Jiangsu Shagang Materials Trading Co., Ltd v. Daily-tech Hongkong Co., Ltd
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HCA 1093/2022 [2025] HKCFI 4377 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 1093 OF 2022 ____________ BETWEEN
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_______________ D E C I S I O N _______________ Introduction and Background 1.By Summons dated 7 May 2024, the Plaintiff (“P”) applied for final judgment be entered against the Defendant (“D”) for the sum of HK$787,617,362.78 (“the Sum”) together with interest thereon. 2.P’s case is that between January to March 2020 and September 2020 and May 2022, it had paid in total the Sum to Global Switch Hong Kong Limited (“Global”) on behalf of D pursuant to its obligation under a Guarantee executed by P and Daily-Tech Beijing Co., Limited (“DTBJ”), D’s parent company, in favour of Global (“the Guarantee”). By the Guarantee, P and DTBJ agreed to guarantee the performance of D under the Services Agreement entered into between D and Global (“the Services Agreement”). The Guarantee was in the form as set out in Schedule 6 to the Services Agreement. P claims that it is entitled to enforce its right of indemnity against D. 3.On the other hand, essentially, D’s case is that as D did not owe Global anything under the Services Agreement (rather Global owed D monies) and given there are ongoing proceedings between D (as plaintiff) and Global and P (as defendants)[1] as to whether D owes any sum to Global under the Services Agreement, D was not legally compellable to pay Global. Furthermore, P is not presently entitled to enforce any right arising from the Guarantee given the terms of the Guarantee. 4.By Order and Judgment dated 22 October 2024, Master Frances Lok SC ordered inter alia that:
5.Before me was the substantive hearing of the respective appeals of P and D;
6.Mr Anson Wong SC leading Mr Martin Kok, counsel, appeared for P. Mr Douglas Lam SC leading Ms Clara Wong, counsel, appeared for D. I am grateful to counsel for their abled assistance in this matter. Applicable Principles 7.It is trite that an appeal from a master to a judge in chambers pursuant to O.58 of Rules of the High Court, Cap.4A (“RHC”) is dealt with by way of 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 or her for the first time: see Hong Kong Civil Procedure 2025, Vol.1, §58/1/2. 8.The applicable principles for O.14 of RHC are also trite. These were summarised by Ng J in Guanghua SS Holdings Limited v Lim Yew Cheng & Another [2022] HKCFI 1052 at §13 as follows:
9.It has also been held that O.14 is for clear cases only, that is, cases in which there is no serious material factual or legal dispute. The procedure is entirely inappropriate where the plaintiff’s entitlement to recover any sum is the subject of any serious dispute, whether of law or fact. See Lesnina H DOO v Wave Shipping Trade Co Ltd [2022] 2 HKLRD 727 at §36 and Hong Kong Civil Procedure 2025, Vol.1, §14/4/9. 10.The following legal principles on a surety’s right to indemnity, are also not in dispute:
Discussion 11.Mr Lam submitted that there are 3 triable issues raised by D such that summary judgment ought not be granted:
12.Mr Lam accepted that the first two of the issues raised are related and would only afford D a partial defence (such that judgment should be entered in favour of P for the sum of HK$669,481,244.85, being indisputably the correct amount of the invoices due by D to Global). However, he submitted that the third issue would entitle D to unconditional leave to defend the entirety of P’s claim as it is a complete defence to P’s claim. 13.On the first issue, Mr Wong had relied on the contemporaneous WeChat messages between Mr Yang for D and Mr Gu for P which he submitted demonstrate that initially D requested P to assist on obtaining bank guarantees for the purposes of D’s intended services agreement with Global, but later when the Bank of China (“BOC”) said that because P was not a party to the intended services agreement the bank guarantee cannot be issued, BOC then came up with the idea that P be added as one of the guarantors which P agreed to[2]. Mr Wong also submitted that, at the very least, D impliedly requested the Guarantee as D knew that P had entered into the Guarantee and acquiesced to its provision as demonstrated in its letter to Global dated 17 October 2019 (“the Letter”) which stated inter alia that P was one of the guarantors under the Guarantor and Global should ask P for concurrent payment of part or all of the outstanding fees[3]. 14.Mr Lam did not seriously dispute Mr Wong’s summary of the effect of the WeChat messages and the Letter but stressed that D was not saying in the Letter that P would pay any outstanding sums demanded but only if D is in default, and that D had expressly reserved its rights to verify the amount of outstanding fees due[4]. 15.I am not satisfied that D has raised any triable issue that the Guarantee was not provided as a result of an implied request by D in view of the contemporaneous documents I have been referred. The consequence of this is there is a prima facie presumption that D had made an implied request to P to “pay if I do not” and not “pay if I do not and I am legally compellable to pay”. 16.On the second issue, Mr Lam submitted that in any event, even if D had requested the Guarantee from P such as to give rise to a prima facie presumption that D had made a request to P of “pay if I do not”, there is a triable issue that the presumption has been rebutted given: (1) clause 1(a) of the Guarantee expressly provides that the guarantors (including P) are liable to pay Global if D is “in default of the due and proper performance… of any obligations” under the Services Agreement; and (2) in a commercial context, it is unlikely that the principal debtor impliedly agreed to pay the guarantor a sum that the principal debtor is not legally obliged to pay the creditor. Ultimately, he submitted that the question depends on ascertaining the intention of the parties (see Law of Guarantee, §10-007[5]). Furthermore, he submitted that there is uncertainty in the law as to whether a principal debtor agrees to indemnify the surety of whatever sum it has been asked to pay by citing Chitty on Contracts Hong Kong Specific Contracts, Vol.2, 7th Edn, §23-133 which referred to the dicta of Tomlinson LJ in North Shore Ventures Ltd v Anstead Holdings Inc and Others [2012] Ch 31 at §65. 17.With greatest respect to Mr Lam, I do not accept there is uncertainty in the relevant legal principles although the application of those principles to the facts of any particular may lead to different results. Tomlinson LJ at §64 of North Shore Ventures Ltd held that the decision of the Court of Appeal in IIG Capital LLC v Van Der Merwe [2008] 2 All ER (Comm) 1173 was distinguishable on the facts. Moreover, at §65, although he was doubtful of Waller LJ’s observations in IIG Capital LLC that “payment of what is found to be due from the guarantors will lead almost certainly to a right of indemnity from the company [the principal debtor] if the guarantee has to be paid”, he went on to say that it may be that Waller LJ was not intending to state a general principle but rather considered that the circumstance that the guarantors were there directors of the principal debtor company might be relevant the implication of a right of indemnity (which was not the case before him). The differing judicial opinions referred to in Chitty thus clearly arose from whether a right of indemnity should be implied on the particular facts and circumstances of the case. 18.In the present case, there being a presumption that D requested P to “pay if I do not”, it is for D to demonstrate by credible evidence that there is a triable issue that the presumption is rebutted. 19.Although it is true that arguably the effect of clause 1(a)[6] of the Guarantee is that P is to perform the obligations or cause D to perform all obligations under the Services Agreement where D is in default of the due and proper performance of such obligations, this has to be read together with clause 3(a)(i) of the Guarantee[7]. That clause plainly provides that P must not “reduce the Guarantors’ (or either of them) liability under [the Guarantee] by claiming that [D] or the Guarantors, or any other person, has a right to set off or counterclaim against [Global]”. Thus under the express term of the Guarantee, P had no right to raise any set-off or counterclaim against Global. As the Guarantee formed part of the Services Agreement (contained in Schedule 6 to the Services Agreement), D plainly knew that this was the case.[8] It is also consistent with clause 7.1 of the Services Agreement[9] which provides that D also has to pay inter alia service fees of Global without any deduction, counterclaim or set-off. Whilst the Services Agreement was subsequently amended with clause 7.1 deleted, this does not affect the intention of the parties at the time P requested D to execute the Guarantee. 20.Furthermore, I agree with Mr Wong, the burden is on D to demonstrate a triable issue that the presumption is rebutted but no evidence has been filed by D that P is not legally liable to pay the Sum. Apart from asserting that there ongoing proceedings between Global and P, and that there was never any application to strike out D’s claims by Global, it is not said that D was not liable to Global for the Sum. In any event, any assertion that D is not liable to pay the Sum to Global is simply incredible in light of D’s position in the 866 Action that P had paid on behalf of D a total of HK$817,549,625.35[10]. It was on that basis that D claimed inter alia for a refund from Global of HK$310,663,282.89 being the difference between the sums paid by D in settlement of amounts due under the Services Agreement (HK$162,594,902.39), the HK$817,549,625.35 paid by P on behalf of D, and the amount of HK$669,481,244.85 being the amount which Global should have charged. D further averred in the Statement of Claim in the 866 Action that it would rely on the fact that P helped D in its capacity as guarantor to settle in full the outstanding invoices.[11] 21.There being no other evidence adduced by D, apart from the submissions from the Bar table that the parties would not have intended D to indemnify P for any sum paid by P to Global even if D is not legally compellable to pay that sum to Global, in all, I am of the view that there is no triable issue raised by D that the presumption can be rebutted. 22.On the third issue, Mr Lam submitted that under clause 3(a)(ii) of the Guarantee, P must not claim any amount from D in relation to a right of indemnity or contribution as long as the Guarantee is in force[12]. Given that there remains ongoing legal proceedings as regards D’s alleged breach of the Services Agreement, and Global’s position in the 866 Action is plainly that D had not fully performed its obligations under the Services Agreement, he submitted that the Guarantee remains in force. It was further submitted that this is unaffected by the Notice of Termination issued by Global (which effectively stated that the Services Agreement and the Guarantee shall cease to have effect immediately) as it relates only to future and not accrued obligations as of the date of that notice. It was also submitted that the Notice of Termination dated 26 May 2022[13] was an unilateral expression by Global that the Services Agreement and Guarantee are terminated but is still subject to clause 2 of the Guarantee[14] which provides inter alia that the Guarantor’s obligations under the Guarantee is to continue until performance of all obligations of D. 23.I am afraid that I cannot accept Mr Lam’s submissions. It is plain from the Notice of Termination as confirmed by Global’s email dated 15 August 2023[15] that the Guarantee cease to have effect immediately and clause 3(a)(ii) no longer has effect. It is not arguable, whether as a matter of proper construction of the documents or as a matter of fact, that the obligation not to claim indemnity from D has accrued and continues after the Notice of Termination. 24.Whilst Mr Lam submitted that it was not open to Global to unilaterally waive any operation of clause 3(a)(ii), no authorities in support were cited to me. The Guarantee was executed by P and DTBJ in favour of Global. I cannot see why as a matter of principle Global cannot unilaterally release the guarantors from further obligations under the Guarantee which is clearly beneficial to the guarantors. 25.Given that clause 3(a)(ii) plainly has no effect, it not necessary to consider whether D not being a party to the Guarantee can rely on and enforce this clause against P by virtue of s.4 of the Contracts (Rights of Third Parties) Ordinance, Cap. 623. 26.In all, I am not satisfied the three issues raised by D are bona fide and triable issues. Disposition and Orders 27.Accordingly, I will allow P’s Appeal, dismiss D’s Appeal and order judgment be entered against D in favour of P for the sum of HK$401,185,002.95 together with interest thereon in terms of paragraph 1 of P’s Notice of Appeal. 28.I make a costs order nisi that the costs of this action (including the costs of these appeals and all reserved costs) be paid by D to P forthwith, with certificate for two counsel, to be taxed if not agreed. 29.In the absence of any application to vary the above costs order nisi within 14 days from the date of the handing down of this Decision, the costs order shall become absolute.
Mr Anson Wong SC leading Mr Martin Kok, instructed by Dentons Hong Kong, for the Plaintiff Mr Douglas Lam SC leading Ms Clara Wong, instructed by Tsui & Co., for the Defendant [1] In HCA 866/2022 (“866 Action”). [2] [B4/80/1145-1165]. [3] See §§6-7 [B3/48/875-876] [4] Ibid and §11 [B3/48/876]. [5] This states: “The nature and extent of the implied promise to repay will depend, of course, on the intention of the parties, to be ascertained by the court in each particular case. …” [6] [B3/41/830]. [7] [B3/41/831]. [8] In the Witness Statement of Yang Guang, §13 [A2/35/299] filed on behalf of D it was stated that D had some say on the formulation of the terms of the Guarantee [9] [B2/40/692] [10] See Statement of Claim in the 866 Action, §§46 [B4/86/1234-1235]. [11] See ibid, §75 [B4/86/1242]. [12] [B3/41/831]. [13] See §7 [B1/38/320]. [14] “2. Period of Guarantee
[15] [B4/87/1246]. |
Cases cited in this judgment