Fitto Entertainment Co Ltd v. Fantasy Film City Co Ltd and Another

HCA004810/1997

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Coram: The Hon. Mr. Justice Waung in Chambers

Date of Hearing: 10 December 1997

Date of Handing Down Reasons for Judgment: 12 December 1997

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REASONS FOR JUDGMENT

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1. This is two appeals from the Orders of the Master entering summary judgment against the Defendants in two Actions. The two Actions although somewhat related are in fact separate and it was merely convenient to hear them together. I dismissed both Appeal at the end of the hearing and I now hand down my Reasons.

2. The first Action by Emperor Finance Ltd. ("Emperor") against Jimmy Ip ("Ip") although later in time as to Action No., is first in time in relation the events. Fitto Entertainment Co. Ltd. ("Fitto") is in the entertainment business and got itself into serious financial difficulties, owing something like $20 million in 1994. Ip together with associates owned Fitto through their 100% shareholding in the Fitto parent company ("Fitto Parent"). To get out of Fitto's financial troubles, Ip found that he had to sell 51% in the Fitto Parent to Hapus Enterprises Ltd. ("Hapus") a company controlled by Mr. Albert Yeung ("Yeung") of the Emperor and HK Daily Newspaper Group. The deal which was struck resulted in a Share Agreement in January 1994 ("Share Agreement") between Ip and Hapus and others, whereby in essence:-

3. It is not in dispute that the Share Agreement was performed by the parties nor is it disputed that upon NAV assessment by reputable accountants in 1994, Ip found himself obliged under the Share Agreement to make substantial payments to Hapus. Ip did not have the money to pay to Hapus in relation to these NAV adjustments and therefore in the middle of 1994, some 7 loans came into being from Emperor to Ip. The seven loans were of different amounts and bore some different repayment dates. They are of two types according to Mr. Yau for the Defendants and it is not in dispute that although originally claims were made by Emperor for all 7 loans, the Court is now concerned with only 3 loans totally some $8 million. This is the subject of the Emperor claim. In relation to this Emperor claim, three defenses were raised.

4. First it was argued that there was no consideration for these loans because the Share Agreement is void for mistake or no consideration. It is to be observed that the Share Agreement is a complex document whereby various obligations and benefits were created and it is really impossible to suggest that the Share Agreement was void for no consideration specially when Ip had already taken the benefit under the Share Agreement. For me, the Share Agreement was perfectly valid and I notice merely in passing that Ip had done nothing to attack the contracting party, Hapus for this alleged void Share Agreement. Surely the person against whom he ought to seek remedy if such is his case is Hapus and other contracting parties to that Share Agreement. Emperor had merely lent him the money in order for Ip to comply with certain obligations he had undertaken under the Share Agreement. If Ip was not obliged to pay the money then he should recover the money from Hapus but that is not a ground to say that he is not liable to the lender, Emperor which is a different party.

5. The second ground relied on by Ip is that there was a collateral agreement by Yeung on behalf of Emperor at the time of the loans or shortly before the loans, that Ip would not have to repay the loans until his own injection loan to Fitto Parent was repaid by Fitto Parent to Ip. This of course is directly against the express term of the two year loan to be seen at page 14, 18 and 22 of the Bundle, namely repayment on 27th July 1996. The alleged collateral agreement goes to the heart of the 3 loan agreements and seeks to contract the express term in these loan agreements. No court will permit this. Further having regard to the circumstances, and specially for example the different provision seen in an early loan agreement page 6 (providing for loan repayment either by fixed date or repayment to Ip by Fitto whichever is the earlier) the defence raised is simply not credible or capable of belief.

6. The third defence raised by Mr. Yau is that there was no evidence of the payment of the loan money by Emperor to Hapus. Each of the three loan agreements provide that as directed by Ip, the loan money will be paid to Hapus by Emperor and there was in each case also a signed drawdown of the loan by Ip on 27th July 1994. The argument of Mr. Yau is that Ip was not satisfied that Emperor had paid Hapus on 27th July 1994 and therefore Ip was entitled to challenge all the accounting records of Emperor to be produced to Ip to prove the payment of the loan money on 27th July 1994 by Emperor to Hapus. I disagree. The Defendant is entitled to no such proof. It is to be noted that the obligation of Ip to pay Hapus was in July 1994 and therefore if such obligation had not been discharged by Emperor on behalf of Ip by the payment of the loan money to Hapus, Hapus would be asking Ip for such money and this had not happened because the money had been paid to Hapus by Emperor on Ip's behalf and as directed by Ip. Exactly how it was done was irrelevant. This is not the purpose of Order 14. In case there is any doubt that money had been paid and received by Hapus, there is at page 288 a letter dated 27th October 1977 from Hapus to Emperor confirming the receipt of the 3 amounts by Hapus from Emperor.

7. Finally in desperation Mr. Au called in aid Miles and Bull and asked the Court to say that there are special circumstances why "for other reasons" unconditional leave to defend should be given. I regret that I cannot find any basis for resorting to this rarely applied discretion. In my judgment, there is really nothing in any of the matters presented to me which could possibly give rise to leave to defend. There is no defense to the claim by Emperor and judgment must be entered against the Defendant.

8. There was finally the complication of the so called assignment by Emperor to Richfield Development Ltd. The problem was solved by the addition of Richfield as 2nd Plaintiff so that the Defendant would not run any possible risk of double jeopardy.

9. I now turn to the Fitto claim. In early 1995, Ip found that he required to use the Fitto name and logo for his Entertainment Park in China and so a Licence Agreement was entered into between Fantasy Film, Ip and Fitto. The licence fee which had to be paid was some $50 million payable by many installments. 4 installments totally some $15 million were paid in 1995 but then there was default in early 1996 and as result this Fitto claim was brought and the amount outstanding was some $34 million. The only defence to this Fitto claim is economic duress. I believe even Mr. Yau recognized the lost cause of this defence. I will not labour the matters covered during arguments except merely to reiterate that in my judgment, no triable issue is raised when the alleged economic duress was not properly particularised, where the party alleged to exercise the duress was not Fitto but some third party (Albert Yeung or Emperor), when the Licence Agreement was entered into by Ip with full advice of lawyers, when there was nothing said about no possible alternatives to his entering into this Licence Agreement, where he had made no protest whatsoever about the economic duress and when he had affirmed the Licence Agreement, not once but five times by 4 separate Licence fee payments and by entering into the Supplementary Agreement in January 1996. The economic duress defence in the circumstances is hopeless and deserves now to be properly buried.

10. Accordingly therefore in respect of each Action, I find that no triable issue had been raised and the Master was quite right to enter final judgment in each Action. The two appeals of the Defendants must be dismissed with costs.

Representation:

Mr. Albert Yau instructed by Messrs K.W. Lau & Liu for the Defendants

Mr. Rimsky Yuen instructed by Messrs Fairbairn Catley Low & Kong for the Plaintiffs