Ricardo Leong v. Asean Resources Ltd

CACV000027/1983

IN THE COURT OF APPEAL

BETWEEN

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Coram: Hon. Leonard, V-P., Cons & Fuad, JJ.A.

Date: 14th July, 1983.

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JUDGMENT

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Leonard, V-P.:

1. I have had difficulty in marshalling the relevant facts and issues in this case partly because of the manner in which the papers were presented to us- in a plethora of bundles. My difficulties have not been lessened by the absence of any skeleton arguments in writing nor by the fact that we have before us (1) the original grounds of appeal specified in the Notice of Appeal, (2) an appellant's Notice of Motion specifying further grounds, (3) a respondent's notice, (4) a respondent's supplementary notice and (5) a respondent's Notice of Motion specifying still further grounds on which, it is argued, the judgment in the Court below should be affirmed. When it is noted that the original Statement of Claim was amended and re-amended as was the Defence and Counterclaim and the Reply and Defence to Counterclaim and, that the Statement of Claim was finally and further re-amended at the trial after the conclusion of the evidence one may be pardoned for concluding that neither party had been properly prepared in the Court below nor when this appeal was launched. Such lack of preparation places us in an unenviable position.

The Pleadings

2. The re-amended Statement of Claim sets out the terms of a Promissory Note dated 3rd October 1974 whereby the defendant "for value received" promised to pay to the order of "Falcarra Investment Corporation" the sum of U.S. $130,466 with interest on the sum of $100,000 the principal and interest to be paid by instalments, the balance being payable on or before 3rd July 1976. It claims that on the same day Falcarra had assigned, for value received, all its rights, title and interest in the loan owed by the defendant to Falcarra in respect of which the Promissory Note was given and that the defendant had signed on the assignment to confirm its agreement to the same. It contended that the plaintiff is the transferee and holder for value of the Promissory Note. Alternatively it contended that by reason of the matters pleaded there was a novation under which the defendant became indebted to the plaintiff in the amount claimed and indicated that the plaintiff would rely on acknowledgements of indebtedness in writing periodically sent to the plaintiff by the defendant's auditors and by the defendant.

The Defence, as the trial judge remarked, in substance is little more than a general traverse. It is worth noting however that in it "the Defendant puts the Plaintiff to strict proof that the purported assignment of the alleged loan is valid and properly authorized by "Falcarra and to strict proof that any purported assignment of the Promissory Note was valid and properly authorized. It states that if any loan was made to the defendant it was made by Falcarra and not by the plaintiff and that the plaintiff had no right to sue for it in his own name. Paragraph 12 of the Counterclaim which does not appear to have been pursued at the trial reads:

I think it as well to set out the Reply in extenso, as to do so may render my review of the facts and questions of law arising more intelligible. It reads:

PARTICULARS

3. The respondent, a businessman living in Honolulu was the only witness of importance called in the Court below. Since the appellant elected to call no evidence, his evidence stands uncontradicted.

4. On the advice of his bankers (Citibank) he arranged that Falcarra Investments Ltd. be set up in the Bahamas on 20th June 1969 in order "to deal in stocks". The objects as stated in the Memorandum of Association are, of course, much wider but I must take it that was the essential purpose for which Falcarra was set up.

5. The 5 subscribers to the Memorandum were the nominees of the respondent who secured from each of the shareholders a declaration that the share registered in his or her name was held as the property of and to the use of the respondent and his brother Ramon de Leon (who in fact had no beneficial interest in Falcarra).

6. On the basis of the respondent's evidence the learned trial judge concluded that the respondent left it to the Bank to appoint the directors and secretary of Falcarra and to run the administrative side of the company for him. He had never seen either its books or its seal but he was the sole beneficial owner of its shares and "it danced to his tune to such an extent that he did not ... mentally distinguish between that Company and himself, nor was he particularly precise in describing it".

7. In 1970 or early 1971 a Michael Limm was Managing Director and Chief Executive of the Ka Wah Bank Ltd. and was also Managing Director of Michaelson Ltd. (the former name of the appellant) and at his suggestion the respondent opened accounts with the Ka Wah Bank Ltd. The respondent dealt with Ka Wah Bank Ltd. as agent for Falcarra and Mr. Michael Limm did not question his agency. In or about January 1973 the respondent had paid into Falcarra's account with Ka Wah Bank Ltd. the sum of U.S.$216,804.79. The trial judge has found and no complaint is made of his so finding that the plaintiff lent this sum to Falcarra.

8. In June 1973 the respondent, in Tokyo, met Mr. Michael Limm and a Mr, Tsai I Ching also a director of Michaelson Ltd. Mr. Limm asked him if he needed the sum banked in the name of Falcarra and, if not, if he would lend it to Michaelson Ltd.  He agreed subject to the personal guarantees of each. He wrote to the Ka Wah Bank on the 29th June 1973 in the following terms:

Attn. Mr. Or See Nin

Gentlemen:

This is my instruction to authorize you to take out U. S.$200,000.00 from our above accounts and give to Mr. Tsai I Ching as a loan to Michaelson Ltd. (Indonesia). It is understood that you will establish a 180-day T/D for the fund left in the above accounts.

The loan was made pursuant to this letter and was not repaid within the period of 30 days and the continued indebtedness was acknowledged in the appellant's books. It was also acknowledged at least in part by Messrs. M. W. Kwan & Co., Certified Accountants for Michaelson Ltd. in that they stated that as at 30th November 1973 there was due to Falcarra the sum of U.S.$200,000. This was confirmed by the respondent on behalf of Falcarra. On the 3rd October 1974 U.S.$100,000 was repaid.

9. The trial judge's unchallenged analysis of the legal effect of what had transpired by the 3rd October 1974 was that "Falcarra had lent $200,000 to the [appellant], being part of the monies already lent to them by the [respondent]; that the appellant had repaid U.S.$100,000 to Falcarra and that, in turn, Falcarra had repaid a like sum to the [respondent]." It should be noted that the original loan by Falcarra was made through the agency of the respondent and that his authority to lend on behalf of Falcarra has at no time been challenged by appellant.

10. On the occasion of the repayment of U.S.$100,000 the appellant could not repay the balance. The respondent stated in evidence:

"I wanted something concrete. They wanted 21 months. We agreed the repayment dates. On behalf of Michaelson Ltd. Michael Limm and Victor Sun ... have signed... Michaelson prepared the documents."

11. Two documents were signed. The first was a Promissory Note in the following form:

US$30,000.00 PAYABLE 15 MONTHS AFTER THE DATE OF THIS NOTE.

US$30,000.00 PAYABLE 18 MONTHS AFTER THE DATE OF THIS NOTE.

THE REMAINING BALANCE PAYABLE 21 MONTHS AFTER THE DATE OF THIS NOTE."

It was signed by Messrs. Michael Limm and Victor Sun as directors of Michaelson Ltd. and the "chop" of Michaelson Ltd. Was affixed to it. The second was entitled "Assignment of Claims". It was in the following terms:

It bore the following endorsement: "We hereby confirm and agree the above assignment". This was signed "for and on behalf of Michaelson Ltd. Michael Limm and Victor Sun Directors."

12. The only evidence to indicate the effect of the appellant's behaviour on the mind and subsequent actions of the respondent comes in the following pieces of evidence by the respondent:

"Michaelson Ltd. kept copies of both documents. I returned to Hawaii. Since I had no further use for it Falcarra Investments Ltd. was wound up for me by Citibank during December 1974" and "The Promissory Note has been assigned to me. That was the intention."

13. On the 22nd December 1975 Michaelson Ltd. wrote to Falcarra c/o the respondent in Honolulu as follows:

Neither the respondent nor Falcarra replied. The "group" referred to in this letter must be taken to refer to Michaelson Ltd. and its associated companies.

14. On the 30th July 1977 by a letter addressed, not as had been the case previously to Falcarra, but to the respondent personally, the Michaelson's accountants acknowledged as due to the respondent the sum of $708,540.15 which presumably represented the U.S.$100,000 plus interest. On or about 30th November 1979 Messrs. Kwan Wong Tan & Fong, Chartered Accountants again on behalf of Michaelson's Ltd. wrote to the respondent. This letter again bears no reference to Falcarra and is addressed to the respondent, c/o his Hong Kong Solicitors, Messrs. Woo & Woo. It acknowledges that as at the 30th November 1979 there was due to the respondent the sum of H.K.$728,290.15. It seeks for confirmation of the amount. A number of similar requests for confirmation of the amount due were sent to the respondent.

15. In view of the letter of the 30th November 1979 it is puzzling to find on the respondent's bundle a letter from those same solicitors dated 22nd January 1980 enquiring about "the present position of the said loan in the sum of U.S.$200,000.00" but Messrs. Woo & Woo apparently attempted to put this matter right by a letter of the 25th February 1980. We were not addressed in any detail on these letters or on such sums as may be due by way of interest. Suffice it to note that the request for confirmation prior to 3rd October 1974 was addressed to Falearra while those of later dates are addressed to the respondent personally.

The judgment of the Court below

16. As I see it the ratio decidendi of the judgment is two fold The first ratio is to be found in the following passage:

"             It is also possible to spell out from the Reply the plea that the defendants are estopped from challenging the plaintiff's authority in that, relying upon their confirmation and consent to the assignment of the debt to him which were meant to be acted upon, he caused the assignor company to be dissolved; which was to his detriment. I am satisfied that when the plaintiff told the Court in evidence that he had no further use for Falearra and therefore had it dissolved he meant that he regarded its assets and rights as being by then fully vested in himself personally and that the matters just recounted gave rise to such assurance. It follows that the plea, of estoppel is valid and precludes the defendants from restrospectively challenging the plaintiff's authority to act for and on behalf of Falearra in executing the assignment."

The second is in the following paragraphs:

Both these conclusions are attacked.

17. The original grounds of appeal urged were:

18. In addition we permitted the appellant to argue a further t ground namely "

19. As to the question of estoppel I have already set out the only evidence as to the effect on the respondent's mind and actions of the appellant's behaviour. It is very scanty. Furthermore there appears in the respondent's bundle of documents a letter (admittedly objected to by the appellant and consequently not admitted in evidence) dated 8th January 1975 from the Deputy Registrar General of the Bahamas to one Gilbert Cassar which appears to indicate that the winding-up of Falcarra was in train by the 17th September 1974 at the latest, that is some weeks before the Assignment of Claims was prepared and endorsed by the appellant. I do not think that the evidence is sufficient to support the estoppel found by the trial judge, nor with respect to him can I find that estoppel spelled out in the respondent's Re-amended Reply. Nowhere in that document can I find any averment that "Relying upon their confirmation and consent to the assignment of the debt ... he caused the assignor company to be dissolved". I find force in ground 1 in the Notice of Appeal and in the ground outlined in (a) and (b) above.

20. Mr. Ching properly and readily concedes that if the respondent had shown that he had authority to execute theARTICLE73

Assignment of Claims the appeal must fail. The trial judge, he submits, based his conclusion that the respondent had actual authority firstly on a certified copy of a resolution of the 7th April 1970 and on the powers of delegation of the directors contained in Article 88(1) of Falcarra's Articles. That is so but I do not consider that these were the only matters on which the judge relied or was entitled to rely. It is convenient at this stage to quote this document in full. It was produced by the respondent without any challenge being made to it and became "Exhibit P2". It reads:

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'RESOLVED:

THAT Ricardo Leong and/or Ramon de Leon be, and they hereby are, duly appointed Agents for the Company to act on behalf of and in the name of the Company in all matters, including the establishment of Bank Accounts in the name of the Company and the operation thereof.'

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21. Although the certified copy of the resolution was admitted in evidence without challenge it was Mr. Ching's case that the document proved nothing. He tells us that in the Court below he argued, as he did before us, that since the identity of its signatories was not proved it could prove nothing. I find it strange that the judge did not, in his most careful judgment, allude to this argument and can only conclude that because the resolution was before him without challenge he must have thought that there was some concession to the effect that the signatories of the original were the directors of Falcarra and had signed the original as such.

22. No such concession appears on the record. I am constrained to agree with Mr. Ching that the document proves nothing. The question then is whether without it it has been proved on the balance of probability that the respondent had authority to execute the Assignment of Claims. The following facts were proved:

I find that all these factors are coercive. Taken together they compel me, in the absence of any evidence which might even suggest the contrary, to the conclusion that in fact the respondent had the necessary authority. It is true that there is a possibility that all the parties may have wrongly thought that the authority existed when in fact it did not; indeed that possibility in itself was an invitation to the appellant to seek evidence to show the lack of authority. This it conspicuously failed to do. For this reason I consider that the appeal must fail. Many contentions were put forward in the respondent's Notice. These were argued in considerable detail and some were of great academic interest. However, in view of the conclusion to which I have come I do not think it necessary at the moment to deal with them and I must resist the temptation to add obiter dicta to this judgment.

Cons, J. A.:

23. I agree that the appeal should be dismissed and for the reasons given by My Lord the Vice-President.

Fuad, J. A.:

24. I have had the advantage of reading in advance the judgment of Leonard, V.-P. and I agree that the appeal should be dismissed. I only wish to add that in my view, the Judgment of Kempster, J. can be upheld on another ground which was sufficiently raised in the pleadings and in the Respondents notice. The facts of this case have been fully stated by Leonard V.-P. and I need not restate them. There was clear evidence that on a number of occasions and over a long period, the defendants, through their agents, acknowledged the debt now claimed as being due personally to the Plaintiff. I adopt, with respect, the following statement of the law in paragraph 2057 of the 25th Edition of CHITTY ON CONTRACT -

25. The defendants made no attempt to rebut the unequivocal admissions of the existence of the debt. They were not challenged or explained as so easily could have been done.

Representation:

Mr. Charles Ching, Q.C. and Mr.

Raymond Leung (Tsang, Chau & Shuen) for Appellant/Defendant.

Mr. Denis Chang, Q.C. with Mr. Kenneth Kwok (Woo & Woo) for Respondent/Plaintiff.