Sanwa Finance Hong Kong Ltd. v. Honey Technology Ltd. and Others
Read the full judgment text of CACV 271/1999 on BabelCite. This Court of Appeal judgment was delivered on 3 February 2000.
1. The Plaintiff entered into a total of six hire-purchase agreements with the 1st Defendant on various dates in 1995 and 1996. In March and April 1998, the 1st Defendant defaulted on the rental instalments payable under each of those agreements. This led the Plaintiff, by letter dated 29 April 1998, to terminate the agreements and to demand payment and delivery up of the hired goods for repossession. One partial payment was thereafter made but, as at 18 November 1998, no goods had been reposses
Cited by 3 cases
|
CACV000271/1999 CACV 271/1999 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 271 OF 1999 (ON APPEAL FROM HCA 22129 OF 1998) ____________________
____________________ Coram: Hon Mayo VP and Ribeiro JA in Court Date of Hearing: 27 January 2000 Date of Handing Down Judgment: 3 February 2000 _________________ J U D G M E N T _________________ Ribeiro JA: The claim 1. The Plaintiff entered into a total of six hire-purchase agreements with the 1st Defendant on various dates in 1995 and 1996. In March and April 1998, the 1st Defendant defaulted on the rental instalments payable under each of those agreements. This led the Plaintiff, by letter dated 29 April 1998, to terminate the agreements and to demand payment and delivery up of the hired goods for repossession. One partial payment was thereafter made but, as at 18 November 1998, no goods had been repossessed and, according to the Plaintiff, $7,706,640.10 remained due and owing. On that date, it issued a letter before action demanding payment but no further payment has resulted. 2. The other three Defendants provided a series of guarantees to the Plaintiff securing the 1st Defendant's liabilities under the abovementioned hire-purchase agreements. Demands for payment under such guarantees were also issued by the Plaintiff on 18 November 1998, and again, no payments have resulted. 3. The Plaintiff brought this Action by Writ issued on 24 December 1998. It sought summary judgment against the 1st Defendant on the debt allegedly due and against the other Defendants on their guarantees. The application for summary judgment was adjourned by the Master to the Judge in Chambers and, on 26 August 1999, Godfrey JA, sitting as an additional judge of the High Court, gave judgment against all Defendants. They now bring this Appeal for orders setting aside such judgment and allowing them unconditionally to proceed to trial. The Defendants' arguments 4. The 1st Defendant does not dispute the fact that it was in default on the rental payments. Mr Peter Graham, appearing for the Defendants, puts forward three arguments by way of defence. 5. The first is that the judgment cannot be sustained because of the way the Plaintiff's case has been pleaded in the Amended Statement of Claim ("the pleading point"). This was a point not taken below when the Defendants were represented by different counsel. 6. The second is that Godfrey JA erred in failing to accept that the 1st Defendant's evidence of a "standstill agreement" had raised a triable issue as to whether the Writ had been issued at a time when the Plaintiff had an accrued cause of action ("the standstill point"). 7. The third argument is related to the second. It is that Godfrey JA applied the wrong legal test when he rejected the standstill point ("the legal test point"). The pleading point 8. In relation to the claim against the 1st Defendant, the Amended Statement of Claim pleads the six hire purchase agreements which are all in the same form. It refers in detail to some of the more important clauses in the agreements including Conditions 6(1) and 7 which provide as follows:-
9. The pleading then alleges the 1st Defendant's default in making the rental payments as follows:-
PARTICULARS
It then proceeds to make the following averments :-
In the Prayer, the Plaintiff claims "the sum of HK$7,706,640.10" and other minor heads of relief. 10. Mr Graham contended that as a result of the language of paragraphs 9 and 10 of the Amended Statement of Claim, the Plaintiff's claim can only be based on a repudiation of the hire purchase contracts under the general common law. It does not permit the claim to proceed as one for a liquidated sum quantified under the terms of the contract. He argued that the Plaintiff should therefore not have obtained judgment because failure to make rental payments for a relatively short time could not be regarded as repudiatory conduct sufficient to found a common law claim. Alternatively, he argued, the Plaintiff was at best only entitled to interlocutory judgment for damages to be assessed and not to judgment in the amounts awarded. 11. In my judgment, while it is true that the pleading contains surplusage (including unnecessary references to the 1st Defendant evincing an intention not to be bound), taken as a whole, it clearly indicates and justifies the Plaintiff's reliance on its contractual rights to liquidated damages under Clauses 6(1) and 7. Not only are those clauses specifically pleaded, in the paragraphs following reference to those provisions, the pleading sets out the facts relevant to their operation, namely, the fact of default in rental payments, the consequential determination of the agreements by letter dated 29 April 1998 and quantification of the liquidated damages claimable under Clause 7. 12. I therefore reject the argument that the claim must be restricted to one for general damages at common law and hold that the pleading is sufficient to found a claim for the remedies provided for under Clause 7. The default on 25 April 13. As appears from the facts set out above, the last payment default occurred on 25 April 1998, only four days before the Plaintiff determined the agreements by the letter of 29 April. It was argued by Mr Graham that, at any rate in relation to this instance of default, the remedies provided for by Clause 7 could not apply since, as a matter of construction, such remedies could only arise if the default had persisted for at least 7 days prior to the date when the Plaintiff terminated the contract. The Plaintiff was therefore thrown back onto its common law remedies in relation to this default and faced the attendant difficulties described above. 14. In my view, this argument involves too narrow a construction of the two provisions. Clause 6(1) provides that the power to determine the agreement for default may be exercised at any time with the instant legal consequence of depriving the hirer of possession of the goods. The words "upon termination of this Agreement under Clause 6(1)" in Clause 7(1) are, in my view, not intended to limit the subsequent words "if the Hirer has failed to pay any rental instalment for more than seven days after becoming due" to cases where the seven days had already elapsed by the time of the termination. 15. While the parties plainly intended to allow the defaulting hirer a grace period of 7 days to make payment if he wished to avoid the Clause 7 remedies, I do not see any reason to conclude that the Clause 7 remedies were intended to be inapplicable unless the Plaintiff had first held off determining the contract until the default had already persisted for seven days. On the contrary, the provision in Clause 6(1) that, subject to the provisions of Clause 7 and any pre-existing liabilities of the Hirer under the agreement "neither party shall have any rights against the other" strongly suggests that Clause 7 is intended to persist as the condition governing remedies, whatever the timing of the Clause 6(1) determination. 16. Accordingly, in my view, Clause 7(1) is intended to operate where two elements are present, namely, (i) termination of the agreement under Clause 6(1) and (ii) non-payment which has persisted for a period of at least 7 days after the initial default. There is no requirement for such period entirely to precede the act of termination. 17. It is therefore my conclusion that the 25 April default, like the other defaults, supports a claim for liquidated damages under Clause 7(1). The standstill point 18. The evidence on this point is set out in the 1st Affirmation of the 2nd Defendant (who is a director of the 1st Defendant). The 1st Defendant is said to have fallen into financial difficulties in about March 1998 and a steering committee appointed by the 1st Defendant's banking creditors to deal with its affairs while an attempt was made to restructure its liabilities. 19. In this context the 1st Defendant alleges that "an informal standstill" in relation to its debt repayments was agreed to by its creditors, including the Plaintiff. Such arrangement was to last in the first instance until 31 October 1998, while restructuring efforts were made. 20. The ensuing material paragraphs in the Affirmation read as follows:-
21. On the basis of such evidence, the 1st Defendant alleges that the Plaintiff agreed to an extension of the standstill arrangement until the finalization of the restructuring exercise expected in April or early May 1999 and that in the meantime, the Plaintiff was precluded from demanding repayment of the outstanding debt as it did on 18 November 1998. 22. Godfrey JA held that this evidence did not give rise to an arguable defence. I agree. For the defence to be sustainable, it would be necessary to show that the Plaintiff had arguably bound itself in law not to demand or sue for the debt prior to "April or May 1999". In my view, nothing in the evidence even arguably makes out such a legal obligation on the Plaintiff's part. 23. On the 1st Defendant's own evidence, there was never more than agreement to "an informal standstill". This merely indicates that the 1st Defendant's creditors had informally indicated a willingness to stay their hands to give the efforts at restructuring a chance of success. It provides no basis for suggesting that the creditors had waived or suspended their rights in a legally binding manner so as to prevent them from thereafter (or for any particular period) changing their minds and resuming enforcement of their rights if so advised. 24. The Plaintiff in fact held its hand until mid-November when, it says, because of the lack of progress towards a restructuring and because another creditor had broken ranks and started proceedings, it decided to resume enforcement of its claim. In my judgment, it was entitled to do so and no arguable basis for precluding this course of action has been disclosed. The legal test point 25. Mr Graham submits that Godfrey JA applied the wrong test in deciding to reject the standstill point. This was based on the following passage from the Judgment :-
26. I am unable to accept that these words indicate any error of law. In my view, what the Judge was saying was that the matters advanced did not constitute sufficiently clear or unequivocal evidence of the existence of facts which (if properly supported by evidence) might be capable of constituting a triable defence. While a Defendant in Order 14 proceedings needs to do no more than demonstrate that he has an arguable case, he fails to achieve this if the evidence relied on for this purpose does not amount to workable evidence of the facts needed to establish the arguability of the defence. The guarantees 27. Before Godfrey JA, the 2nd, 3rd and 4th Defendants had sought to set up an independent defence involving an alleged release from their guarantees. Mr Graham abandoned those arguments so that the liability of such Defendants depends solely on whether the 1st Defendant's liability is upheld. With respect, abandonment of the purported defence was entirely justified in the light of the evidence before the Court. 28. As I have held the 1st Defendant liable, it follows that the 2nd, 3rd and 4th Defendants are also liable under their guarantees. 29. In my view, the appeal must therefore be dismissed. Mayo VP: 30. I agree entirely and have nothing to add. 31. The appeal is dismissed with an order nisi that the Defendants pay the Plaintiff's costs.
Representation: Mr Clifford Smith instructed by Messrs Deacons Graham & James for the Plaintiff (Respondent) Mr Peter Graham instructed by Messrs Richard Tai & Co for the Defendants (Appellants) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other judgments that cite this case