Keepgrand Ltd v. Rich Million International Ltd and Others
Read the full judgment text of HCA 14192/1998 on BabelCite. This High Court CFI judgment was delivered on 10 June 1999.
1. By Writ of Summons issued on the 22nd of August 1998 the Plaintiff claims inter alia, damages and an indemnity against the Defendants.
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HCA014192/1998
IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 14192 OF 1998 -----------------
----------------- Coram: The Hon. Mr. Justice Jackson in Chambers Date of Hearing: 10 June 1999 Date of Judgment: 10 June 1999 Date of Handing Down Reasons for Judgment: 8 July 1999 ----------------- JUDGMENT ----------------- Introduction 1. By Writ of Summons issued on the 22nd of August 1998 the Plaintiff claims inter alia, damages and an indemnity against the Defendants. 2. The Statement of Claim recites that the 2nd, 3rd and 4th Defendants were beneficial owners of not less than 78% of the entire share capital of the 1st Defendant. 3. The Statement of Claim also recites as follows:-
4. By Writ of Summons in High Court Action No. 3325 of 1998 Sunlink claimed against Wing Wah the repayment of the loans with interest totalling HK$9,972,989.80 as at 6th May 1998 with further interest accruing thereafter. It is, if I have understood the position correctly, principally this claim in respect of which the Plaintiff has sought the indemnity. 5. In their Defence filed on 23rd October 1998 (pursuant to an order of Mr. Registrar Betts dated 20th October 1998) the Defendants inter alia admit the fact of the 'Sunlink loans' but aver that such were disclosed to the Plaintiff prior to the Share Sale Agreement. Further the Defendants aver that if, which is denied, they were in breach of any warranties representations or undertakings, the Plaintiff has suffered no loss or damage whatsoever and that if, which is again denied, they made misrepresentations to the Plaintiff they did so innocently. 6. By summons dated 23rd November 1998 the Plaintiff applied for Order 14 judgment against the Defendants. 7. On the 4th March 1999 Master Lok gave judgment for the Plaintiffs in the following terms:-
8. The date of the Share Sale Agreement in the order is wrong. It should be 13th June 1997. In any event that is the order which is now appealed against. 9. On the same day - 4th March 1999 - Master Lok gave judgment for Sunlink against Wing Wah for the principal amount of the loans with interest in High Court Action No. 3325 of 1998. The 2nd Defendant 10. The 2nd Defendant has appeared before me in person. He is the subject of a receiving order in bankruptcy which was made on 6th August 1997. The Solicitors acting for the Plaintiffs were not made aware of that fact by the Solicitors then acting for all of the Defendants, and only discovered it upon making a Bankruptcy Search in March of this year, long after the commencement of these proceedings and, if I have understood the position correctly, after the order now appealed against. 11. The position then, as it relates to the 2nd Defendant, is that by virtue of Section 12 of the Bankruptcy Ordinance (Cap. 6), proceedings could not be commenced against him without the leave of the Court and on such terms as the Court might impose. No such leave has been sought and that being so the proceedings against the 2nd Defendant are a nullity - and at the invitation of Mr. Lam who appears for the Plaintiff (and unsurprisingly without demur from the 2nd Defendant) I set aside the order presently being appealed against in so far as it concerns the 2nd Defendant. In relation to that matter I make no order as to costs. The Issues 12. I have been assisted greatly in this case by the provision of most helpful skeleton submissions by Mr. Lam, Counsel for the Plaintiff, and by Mr. Chan, Counsel for the 1st, 3rd and 4th Defendants. The case for the Plaintiff 13. The argument advanced by Mr. Lam for the Plaintiff has been concise. He relies principally, as doubtless he did before the Master, upon the proposition that the Defendants are clearly liable to the Plaintiff for breach of warranties and undertakings both in the Share Sale Agreement and in subsequent correspondence. He argues that disputes raised by the Defendants cannot alter the fact that those warranties and undertakings were breached. He says that they were absolute warranties and undertakings as to a state of affairs concerning the financial position of Wing Wah, which state of affairs did not in fact exist and thus the Order 14 application and the judgment that followed it were entirely appropriate. 14. Mr. Lam took me through each and everyone of the alleged warranties and undertakings upon which, he said, the Plaintiff relied. 15. However, and I shall return to this matter later, it is still unclear to me what it is suggested that the Plaintiff did to its detriment relying upon those undertakings and warranties. What is abundantly clear to me now is the fact that the Plaintiff only invested funds into ITC many months after the fact of the Sunlink loans were known to it, and thus it cannot, in my view, claim that such investment was made in ignorance of those loans albeit that the Statement of Claim would appear to suggest otherwise. 16. Mr. Lam appeared to me to be saying that as the warranties and undertakings were by their very nature absolute; and as the Plaintiff relied upon them somehow to its detriment then the Plaintiff has a right of action based upon their breach. That is undoubtedly right if there was firstly a breach, and secondly an identifiable and quantifiable loss brought about as a direct consequence of that breach. 17. Mr. Lam argues that in a case of breach of warranty as to the attributes of a Company whose shares were purchased, then the purchaser is prima facie entitled to the difference between what the shares as warranted would have been worth and what they were actually worth [Lion Nathan Ltd. v. C. C. Bottlers Ltd. [1996] I WLR 1438] 18. With reference to Benjamin's Sale of Goods (5th Edition) Mr. Lam quotes to me from para. 10-019 as follows:-
19. And from para 10-017 the following:-
The case for the 1st, 3rd and 4th Defendants A. Liability 20. Having taken me through the background matrix of the Share Sale Agreement Mr. Chan argues as follows:-
B. The Assessment of Damages 21. As to the judgment for damages to be assessed, Mr. Chan argues that given the disputes in this case it is simply impossible, without a full trial of the issues, to determine what the heads or nature of the damages are, let alone what is the quantum of damages. 22. That being so Mr. Chan argues, relying on Auto Shade (Overseas) L.L.C. & Another v. Chai Lun and Others (HCA No. A14722 of 1996) unreported, that there should not be summary judgment but a full trial. 23. In pursuit of that argument Mr. Chan also says that the Statement of Claim alleges tortious misrepresentation and breach of contract, and the measure of damages being different he asks, rhetorically, how can damages be assessed without knowing the appropriate measure; which measure can only be determined after trial. 24. In summary Mr. Chan argues that there are triable issues as to what heads and types of damages are recoverable, and whether they are substantial or merely nominal damages for breach of contract. Conclusion 25. I am in no doubt, in the absence of any reasons for the judgment, that the full and lengthy arguments put before me by Mr. Chan were not put - at least in such persuasive detail - before the Master. Had they been, and had reference been made, as it was before me, to detailed affidavit evidence, I daresay that he would have dismissed the Order 14 summons upon the footing that Order 14 proceedings are, as Keith J. (as he then was) stated in Auto Shade, "intended to be summary in nature and not an appropriate occasion for the detailed examination of evidence". 26. There are, in my view, in this case substantial and difficult issues to be resolved which can only properly be resolved at trial. By entering judgment upon the Order 14 application in the terms that he did, it seems to me (and I say this entirely in the light of the arguments put before me which arguments I believe were not before the Master) that the Master imposed upon himself, or upon another Master, a task which would be impossible to fulfil without a full trial of all of the issues in this case, limited not only to the assessment of damages but extending to the whole question of liability. 27. I agree with Mr. Chan's submission that the Share Sale Agreement cannot be considered in a vacuum and, if I am right about that, it must follow as night follows day, that all of the circumstances which gave rise to the document may well need to be examined at trial. 28. Quite apart from that matter, the Plaintiff needs must determine precisely what it is that it is claiming, given as I have said, that it is now quite apparent that when it injected the capital sum through Belidore into ITC it knew full well, and had known for many months, of the existence of the Sunlink loans, and that Wing Wah was being pressed for payment. 29. If, as a consequence, the Plaintiff has no claim in respect of that injected capital, and given that the Statement of Claim does not refer to a claim in respect of any loss or damage arising out of the fact of the Sunlink loans, the only claim remaining would appear to be a nominal one relating to consideration of $100.00 (in respect of which I might add there is an affirmation now before me made by the 3rd Defendant dated 9th June 1999 denying that that sum was, in fact, ever paid) and 120 shares in Wing Wah. 30. I respectfully adopt all that was said by Keith J. (as he then was) in the Auto Shade case, to which I have already made reference, under the sub-heading "The nature of the hearing" at pages 6 and 7 of that judgment. It seems to me that all of what is said there is particularly apposite to the case before me. 31. It was for all of these reasons that on 10th June 1999 I allowed this appeal; I set aside the judgment entered by the Master and I ordered that the Plaintiff's summons for summary judgment under Order 14 be dismissed. 32. For the sake of completeness I should add that having heard submissions from counsel on 10th June I ordered that the costs of the hearing before the Master be costs in the cause and that the costs of the appeal on the 10th June be to the 1st, 3rd and 4th Defendants.
Representation: Mr. Godfrey Lam, instructed by Messrs. Baker & Mckenzie, for the Plaintiff. Mr. Chan Chi Hung, instructed by Messrs. W. K. To & Co., for the 1st, 3rd and 4th Defendants. The 2nd Defendant, Mr. Ho Hit Po, in person. |