Perfect Award Holdings Ltd v. Ouyang Yida and Others
Read the full judgment text of HCA 349/2018 on BabelCite. This High Court CFI judgment was delivered on 13 October 2023.
1. This was the trial of the action brought by the Plaintiff (“P”), Perfect Award Holdings Limited, against the 1 st to 6 th Defendants (“Ds”; and respectively, “D1”, “D2”, “D3”, “D4”, “D5” and “D6”).
Cited by 3 cases · Cites 3 cases
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HCA 349/2018 [2023] HKCFI 2498 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 349 OF 2018 ________________________ BETWEEN
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________________________ J U D G M E N T ________________________ INTRODUCTION 1.This was the trial of the action brought by the Plaintiff (“P”), Perfect Award Holdings Limited, against the 1st to 6th Defendants (“Ds”; and respectively, “D1”, “D2”, “D3”, “D4”, “D5” and “D6”). 2.The claim is in respect of a sum of RMB27,000,000, which P says is due pursuant to 9 Promissory Notes (“the Notes”) made jointly and severally by Ds. D1, D5 and D6 had pleaded a number of counterclaims, but by reason of their non-attendance at trial, these became moot. 3.Prior to service of the writ, on 5 December 2019, the action had been discontinued against D2 to D4. 4.At trial, P was represented by counsel Mr Derek J Y Chan, and D1, D5 and D6 were absent, their solicitors having come off the record shortly before trial commenced. 5.D5 had been dissolved by striking off on 21 July 2023. In consequence, by summons dated 22 August 2023, P sought leave to discontinue the claim against D5, there being no reasonable prospect of recovery from it (see 深圳正高金屬製品有限公司v Iu Ho Construction Engineering Co Ltd [2022] HKCFI 2685 at §§17-19). I granted an order in terms of the summons at the outset of trial. 6.It was in those circumstances that P proceeded with the trial against D1 and D6. In circumstances such as this, where the defendants are absent, the plaintiff is still required to prove its claim (and call evidence accordingly), having regard to the pleaded defence where appropriate. However, as the defendants are not present and there is no evidence to be tendered on their behalf, the Court will not have regard to their filed witness statements (Jotz Klaus-Bernhard Markus v Hamawy Tarek Mahmoud, HCA 345/2014 (unrep., 30 Jun 2017) at §4; O.35, r.1(2), RHC). BACKGROUND 7.The following is undisputed or not readily disputable. 8.P is a BVI company, incorporated as a special purpose vehicle for investment in D3 ("Feichi International") and managed by China Renaissance Capital Investment Inc. ("CRCI"), a private equity investment management company. 9.Feichi International (D3) was incorporated in the Cayman Islands and holds a chain of Cayman, Hong Kong and PRC subsidiaries, namely D4 ("Feichi Machinery"), D5 ("Feichi HK") and D6 ("Fujian Feichi"). 10.D1 was the founder of Feichi International and the person managing the affairs of Feichi International and its subsidiaries. D1 indirectly held a majority interest in Feichi International through his BVI corporate vehicle, D2("Plateau"). 11.Following a Subscription Agreement dated 8 September 2011, P became a 37.96% holder of Series A Preferred Shares in Feichi International ("Preferred Shares"). 12.In anticipation of the intended listing of Fujian Feichi on the NEEQ in China, Profitee International Limited (益盟國際有限公司), a company incorporated in Hong Kong, was nominated by P and allocated 39.96% of the shares in Fujian Feichi to represent P’s investment in Feichi International. 13.P had a right of redemption in respect of the Preferred Shares under the amended memorandum and articles of association of Feichi International. 14.On 22 October 2014, P issued a redemption notice to Feichi International to exercise its right of redemption over all of the Preferred Shares whereupon D1, Plateau and Feichi International became jointly and severally liable to P for RMB453,434,886 ("Redemption Amount") with interest. 15.On 20 December 2014, D1 representing himself, Plateau, and Feichi International signed a written Acknowledgement in favour of P acknowledging that D1 to D3 were jointly and severally liable for the redemption obligation and requested a grace period of up to 30 June 2015 to make full payment in respect of the share redemption. 16.On 26 June 2015, Ds entered into a Payment Agreement with P ("Payment Agreement") whereupon they jointly and severally agreed to pay the sum of RMB27,000,000 ("Extension Consideration") on top of the Redemption Amount in exchange for a further extension to 30 December 2015. Clause 2 of the Payment Agreement provides that the Extension Consideration is to be paid by way of nine(9)promissory notes in the form annexed as Attachment 1 therein. 17.On the same day, Ds executed and delivered the nine Promissory Notes (i.e. "the Notes") to P. The Notes are in identical terms save for the maturity date and amounts (totalling RMB27,000,000). 18.Payment terms for the Notes were referable to whether or not Fujian Feichi (D6) was successfully listed on the NEEQ on or before 31 January 2016. The relevant terms state as follows:
19.Fujian Feichi was ultimately not listed (whether on the NEEQ or at all) by the stipulated deadline. THE CLAIM AND THE DEFENCES 20.On the basis of the above, P says that the Promissory Notes became due and payable on 28 February 2016. 21.P’s claim commenced as a relatively straightforward one. As set out in the Statement of Claim filed on 13 March 2018, the subject matter of the action was strictly based on the Notes, and in the prayer, the relief sought is for the sum of RMB27,000,000, together with interest and costs. 22.By the defences (D1 and D5 filed a Defence and Counterclaim on 5 June 2018; D6 filed a Defence and Counterclaim on 15 July 2019), Ds’ version of the alleged background to the entry into the Notes was brought in. 23.D1, D5 and D6 put forward a number of defences:
24.These are addressed in turn below. DISCUSSION 25.The starting point is the definition of “promissory notes” within section 89(1) of the Bills of Exchange Ordinance (Cap. 19) ("BEO"), which states:
26.Promissory notes are themselves independent contracts separate from the underlying transactions between the parties. As bills of exchange, promissory notes are treated as good as cash and are to be honoured unless there is some good reason to the contrary. A counterclaim or set-off in the underlying transaction is no defence to a claim on a promissory note: see Xu Ziming v Ruifeng Petroleum Chemical Holdings Ltd, HCA 450/2013(unrep., 6 May 2015) at §§15,49. 27.Pursuant to section 91 BEO:
ISSUE 1: PRESENTMENT 28.The contention is that Clause 5 of the Notes requires payment only upon presentment, and that no liability to pay arises as there was no presentment. 29.P presented inter alia the following arguments to address the pleaded defence. 30.First, Clause 6 of the Notes (paragraph 18 above), is framed broadly and operates as a waiver of any requirement of presentment. This is consistent with section 46(2)(e), BEO. It is not expressed to be limited in its application, and would presumably include Clause 5. 31.Whilst there is a rule of construction that an earlier provision overrides a later inconsistent provision, it is clear from the discussion in Lewison, The Interpretation of Contracts(7th ed.)at[9.77] that this is a rule of “last resort only” and that it applies in cases of clear irreconcilable difference. See also Holloway v Damianus BV [2015]IECA 19 at §§21-23. 32.However, in this case, it is possible to read the clauses in a way which are not inconsistent. Notably, Clause 5 does not use words requiring formal presentment at the place for payment and cannot be said to be clearly and irreconcilably inconsistent with Clause 6. 33.In any event, even if Clause 6 can be said to be inconsistent with the language of Clause 5, it is notable that Clause 6 deals specifically with the necessity for presentment (or more accurately, the lack of requirement thereof),and should prevail over Clause 5(which is primarily concerned with accelerating the time for payment on the occurrence of specified events) by virtue of the maxim generalia specialibus non derogant: Holloway v Damianus BV at §§24-36. 34.Second, and by way of fallback, even in the absence of formal presentment, P argues that the requirement for payment is dispensed with under section 46(2)(a) BEO in that D1 (whether by himself or his authorised representative) was not present at the Place for Payment to make payment, whether on the maturity dates of the Promissory Notes or thereafter: s.46(2)(a) BEO:
35.P refers to Clause 2 of the Notes, which specified CRCI’s Hong Kong office as the place for payment. It is P’s argument that there is no suggestion that Ds or any person authorised to make or refuse payment on Ds' behalf could possibly be found at the place for payment (i.e. CRCI's Hong Kong office) on the maturity dates. Accordingly, presentment under section 93(1) BEO could not have been effected by P even after the exercise of reasonable diligence, and is dispensed with. 36.I am persuaded by the construction of Clauses 5 and 6 proffered by P (discussed at paragraphs 30 to 33 above), and thus find in P’s favour on this basis. It is unnecessary in the circumstances to make any findings on the fallback argument. ISSUE 2: PAYMENT DEPENDENT ON CONTINGENCIES? 37.The contention, in essence, is that the Notes are not valid promissory notes as they do not provide for payment “at a fixed or determinable future time” in that the maturity date is dependent upon whether Fujian Feichi is listed before 31 January 2016 (thus, Ds would say, falling foul of section 89(1), BEO). 38.P disagrees with the contention, and puts forward the argument that as a matter of construction, payment is in fact to be made “at a fixed or determinable future time”. In essence, the point is that Clause 5 does not create a contingency (because the Notes must be paid regardless of listing) but simply provides a mechanism by which the fixed or determinable future date for payment is to be ascertained (i.e. different dates of payment apply depending on whether or not listing takes place by the deadline). 39.In support of this argument, P refers to:
40.P’s position is to be distinguished from the situation where payment is dependent on a contingency which may or may not happen (e.g. payable only if listing takes place) (see section 11, BEO; Chalmers at [2-088]. In this type of scenario, it would be unclear if payment would ever take place. The present scenario, however, is not a contingency, since it simply specifies different dates depending on what happens. 41.I am persuaded by P’s arguments in relation to the construction of Clause 5, and thus, would reject the pleaded defence that the engagement to pay was dependent on contingencies. ISSUE 4: ALLEGED ADVISORY AGREEMENT 42.This contention rests on factual assertion. No one was present for any of the Ds to put forward any evidence in support. I accept P’s case, as spoken to by P’s witnesses, that such agreement never existed, also taking into account the following points put forward by P:
43.Moreover, the pleadings by D1, D5 and D6 are themselves woefully deficient in failing to identify credible particulars of the alleged agreement. It was not even clear on the face of the pleadings whether the agreement was made orally or in writing, when precisely it was made, and who it was that acted on behalf of Ds or P in reaching such alleged agreement. 44.The defence must fail. ISSUE 3: TOTAL FAILURE OF CONSIDERATION 45.The contention is that the Notes were somehow compensation for the valuation in listing on NEEQ as opposed to potential listings in Hong Kong or the United States of America. This issue rested at least in part on the factual background as asserted by D1, D5 and D6. 46.Given the finding above, it follows it must also fail. 47.In any event, such contention is contrary to the express terms of the documents before the Court. In particular, Clause 1 of the Payment Agreement expressly provides that the sum of RMB 27 million (i.e. the Extension Consideration) was payable in consideration of P agreeing to defer enforcing recovery of the Redemption Amount (“作為 PERFECT 同意延遲追討有關欠款的代價”). ISSUES 5 TO 7: ALLEGED BREACH OF IMPLIED TERMS AND MISREPRESENTATION AND ISSUE 8: BREACH OF SFO 48.Again, the contentions rest on factual assertions. These all similarly fail, given the finding regarding the Alleged Advisory Agreement. RELIEFS 49.In the circumstances, P succeeds in its claim. Judgment is granted against D1 and D6, who are jointly and severally for:
50.As to costs, with reference to Take Point Investment Holdings Ltd v Ngai Lok Kei [2020] HKCFI 1709 at §§137-139, the Court was invited to order costs on an indemnity basis in view of D1 and D6’s poor and/or irresponsible conduct of the action. I agree that their conduct of the action has been lacking. D1 and D6 had maintained the action, and their defence containing serious allegations against P (viz. including misrepresentation, breach of the SFO and the like), all the way throughout until shortly before trial. They had not given any indication that they would not be pursuing the defence and/or counterclaim, necessitating P’s attendance and full preparation. This resulted in the wastage of time and costs. No explanation has been proffered. Costs are therefore ordered in favour of P on an indemnity basis. 51.In support of the judgment, I also continue the Mareva injunction order originally granted against D1 on 8 February 2018 (and continued on 6 December 2018) for a period of 18 months from the date of judgment or until further order. 52.I thank counsel for his assistance.
Mr Derek JY Chan, instructed by Bird & Bird, for the Plaintiff The 1st, 5th and 6th Defendants were not represented and did not appear |
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