Penta to a claim for damages. 

21.  If I am wrong in my construction of clause 5 of the Deed (in other words, the word “can” confers on Hennabun a choice whether to give instruction for the disposal of the Disposal Shares), I would be attracted by Mr Manzoni’s submission mentioned in paragraph 18 above so that the agreed mechanism under clauses 5 and 6 may be carried into effect in the event that Hennabun fails or refuses to give instruction.  Such result may be achieved either by an implied term or upon the true construction of clauses 5 and 6 of the Deed.  However, given my construction of clause 5 of the Deed, I would rest my judgment on the basis that Penta is entitled to claim damages for Hennabun’s repudiatory breach of the Deed. 

Penta’s claim for damages

22.  In my view, Hennabun acted in breach of the Deed by refusing to give instruction for the disposal of the Disposal Shares. The breach occurred when Hennabun made it clear, by letter dated 6 February 2012, that it regarded the Deed as not binding on it. 

23.  Subject to Hennabun’s contention that the Deed is not binding on it (which I understand is an issue which Hennabun will pursue in its appeal to the Court of Appeal), Hennabun accepts that it acted in repudiatory breach of the Deed by refusing to comply with any of its obligations under the Deed as from 6 February 2012.  Even if I am wrong in my construction of clause 5 of the Deed and also wrong in my view that Hennabun breached the Deed by refusing to give instruction for the disposal of the Disposal Shares, as can be seen from paragraphs 9 and 13 of the skeleton submissions of Mr Adrian Bell SC (for Hennabun) dated 7 January 2015, Hennabun accepts that Penta is, in principle, entitled to a remedy in damages but argues that Penta should not be awarded any damages because the loss (if any) has been suffered by the investors and not by Penta. 

24.  I may add that the parties disagreed on whether Penta had accepted Hennabun’s repudiatory breach of the Deed.  It does not seem to me that the resolution of this issue has any consequence for the present purpose.  The reason is that the effect of an acceptance of repudiation is simply that the parties are discharged from further performance of their obligations under the contract which each has still to perform, and the innocent party may bring an action for damages: see Johnson v Agnew [1980] 367 at 392E-393E, per Lord Wilberforce.  It is important to appreciate that an acceptance of a repudiatory breach does not affect rights which have already accrued, including the right to claim damages for any breach of contract committed prior to the date of acceptance of the repudiation. 

25.  The measure of damages for a breach of contract is well established: the innocent party is to be placed, in so far as money can do so, in the same position as if the contract had been performed: see Johnson v Agnew [1980] 367 at 400H, per Lord Wilberforce.

26.  Had the Deed been duly performed by Hennabun, Penta would have been paid the amount calculated in accordance with the formula in clause 6 of the Deed.  Although Amount B in that formula can no longer be precisely ascertained now, assessment of damages is not an exact science.  I regard the amount of the Sale Proceeds as a reasonable estimate for Amount B. 

27.  In all, I assess the damages for Hennabun’s breach of the Deed at HK$210,366,448, and order Hennabun to pay to Penta the sum of HK$210,366,448 by way of damages, together with interest thereon for the period from 6 February 2012 to the date of this judgment at the interest rate of 2.5% per annum: see Waddington Ltd v Chan Chun Hoo Thomas and Others (No 2) [2014] 4 HKC 356. 

28.  I also make an order nisi that Penta shall have the costs of the quantum hearing (including the costs of preparation of the witness statement of Vui Ling Leong), to be taxed if not agree. 

HCA 1656/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1656 OF 2012

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J U D G M E N T

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Introduction

1.  This is the trial of an action brought by the plaintiff against the defendant for an amount due under a deed of guarantee dated 24 June 2011 (“the Deed”), or for damages for repudiatory breach of the Deed by the defendant.

2.  The main issue for determination in this trial is whether the Deed was properly executed by or on behalf of the defendant and thus binding on it.  In the event it is found that the Deed is binding on the defendant, the plaintiff claims to be entitled to recover from the defendant the amount of HK$210,552,524 under the Deed or by way of damages, together with interest thereon and costs.  There is a dispute between the parties as to whether, subject to the question of liability being established against the defendant, the amount of the plaintiff’s claim has been admitted by the defendant in its Defence.  I shall come back to this issue later after I have considered the question of liability.

Background facts

3.  The plaintiff, Penta Investment Advisers Ltd (“Penta”), is a company incorporated in the British Virgin Islands with its principal place of business in Hong Kong and carries on business as a hedge fund manager.  It was established by Mr John Zwaanstra (“Mr Zwaanstra”) in 1998, who is its chief investment officer.  Mr John Pridjian (“Mr Pridjian”) is a director and chief financial officer of Penta.

4.  Penta operates in conjunction with Old Peak Limited (“OPL”), a sub‑adviser of Penta which provides investment research and advice, back‑office and administrative services to Penta.  Mr Ming Sun Wan (“Mr Wan”) is an analyst at OPL and reports to Mr Zwaanstra.

5.  The defendant, Allied Weli Development Limited (formerly known as Hennabun Capital Group Limited) (“Hennabun”), was incorporated in the British Virgin Islands in 1996.  Its principal place of business is in Hong Kong.  It is an investment holding company and its subsidiaries are engaged in a broad range of activities in the financial services industry including commodities dealing, investment advice, proprietary trading, securities brokerage, fund management, research and analysis, money lending and investment holding.  One of its wholly owned subsidiaries is called Chung Nam Securities Limited (“Chung Nam”), a company incorporated in Hong Kong whose principal activities are securities brokerage and financial services.

6.  Between 2009 and 2012, Ms Cindy Liao Miao Ling (“Ms Liao”) was the permanent managing director of Hennabun.

7.  Ms Tong So Yuet (“Ms Tong”) was at all material times and is the company secretary of Hennabun, having custody of the common seal of Hennabun.

8.  Mr Eugene Chuang (“Mr Chuang”) was the former permanent managing director of Hennabun, being so named in article 71A of Hennabun’s articles of association, until the time when Ms Liao was appointed in his stead.

9.  Mr William Pak (“Mr Pak”) was formerly a director of Hennabun until December 2010.  He was, at the time of execution of the Deed in or about June 2011, employed by Chung Nam as a compliance consultant.  He was admitted to the New York Bar and briefly worked in New York as a lawyer prior to coming to work in Hong Kong in 2007.

10.  In Hennabun’s audited financial statements for the year ended 31 December 2009, it was stated that in the opinion of its directors, the ultimate parent of Hennabun was “Freeman Corporation Limited”, a company incorporated in the Cayman Islands and listed on The Stock Exchange of Hong Kong Limited.

11.  According to a corporate chart of the Hennabun group dated 23 June 2011, “Freeman Financial Corporation Limited”, a Cayman Islands company listed on The Stock Exchange of Hong Kong Limited with the Stock Code of 279, held a 30.30% shareholding interest in Hennabun directly, and also a smaller stake in Hennabun through another company called Cordoba Homes Limited.  I take it that the reference to “Freeman Corporation Limited” in Hennabun’s aforesaid audited financial statements was intended to be a reference to “Freeman Financial Corporation Limited” (hereinafter referred to as “Freeman”).  For the present purpose, it does not matter whether Freeman was strictly speaking the parent company of Hennabun at the time of execution of the Deed in or about June 2011.  There is no dispute that Freeman was a major shareholder of Hennabun at that time.

12.  Mr Qunicy Hui Kwong Hei (“Mr Hui”) is, and all the material times was, the managing director of Freeman.  Mr Hui is also a qualified solicitor in Hong Kong, having obtained his qualification in 1999, and previously worked for Linklaters, Deutsche Bank, and Credit Suisse before joining Freeman in 2010.

13.  Mr Andrew Liu (Mr Liu”) was a major shareholder and non‑executive director of Freeman.  He is from the Liu family in Hong Kong with connection to Chong Hing Bank.  Mr Liu is also the chief executive officer of Unitas Capital Pte Limited (“Unitas”), a private equity firm in which he has an interest.

14.  The background giving rise to the Deed was an earlier investment made by Penta in Freeman in early 2011.  This investment was discussed at (inter alia) a meeting in December 2010 at which Mr Zwaanstra, Mr Wan and one Mr Max Guglielmucci (representing Penta) and Mr Liu and Mr Hui (representing Freeman) were present.  According to Mr Zwaanstra and Mr Wan, Mr Chuang was also present at that meeting, but Mr Hui is unable to recall whether Mr Chuang was present.  Eventually, Penta subscribed for 500 million shares in Freeman at HK$0.275 per share.  Although Freeman’s share price initially went up after Penta’s investment, for reasons which it is not necessary to go into in this judgment, Freeman’s share price fell significantly afterwards, and Penta had suffered a heavy loss by May 2011.

15.  In May 2011, there were two lunch meetings at Sevva restaurant in Hong Kong between Mr Zwaanstra, Mr Wan, Mr Liu, Mr Hui and Mr Chuang to discuss the fall in Freeman’s share price and Penta’s loss.  It was in the course of those meetings that the opportunity for Penta to invest in Mascotte Holdings Limited (“Mascotte”), a company listed on The Stock Exchange of Hong Kong Limited, was raised by Mr Liu and/or Mr Hui, who presented this potential investment as an opportunity for Penta to recoup the loss or part of the loss that it had suffered in the previous investment in Freeman.

16.  At that time, Mascotte was seeking to raise capital to invest in a polysilicon project in Taiwan by way of placement of 5,000,000,000 new shares of HK$0.10 each.  Deutsche Bank AG, Hong Kong Branch was the principal placing agent, and Chung Nam was one of the sub‑placing agents for this placement exercise.

17.  There was also a meeting in May 2011 at OPL’s office at which representatives of Mascotte were present to present to Mr Wan its proposed investment in the polysilicon project and the proposed placement of its shares.  Mr Hui was present at that meeting.  According to Mr Wan, Mr Liu was also present at that meeting.  On the other hand, according to Mr Hui, it was Mr Pak who was present at the meeting (instead of Mr Liu).

18.  Penta was prepared to subscribe for 550 million shares in Mascotte at the price of HK$0.40 each.  However, in view of the loss that it had suffered in the Freeman investment, Penta wished to have a degree of comfort and protection included in the terms of the Mascotte investment to protect it from further losses and to reassure it as to future recoveries.  Various options were explored, including a guarantee to be given by Mr Liu personally or by his company, Unitas. However, neither Mr Liu nor Unitas was prepared to act as guarantor.  Eventually, Mr Hui proposed to Mr Wan that Hennabun would act as the guarantor.  After carrying out a due diligence on Hennabun, Penta agreed to accept Hennabun as the guarantor.

19.  The drafting and negotiation of the terms of the Deed were handled by Mr Wan and Mr Pridjian on behalf of Penta and Mr Hui and Mr Pak apparently on behalf of Hennabun.  I say “apparently” because it is Hennabun’s case that neither Mr Hui nor Mr Pak was acting on behalf of Hennabun, and that they “took it upon themselves to draft the guarantee for Penta’s benefit in the expectation, or hope, that [Hennabun] would agree” (see paragraph 25 of the written opening of Mr Adrian Bell SC for Hennabun).  I shall come back to this issue later in this judgment.

20.  On 24 June 2011, Penta signed a Placing Commitment Letter, agreeing to subscribe for 550 million shares of Mascotte at the placing price of HK$0.40 per share for a total consideration of HK$222,437,600 (inclusive of stamp duty, SFC transaction levy, trading fee of The Stock Exchange of Hong Kong and brokerage fee).  Subsequently, Penta was allocated the full amount of the subscription and paid the said consideration accordingly.

21.  On 27 June 2011, Mr Pridjian signed a copy of the Deed (undated and unsealed) and sent a PDF version of it by email to Mr Pak for execution by Hennabun.  Mr Pridjian placed his signature in a space underneath the words “In the presence of”, and also initialled at the bottom right hand corner of each of pages 1 to 5 of the Deed (consisting of a total of six pages).  The space where Mr Pridjian placed his signature was, on the face of it, intended to be signed by the person who witnessed Mr Pridjian’s execution of the Deed.  However, Mr Pridjian’s evidence, which I accept, is that he did not consider that the execution of the Deed required witnessing since it was signed by a director (and, as mentioned below, sealed with the common seal of each of the parties in the duplicate originals of the Deed), and he put his signature in the place intended for the witness by mistake.  He also said that the provision for a witness in the signature block was superfluous and should have been deleted prior to execution.

22.  On 28 June 2011, Mr Pridjian sent an email to Mr Pak stating as follows: “When do you think that you can send me a PDF of your counter‑signed copy while the hard copy originals are being circulated?”

23.  On the same date, Mr Pak replied by email to Mr Pridjian stating as follows: “I’ve passed the execution copies to the directors of Hennabun, and they will have their meeting today and execute. We’ll update you on the timing.”

24.  According to Mr Pak, he asked his secretary to print and deliver a copy of the Deed (signed by Mr Pridjian) to Ms Cathy Lam (“Ms Lam”), the personal assistant to Ms Liao, for execution by Ms Liao.  Ms Liao signed on the copy of the Deed underneath the words “In the presence of”.  The executed copy of the Deed was returned by Mr Pak to Mr Pridjian by email on 28 June 2011.

25.  Later, Mr Pridjian signed two duplicate originals of the Deed.  Penta’s seal was affixed on the two documents, which were then sent by courier and received by Mr Pak on or about 3 July 2011.  Mr Pak arranged for the two duplicate originals of the Deed to be signed by Ms Liao as on the previous occasion, and Ms Liao signed them, again underneath the words “In the presence of”.  Mr Pak then requested Ms Tong, the company secretary of Hennabun who had custody of the common seal of Hennabun, to affix the seal on the two documents.  Ms Tong agreed, and gave the seal to a staff member to attend to Mr Pak’s request.  It would appear that the actual sealing of the two documents was carried out by either the staff member or Mr Pak’s assistant.  In any event, Mr Pak arranged for the one of the duplicate originals of the Deed, signed by Ms Liao and bearing the common seal of Hennabun, to be returned to Penta on or about 12 July 2011.

26.  The Deed was dated 24 June 2012, the same date of the Placing Commitment Letter signed by Penta.

27.  For the purpose of this judgment, it is not necessary for me to set out the detailed provisions of the Deed, save to mention that the effect of the Deed, in substance, is to oblige Hennabun to make good to Penta the difference between (i) HK$0.50 times the number of Mascotte shares remaining in the hands of Penta on the 180^th day after completion of the share placement which Penta elected not to continue to hold (“the Disposal Shares”) and (ii) the gross proceeds of sale of the Disposal Shares.

28.  As it was, the share price of Hennabun fell after the share placement.  Penta decided to call upon Hennabun to honour its obligation under the Deed by a letter dated 10 January 2012.  The number of Mascotte shares remaining in the hands of Penta at that time was 481,564,000 and Penta elected not to continue to hold any of those shares.  Hence, the number of Disposal Shares was also 481,564,000.

29.  In January 2012, there was some discussion between Mr Wan and Mr Hui regarding an alternative proposal to amend certain of Hennabun’s obligation under the Deed.  Mr Wan says that Mr Hui expressly informed him that the proposal was put forward by Mr Chuang on behalf of Hennabun to Penta.  On the other hand, Mr Hui says that he put forward the proposal on his own initiative and without having discussed it with Hennabun.  In any event, no agreement was reached.

30.  Between 10 January 2012 and 6 February 2012, Mr Wan and Mr Pridjian on behalf of Penta and Mr Hui apparently on behalf of Hennabun were engaged in (inter alia) negotiating an agreed protocol for an orderly disposal of the Disposal Shares in the form of a supplemental deed.  By an email dated 26 January 2012, Mr Hui informed Mr Wan and Mr Pridjian that Hennabun was prepared to sign the draft supplemental deed that had earlier been sent by Mr Pridjian to Mr Hui, and that Ms Liao would sign the supplemental deed as well as hold a board meeting of Hennabun to approve it after her return to Hong Kong early in the following week.

31.  However, on 6 February 2012, Hennabun, through its solicitors (Lam & Co), sent a letter to Penta alleging that Hennabun had never agreed to the terms of the Deed, and that the Deed was not duly executed by Hennabun and not enforceable against it.  In that letter, the following (inter alia) was stated:

“ Our client denies that it ever agreed to the terms of the Purported Deed. While it is accepted that Ms. Liao Miao Ling is a director of our client and the signature appearing on the Purported Deed is hers, according to Ms. Liao, when she was given the copy of the Purported Deed for signature by Ms. Cathy Lam Bun, who had the document passed to her on the instructions of Mr. William Pak, she told Mr. Pak that she had no authority to do so without the proper authorization from the board and the shareholders of our Client, and would only sign the Purported Deed as a witness to the existence of then ongoing negotiations. Thus she signed under the line headed ‘In the presence of:-’ in the execution block….

          Our Client has confirmed that there has never been any approval by the board of directors and/or shareholders of our Client of the terms of the Purported Deed or the execution thereof.”

32.  On 11 September 2012, Penta commenced the present action against Hennabun.

Defences

33.  As set out in Mr Bell’s final submissions for Hennabun, three grounds of defence are relied upon by Hennabun to resist Penta’s claim.

34.  First, it is said that there was no execution of the Deed by Ms Liao on behalf of Hennabun.

35.  Second, it is said that even if Ms Liao did execute the Deed on behalf of Hennabun, she had neither actual, nor ostensible, authority to do so.

36.  Third, it is said that Penta was put on notice, as was the fact, that the Deed provided no benefit to Hennabun but only to Penta and, possibly, to Chung Nam, and was signed not for Hennabun’s purposes.  Accordingly, the Deed is not binding on Hennabun, or enforceable against it at the instance of Penta.

The Deed was executed by Ms Liao on behalf of Hennabun

37.  According to Ms Liao, on a day in late June 2011, her assistant (Ms Lam) handed her a printed copy of the Deed and told her that the document had been passed to her by Mr Pak’s secretary who told Ms Lam that Ms Liao’s signature was required on the document.  Ms Liao looked at it and understood that it was a kind of guarantee to be provided by Hennabun in favour of a named party.  Ms Liao said she did not have any clue as to who that party was, and had never heard of Penta before.  She had not known, met or dealt with anyone in Penta.  She was also aware that the document required the seal of Hennabun.  Mr Liao said that she was aware of the provisions in Hennabun’s memorandum and articles of association regarding the requirements for the use of the corporate seal.  She also said that she tried to contact Mr Pak on the phone to enquire about the background of the document, but could not find him.  She was “sceptical and cautious”.  She noted that on the back page of the document, someone had signed “as a witness” (this being a reference to the signature of Mr Pridjian), but did not know who that person was.

38.  She said in her witness statement (which she adopted as her evidence in chief) as follows:

“With a moment of thinking, I decided to follow suit and signed my name on that document as a witness, like that person did. I then handed back the document to Ms. Lam for her passing to Mr. Pak. Without having an opportunity to enquire more from Mr. Pak, I thought my signature was required as a witness like that person did for the other party on the document.”

39.  Ms Liao went on to say that a couple of days later, through the same arrangement, Ms Lam handed to her the Deed in duplicate.  She signed on them as a witness “in order to complete the cycle”, they being identical to the one that she had earlier signed and handed the document in duplicate back to Ms Lam.

40.  Ms Liao said that she knew nothing about the fate and the whereabouts of the documents that she had signed until the time when Hennabun was sued by Penta.

41.  Mr Bell submits that Ms Liao neither intended to, nor did, execute the Deed, and relies upon the following matters in support of this argument:

(1) the aforesaid evidence of Ms Liao, which it is said shows that she intentionally placed her signature in the witness’s space and had no intention of executing the Deed in the absence of a board meeting which authorised her to do so;

(2) unlike Mr Pridjian who did so, Ms Liao did not put her initials at the bottom of each page;

(3) Ms Liao did not affix the common seal of Hennabun at the time of signing the Deed; and

(4) Ms Liao had no authority or consent from Hennabun to execute the Deed.

42.  I reject this submission for the following reasons:

(1) It is clearly stated on page 5 of the Deed that it was meant and intended to be sealed with the common seal of Hennabun and “signed by Liao Miao Ling, Director”.

(2) Ms Liao read the Deed before signing it and understood that it was a guarantee to be provided by Hennabun.  Further, Ms Liao knew, or must have known, that the Deed was presented to her for signing in her capacity as director of Hennabun, and not as “witness”.

(3) It is completely disingenuous for her to say that she thought that her signature was required as “witness”.  She knew full well that she did not witness any person’s execution of the Deed.

(4) The suggestion made in Lam & Co’s letter dated 6 February 2012 that Ms Liao signed, or would only sign, the Deed as “a witness to the existence of then ongoing negotiations” makes no sense whatsoever.  On her own evidence, Ms Liao was unaware of any negotiation between Hennabun and Penta (or any other party) and did not witness any negotiation.  Further, I am unable to see how Ms Liao could, by signing on the Deed, signify that she was witnessing any negotiations.

(5) I am also unable to see how the fact that Ms Liao did not put her initials on the bottom of each page of the Deed provides any support for the contention that she did not intend to, or did not, execute the Deed as director of Hennabun, but did so only as “witness”.

(6) Equally, the fact that Ms Liao did not affix the common seal of Hennabun at the time of signing the Deed seems to me to be quite irrelevant to this issue.  Ms Liao did not have the custody of the common seal, but must have realised that the common seal of Hennabun would be affixed on the Deed after her signing, as in fact was the case.

(7) I shall deal with the contention that Ms Liao had no authority or consent from Hennabun to execute the Deed later in this judgment.

43.  In rejecting the evidence of Ms Liao, I also take into account the fact that the suggestion made in Lam & Co’s letter dated 6 February 2012 that prior to the execution of the Deed, Ms Liao had told Mr Pak that she had no authority to sign the Deed without the proper authorization of the board and the shareholders of Hennabun, and repeated in paragraph 37 of Hennabun’s Defence, is contradictory to Ms Liao’s evidence (referred to in paragraph 37 above).

44.  Further, having regard to the background and negotiation leading to the execution of the Deed, it seems to me that, objectively, Ms Liao’s signing of the Deed must be understood to have been in her capacity as director of Hennabun, and not as “witness”. That was also how it was understood by Penta.

45.  In all, I find that Ms Liao intended to, and did, execute the Deed in her capacity as director on behalf of Hennabun.

Ms Liao had actual authority to execute the Deed on behalf of Hennabun

46.  Article 71C of Hennabun’s articles of association states as follows:

“So long as there is a Permanent Managing Director of the Company, the Permanent Managing Director shall control and manage the business and affairs of the Company in such manner as in his absolute discretion he thinks fit in the interest of the Company and shall have the authority to exercise all the powers, authorities and discretion by these presents expressed to be vested in the Directors generally and in case of conflict between this Article and Articles 85 to 90, this Article shall prevail…”

47.  Article 85(1) of Hennabun’s articles of association provides as follows:

“The business of the Company shall be managed and conducted by the Board, which … may exercise all powers of the Company (whether relating to the management of the business of the Company or otherwise) which are not by the Statutes or by these Articles required to be exercised by the Company in general meeting…”

48.  There is no dispute that Ms Liao was the permanent managing director of Hennabun at the time of execution of the Deed.  There is no suggestion that the execution of the Deed was something which was required to be authorised by Hennabun in general meeting.  In this regard, although Hennabun is a company incorporated in the British Virgin Islands, no evidence has been adduced on the laws of the British Virgin Islands.  I therefore proceed on the basis that the laws governing the interpretation and effect of the articles of association of Hennabun are the same as Hong Kong laws.

49.  It follows that Ms Liao had actual authority of Hennabun to execute the Deed on its behalf.

50.  Mr Bell relies upon article 114(1) of Hennabun’s articles of association to argue that Ms Liao had no authority of Hennabun to execute the Deed on its behalf.  Article 114(1) states as follows:

“The Company shall have one or more Seals, as the Board may determine. The Board shall provide for the custody of each Seal and no Seal shall be used without the authority of the Board or of a committee of the Board authorised by the Board in that behalf. Subject as otherwise provided in these Articles, any instrument to which a Seal is affixed shall be signed autographically by one Director and the Secretary or by two Directors or by such other person (including a Director) or persons as the Board may appoint, either generally or in any particular case.”

51.  Mr Bell makes two points.  First, it is said that the only situation in which a single person may be authorised to bind Hennabun in a deed is where he or she is appointed to do so by the board, either generally or for a particular case.  However, by virtue of article 71C, Ms Liao, as the permanent managing director of Hennabun, had the authority to exercise all the powers, authorities and discretion vested by the articles in the board.  That would include the power to authorise herself to sign the Deed on her own.  By signing the Deed in the circumstances as aforesaid, she must be regarded as having exercised such power.

52.  Second, it is said that there is no evidence of any resolution of the board or of a committee of the board of Hennabun which authorised the affixing of its common seal on the Deed.  It seems to me that, again, the answer lies in article 71C. Ms Liao, as the permanent managing director of Hennabun, had the authority to permit the common seal of Hennabun to be affixed on the Deed.  She signed the Deed under the words “SEALED with the Common Seal of HENNABUN CAPITAL GROUP LIMITED”, and must, in my view, be regarded as having authorised, by conduct, the common seal of Hennabun to be affixed on the Deed. Also, the evidence demonstrates that the common seal was used with the consent of the company secretary of Hennabun (ie Ms Tong) who had lawful custody of it.  In these circumstances, I consider that the person who affixed the common seal of Hennabun on the Deed had the authority of the company to do so.

53.  Having reached the above conclusions, it is not necessary for me to consider Penta’s alternative arguments based on ostensible authority, or that there was an actual board meeting of Hennabun which authorised Ms Liao to execute the Deed on its behalf.

Two further or alternative bases as to why the Deed is binding on Hennabun

54.  First, I agree with the submissions of Mr Charles Manzoni SC (for Penta) that the Deed is binding on Hennabun by virtue of the fact that it bears the common seal of the company and is thus to be regarded as the act of the company itself, applying the following statement of principle by Mason CJ in Northside Developments v The Registrar General 93 ALR 385 at 392:

“…The affixing of the seal to an instrument makes the instrument that of the company itself; the affixing of the seal is in that sense a corporate act, having effect similar to a signature by an individual, as I noted earlier. Thus, it may be said that a contract executed under the common seal evidences the assent of the corporation itself and such a contract is to be distinguished from one made by a director or officer on behalf of the company, that being a contract made by an agent on behalf of the company as principal.

Consequently, it has been held that, if the person dealing with the company receives a document to which the common seal has been affixed in the presence of individuals designated in the articles of association, he is entitled to rely on its formal validity”.

55.  In the present case, as mentioned above, I consider that the common seal of Hennabun was affixed on the Deed with its authority and, on the face of the Deed, in the presence of a person designated in the articles of association (namely, its permanent managing director).  Hence, Penta was entitled to rely on its formal validity and act on the basis that it was binding on Hennabun.

56.  The above principle is subject to the qualification that a third party cannot rely upon the formal validity of an instrument bearing the seal of a company “if the very nature of the transaction is such as to put him upon inquiry.  If the nature of the transaction is such as to excite reasonable apprehension that the transaction is entered into for purposes apparently unrelated to the company’s business, it will put the person dealing with the company upon inquiry”: see Northside Developments v The Registrar General 93 ALR 385 at 393 per Mason CJ.  However, I do not see anything in the nature of the transaction relating to the Deed which is such as to put Penta upon inquiry in the present case.

57.  Second, I also consider that the Deed is binding on Hennabun by virtue of article 85(2) of its articles of association, which states as follows:

“Any person contracting or dealing with the Company in the ordinary course of business shall be entitled to rely on any … deed … entered into or executed as the case may be by any one Director acting on behalf of the Company and the same shall be deemed to be validly entered into or executed by the Company as the case may be and shall, subject to any rule of law, be binding on the Company.”

The Deed could not be regarded as providing no benefit to Hennabun or not being for Hennabun’s purposes

58.  Hennabun was an investment holding company.  One of its operating subsidiaries was Chung Nam. Chung Nam was one of the sub‑placing agents in relation to the placement of shares by Mascotte, and obviously would be remunerated for taking this job.

59.  Mr Pak, who was called by Hennabun at the trial to give evidence on its behalf, was a former director of Hennabun and stated the following in paragraph 6 of his witness statement (which he adopted as part of his evidence):

“… Mr. Hui told me that Mr. Wan’s main concern was the previous bad experience of Penta’s loss in the Freeman Investment. Mr. Wan suggested to Mr. Hui that if Penta was to go ahead investing in Mascotte shares, it would require some sort of security such as personal guarantee or corporate guarantee to make sure Penta would be protected from loss. I told Mr. Hui that Mascotte and Chung Nam were not in a position to provide guarantee and it would not be proper and legal for either of them to do so. On the other hand, since Chung Nam was the sub‑underwriter of the Mascotte placement, it would enhance the image of Mascotte and attract investors if Penta, whom I knew was a reputable US investment fund, would subscribe the Mascotte shares. It would make Chung Nam’s job easier in the sub‑underwriting exercise and be beneficial to Chung Nam if Penta would agree to subscribe the Mascotte shares. I was eager to find Penta some security to ease its mind. I had in mind to request [Hennabun] to provide the guarantee to Penta. I was the ex‑director of [Hennabun] and Mascotte was its shareholders. I then told Mr. Hui that if we wanted to procure the provision of a guarantee to Penta, [Hennabun] could be a suitable candidate.”

60.  On this evidence and having regard to the fact that Chung Nam was one of the operating subsidiaries of Hennabun, it seems to me clear that Hennabun had a good commercial reason to provide the guarantee sought by Penta, and the Deed could not be regarded as providing no benefit to Hennabun or not being for Hennabun’s purposes.

61.  Mr Bell argues that originally Penta wished to have either Mr Liu or Unitas acted as guarantor, but when they were ruled out Hennabun was “more or less plucked from the air to act as a guarantor instead”.  However, Hennabun was put forward by Mr Liu and/or Mr Pak to act as guarantor, and Penta was not privy to the discussion between the two of them which led to Hennabun being put forward.

62.  In conjunction with this ground of defence, Hennabun contends that Mr Hui and Mr Pak were acting as agents of Penta in relation to the negotiation of the Deed and its execution by Hennabun.  I reject this contention, for the following reasons:

(1) As a starting point and as acknowledged by Mr Bell in his written final submissions, none of the witnesses called by the parties to give evidence at the trial has asserted that Mr Hui or Mr Pak were acting as agents of Penta.

(2) On the other hand, the evidence of Mr Zwaanstra and Mr Wan, which I accept, is that they never engaged, on behalf of Penta, Mr Hui and Mr Pak to act as Penta’s agents in relation to the negotiation of the Deed or its execution by Hennabun.

(3) At various meetings in May 2011 mentioned above, Mr Hui and Mr Liu were clearly acting on one side in presenting to Penta the opportunity to invest in Mascotte.  They could not have been acting as agents of Penta on those occasions or in the subsequent discussion relating to the investment in Mascotte.

(4) Penta’s request for a guarantee was part and parcel of the discussion between Mr Wan and Mr Pridjian (as Penta’s representatives) on one side, and Mr Hui and Mr Pak on the other, in relation to the investment in Mascotte, and it is clear that the latter two were not acting, and did not purport to act, as agents of Penta in relation to the discussion about the guarantee to be provided by Hennabun.

(5) It is equally clear, from reading the exchange of emails relating to the negotiation and execution of the Deed, that Mr Hui and Mr Pak were acting, or appearing to act, on behalf of Hennabun when they corresponded with Mr Wan and Mr Pridjian on behalf of Penta.

(6) Further, when corresponding with Penta’s representatives (ie Mr Wan and Mr Pridjian) by emails, they gave the appearance that they were authorised by Hennabun to act on its behalf in relation to those matters, and never informed Penta’s representatives that they had no authority to do so. 

(7)             Lastly, having regard to the positions of Mr Hui and Mr Pak as the managing director of Freeman and compliance consultant of Chung Nam respectively and the fact that Freeman, Hennabun and Chung Nam were closely associated with one another, it would be most unlikely, in my view, that Mr Hui and Mr Pak could be acting as Penta’s agents in relation to the negotiation of the Deed and its execution by Hennabun.

63.  I have no doubt that Mr Hui and Mr Pak in fact acted, or purported to act, on behalf of Hennabun when discussing with Mr Wan and Mr Pridjian (the latter two acting on behalf of Penta) in relation to the negotiation of the Deed and its execution.  In no sense could they be said to be acting as agents of Penta in those matters.

64.  On the totality of the evidence before the court, I also consider it to be the irresistible inference that Mr Hui and Mr Pak were duly authorised by Hennabun to act on its behalf to negotiate with Penta in relation to the Deed and to arrange for its execution by Hennabun.  I am unable to accept the submission made by Mr Bell in his written opening on behalf of Hennabun that Mr Hui and Mr Pak “took it upon themselves to draft a guarantee for Penta’s benefit in the expectation, or hope, that [Hennabun] would agree”, nor can I accept their evidence that they never spoke or communicate with anyone in Hennabun about the Deed until the time when Mr Pak arranged for it to be executed by Ms Liao on 28 June 2011, this being inherently incredible and contrary to what one would reasonably expect of the conduct of two qualified lawyers.

65.  In all, I do not accept any of the three grounds of defence raised by Hennabun to resist Penta’s claim, and consider that the Deed is binding on, and enforceable by Penta against, Hennabun.

Quantum

66.  Paragraph 19 of Penta’s Statement of Claim states as follows:

“On 17 April 2012, [Penta] notified [Hennabun] that the Guarantee Amount calculated in accordance with the formula prescribed under clause 6 was HKD210,552,524 and demanded payment thereof within 5 business days (the “Demand Letter”).  The Demand Letter enclosed a breakdown of the calculation of the Guarantee Amount pursuant to clause 6 as follows …”.

67.  Paragraph 19 of Hennabun’s Defence states that:

“Paragraph 19 is admitted. The letter of 17^th April 2012 was sent by Linklaters to Lam & Co.”

68.  Mr Manzoni submits that the admission made by Hennabun in paragraph 19 of its Defence amounts to an admission of the amount due by Hennabun to Penta under the Deed (subject to the question of liability being established against Hennabun), and thus Penta is not required to adduce, and has not adduced, evidence to prove the amount due by Hennabun to Penta under the Deed.

69.  Mr Bell argues, however, that paragraph 19 of Hennabun’s Defence is only an admission that a demand letter was sent by Linklaters to Lam & Co which set out a breakdown of the calculation of the amount claimed by Penta against Hennabun under the Deed, but does not amount to any admission of the actual amount due.

70.  I am inclined to agree with Mr Manzoni’s reading of paragraph 19 of Hennabun’s Defence.  However, in view of the size of the claim and the possibility that there could be a genuine misunderstanding on this matter, I consider that the fair course to follow is to direct a further hearing to be held to resolve the question of quantum.  I give liberty to Penta to apply for directions regarding the filing of evidence by the parties and fixing of the hearing date.  I am minded to set a tight timetable to avoid any delay in this matter.

Disposition

71.  I grant a declaration that the Deed is binding on Hennabun and enforceable against it by Penta, and give judgment in favour of Penta against Hennabun on the question of liability.  I direct that the amount due to Penta from Hennabun under the Deed, or by way of damages for repudiatory breach thereof, be assessed at a further hearing.

72.  I also make an order nisi that Hennabun shall pay to Penta its costs of the action up to the date hereof, to be taxed if not agreed.