Ng Ting Kwok v. Ng on Kwok and Another
Read the full judgment text of HCA 1587/2017 on BabelCite. This High Court CFI judgment was delivered on 31 October 2018.
1. The plaintiff Ng Ting Kwok Andrew (“ P ”) is the younger brother of the 1 st defendant Ng On Kwok Raymond (“ D1 ”). The 2 nd defendant is D1’s wife Dan Yan Ping Bella (“ D2 ”). By the present action, P sought to enforce payment obligations by D1/D2 (collectively, “ Ds ”) under a master agreement dated 29 May 2014 between P and Ds (“ MA ”) as subsequently varied by a supplemental deed dated 29 April 2016 between the same parties (“ SD ”) (collectively, “ Revised MA ”).
Cited by 5 cases · Cites 6 cases
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HCA 1587/2017 [2018] HKCFI 2438 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE HIGH COURT ACTION NO 1587 OF 2017 ________________________
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_______________ JUDGMENT _______________ I. INTRODUCTION 1.The plaintiff Ng Ting Kwok Andrew (“P”) is the younger brother of the 1st defendant Ng On Kwok Raymond (“D1”). The 2nd defendant is D1’s wife Dan Yan Ping Bella (“D2”). By the present action, P sought to enforce payment obligations by D1/D2 (collectively, “Ds”) under a master agreement dated 29 May 2014 between P and Ds (“MA”) as subsequently varied by a supplemental deed dated 29 April 2016 between the same parties (“SD”) (collectively, “Revised MA”). 2.Pursuant to the MA, P agreed to sell and Ds agreed to purchase certain shares (“Shares”) in 5 companies (ie Steps Consulting Limited (“Steps Consulting”),[1] S&W Holding Limited (“S&W Holding”),[2] Rabeanco Singapore Pte Ltd, Rabeanco Europe BV and Brighteam Holdings Limited (“Brighteam”) (collectively, “Companies”)) within the Rabeanco Group[3] (“S&P”) for the Consideration (see paragraph 102 below) payable jointly and severally by Ds to P. Completion of the S&P took place on 29 May 2014. By the SD, P and Ds agreed to vary certain provisions of the MA. 3.Pursuant to the Revised MA, Ds were to jointly and severally pay P the balance of the Consideration ($58,135,000) by 75 monthly instalments (“Instalments”), the respective amounts of which were set out in the schedule attached to the SD (“Payment Schedule”), and each Instalment was due and payable on the last day of the respective instalment period (“Instalment Period”) ascertained in accordance with clause 5.6 of the Revised MA (“Instalment Payment Date”) and set out in the Payment Schedule. Interest (“Interest”) shall accrue on the outstanding amount of the Consideration (“Outstanding Consideration”)[4] on the basis of actual days elapsed and a 365 days’ year at the rate of HIBOR[5] plus 2% and shall be payable by Ds on each Instalment Payment Date. If Ds failed to pay any sum payable under the Revised MA when due, they shall pay interest (“Default Interest”) on each such overdue sum from and including the due date to the date of actual payment at 5.5%pa (as well after as before judgment) and be calculated on the basis of the actual number of days elapsed and a 365 days’ year. 4.Ds paid the Instalments up to 27 March 2017 pursuant to the Payment Schedule, but thereafter did not pay (a) the following 3 Instalments ($1,740,000),[6] (b) Interest on the Outstanding Consideration[7] ($347,707.22),[8] (c) Default Interest on the overdue Instalments ($6,817.73)[9] and/or (d) further Default Interest on the overdue Instalments. 5.On 5 July 2017, P commenced the present action against Ds to recover the aforesaid outstanding sums and further Default Interest. On 24 July 2017, Ds gave notice of intention to defend. On 28 July 2017, P issued a summons for summary judgment (“O14 Summons”) pursuant to Order 14 of the Rules of the High Court (“RHC”). On 28 July and 13 November 2017, P filed his 1st and 2nd affidavits in support of the O14 Summons (“P 1st and 2nd Affs”). On 9 August, 11 September and 14 December 2017, Ds filed D1’s 1st, 2nd and 3rd affirmations (“D1 1st, 2nd and 3rd Affs” or collectively “D1 Affs”) in opposition. 6.The O14 Summons was heard on 13 December 2017 (“Master Hearing”) before Master Benny Lo (“Master”), which meant the D1 3rd Aff was filed a day after the Master Hearing. This was because of the following:
7.At the Master Hearing, the Master granted judgment in favour of P against Ds (“Master Order”) for:
The Master reduced his reasons for decision in writing, which written reasons were handed down to the parties on 3 January 2018 (“Decision”). 8.On 27 December 2017, Ds filed Notice of Appeal against the Master Order (“Appeal”) for the following reliefs:
On 4 January 2018, the hearing of the Appeal was scheduled to be heard before this court on 24 July 2018 (“Appeal Hearing”). 9.Also on 27 December 2017, Ds filed (a) a summons for stay of execution of the Master Order pending final determination of the Appeal (“Stay Summons”) and (b) D1’s 4th affirmation in support thereof. On 9 January 2018, Master Hui granted an order by consent for P and Ds to respectively file affirmations in opposition and in reply, and for the Stay Summons to be adjourned for argument before a judge with 1 hour reserved. By that time, both P and Ds were well aware the Appeal Hearing was scheduled to be heard on 24 July 2017, but neither P nor Ds asked for the Stay Summons to be made returnable for argument at the Appeal Hearing. Time extensions were granted for P to file affirmation in opposition, and he eventually filed his 3rd affidavit on 21 March 2018. Time extension was granted for Ds to file affirmation in reply, and they eventually filed D1’s 5th affirmation (“D1 5th Aff”) on 30 April 2018. 10.In the meantime, P issued bankruptcy petitions against D2 in HCB1310/2018 and HCB2098/2018 on 8 March and 17 April 2018 respectively. The hearing of such bankruptcy petitions was adjourned to 1 August 2018, and further adjourned to 31 October 2018. 11.Unlike the Appeal in respect of which Ds took the initiative in January 2018 to fix/schedule the Appeal Hearing (see paragraph 8 above), Ds did not arrange to fix/schedule the argument hearing of the Stay Summons until 5 July 2018 when Ds’ solicitors proposed to P’s solicitors to attend before the listing clerk on 10 July 2018 to have such argument heard at the Appeal Hearing. On 6 July 2018, Ps’ solicitors disagreed because:
On 9 July 2018, Ds insisted the Stay Summons should be heard at the Appeal Hearing but Ps continued to disagree, so Ds’ solicitors wrote to this court for leave to have the Stay Summons heard together with the Appeal[10] otherwise the latter might be rendered nugatory. On 10 July 2018, the parties attended before the listing clerk who refused to fix/schedule the argument hearing for the Stay Summons at the same time as the Appeal Hearing, but offered an earlier hearing for the Stay Summons on 17 July 2018 (which Ds declined to take up). On 11 July 2018, P’s solicitors wrote to this court to express P’s concern that Ds’ request for the Stay Summons to be heard together with the Appeal was a veiled attempt to slip in the D1 5th Aff as evidence before this court at the Appeal Hearing. On 12 July 2018, Ds’ solicitors wrote to this court to deny such suggestion, and reiterated it would be undesirable for the Stay Summons to be heard by another judge. 12.On 12 July 2018, I refused to allow the Stay Summons hijack the Appeal Hearing:
With hindsight, it appeared such directions were quite perceptive since the Appeal Hearing itself took full 3 hours, so decision had to be reserved. 13.Notwithstanding Ds’ denial of any intention to slip in the D1 5th Aff as evidence at the Appeal Hearing, 5 days later and a week before the Appeal Hearing (ie on 17 July 2018), Ds filed a summons returnable at the Appeal Hearing for leave to adduce the D1 5th Aff into evidence for the Appeal (“Leave Summons”). On the same day (ie 17 July 2017), Ds filed D2’s affirmation in support (“D2 Aff”). At the Appeal Hearing, Mr Hariman, counsel for Ds, confirmed that for the Leave Summons Ds would only seek to adduce paragraphs 5-15 of the D1 5th Aff for the Appeal, so for convenience references to the D1 5th Aff below are references to paragraphs 5-15 thereof unless otherwise stated. Upon agreement by Mr Chang (and Ms Wong with him), counsel for P, and Mr Hariman at the Appeal Hearing, counsel addressed on the D1 5th Aff on de bene esse basis pending determination of the Leave Summons. II. DS’ AFFIRMATION EVIDENCE 14.D1 1st Aff filed on 9 August 2017 D1 claimed that at the time of the D1 1st Aff, Ds were still gathering evidence, compiling information and providing documents for Ds’ solicitors, and they would file a further detailed affirmation to set out how P/Ds carried on leather handbags business under the Rabeanco brand name and how they entered into several ventures in various companies that eventually led to the MA by which P substantially disposed of his interests in those companies to Ds. D1 claimed the matter was not as simple as P depicted for there was a long history of business relationship between P and Ds that led to the present dispute, and voluminous documents[11] would be exhibited to the further detailed affirmation to be filed. 15.The D1 1st Aff claimed the further detailed affirmation would set out P’s misrepresentations and “what were the actual pictures of the various entities in particularly the entities in the USA which costed [Ds] a fortune, rather than the rosy picture that [P] described”:
On such basis, it was said P failed to act in good faith, and failed to show honesty and/or observance of reasonable commercial standards of fair dealing. 16.D1 2nd Aff filed on 13 November 2017 D claimed S&W Handbags Limited (“S&W Handbags”)[13] was principally engaged in retail/wholesale of handbags, and in the early years it was the joint effort of Ds through Gala Prosper Investment Limited (“Gala Prosper”) and P and Ms Sian Ping (“SP”) through Steps Consulting. Steps Consulting and Gala Prosper as “equal shareholders held the operating arms of the handbag business in Rabeanco Limited[14] and [S&W Handbags]”. In/about 2007/2008 dispute arose between SP and Ds/P that led to a sale and purchase agreement dated 18 June 2009 whereby SP sold her shares/interests in Steps Consulting (and S&W Holding) to P/Ds for $8,000,000. From then until the MA dated 29 May 2014 whereby P disposed of his Shares/interests in the Companies to Ds, P/Ds operated the handbags business with the Rabeanco brand name under S&W Handbags with P in charge of finance/operation, D1 in charge of manufacturing, and D2 in charge of design and product development. 17.In/about 2013/2014, there were disputes between P and Ds over the expansion plan / future direction of the Rabeanco Group. Ds wanted to focus more on the Asian markets, but P “in the last few years or so endeavoured in very aggressive expansion plan into the markets of the USA which [Ds] felt very risky”. Even though Ds were the indirect majority shareholders of S&W Handbags, P caused his majority shareholding in Steps Consulting[15] to frustrate S&W Handbags’ normal operations (which practically came to a standstill for several months) by hindering business decisions/actions that Ds wanted to make, and to force Ds to buy out his Shares in the Companies at a high price. D1 further claimed P as joint signatory of S&W Handbags’ bank accounts also intentionally refused to sign cheques to pay staff wages. Nevertheless, Ds refrained from winding up Steps Consulting as P was D1’s brother, and Ds negotiated with P on his terms for disposal of his interests in the Rabeanco Group to them. P and Ds eventually signed the MA. 18.During negotiations for the MA, D1 suffered from illness and had surgery with slow recovery. D1 claimed P made various misrepresentations “without which [Ds] would not have acquired his shareholding at such high price”:
19.D1 3rd Aff filed on 14 December 2017 D1 claimed most if not all operating entities/companies in the Rabeanco Group required unanimous vote for decision-making, so P could easily force a deadlock to frustrate decision-making and operation of such companies, and P was 1 of 2 joint signatories to all company accounts. D1 claimed the Companies’ true financial picture was not fully revealed to Ds until after settlement of HCA1772/2015 (see paragraph 32 below) as the previous auditor did not present consolidated accounts and the new auditor needed time to review the previous accounts and to prepare appropriate financial statements according to applicable accounting standards. “…… [The] audited accounts of [S&W Handbags], the main operating company, was only available to [Ds] on or about 13 October 2015. [Ds] were not given the full picture of the financial situation of Companies until then. However, the matter in HCA1772/2015 was already settled by way of Consent order dated 8 October 2015”. 20.D1 considered HCA566/2017 (see paragraph 37 below) irrelevant to the present action, and would not address the same. 21.Summary It appeared the D1 Affs alleged Ds did not understand the impact of the non-consolidated audited accounts of S&W Handbags, so they trusted and relied on P’s representations “…… that there was no problem and the accounts were accurate” (paragraph 19 of the D1 2nd Aff and paragraph 18(a) above), and when Ds wanted to carry out due diligence to check the accounts “especially the overseas entities” P disagreed and “…… told [Ds] that the accounts were OK and they were accurate” (paragraph 24 of the D1 2nd Aff and paragraph 18(b) above).[17] 22.It also appeared from the D1 Affs that subsequently Ds (who took over control of the Rabeanco Group after execution of the MA and who was not given “the full picture of the financial situation of the Companies” until the 2015 consolidated accounts of S&W Handbags were available on 13 October 2015) realised such representations were false and inaccurate:
The above plainly showed the D1 2nd/3rd Affs set out Ds’ case as to their misrepresentation defence, including the alleged representations, alleged inducement/reliance and alleged falsity with nothing on their face (bearing in mind the D1 3rd Aff was adduced into evidence only at the Master Hearing) to suggest Ds’ inquiries/investigations were still ongoing/ incomplete at the time of the Master Hearing. III. P’S AFFIRMATION EVIDENCE 23.P claimed the bare allegations of misrepresentation raised in the D1 Affs were false, incapable of belief and contradicted by contemporaneous records, and further claimed Ds made up such purported defence at a late stage to delay payment of substantial sums owed to P when Ds always had cashflow problems and struggled to meet their payment obligations under the MA and Revised MA. 24.P said that since SP left Steps Consulting in June 2009, Ds/P worked on expanding the Rabeanco Group into Singapore, Europe and (in/about late 2012) USA with a view to eventual listing on the Hong Kong Stock Exchange. P/Ds were all actively involved in the operations of the Rabeanco Group, and made all major decisions collectively. Before execution of the MA, P was a minority shareholder whereas Ds together held majority shareholdings in the operating entities within the Rabeanco Group, so P claimed it was absurd and misleading for Ds to allege:
25.P also claimed the decision to expand the Rabeanco Group into USA was made collectively by P/Ds, who were aware of the risks/ uncertainties involved, but who also saw the potential benefits such expansion could bring. So the 3 of them decided to expand into the US market, and in/about mid-2012 decided to acquire Brighteam (with P and Ds as equal shareholders) as holding company of Rabeanco US and to become directors of Rabeanco US. P claimed:
26.Accordingly, P claimed:
27.P claimed Ds falsely alleged they did not know the financial problems with Rabeanco US before they signed the MA; rather, Ds were at all material times fully aware of the difficulties/risks they would have to face after acquiring P’s interests in the Companies, and P had never painted any “rosy picture” relating to Rabeanco US or any of the Companies. 28.First, D1’s email to P dated 30 January 2014 (ie sent during negotiations on the initial draft of the sale and purchase agreement prepared by Ds’ solicitors) explained D1’s observations on P’s proposed amendments to the draft agreement as follows:
P claimed such email unequivocally evidenced Ds’ knowledge and appreciation of the “disastrous” and “bleeding” situation of the US operations. 29.Secondly, Eva Yiu (“Eva”) of S&W Handbags circulated an email dated 28 May 2014 (ie before the MA was signed) that enclosed a copy “Bankruptcy Action Plan” as approved by Ds that set out inter alia what had to be done to close down the US operations, including termination of long-term leases. P claimed this showed Ds plainly knew Rabeanco US had to be closed down with bankruptcy action pending even before the MA was signed. P further claimed Ds obtained legal advice on Rabeanco US in early May 2014 in light of its then dire financial situation, so P believed Ds were advised and fully understood the extent/nature of Rabeanco US’ debts. 30.Thirdly, by 12 June 2014 P had sold his Shares/interests in the Companies, but P (who remained as consultant to the Rabeanco Group for about a year after signing the MA) prepared a “story” to be sent to creditors of the US operations (primarily landlords of Rabeanco US’ shops) to explain to them the decision to close down the US operations (see correspondence between P and D1 on 12 June 2014):
D1 approved such “story” by stating in his email dated 12 June 2014 “[the] story is fine for me. Please proceed”, which (according to P) unequivocally demonstrated D1’s knowledge of the troubled financial situation in USA. 31.After the MA was signed on 29 May 2014, Ds took complete control over the management/finances of S&W Handbags, and its audited financial statements showed Ds became its only directors on 1 August 2014. From June 2014 to about March 2015, Ds made regular payments by post-dated cheques under the MA. Since about April 2015, some of Ds’ post-dated cheques were dishonoured even though they still paid the Interest, and Ds indicated they had cashflow problems and requested deferred payment on a number of occasions. P’s solicitors sent a demand letter dated 15 July 2015 to Ds’ solicitors, and by a reply letter dated 21 July 2015 Ds claimed to have personally told P many times they had cashflow problems and would like to re-schedule payment of the outstanding balance of the Consideration. By letter dated 28 July 2015, Ds’ solicitors stated inter alia that:
32.P claimed that due to Ds’ breach of their payment obligations under the MA, he commenced HCA1772/2015 against them on 5 August 2015 to claim inter alia for outstanding Instalments of the Consideration payable from April to July 2015. Quite soon thereafter Ds fully settled P’s claim (with interest) in HCA1772/2015 without raising any of the allegations in the D1 Affs, and by a consent order dated 8 October 2015 HCA1772/2015 was discontinued with costs of such action to P. By a further consent order dated 6 January 2016, Ds were ordered to pay such costs agreed at $181,356.10 by 4 instalments, the last of which was due on/before 15 May 2016 and had since been duly paid. P claimed that if Ds’ present allegations of misrepresentation had any modicum of truth, it was inconceivable for them to have (a) sought indulgence to re-schedule payment of the outstanding balance of the Consideration, (b) agreed to settle P’s claims (with interest) in HCA1772/2015 based on Ds’ failure to pay, and/or (c) agreed to pay P’s legal costs of $181,356.10. 33.P claimed Ds continued to struggle to meet their payment obligations under the MA, so at Ds’ request P agreed to enter into the SD on 29 April 2016 to give them more time to pay but on condition Ds would pay the then outstanding Interest of $248,491.02. Recital (B) of the SD expressly acknowledged (a) Ds had “failed to pay the Consideration in accordance with the terms of the [MA]” and (b) the Outstanding Consideration was $58,135,000 with outstanding Interest at $248,491.02 (which Interest sum was paid by Ds to P upon execution of the SD without any reservation). 34.A month after signing the SD, P and Ds completed P’s sale to Ds another 1,000 shares of $1 each in Steps Consulting without any complaint/reservation by Ds pursuant to an agreement for sale and purchase dated 29 May 2014 (“2nd SC SPA”), and pursuant thereto Ds agreed to pay P a further sum of $5,800,000 according to a payment schedule with payment to be made in 2021. 35.After signing the SD, Ds paid P 11 Instalments with Interest even though they were occasionally late with payment,[19] but P did not receive any further payment thereafter from Ds who again blamed their ongoing cashflow problem. P claimed that from February to May 2017, Ds through Worldbe’s accountant Iris Chan (“Iris”) repeatedly sought P’s indulgence for more time to make payment as shown in email/WhatsApp messages by P and Iris between 24 February and 26 May 2017:
36.When P commenced the present action on 5 July 2017, Ds had defaulted payment of the 3 Instalments due on 27 April, 29 May and 29 June 2017. In the months leading up to commencement of the present action, neither Iris nor Ds alleged any misrepresentation by P, so P believed the purported misrepresentation defence raised in the D1 Affs were just desperate attempts to delay recovery of the outstanding sums due to him. 37.P recently discovered that on 10 March 2017 the landlord of a property that was leased to DBE (HK) Limited commenced HCA566/2017 against inter alia Ds as guarantors for inter alia outstanding rent of $4,970,000 from July 2016 to March 2017, and such landlord applied for summary judgment with argument hearing scheduled to be heard on 7 November 2017. 38.By reason of the foregoing matters (especially in light of contemporaneous documents), P claimed Ds’ allegations as to P’s misrepresentations were incapable of belief:
IV. D1 5TH AFF AND D2 AFF 39.D1 5th Aff D1 made the following “averments and clarifications” in reply to the P 2nd Aff in relation to Ds’ misrepresentation defence:
40.D1 claimed that had Ds found out about the causes/reasons behind the problems earlier such that there was a viable cause of action against P for misrepresentation, they would not have signed further documents/agreements such as the SD, but would most likely have proceeded to take legal action against P for being induced by and having relied on P’s misrepresentations to pay the highly inflated price for the Shares in the Companies. 41.Ds alleged that since P did not make positive responses to Ds’ assertions about obsolete stock with no resale value, huge hidden losses in the overseas entities and inter-company loans that turned out to be non-recoverable bad debts without plausible reason offered for not doing so, this would lend weight and be material to Ds’ case on misrepresentation. 42.D1 claimed Ds were informed after the Master Hearing that the Inland Revenue Department (“IRD”) had commenced investigation into the accounts of S&W Handbags and Worldbe since 2011, and he was prepared to render assistance. D1 claimed (a) the relevant accounts from 2011-2014 were prepared under and supervised by P, (b) the IRD investigation by Investigation Team 4 was not a routine matter, (c) the “investigations might reveal the relevant accounts prepared under and supervised by [P] to have been falsified, misleading and/or riddled with inaccurate information and/or misrepresentations by P” (my emphasis), and (d) “the results of the investigations may be of assistance to [Ds’] case of misrepresentation” (my emphasis). 43.Given the respective differing case of the parties on misrepresentation, D1 believed there was a triable issue that would go to the heart of such dispute. D1 claimed that to properly determine Ds’ case of misrepresentation, their knowledge, the circumstances faced, the dealings between the parties at the material times, and the IRD investigation and results thereof were all relevant matters to be examined and would likely constitute/trigger factual disputes that should only be determined by the trial process. It was said Ds’ case at present was not incapable of belief. 44.Observations on the D1 5th Aff It appeared the D1 5th Aff alleged P made misrepresentations that “the losses in the US amounted to around HK$20 million in the previous 1-2 years” (ie P downplayed the non-recoverable loss in the US business), and “the US business need not be closed down as (1) the losses there can be offset against gains from elsewhere such as Singapore and (2) it was normal for the recently established US business to make losses initially. [P] played up the prospects of the Companies and also contended that there were further opportunities in the US and elsewhere to explore, especially with there being business for the Companies in Europe and Asia” (see paragraph 39(b) and (j)(i) above). 45.The D1 Affs showed Ds realised the falsity/inaccuracy of P’s alleged representations when (a) they had to face up to and deal with the matters in paragraph 22(a)-(c) above after execution of the MA and taking over sole control of the Rabeanco Group, and (b) they were given “the full picture of the financial situation of the Companies” by mid-October 2015 when the 2015 consolidated accounts of S&W Holding were available[20] (see paragraph 19 above). It was therefore apparent from the D1 Affs that Ds knew the constituent elements of the misrepresentation defence and the problems with P’s alleged representations (ie their alleged falsity/ inaccuracy) well before commencement of the present action (see paragraphs 63-65 below), but the D1 5th Aff tried to put a gloss on this by alleging Ds only found out later the causes/reasons behind the problems (see paragraphs 70(a)-(b) below). In my view, such assertion as well as the metamorphosis of the alleged representations by P in the D1 2nd Aff to those in the D1 5th Aff (which matters must necessarily be a matter of Ds’ recollection) did not sit well with Ds’ appreciation of the constituent elements of the misrepresentation defence (see paragraphs 67-68 below). In any event, even though the D1 5th Aff stated D1 wished to respond to the P 2nd Aff, it did not say Ds had not completed their inquiries/ investigations by the time of the Master Hearing. 46.D2 Aff By the D2 Aff, D2 claimed the information/evidence set out in the D1 5th Aff were not available or could not have been obtained before the Master Hearing. After entering into the MA and SD, Ds focused their energies on turning around the Companies and their subsidiaries/ businesses, and there was no reason for them to delve and look back into what had gone wrong previously. After P commenced the present action on 5 July 2017 and filed the O14 Summons on 28 July 2018, Ds immediately sought advice from their legal advisors and came to realise there was “…… pressing need to look into the financial situation of the various companies, the problems faced and the causes and reasons thereto” (my emphasis). 47.D2 claimed large-scale and extensive inquiries/investigations that concerned the Companies and their subsidiaries (which covered many years before 2015 when P was in charge of finances) were only started in August 2017. “We had to dig up and trough through documents and recall information dating back to two years or more before”, which was time-consuming and costly with multiple correspondence exchanged among Ds, their legal advisors and relevant employees/professionals “who did the groundwork”. It was said such inquiries/investigations were still at an early stage by September 2017, but Ds managed to come up with piecemeal information/evidence for the D1 2nd Aff even though “…… many things were still in the air and not known to [Ds] at the time given the ongoing inquiries and investigations”. Ds claimed their difficulty was reflected by the need for belated leave to file the D1 3rd Aff returnable at the Master Hearing. On such basis, D2 claimed Ds’ misrepresentation defence was handicapped by time pressure and by piecemeal, scattered and incomplete picture at the time, so Ds could only put forward the evidence in the D1 Affs in summary form and scattered manner. D2 claimed the ongoing inquiries/investigations meant the ramifications of exchanges with P were not entirely known, and Ds were not in a position to proffer the same at the Master Hearing. D2 went on to say “[the] inquiries and investigations undertaken were only completed after the [Master Hearing]. The findings and results of the inquiries and investigations were therefore only available after 13 December 2017 and have been summarised and put forward in the [D1 5th Aff], notably paragraph 7 and the subparagraphs therein.” 48.D2 said a key reason given by the Master in finding for Ps was that Ds’ complaints were not put forward earlier, particularly given the involvement of D’s present legal team. It was said the Master did not pose this point at the Master Hearing, so Ds had no opportunity to address the same let alone appreciate its significance as well as the need adduce information/evidence and make submissions on the same. It was said this explained why information/evidence in this regard was not put forward/argued at the Master Hearing, so fairness required that Ds be allowed to address such matter by the D1 5th Aff given the serious implications of the summary judgment application. D2 added that matters in paragraph 10 of the D1 5th Aff onwards concerned developments/events after the Master Hearing and could not have been raised before the Master. 49.D2 further claimed the information/evidence in the D1 5th Aff (particularly paragraph 7 and its sub-paragraphs therein that were most relevant to the misrepresentation defence) would probably have an important influence on the result of the O14 Summons and would presumably be believed as it demonstrated a more complete/ comprehensive case on the misrepresentation defence that was not incapable of belief. D2 claimed the same could also be said for the IRD investigation raised in the D1 5th Aff for they “suggested wrongdoing on the part of [P] and give credence to [Ds’] case of having relied upon and being induced into the transaction by way of misrepresentations (fraudulent or otherwise) by [P] as to the financial situation of the Companies”. D2 believed there was no reason why the matters in the D1 5th Aff were not to be believed or at least incapable of being believed. 50.D2 suggested whilst P might take issue over the timing of the Leave Summons made a week before the Appeal Hearing, she claimed to have been advised that the timing of the application had no bearing on whether it would be granted or not. V. LEGAL PRINCIPLES 51.Appeal against master’s decision It is trite that an appeal from the master to judge in chambers is dealt with by an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time. The judge will give the weight it deserves to the previous decision of the master; but he is in no way bound by it.[21] 52.Summary judgment A plaintiff may invoke the procedure under Order 14 of the RHC where there is no valid defence to his claim or otherwise a triable issue. The rationale is set out in Hong Kong Civil Procedure 2019:[22]
53.In Ng Shou Chun v Hung Chun San,[23] Godfrey J noted it was not appropriate to embark on a mini‑trial of the action on affidavit evidence.[24] The court should ask itself the question whether what the defendant says is credible or believable. If so, he must have leave to defend; if not, the plaintiff is entitled to summary judgment. Hong Kong Civil Procedure 2019 goes on to say that:[25]
54.But to raise a triable issue or arguable defence, the defendant cannot be sparing of the particulars of his defence, and then claim that as a result of his own parsimony in details there is an obscurity which must await trial for illumination.[26] Further, “‘[a] desire to investigate alleged obscurities and a hope that something will turn up on the investigation cannot, separately or together, amount to a sufficient reason for refusing to enter judgment for the plaintiff. You do not get leave to defend by putting forward a case that is all surmise and Micawberism’ (per Megarry V.-C. in Lady Anne Tennant v. Associated Newspapers Group Ltd [1979] F.S.R. 298)”.[27] 55.Adduce further evidence on appeal Order 58 rule 1(5) of the RHC provides that “[no] further evidence (other than evidence as to matters which have occurred after the date on which the judgment, order or decision was given or made) may be received on the hearing of an appeal under this rule except on special grounds”. 56.The phrase “special grounds” is the same expression as in Order 59 rule 10(2) of the RHC and requires the conditions laid down in Ladd v Marshall[28] to be satisfied.[29] The Ladd v Marshall conditions are: (a) the evidence could not have been obtained with reasonable due diligence for use at the hearing below, (b) the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive, and (c) the evidence must be such as is presumably to be believed. 57.In the case of an application for summary judgment, the conditions in (b)-(c) above will be satisfied if the further evidence tendered is sufficient, according to the ordinary principles applied on applications for summary judgment, to raise a triable issue, but there is no injustice in requiring a defendant to use diligence as is reasonable in the circumstances to put before the tribunal on the hearing of the summons, albeit in summary form all the evidence he relies on in defence, “whereas it would be a great injustice to the plaintiff to allow the defendant to introduce for the first time on appeal evidence which was readily available at the hearing of the summons but was not produced”.[30] 58.This is emphasised by Poon JA in Bank of New York Mellon v Sun Jiangrong[31] that in considering the 1st limb of the Ladd v Marshall conditions the court will take into account all relevant factors, “such as the time available to the defendant to gather the evidence, the nature of the evidence, the difficulty encountered in obtaining the evidence, and the effort that the defendant had used in gathering the evidence. (The list is of course not exhaustive)”, but “if the defendant has been given ample time to gather all the evidence in opposition but has unreasonably failed to do so, we doubt very much if an appellate court would be prepared to relax the reasonable diligence requirement in his application to adduce fresh evidence on appeal simply because it is an appeal from summary judgment”. 59.The observations in paragraph 57 above also found support in Law Kwok Fai Paul & ors v Wellmei (HK) Plastics & Electronics Industrial Limited & anor in which Yuen JA dismissed an application for adducing fresh evidence on appeal on the ground that the 1st condition of Ladd v Marshallcould not be satisfied, but in any event she would have exercised the court’s discretion to refuse such late application made on 20 October 2014 to adduce evidence for an appeal to be heard on 5 November 2014:[32]
60.In my view, the above guidance applied mutatis mutandis with equal force to applications to adduce fresh evidence for appeal from master’s decision. This was echoed by DHCJ Au-Yeung (as she then was) in Bank of China (Hong Kong) Limited v Certain Aim Limited[33] as follows:[34]
To allow last-minute evidence would not sit well with the underlying objectives of ensuring a case is dealt with as expeditiously as is reasonably practicable (see Order 1A rule 1(b) of the RHC) and/or ensuring fairness between the parties (see Order 1A rule 1(d) of the RHC). VI. LEAVE SUMMONS 61.The Leave Summons was undoubtedly very late. There are 2 aspects to the matter of lateness: (a) whether Ds satisfied the 1st limb of the Ladd v Marshall conditions, ie whether the evidence could not have been obtained with reasonable due diligence for use at the Master Hearing, and (b) whether leave should not be granted given the lateness of the application even if Ds satisfied the 1st limb of the Ladd v Marshall conditions. 62.Ds claimed that prior to commencement of the present action they focused on turning the Companies and their subsidiaries/businesses around, so there was no reason for them to look back to the time when P was in charge of finance/operation, hence the relevant inquiries/ investigations only started in August 2017 after Ps commenced the present action and filed the O14 Summons, and as the inquiries/investigations took time, the evidence in the D1 5th Aff could not have been obtained with reasonable due diligence for use at the Master Hearing. But in my view, the D1 Affs and D1 5th Aff gave a different picture. 63.According to the D1 1st Aff filed on 9 August 2017 (ie about the time when Ds allegedly started their inquiries/investigations), Ds already anticipated filing further detailed affirmation to set out P’s misrepresentations as to “various entities” (but specifically referring to Rabeanco US) and to exhibit voluminous documents in support. Clearly, by the time of the D1 1st Aff, Ds already knew the key constituent elements of their misrepresentation defence, ie P painted a “rosy picture” and made “many misrepresentations” prior to the MA (ie the alleged representations) that were “very material to the price” Ds paid for acquiring the Shares (ie the alleged inducement/reliance) but which was subsequently discovered to be inflated/overpriced (ie the alleged falsity), and they further knew P’s alleged misrepresentations concerned Rabeanco US and “various entities” which suffered huge losses and required a fortune to close down (see paragraph 15 above). Clearly Ds had Rabeanco US and “various entities” on their minds at that time, and they well knew the scope/focus of their misrepresentation defence, which meant they must already have recollection and information to hand. In my view, Ds could not have started their inquiries/investigations from scratch only after commencement of the present action and/or after filing of the O14 Summons as alleged in the D2 Aff (see paragraphs 46-50 above). 64.In the D1 2nd Aff filed on 13 November 2017, D1 was able to set out Ds’ case on (a) the history of business relationship between the parties, (b) P’s alleged misrepresentations (see paragraphs 18(a)-(b) above and summarised in paragraph 21 above) “without which [Ds] would not have acquired his shareholding at such high price” (and indeed D1 was even able to assert $28 to $38 million should be shaved off the Consideration as a result of P’s misrepresentations – see paragraph 18(f) above), (c) the alleged inaccurate picture presented by 2013/2014 non-consolidated accounts of S&W Handbags, and (d) the revelation of such alleged inaccurate picture to Ds after they took control of the Rabeanco Group when they had to deal with write-offs (for unsaleable obsolete stock and non-recoverable receivables), to pay compensation for closing down the US/overseas operations, and to learn the “true picture of S&W Handbag’s financial status” presented in the 2015 consolidated accounts of S&W Handbags, which would also reflect the financial status of the US/overseas operations due to unsaleable obsolete stock (supplied by S&W Handbags) held by such entities, and non-recoverable inter-company loans owed (to S&W Handbags) by such entities (see paragraphs 18(c)-(e) above, footnote 20 above and summary in paragraph 22 above). Plainly, these matters were known to Ds well before the commencement of the present action let alone the Master Hearing, and Ds were able to exhibit documents to the D1 2nd Aff as alluded to in the D1 1st Aff. 65.The D1 3rd Aff that was adduced into evidence at the Master Hearing was significant on 4 matters:
66.More importantly, there was nothing in the D1 2nd and 3rd Affs to suggest Ds’ inquiries/investigations were in any way incomplete (indeed the analysis in paragraphs 64-65 above suggested otherwise), and Ds were able to set out the alleged representations by P in the D1 2nd Aff (summarised in paragraph 21 above), their alleged reliance on such representations, and the alleged falsity/inaccuracy of such alleged representations (summarised in paragraph 22 above). By the D1 3rd Aff, D1 merely claimed Ds wished to respond to certain matters raised in the P 2nd Aff. 67.Thus, irrespective of the question of whether or not the misrepresentation defence had any arguable merits which I will deal with in Part VII(a) below, Ds squarely raised and addressed the issue of misrepresentation in the D1 Affs. They were also well aware of the pressing need to put forward an arguable defence to oppose the O14 Summons (see paragraph 46 above), and had 5 months until the Master Hearing to place full affirmation evidence in opposition (with leave if necessary as in the case of the D1 3rd Aff). Despite D1’s assertions in the D1 5th Aff that Ds did not have full/complete knowledge at the time of negotiations for the MA and shortly thereafter (see paragraph 39(a) and (e) above), the D1 5th Aff confirmed Ds’ case on misrepresentation was elicited when they sat down to discuss full details of the financial situation of the Companies with their legal advisors after P commenced the present action and filed the O14 Summons, and upon analysis and response to inquiries from their legal advisors (see paragraphs 39(j) and 45 above). As alluded to above, there was no suggestion in the D1 5th Aff itself that Ds’ inquiries/investigations were incomplete at the time of the Master Hearing, and/or part/all of its contents were derived from results of inquiries/ investigations carried out only after the Master Hearing. 68.It must also be remembered at the time the D1 5th Aff was made it was for the Stay Summons and not the Appeal, and it raised “averments and clarifications” in reply to the P 2nd Aff for the Stay Summons without indication it was “new” evidence acquired after the Master Hearing (save for the IRD investigation) to be placed before the court for the Appeal. Further, such “averments and clarifications” also raised concerns (which concerns were also pertinent to the 2nd and 3rd limbs of the Ladd v Marshall conditions):
69.It was only in the D2 Aff made a week before the Appeal Hearing and against the procedural background that I have explained in Part I above that Ds asserted the D1 Affs placed before the Master were piecemeal and scattered, and their large-scale inquiries/investigations involving many companies/entities had not been completed by the time of the Master Hearing (even though Ds admitted their case on misrepresentation could have been better presented). It was also the D2 Aff rather than the D1 5th Aff that suggested the latter summarised the findings/results of inquiries/investigations that continued after the Master Hearing. 70.To support such contention, D2 claimed Ds had to dig up and go through documents going back 2 years or more with extensive liaison among Ds, legal advisors and employees/professionals. I am unimpressed by such bare assertions, and even on the basis of Ds’ case I find such contentions unpersuasive:
71.In my view, the D2 Aff had the odour of belated effort to slip in affirmation evidence to bolster the Appeal in face of the adverse Master Order, and I am not satisfied the 1st limb of the Ladd v Marshall conditions was satisfied. 72.Mr Hariman next argued that even if the 1st limb of the Ladd v Marshall conditions was not fulfilled, Ds had not replied to certain matters raised in the P 2nd Aff and they should be afforded the opportunity to do so. Such argument is not understood. To adduce new evidence for the Appeal on “special grounds”, Ds had to establish all 3 limbs of the Ladd v Marshall conditions. Having failed to establish the 1st limb and having had the opportunity to respond to matters raised in the P 2nd Aff by way of the D1 3rd Aff, I see no “special grounds” to give Ds a further bite of the cherry when they did not seize the opportunity afforded by the D1 3rd Aff to respond to such matters. 73.In the D1 5th Aff, D1 made the bare assertion that Ds were informed “in the past month” of an investigation by the IRD into the accounts of S&W Handbags (see paragraph 42 above). There was no document to evidence such IRD investigation or explain the focus/scope of such investigation (save for D1’s bare assertion that it was not a routine matter). Whilst it seemed the discovery of such IRD investigation was made after the Master Hearing, it is pertinent to note Ds had to satisfy the 2nd and 3rd limbs of the Ladd v Marshall conditions, ie the evidence would probably have an important influence on the result of the Appeal (though it need not be decisive) and the evidence must be such as is presumably to be believed. 74.In my view, given the sad lack of particulars as to the nature, focus and scope of the IRD investigation, it was a speculative leap of faith for D1 to assert the IRD investigation might reveal the relevant accounts “prepared under and supervised by [P] to have been falsified, misleading and/or riddled with inaccurate information and/or misrepresentations by P”, especially in view of the seriousness of such allegations. I am not persuaded Ds even began to show any arguable basis to suggest the IRD investigation would aid their case of misrepresentation against P and/or would have an important influence on the result of the Appeal. 75.As for the 3rd limb of the Ladd v Marshall conditions, the fact IRD commenced investigation of the accounts of S&W Handbags and Worldbe as from 2011 was neither here nor there since Ds did not provide any believable basis for the speculative suggestion that such investigation might “have been falsified, misleading and/or riddled with inaccurate information and/or misrepresentations by P”. It was of particular concern that the IRD investigation was said to concern the accounts of both S&W Handbags and Worldbe (the P 2nd Aff explained that the latter was a company solely owned and controlled by Ds), and Ds must have known the P 2nd Aff had already alluded to commercial conflict between S&W Handbags and Worldbe, ie the latter was at the material times virtually the sole supplier of products to the Rabeanco Group (as reflected in the relevant accounts of S&W Handbags – see footnote 18 above), which was said to be one of the reasons for the S&P (see paragraph 25(d)(i) above). Ds had no response on this, and by being silent on the nature/scope of the IRD investigation Ds failed to allay concern that such investigation might possibly be related to such matter. I am unable to see how the D1 5th Aff on the IRD investigation would lend credence to Ds’ case of misrepresentation. 76.This nicely brings me to the 2nd and 3rd limbs of the Ladd v Marshall conditions as to other aspects of the D1 5th Aff. I repeat my views in paragraph 70 above, and propose to further deal with those matters on de bene esse basis in the discussion in Part VII(a) below in relation to the Appeal. But suffice to state here I find Ds have failed to show the “new” evidence could have material impact on Ds’ Appeal and/or was presumably to be believed. 77.Mr Hariman submitted the “new” evidence in the D1 5th Aff “along with [the D2 Aff]” would help explain the difficulties Ds faced in particularising the precise contents of P’s misrepresentations, which was important as the Master found against Ds’ case of misrepresentation on the premise that Ds knew about the financial situation when entering into the MA and/or SD given (a) contemporaneous emails predating the MA showed Ds were well aware of the problems associated with the Rabeanco Group’s overseas operations, (b) Ds signed the 2013/2014 audited accounts of S&W Handbags, (c) the misrepresentation complaints were not raised earlier, and (d) Ds received the 2015 consolidated accounts of S&W Handbags on 13 October 2015, but still proceeded to sign the SD and make payments under the Revised MA without reservation. It was said the Master oversimplified the matter, and the D1 5th Aff would help to clear things up by explaining that although the financial situation “may have been made clearer by the receipt of the consolidated accounts”, it did not mean that Ds knew the complete financial situation and all causes/reasons behind the problems they faced at the time, and that their ignorance of the entire picture played a part in their decisions in (a)-(d) above and in not raising their misrepresentation allegations earlier. 78.I am unconvinced by these arguments:
79.In any event, the extreme lateness of the Leave Summons justified exercising of my discretion to dismiss such application even if the Ladd v Marshall conditions were satisfied (which I disagree). First, the Appeal was lodged on 27 December 2017 and the Appeal Hearing was fixed on 4 January 2018, so when Ds filed the D1 5th Aff on 30 April 2018 they were well aware their Appeal was due to be heard on 24 July 2018. If, as Ds claimed, their enquiries/investigations to unearth information/evidence in response to the O14 Summons and P 2nd Aff were completed before they filed the D1 5th Aff on 30 April 2018, Ds could not have forgotten or omitted to seek leave to adduce such further evidence for the Appeal. But Ds did not do anything about this until June/July 2018 when they tried to restore the Stay Summons to be heard at the Appeal Hearing and to include the D1 5th Aff in the hearing bundle. Still there was no attempt to adduce the D1 5th Aff for the Appeal in contra-distinction to the Stay Summons. But when Ds’ efforts to restore the Stay Summons to be heard at the Appeal Hearing met with resistance and were foiled by this court, Ds then took out the Leave Summons just a week before the Appeal Hearing. Given such chronology of events, there was force in P’s concern that it was a tactical/forensic exercise to slip in the D1 5th Aff by the backdoor, but when Ds found the backdoor was bolted they had to knock on the front door with the Leave Summons. This view was reinforced by the fact, as Mr Hariman was constrained to acknowledge, there was no or no acceptable explanation for Ds’ inaction for over 2 months from 1 May to 17 July 2018. 80.Further, P might be forgiven for preparing for the Appeal on the assumption that Ds would not adduce any “new” evidence (and hence they did not react to the D1 5th Aff for the purpose of the Appeal), especially when there was no application at all since 30 April 2018 to adduce the D1 5th Aff as evidence for the Appeal. In this respect, it would be pertinent to note 2 matters. First, this was not the first time Ds tried to adduce late affirmation evidence prior to court hearing. Indeed, Ds applied to adduce the D1 3rd Aff as evidence shortly before the Master Hearing, and was granted leave at the Master Hearing. Ds (who were all along legally represented) must have known this was procedurally undesirable, and hence should have applied with due diligence to adduce the D1 5th Aff into evidence much earlier than they did. Secondly, by reason of Ds’ conduct of adducing the D1 3rd Aff as evidence at the Master Hearing and their attempt (if successful which I disagree) in adducing the D1 5th Aff as evidence at the Appeal Hearing, Ds would have 2 chances to put in the last word for the O14 Summons when P as applicant should normally have an opportunity to reply to affirmation evidence in opposition. I cannot agree with Mr Hariman’s submissions that P would not suffer any forensic prejudice. Ds’ delay (for which they had no good reason at all at least for the period since 1 May 2018) left P with no opportunity to respond to Ds’ affirmation evidence not once but twice. The fact P wished to proceed with the Master/Appeal Hearings without seeking adjournment (and P was understandably loath to adjourn such hearings as it would further delay him from the judgment seat) would mean he had to forego rightful opportunity to respond to the D1 3rd/5th Affs, which at least must be forensic/procedural prejudice, especially when the D1 5th Aff attempted to raise substantive matters pertaining the misrepresentation defence. 81.In all the circumstances, I decline to grant leave for Ds to adduce the D1 5th Aff for the purpose of the Appeal, and dismiss the Leave Summons. I will deal with the question of costs in Part VIII below. VII. APPEAL (a) Misrepresentation defence 82.In this Part, I proceed to consider the Appeal by referring to the D1 5th Aff on de bene esse basis. The starting point in considering any misrepresentation defence is to ascertain what precisely is/are the representation(s) that the defendant relies upon. In his oral submissions at the Appeal Hearing, Mr Hariman confirmed Ds relied on P’s alleged misrepresentations in the D1 2nd Aff summarised in paragraph 21 above and in the D1 5th Aff summarised in paragraph 44 above. 83.In the D1 1st Aff, Ds referred to “many misrepresentations” by P in relation to “various entities”, so US/overseas operations under the aegis of Rabeanco US and “various entities” must have been on Ds’ minds, and it begged the question why Ds had to wait until the D1 5th Aff to expand on the alleged representations. Even on Ds’ case, the D1 1st/2nd Affs clearly suggested Ds knew from available information before the signing of the MA (see paragraphs 63-64 above) that the Consideration was allegedly overpriced, which would have alerted Ds to the significance of P’s alleged oral representations to them, and it begged the question why D1 would have recollected such alleged oral representations by P (in the D1 5th Aff as summarised in paragraph 44 above) only after the Master Hearing with no mention of any particular document/dialogue that would have triggered such belated recollection. Indeed, for reasons in Part VI above, I was not satisfied with Ds’ contention that they had to continue their inquiries/investigations after the Master Hearing. 84.Mr Hariman tried to answer such concerns by submitting that notwithstanding criticisms levelled at Ds for failing to properly particularise their case on misrepresentation at the Master Hearing, the difficulties Ds faced had to be understood in the relevant factual matrix, ie the time constraints Ds faced, the inquiries/investigations into the financial situation of the Companies and on the causes/reasons of the problems that started only after commencement of the present action, and the time/effort needed for such inquiries/investigations to ascertain the Companies’ true financial situation and to establish association with misrepresentations made by P. Mr Hariman submitted that even though P/Ds were in control of the Companies prior to entering into the MA, P (upon whom Ds reposed trust and reliance) was in charge of finance/operation, and Ds would not have agreed to substantially buy out P’s Shares in the Companies by entering into the MA and SD for the inflated Consideration but for P’s representations set out in the D1 2nd Aff, which representations caused Ds not to insist on due diligence verification (see D1 2nd/5th Affs) or on concise breakdown calculation for P’s valuation of the Shares (see D1 5th Aff). 85.I have carefully considered such contentions in the analysis above, and repeat the discussions in paragraphs 63-70 above. Suffice to say here I am not persuaded such contentions amounted to credible explanation for metamorphosis of Ds’ case on P’s alleged representations (which I have found was not justifiably explained), and this gave pause for concern as to whether there was truly a credible defence. In light of the above, I agree with the observations by the Master in paragraph 12 of the Decision as follows:
This was further compounded by the D1 5th Aff that gave even more formulations of P’s alleged oral representations. 86.Mr Hariman acknowledged Ds’ case on misrepresentation would turn on Ds’ knowledge of the financial situation of the Companies. He suggested it was over-simplistic and ignored commercial realities at the time for P to contend Ds must have known about the true financial situation when agreeing to purchase the Shares at the agreed Consideration such that they could not have been misled as to the accuracy of the 2013/2014 accounts, could not have failed to fully understand the financial status of S&W Handbags and/or its subsidiary, and in turn could not have made any misrepresentation. 87.I disagree, and repeat paragraphs 63-70 above in which I have addressed with this point. Further, when the 2013/2014 audited accounts of S&W Handbags were published on 18 October 2013 and 31 July 2014 respectively, Steps Consulting (owned by P, D1 and D2 until execution of the MA on 29 May 2014 with P and D2 as its directors) and Gala Prosper (solely owned/controlled by Ds) were the 2 corporate directors of S&W Handbags. As stated in the Auditor’s Reports for 2013/2014:
Plainly, the 2013/2014 financial statements were “approved and authorised for issue by the Board of Directors”and signed by P (on behalf of Steps Consulting) and D1 (on behalf of Gala Prosper) on 18 October 2013, and by D1 (on behalf of Steps Consulting) and D2 (on behalf of Gala Prosper) on 31 July 2014. This did not sit well with Ds’ assertion that they signed as P requested without examining/scrutinising the contents thereof because of their trust in P. More importantly, by the time Ds signed the 2014 audited accounts of S&W Handbags on 31 July 2004, P had already sold the Shares to Ds who had taken up sole control of the Rabeanco Group (including S&W Handbags) for 2 months. In any event, on D’s case, their allegation of reposing trust and reliance on P did not sit well with their criticisms against P for frustrating normal operations of S&W Handbags to force purchase of his Shares at a high price, and for refusing to sign cheques to pay for staff wages (see paragraph 38(b) above). As Mr Chang submitted, Ds’ allegation that they were ignorant of the true financial status of the Companies on/before May 2014 (or on/before August 2017) was rather unbelievable. 88.Next, as regards Ds’ claim that they only discovered the “many problems” with the overseas entities/business after executing MA on 29 May 2014, there was in fact contemporaneous evidence to show Ds had known about the financial problems faced by the overseas entities, including Rabeanco US’ “disastrous” “bleeding”. 89.As a starting point, I note (a) Rabeanco US was wholly owned by Brighteam which in turn was equally owned by P, D1 and D2 who were also the 3 directors of Rabeanco US, (b) D1 was the executive chairman of Rabeanco US, and (c) the other overseas entities were also directly or indirectly owned by P, D1 and D2 in equal shares, and either D1, D2 or both were directors. 90.In my view, the emails disclosed in the P 2nd Aff provided cogent and contemporaneous evidence that Ds knew the existence/extent of financial problems faced by Rabeanco US and other overseas operations before execution of the MA:
91.Ds had no real answer to the 4 emails save to say (a) they were selective (see D1 5th Aff), and (b) whilst indicative Ds knew there were certain problems with the financial situation of Rabeanco US they did “not necessarily mean [Ds] had complete knowledge and knew about the true extent and nature of the problems of the Companies”. But despite the complaint in (a) above and Ds’ claim that their inquiries/investigations were completed before the D1 5th Aff, Ds failed to provide complete email chain to demonstrate how the 4 emails were selective or at the very least to indicate what material emails had been omitted. In respect of (b) above, the contents of the 4 emails speak for themselves without need for further elaboration, and I agree with Mr Chang it was quite unbelievable for Ds to say they were ignorant of the finances/problems of the overseas entities (especially Rabeanco US) until after the MA was signed. 92.Next, Mr Chang submitted that if Ds’ allegations of misrepresentation had any modicum of truth, it was inconceivable that Ds would have:
93.Mr Chang submitted Ds’ allegations of misrepresentation were inconsistent with and contradicted by their own contemporaneous/ subsequent conduct as outlined above. The Master regarded such matters as “telling” (paragraph 14 of the Decision), and considered it “wholly unthinkable”that Ds’ complaint of misrepresentation had not been raised earlier when their legal team had been involved since negotiations for the MA, settlement of HCA1772/2015 and even now (paragraph 18 of the Decision). 94.Mr Hariman submitted the suggestion that by virtue of these matters Ds must have known about the true/actual financial situation of the Companies (particularly the US operations) such that there was no misrepresentation was flawed as it presupposed Ds to have and must have started a chain of inquiry after obtaining the 2015 consolidated accounts, gone on to investigate the causes/problems associated with the finances of the Companies and thereby discovered the falsity of P’s alleged representations, but there was no reason for Ds to do so when their focus at the time was very much on trying to turn the Companies and their businesses around, which was a perfectly reasonable explanation as to why Ds acted as they did in paragraph 92(a)-(h) above, and just because they did not raise the issue of misrepresentation there and then did not mean Ds did/could not have a case. 95.Mr Hariman further submitted that to suggest otherwise as P did would be to engage in exactly the kind of minute forensic exercise which the Court advocated against for Order 14 applications, and P’s contention that Ds had an opportunity to find out the truth before the SD or 2nd SC SPA but failed to do so and/or to take issue was tantamount to an argument that failure to avail oneself of the opportunity to discover the falsity of misrepresentation was a bar to relief, which argument had been rejected by the courts.[39] 96.I do not believe that was the focus of P’s contentions in paragraphs 92-93 above. Ps were not saying Ds could have investigated the matter earlier to discover the falsity of P’s representation; rather Mr Chang submitted Ds’ inaction and complacency demonstrated their allegations were inherently implausible and contrary to common/commercial sense, especially when it was for Ds to show an arguable case and when Ds failed to adduce documentary corroboration of the alleged misrepresentations in contrast to the contemporaneous documents P produced to evidence Ds’ knowledge. Indeed, Ds were unable to explain the messages in February to May 2017 by Iris, who (as Ds agreed) was tasked to deal with P to seek greater flexibility on payment timeframe, which was what she had done. Iris had no personal interest in the matter, and Ds’ suggestion that they had no idea of the contents of communications between Iris and P (belatedly raised in the D1 5th Aff) was unconvincing. 97.In essence, P claimed that even if, as Ds alleged, they were busy trying to turn around the Rabeanco Group and did not initially delve into its historynotwithstanding, say, P’s alleged robust assurance the accounts were accurate and/or okay and Ds’ later discovery that the US/overseas entities suffered “huge loss” (which the D1 5th Aff said was about $50 to $60 million instead of $20 million for the previous 1-2 years as P allegedly represented), it was incredible/ unconvincing that Ds would not have raised any issue on any of the matters in paragraph 92 above in face of (a) litigation against them (when they were legally represented), (b) re-scheduling of payment obligations in the SD (when they had cashflow problems) and (c) completion of the 2nd SC SPA (when the price of the Shares was inflated), when they had already learned of the matters in paragraph 22(a)-(c) above after taking over the Rabeanco Group, having written off losses, irrecoverable receivables and unsaleable obsolete stock, and having received the 2015 consolidated accounts of S&W Handbags that revealed inter-company loans had turned into bad debts (which in short, according to Ds, showed the Consideration was overpriced). It was of particular concern that (a)-(c) above were not normal business operations, but events that as a matter of commercial reality and logic Ds would have been concerned to ascertain whether legal claim against them was defensible and what were their potential liabilities/obligations when entering into completion or further agreement. In my view, the explanations Ds put forward for their complacency had an aura of unreality. 98.Mr Hariman next suggested the small number or even lack of contemporaneous documents in support of Ds’ case would not automatically render it to be incapable of belief. After all, there had been instances where summary judgment application was dismissed and the case be allowed to be taken to trial even for such scenario.[40] In my view, each case turns on own facts, and little assistance could be drawn from the factual matrix in other cases. But here, it was Ds who said there were voluminous documents (D1 1st Aff), and they had to dig up and go through documents going back 2 years or more (D2 Aff). 99.Further, Mr Harmian submitted P’s representations were false/untrue and were misrepresentations since the value of the Companies was inflated (since it transpired there were financial and other problems[41] with the business of the Companies, their subsidiaries and/or Rabeanco Group) and the Consideration was overpriced (since the Shares were worth much less than what P represented). But interestingly, there was no affirmation evidence from Ds as to how much the value of the Shares was inflated or false. Mr Hariman could only refer me to an email by P to D1 on 12 September 2013 during the early stage of negotiations for the MA (signed on 29 May 2014) which stated:
Such email set out various “terms and conditions” for the S&P put forward by P to D1 during the negotiation process, which process took 8 months before the MA (with the Consideration agreed at $68 million) was signed. In my view, such email set out P’s stance on the “terms and conditions” for the S&P for the purpose of negotiations, and I am unable to see how this could be elevated to representation as to the value of the Shares. More importantly, there was no evidence before this court as to the what was the true value of the Shares apart from the bare assertion in the D1 2nd Aff that the Consideration was overpriced and should be reduced “for a sum of about HK$28M to 38M or to be assessed as a result of the misrepresentation made by [P] to [Ds] before the execution of the [MA]”. Mr Hariman sought to answer this by saying P failed to deny the Consideration was overpriced and/or failed to adduce evidence to show the price was not inflated, and such silence was suspicious and required investigation. But the burden was on Ds to establish an arguable misrepresentation defence, including falsity of the alleged representation, and also to condescend upon the particulars of such defence. 100.I am not persuaded by the submission that despite P’s criticisms Ds’ case on misrepresentation was arguably made out and not incapable of belief, and that there were triable issues could only be properly resolved at trial (such that if successful Ds would not have to pay the sums P claimed and would be entitled to rescind the MA/SD that was voidable or void ab initio).[42] Rather, I find there was no arguable defence or triable issue, and I am not persuaded the misrepresentation defence was believable or has any prospect of success. (b) Construction of the MA 101.Ds submitted there were issues of construction/interpretation in respect of certain terms/clauses in the MA which formed the basis of P’s claim. Mr Hariman submitted the construction/interpretation of the term “Outstanding Consideration” was not an academic issue, but one with important/serious ramifications as it would impact on Interest calculation, how much Interest P would receive, and how Default Interest was to be computed (see clause 5.7 of the MA). But Mr Hariman acknowledged this point only went to the matter of Interest and Default Interest, and had no impact on the 3 outstanding Instalments being the subject matter of the Master Order. 102.The Revised MA contained the following definitions:
103.As evident from P’s pleadings, P interpreted “Outstanding Consideration” to mean “the Consideration less the aggregate of whatever amount in Instalment already paid at a particular time”. But Ds said such term meant the outstanding Instalment at the relevant date. Thus, “Outstanding Consideration” as at 27 April 2017 amounted to $56,635,000 according to P’s interpretation, and $150,000 under the Payment Schedule according to Ds’ interpretation. This was a fresh point taken by Ds at the Appeal. Mr Chang did not take any procedural issue, but submitted Ds’ argument was hopeless, which might explain why such argument was not raised in the past 4 years since execution of the MA, and why Ds had always made payments on the basis that the Outstanding Consideration represented the total amount outstanding in respect of the purchase price. 104.Mr Hariman submitted that construction/interpretation of a written agreement involved looking at the agreement as a whole, the factual/legal background against which it was concluded, and the practical objects which it was intended to achieve.[43] He argued that a textual analysis alone would be insufficient to determine the construction/ interpretation issue as there was need to consider the relevant factual matrix, especially in the case of complex formal contracts such as the MA and SD. 105.But Lord Hodge in Wood v Capita Insurance Services Limited at paragraph 13 remarked as follows:[44]
106.Mr Hariman suggested P’s construction/interpretation was not the only meaning that could be ascribed to the term “Outstanding Consideration”. I deal with the various points he raised as follows:
107.Mr Hariman next questioned why the “Outstanding Consideration” could not be construed to mean the amount of the Instalment to be paid by Ds to P in accordance with the Payment Schedule when the MA and SD both had payment schedules that prescribed outstanding amount of the Consideration in the form of Instalments to be paid by Ds on the Instalment Payment Dates. Mr Hariman submitted that since the parties put forward rival meanings, I should lean towards a construction more consistent with business common sense.[45] He argued it would not accord with business common sense for the parties (particularly Ds) to agree to use the exorbitant figure of $56,635,000 (at 27 April 2017) to calculate Interest, and instead Interest calculation based on the more reasonable figure of $150,000 (at 27 April 2017) could not be said to be incapable of belief at this juncture. 108.In my view, the answer is clear and straightforward. Clause 5.5 of the MA provided that “Interest shall accrued on the Outstanding Consideration on the basis of actual day elapsed and a 365 days’ year at the Agreed Interest Rate and shall be due and payable by [Ds] on each Instalment Payment Date”. The starting point was completion of the S&P took place on 29 May 2014, and thereafter Ds took over control of the Companies and their subsidiaries. Whilst Ds already enjoyed the benefit of their bargain, they had not paid the full Consideration. In fact, they needed time to pay off the total Consideration by Instalments over an extended period. Clearly, the commercial purpose for charging Interest at the agreed rate (HIBOR + 2%) on the Outstanding Consideration (ie the entire unpaid part of the Consideration that had yet to be paid by Ds by way of Instalments) was the price Ds had to pay to compensate P (creditor) for keeping him out of money that was due to him (outstanding balance of the purchase price). I agree with Mr Chang it made no commercial sense to charge Interest on the very sum of money that P (creditor) was to receive for a particular Instalment Period. This harked back to paragraph 106(c) above in which I explained that as Ds paid more and more Instalments under the Payment Schedule to P, the Outstanding Consideration would be progressively reduced and Ds would have to pay less and less Interest on the progressively decreased Outstanding Consideration. 109.Mr Hariman submitted clause 6(b) of the MA, which catered for Ds making early payment and/or prepayment of an amount in advance of the relevant Instalment Payment Date and requisite Instalment amount due, gave credence to Ds’ construction/interpretation:
Mr Hariman submitted that under such provision how much Interest stood to be paid depended on the amount of and construction/interpretation of “Outstanding Consideration”. It was said the intent of such provision seemed to be for ensuring P would still receive Interest payment notwithstanding early prepayment of Instalment(s) rendering no Instalment payment(s) payable come the relevant Instalment Payment Date(s), and such arrangement would run all the way through to 29 July 2022 being the last relevant Instalment Payment Date. Mr Hariman agreed that if the entire Consideration ($68,000,000) was paid before 29 July 2022, then on P’s interpretation/construction of “Outstanding Consideration” and the provision for P’s continued entitlement to receive Interest from Ds under clause 6(b) of the MA, it would be impossible to calculate any Interest payable beyond the date on which the Consideration was fully paid off, for there would be simply nothing left of the Consideration that remained to be paid. But on the basis of Ds’ interpretation of “Outstanding Consideration”, calculation of Interest was still possible given the stipulated Instalment amount on each Instalment Payment Date in the Payment Schedule despite prepayment of the entire Consideration, eg Interest due to be paid on 27 April 2017 would be calculated on the basis of $150,000 that had been prepaid. 110.I am not persuaded by such argument. Unlike financial institutions, P was not in the business of earning interest by granting loan facilities. Rather, P received Interest for being kept out of the Consideration which he should have received upon completion of the S&P. When he received the entire Consideration, there would simply be no basis to receive further Interest. This fundamental understanding underlined the provisions for pre-payment under Clause 6(b) of the MA. If Ds made early prepayment of any Instalment or part thereof to P before the relevant Instalment Payment Date, there would no longer be any commercial reason to charge Ds Interest on that sum. Likewise, if Ds fully paid the entire Consideration of $68,000,000 before 2022, then P should no longer charge Interest as there was no longer any “Outstanding Consideration”. It would be wrong to say, as Ds suggested, that even after Ds fully prepaid the entire purchase price, they should still have to pay Interest on each notional Instalment (which had been prepaid) until 2022, which construction (as Mr Chang pointed out) would totally defeat any incentive for Ds to make early payment to P. In my view, clause 6 of the MA made clear Ds could prepay all or part of the Instalments, but clause 6(b) of the MA clarified that if Ds prepaid part but not the entirety of the Outstanding Consideration (eg prepaid 2 Instalments not yet due and payable), then Interest was still payable on the Outstanding Consideration (ie unpaid part of the entire Consideration) on the Instalment Payment Dates for the 2 Instalments that had been prepaid and consequently no longer payable on the Instalment Payment Dates. This turned on the rationale that Interest was payable on the unpaid portion of the entire Consideration and not on any Instalment. 111.Further, as Mr Chang pointed out, Ds’ construction was also contradicted by the clear commercial purpose of clauses 10.1(a) and 10.2 of the MA, which provided that in the event Ds failed to pay 6 consecutive Instalments in accordance with the Payment Schedule, P shall have the right to declare the Outstanding Consideration, accrued interest and all other sums payable under the MA to be immediately due and payable. In my view, the purpose of such acceleration clause was to render whatever amount that was outstanding in respect of the entire purchase price immediately due and payable if Ds failed to pay the Instalments as and when they fell due so P would not have to commence separate legal actions to enforce payment for each subsequent Instalment. It flied against commercial sense if, in such event of default for 6 Instalments, only the next Instalment would become due and payable to P. 112.Mr Hariman submitted the factual background set out in the affirmation evidence was by no means complete, and the court had yet to make findings as to the factual matrix in relation to the MA/SD that would affect the proper construction/interpretation of the “Outstanding Consideration”, which would inform the correct/applicable method of calculating Interest and Default Interest, so the interpretation/consideration point should not be resolved at the summary judgment stage.[46] But in light of the above analysis, interpretation/construction of the term “Outstanding Consideration” was clear and unambiguous from the perspectives of textualism, contextualism and business purpose, and they all point irrevocably towards P’s meaning as the plain and ordinary meaning that made commercial sense. 113.In the circumstances, Ds failed to raise any triable issue or arguable defence, and I discern no other reason for trial. The Master Order was correct, and the Appeal is dismissed. VIII. CONCLUSION 114.The Leave Summons and Appeal are dismissed. There is no reason why costs should not follow event. I therefore grant a costs order nisi that Ds shall pay P costs of and occasioned by the Leave Summons and Appeal (including all costs reserved, if any) to be taxed if not agreed. Mr Chang asked for certificate for 2 counsel. Whilst I have no doubt Ms Wong rendered helpful assistance to Mr Chang in presenting P’s case to this court, on the basis of party and party taxation, I am not persuaded the Leave Summons and Appeal justified two counsel, especially when P had the benefit of helpful submissions and other groundwork done by his legal team (including senior counsel) before the Master.
Mr Jonathan Chang and Ms Sheena Wong, instructed by So Keung Yip & Sin, for the plaintiff Mr Wayne Hariman, instructed by Henry Fok & Co, for the 1st and 2nd defendants [1] Steps Consulting had an issued capital of 10,000 shares of $1 each of which 2/3 was used to be held by P and 1/3 used to be held by Ds, and P and D2 used to be directors thereof [2] P, D1 and D2 each used to hold 1/3 of S&W Holding’s issued share capital of 1,000,000 shares of HK$1 each, which company 100% owned S&W Corporation Limited and which in turn 100% owned S&W Handbags (UK) Limited [3] a loose description of the Companies, their subsidiaries and related companies, but at the material times there was no overall holding company for such group of companies [4] see dispute between the parties on the construction/interpretation of the term “Outstanding Consideration” in Part VII(b) below [5] “HIBOR” was defined to mean “the Hong Kong Interbank Offered Rate for 1 month deposit in Hong Kong dollars (expressed as a rate per annum), as quoted by The Hongkong and Shanghai Corporation Limited at or at about 11:00am (Hong Kong time) on the first Business day of each Instalment Period and if any such rate is below zero, HIBOR will be deemed to be zero”, and “Business Day” was defined to mean “a day (excluding Saturday) on which banks are open for business in Hong Kong, and “Business Days” shall be construed accordingly” [6] with Instalment Payment Dates on 27 April 2017 (HK$150,000), 29 May 2017 (HK$795,000) and 29 June 2017 (HK$795,000) [7] see footnote 4 above [8] Interest was calculated at the rates of 0.46%, 0.38786% and 0.33% (provided to P by Ds’ accountant Iris Chan in line with past practice) for the respective periods up to 27 April 2017 ($118,641.75), 29 May 2017 ($118,563.46) and 29 June 2017 ($110,502.01) [9] Default Interest was calculated up to 29 May 2017 ($1,295.37) and 29 June 2017 ($5,522.36) [10] Ds claimed the outcome of the Stay Summons would stand or fall together with that of the Appeal [11] eg incorporation documents, accounts and expenditure summaries [12] Rabeanco USA Inc was a 100% owned subsidiary of Brighteam and not a subsidiary of Steps Consulting and/or S&W Handbags, and S&W Handbags only had one 100% owned subsidiary Rabeanco (China) Limited [13] S&W Handbags was a Hong Kong company incorporated in July 2003 with authorised/paid-up capital of $10,000 divided into 10,000 shares of $1 each, and Steps Consulting and Gala Prosper used to be its equal shareholders and corporate directors [14] Rabeanco Limited was a Hong Kong company with 10,000 issued shares of $1 each, and Steps Consulting and Gala Prosper used to be its equal shareholders and corporate directors [15] Steps Consulting was a 50% shareholder and corporate director of S&W Handbags [16] D1 2nd Aff claimed the audited accounts of S&W Handbags for the year ended 31 March 2014 were signed/confirmed after execution of the MA, but the figures presented by P during discussions on the price for disposal of his shareholdings were from the audited accounts for the year ended 31 March 2013 [17] this was reinforced by paragraph 26 of the D1 2nd Aff which stated “[if] not for the misrepresentation that the accounts were OK and that consolidation was not necessary made by [P] ……” [18] P claimed the Detailed Income Statements of S&W Handbags for the years ended 31 March 2013 and 31 March 2014 showed that nearly all of the “Purchases” referred therein represented products sold by Worldbe to S&W Handbags [19] Ds paid to P (a) $100,000 for each of the 1st to 6th Instalments due and payable on 30 May, 30 June, 29 July, 29 August, 29 September and 31 October 2016, and (b) $150,000 for each of the 7th to 11th Instalments due and payable on 30 November and 30 December 2016 and 27 January, 27 February and 27 March 2017 [20] in my view, the assertion in the D1 3rd Aff that “[Ds] were not given the full picture of the financial situation of the Companies until then” (my emphasis) suggested Ds had the full picture when the 2015 consolidated accounts became available in mid-October 2015 [21] see Hong Kong Civil Procedure 2019 Vol 1 para 58/1/2 at p 1151 [22] Vol 1, para 14/4/1 at p 301 [23] [1994] 1 HKC 155 [24] see Sterling Services Ltd v Tan Kee Cheung & anor [2003] 3 HKLRD 894, 898 [25] Vol 1, paras 14/4/9A and 14/4/9B at p 305 [26] see Sumikin Bussan International (HK) Ltd v The Precast Piling & Engineering Co Ltd & anor HCA3814/2001, DHCJ Reyes SC (as he then was) (unreported, 10 April 2002) para 39 [27] see Hong Kong Civil Procedure 2019 Vol 1 para 14/4/3 at p 302 [28] [1954] 1 WLR 1489 [29]see Fortis Insurance Company (Asia) Limited v Lam Hau Wah Inneo HCA1840/2009, Fok J (as he then was) (unreported, 30 Mach 2010) affirmed on appeal in CACV86/2010, Kwan JA and Sakhrani J (unreported, 28 October 2010), and Falcon Insurance Company (Hong Kong) Limited v Flagship Underwriting Management Limited HCA312/2010, Sakhrani J (unreported, 22 December 2010) [30] see Johnson Electric International Ltd v Bel Global Resources Holdings Ltd [2014] 5 HKC 504, 508-509 [31] [2016] 1 HKC 137, 142 [32] CACV 45/2014 (unreported, 31 October 2014) paras 17-18 [33] HCMP1272/2007 (unreported, 4 October 2010) at para 17 [34] see also Falcon Insurance Company (Hong Kong) Limited at para 15, and Tsao Chi Ching v Tsao Lung May HCCA2054/2012, DHCJ Marlene Ng (unreported, 22 May 2013) paras 23-26 [35] see items 153-155 and 164-165 of the transcription of the recording of the Master Hearing made by Ds’ solicitors, which was not the official record, but no issue was taken of the accuracy of its contents by either P or Ds at the Appeal Hearing [36] see paragraph 32 above [37] see paragraph 33 above [38] see paragraph 34 above [39] see Ngai Keung v Ming Yiu Heng HCA1584/2010, To J (unreported, 16 July 2012) paras 9-15 where To J held that if the representee did not know the representation was false, it is no defence to an action for rescission that the representee might have discovered its falsity by the exercise of reasonable care (see also Chitty on Contracts 32nd ed Vol 1 para 7-043 at pp 672-673) [40] see New Horizon Finance (HK) Ltd v Easy Luck (HK) Ltd HCA3343/2016, DHCJ Le Pichon (unreported, 8 June 2018) paras 36-37 and 40 [41] Ds claimed (a) there was a huge amount of non-recoverable receivables and non-recoverable losses that had not been disclosed or (as asserted in the D1 5th Aff) were downplayed by P, (b) unbeknown to Ds P had signed various long leases and/or contracts with landlords and/or suppliers resulting in the Companies being subject to unaffordable and unsustainable financial commitments and in Ds having to pay huge compensation to get rid of these non-performing entities, and (c) (as asserted in the D1 5th Aff) P gave false, misleading and/or inaccurate depiction of the Companies’ outlook and prospects [42] see Ngai Keung para 6 [43] see Sina Hong Kong Limited v Pixel Media HK Limited HCA 1400/2013, Master M Wong (unreported, 8 December 2014) para 22 citing Jumbo King Ltd v Faithful Properties Ltd and others (1999) 2 HKCFAR 279, 296 in which Lord Hoffmann said “The construction of a document is not a game with words. It is an attempt to discover what a reasonable person would have understood the parties to mean. And this involves having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve” [44] [2017] UKSC 24 (29 March 2017) [45] see Wood at paras 11-12 citing Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900: “Interpretation is …… a unitary exercise; where there are rival meanings, the court can give weight to the implications of rival constructions by reaching a view as to which construction is more consistent with business common sense. But, in striking a balance between the indications given by the language and the implications of the competing constructions the court must consider the quality of the drafting of the clause ……; and it must also be alive to the possibility that one side may have agreed to something which with hindsight did not serve his interest …… Similarly, the court must not lose sight of the possibility that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms. This unitary exercise involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated …… To my mind once one has read the language in dispute and the relevant parts of the contract that provide its context, it does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the court balances the indications given by each” [46] see Sina Hong Kong Ltd at para 80 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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