Fu’s Coach Ltd v. Golden Champion Travel Co Ltd t/a Golden Champion Bus Investment Co
Read the full judgment text of HCA 608/2020 on BabelCite. This High Court CFI judgment was delivered on 9 March 2021.
1. This is the 1 st Defendant (“D1”)’s appeal against the summary judgment granted by Master Sara Tong whereby D1 was ordered to pay the Plaintiff (“P”) the sum of $2,760,000 with interest at 1% above the HSBC prime rate from 31 December 2019 to the date of judgment and thereafter at judgment rate until payment with costs.
Cites 4 cases
|
HCA 608/2020 [2021] HKCFI 533 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 608 OF 2020 ________________________
_______________________ Before: Deputy High Court Judge Paul Lam SC in Chambers Date of Hearing: 1 March 2021 Date of Decision: 9 March 2021 _________________ D E C I S I O N _________________ Introduction 1.This is the 1st Defendant (“D1”)’s appeal against the summary judgment granted by Master Sara Tong whereby D1 was ordered to pay the Plaintiff (“P”) the sum of $2,760,000 with interest at 1% above the HSBC prime rate from 31 December 2019 to the date of judgment and thereafter at judgment rate until payment with costs. 2.In short, the sum of $2,760,000 represents the unpaid balance of the purchase price of a public bus sold by P to D1. D1 argues mainly that P is not entitled to payment because the parties have entered into a settlement agreement. P’s claim 3.P’s claim may be summarized as follows:
4.P claims against both D1 and the 2nd Defendant (“D2”) (a) a declaration that the Agreement was rightly rescinded on 31 December 2019; and (b) steps be taken by Ds to effect the rescission including but not limited to delivery of possession of the Public Bus to P, and applying or executing all necessary documents for registration to effect the transfer of the Public Bus and the PS Licence back to P. As against D1, P also claims the sum of $48,000; a declaration that the Deposit was rightly forfeited; as well as damages, interests and costs. D1’s defence 5.D1’s Defence and Counterclaim may be summarized as follows:
6.Although P has discontinued its claim against D2, I shall summarise D2’s defence as follows:
The summary judgment application 7.On 1 September 2020, P took out a summary judgment application. The application was supported by an affirmation made by Fu, a director of P, on the same day. Apart from verifying the facts pleaded in the Statement of Claim, Fu, noting that D2 denied that it had ever obtained possession of the Public Bus, pointed out that a vehicle search regarding PG8019 showed that there was no longer such registration. Therefore, it was unlikely that P could recover the Public Bus and the PS Licence. In the circumstances, to simplify P’s claim, P elected to seek summary judgment for the sum of $2,760,000 equivalent to the unpaid balance of the purchase price under the Agreement. 8.Chan made an affirmation in opposition on 23 October 2020. He was the sole director of D1 but had resigned on 12 June 2020. He referred to the contemporaneous records, in particular WhatsApp messages, between Ms Josephine Law (“Law”), a clerk of D1; Ms Serena Fu (“Serena”), P’s representative; Fu and him at the material time. Chan explained that, in fact, D2 had on 3 September 2019 became the owner of the Public Bus and the PS Licence. However, for reasons that are irrelevant for the present purpose, the Public Bus was then transferred to one Bright Way Investment Co Ltd on 2 October 2019, and then Chun Wo Bus Services Ltd on 27 November 2019 with a new registration number HU8845. The registration mark PG8019 had been returned to the Transport Department. He admitted that D1 was in financial difficulties and was unable to honour the Cheque on time. He described the terms of the Settlement Agreement as follows:
9.On 11 December 2020, Master Sara Tong granted summary judgment. 10.On 28 December 2020, D1 filed a notice of appeal, which is the matter now before me. 11.It is trite that an appeal from a master to judge in chambers is a hearing de novo. The legal principles applicable to summary judgment applications are well established as set out in the authorities cited by the parties. The burden is on the defendant to show a triable issue. However, if the court has doubts or suspicion as to the plaintiff’s case, the correct course is to give unconditional leave to defend. In relation to factual assertions made by a defendant, the test is whether they are believable. The court should not conduct a mini-trial on affidavit evidence. That said, the court is not obliged to suspend its critical faculties and assume that the defendant’s evidence is true and accurate. The court is entitled to consider inherent probability, contemporaneous documents and any other relevant circumstances in deciding whether the defendant’s assertions are believable. Analysis 12.The key issue is whether D1’s assertion that the parties have entered into the Settlement Agreement is believable so as to raise a triable issue or an arguable defence. D1’s defence based on estoppel by representation does not, in substance, add anything as it is based on the same factual allegations. 13.In general, whether the parties intended to enter into a concluded contract is a matter to be looked at objectively (World Food Fair Ltd v Hong Kong Island Development Ltd (2006) 9 HKCFAR 735 at §35; Lucy Michaels v Harbour Grand Hong Kong [2020] HKCA 705 at §65). Having considered all relevant evidence and circumstances objectively, for the following reasons, I have come to the conclusion that D1’s assertion that the parties have reached the Settlement Agreement is unbelievable. 14.To begin with, it is surprising that there is no documentary record whatsoever (including WhatsApp messages) to support the existence of the Settlement Agreement. The parties had signed a number of written agreements. In addition, according to the WhatsApp messages, in December 2019 when it was clear that D1 was unable to pay the balance of the purchase price, a draft written cancellation agreement had been prepared by D1. It is clear that the parties had the practice of reducing their agreements into writing. The importance of the Settlement Agreement, if true, was obvious. It is incredible that the parties would reach a concluded settlement agreement as alleged by D1 without any written record at all. 15.The WhatsApp messages exchanged between the parties in December 2019 are telling:
16.Pausing here, it clear that, up to the end of December 2019, the WhatsApp messages do not support that any settlement agreement as alleged by D1 had been reached. Although a draft cancellation agreement had been circulated by D1, none had been signed. 17.P then decided to instruct solicitors to help. Its solicitors issued a demand letter on 31 December 2019. The letter referred to two other vehicles other than the Public Bus. It stated that, pending completion of the Agreement, on 31 July 2019, D1’s related company, Grand Tour Bus Services Ltd, agreed to rent the Public Bus at $20,000 a month. §8 of the letter put on record that, notwithstanding that the ownership of the Public Bus had been transferred to a third party on 3 September 2019, D1 had failed to pay the balance of the purchase price. §9 read:
§10 then stated that D1 failed to pay the rental since October 2019, and as at 31 December 2019, D1 owed to P a total sum of $54,507. Hence, P demanded D1, by 3pm on 7 January 2020, to (a) pay $54,507; and (b) return the physical possession of the Public bus in good repair condition to P. D1 was also demanded to procure the transfer of the ownership of the Public Bus from the third party to P no later than 20 January 2020. 18.On 6 January 2020, P WhatsApp a copy of its solicitors’ letter to D1 and asked D1 to reply by the next day ie 7 January 2020 which was the deadline stated in the solicitors’ letter. Chan acknowledged receipt of the letter. On 8 January 2020, P put on record that D1 did not reply by the deadline on 7 January 2020, and stated the legal action would be taken without further notice if there was still no reply by 3pm on 10 January 2020. However, D1 had never replied to P’s solicitors’ letter. 19.The absence of any reply from D1 to P’s solicitors’ letter is crucial. First, it is incredible that, if the parties had in fact entered into the Settlement Agreement, D1 would fail to refer to it to rebut P’s demands. Second, D1 had not denied P’s claim that it was agreed that a monthly rental of $20,000 would be payable until the ownership of the Public Bus was successfully transferred back to P. This is the Compensation Agreement pleaded by P. 20.After the commencement of this action by P on 12 May 2020, on 31 July 2020, D1’s solicitors issued an open letter marked “Subject to contract”. They mentioned the Settlement Agreement and stated that it was:
They stated further that they had been instructed by D1 to offer a public bus bearing registration number TD2306 with a passenger service licence; and also payment of $100,000 as the agreed rental compensation for the loss of use of the Public bus between 1 March 2020 and 31 July 2000 within 7 days of P’s agreement to take TD2306. If P accepted the offer, D1 also further offered to pay $20,000 a month from 1 August 2000 till completion of the transfer or 31 December 2020 (whichever was the earlier), and allow P to forfeit the Deposit. 21.This is the first time the Settlement Agreement was ever mentioned in any document by D1. However, it was lacking in particulars ie without naming how, between whom and when it was reached. The terms of the Settlement Agreement were also different from the version pleaded by D1 in its Defence or that stated in Chan’s affirmation; in particular, there was no condition that D1 should try to procure the return of the Public Bus and PS Licence to P first; and only upon failure to do so, another public bus with a passenger service licence would be transferred to P. The terms were also uncertain in that it was unclear what was meant by a public bus of “similar condition” as the Public Bus. 22.Up receiving this letter, P’s solicitors, by letter dated 31 July 2020, asked D1’s solicitors to disclose the Settlement Agreement by 11am on 3 August 2020. In reply, on 5 August 2020, D1’s solicitors stated that they were instructed that, in or around mid-December 2019, Chan and Fu reached a verbal agreement in the following terms:
23.This letter was issued about 1.5 month before D1 filed its Defence and Counterclaim on 18 September 2020. This was the first time D1 provided particulars of the Settlement Agreement in line with its pleaded case, which was about 9 months after December 2019 when the Settlement Agreement was allegedly concluded and almost 3 months after P commenced this action. 24.On the same day ie 5 August 2020, P’s solicitors, on behalf of P, denied D1’s allegation that the parties had entered into the Settlement Agreement. 25.In the meantime, on 17 July 2020, D2’s solicitors informed P’s solicitors that D2 had only purchased JN6139 from D1 and had only received that bus. As a result, on 17 August 2020, P’s solicitors asked D1’s solicitors to give a definite answer by 19 August 2020 as to “whether the 1st Defendant has ever passed physical possession of PG8019 to the 2nd Defendant? If so, when?”. D1, however, did not reply. 26.P’s solicitors’ letter dated 17 August 2020 is important. First, D1’s pleaded case is that, under the Settlement Agreement, D1 would try to procure D2 to deliver back the Public bus to P. However, D1 could not possibly agreed to procure D2 to transfer the Public Bus to P when it clearly knew that D2 was not in possession and not the owner thereof by December 2019. Second, the version of the Settlement Agreement stated in Chan’s affirmation is that D1 would try to procure Chun Wo to reassign the Public bus to P, implying that P knew back in mid-December 2019 that the Public Bus had been transferred to Chun Wo. This is plainly untrue because, if P knew this fact, P’s solicitors would not have asked. 27.As just mentioned, the terms of the Settlement Agreement as pleaded in D1’s Defence are materially different from those stated in Chan’s affirmation. In particular, while it was pleaded in the Defence that D1 should procure D2 to return the Public Bus and the PS Licence to P, it was stated in Chan’s affirmation that D1 should procure Chun Wo to do so. Chan acknowledged in §47 of his affirmation that there were discrepancies between D1’s pleaded case and his evidence. He said that “upon checking the files and the records of [D1]”, he confirmed that his evidence was correct and he would apply to amend the Defence. However, he had not explained what files or records he had checked which could explain the discrepancies. It must be borne in mind that his affirmation was made on 23 October 2020, which was only about 1 month after the Defence filed on 18 September 2020. Moreover, Chan signed a statement of truth to confirm that the facts stated in the Defence were true and correct. 28.D1 contends that its subsequent conduct supports the existence of the Settlement Agreement, namely, Chan tried to procure the re-assignment of the Public Bus and the PS Licence to D1, Chan tried to conduct without prejudice negotiations with P’s solicitors in carrying out the substitute assignment, and D1 paid $138,968.13 to P on 9 April 2020. First, the evidence does not support that D1 had in fact tried to return the Public Bus and the PS Licence to D1 (which appeared to be impossible). Second, the fact that Chan had tried to negotiate with P about transferring another vehicle with a passenger service licence is equally consistent with D1’s attempt to negotiate a settlement agreement with P (rather than performing a settlement agreement which has been concluded). Third, the payment of $138,968.13 is equally consistent with P’s case concerning the Compensation Agreement. In principle, is it important to bear in mind that acts which are consistent with the existence of a concluded contract may not prove its existence, in particular, if they are equally consistent with other real possibilities in the relevant circumstances (World Food Fair Ltd v Hong Kong Island Development Ltd (2006) 9 HKCFAR 735 at §§27-28). 29.D1’s main argument is that P’s case on the Compensation Agreement is weak; and, hence, P is not entitled to summary judgment. In particular, D1 pointed out that the Compensation Agreement was not supported by any document, and there was no deadline for the return of the Public Bus and the PS Licence under the Compensation Agreement. However, there is no dispute that, all along, D1 paid a monthly rental of $20,000 for the use of the Public Bus and the PS Licence. As evidenced by the contemporaneous records in December 2019, the parties proceeded on the common ground that a monthly sum of $20,000 remained payable by D1. When it was obvious that D1 could not pay the balance of the purchase price, it was inherently probable that P would want to have the Public Bus and the PS Licence back with payment of a monthly rental at the same rate as before. Most importantly, as mentioned, P’s solicitors referred to the Compensation Agreement expressly in their letter dated 31 December 2019 but D1 had not denied it at all. Chan has not explained in his affirmation why D1 had not replied to this important demand letter. In the circumstances, I do not see any doubt or suspicion in P’s case which justifies granting unconditional leave to defend to D1. 30.As I am not satisfied that D1’s case on the Settlement Agreement is believable in fact for reasons considered together as mentioned above, it is unnecessary for me to consider P’s other arguments in detail. I shall deal with them briefly for the sake of completeness. 31.I am inclined to agree with P that, the Settlement Agreement as pleaded, is void for uncertainty. First, in commercial reality, it is highly unlikely that the parties intended to conclude a settlement agreement as pleaded by D1 without fixing the two important dates for performance: the deadline by which D1 should try to procure the return of the Public Bus and the PS Licence; and, failing which, the deadline by which D1 should transfer another comparable public bus with the same type of licence to P. Second, in respect of the intended substitute transfer, it is difficult, if not impossible, to ascertain what is meant by transferring a public bus “in a condition at least equivalent to the Public Bus”. There are different criteria to determine the condition of a vehicle including but not limited to its age, its mileage, its appearance, its roadworthiness (which would in turn depend on many factors). It is hard to see, without any clear provision, how a comparison can or ought to be made to determine whether D1 had performed its obligation under the alleged Settlement Agreement. 32.I also tend to agree with P that D1’s present stance is rather startling. On the one hand, D1 argues that, because of the Settlement Agreement, P can no longer sue on the Agreement as all potential causes of action arising out of the Agreement have been waived. On the other hand, in §16 of the Defence, D1 pleaded that it accepted P’s repudiation of the Settlement Agreement and is therefore discharged from further performance of the Settlement Agreement. If D1 is correct, it would mean that it does not need to pay the balance of the price; or return either the Public Bus with the PS Licence or, alternatively, another public bus with a passenger service licence to P; or pay any damages. This cannot possibly be correct. In law, it is incorrect to say that a settlement agreement will necessarily put an end to potential rights under the original contract. While it would depend on the exact terms and effect of a particular settlement agreement, in Xpoly Recycling Ltd v Gold Leader Enterprise Ltd [2011] 4 HKLRD 230 at 234, §21, Lam J (as he then was) held that:
In the circumstances, to be realistic, it was most improbable that P would agree to abandon its rights under the Agreement irrespective of whether D1 had performed its obligation under any settlement agreement. And when D1 had evinced an intention not to perform the Settlement Agreement as alleged (if existed), P must be entitled to revert to its rights under the Agreement. 33.At this juncture, I shall consider the implication of the Compensation Agreement on P’s claim. I have already explained above why D1’s denial of the Compensation Agreement does not give rise to any triable issue. Under the Compensation Agreement, D1 was obliged to return the Public Bus with the PS Licence to P, and pay $20,000 monthly rental pending such return. Had D1 performed the Compensation Agreement, P would not be entitled to claim the balance of the purchase price. However, after P started this action and D2 stated its stance, it became clear that D1 would not be able to perform the Compensation Agreement because it cannot procure the return of the Public Bus and the PS Licence to P. In the circumstances, I agree that, in law, P is entitled to elect to put an end to the Compensation Agreement (which is a form of compromise agreement), and revert to its rights under the Agreement. Under the Agreement, having performed its obligation to transfer possession and ownership of the Public Bus together with the PS Licence to and as directed by D1, there is no doubt that P was and is entitled to the balance of the purchase price in the sum of $2,760,000. 34.P only elected to claim the balance of the purchase price when it applied for summary judgment on 1 September 2020. As a matter of fact, D1 has paid monthly rental up to February 2020. In the circumstances, I disagree that interest on the balance of the purchase price should start to accrue from 31 December 2019 as ordered by the Master. I take the view that interest should only run from 1 September 2020. Conclusion and order 35.For the above reasons, the Master was correct in granting summary judgment. I would affirm her order save that pre-judgment interest on the sum of $2,760,000 should run from 1 September 2020 only. Subject to this minor variation to the Master’s order, D1’s appeal is dismissed with costs to be taxed if not agreed.
Mr Leo Wong, instructed by Kwong & Lee Solicitors, for the plaintiff Mr Lok Ho, instructed by Gallant for the 1st defendant |
Cases cited in this judgment