Kenon Engineering Ltd v. Ultra Mill Ltd
Read the full judgment text of DCCJ 4630/2003 on BabelCite. This District Court judgment.
1. The Plaintiff and the Defendant had joint business and inter-dealings in the purchase, sale and hire of crane machines until April 2003. In this action the Plaintiff claims against the Defendant for a sum of $500,000, which the Defendant failed to pay after paying only $300,000 out of a sum of $800,000. It also seeks for an order from this Court to rectify the Deed of Settlement dated 28 th March 2003 signed by both parties.
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DCCJ 4630/2003 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 4630 OF 2003 -------------------- BETWEEN
-------------------- Coram : H.H. Judge Chow in Courts Dates of Hearing: 23rd September, 1st November, 2004 Date of handing down Judgment: 13th January, 2005
-------------------- J U D G M E N T -------------------- 1.The Plaintiff and the Defendant had joint business and inter-dealings in the purchase, sale and hire of crane machines until April 2003. In this action the Plaintiff claims against the Defendant for a sum of $500,000, which the Defendant failed to pay after paying only $300,000 out of a sum of $800,000. It also seeks for an order from this Court to rectify the Deed of Settlement dated 28th March 2003 signed by both parties. 2.The Plaintiff’s case is that the parties had reached a full and final settlement on their dealings as particularized in the Plaintiff’s statement of account which was endorsed by a Mr. Richard Kwan (“Richard Kwan”) of the Defendant. However, due to the mistakes of the parties, the Deed of Settlement referred to the Plaintiff’s claim of $1,548,488.47, but failed to mention all other claims and liabilities mentioned in the statement of account. The Plaintiff states that in reaching the settlement of $800,000, the Defendant’s entitlement in the sale of HS881 had already been taken into account, as recorded in the Plaintiff’s statement. Under the Deed of Settlement, the Defendant had to pay $800,000 by 4 instalments, but the Defendant only paid a total sum of $300,000. 3.The Defendant raised a defence of set off by way of counter-claim. The Defendant claimed that upon the sale of a crane, namely Crane HS881 (“HS881”), in April 2003, it should be entitled to be paid $780,000 by the Plaintiff. If further averred that this Court has no jurisdiction to rectify the deed of settlement. 4.On 28th March 2003, the Plaintiff and the Defendant signed the Deed of Settlement, which has the following recitals:
Under this Deed of Settlement, Party A is the Plaintiff, and Party B is the Defendant. 5.The issue this Court has to decide is whether there is any omission in the Deed of Settlement so that rectification will have to be made to it in order to fill up this gap. In this respect this Court has to find out the true scope of the settlement between the parties. But this would necessitate the admission of oral evidence to find out the negotiations and discussions between the parties leading to the signing of the Deed of Settlement. 6.Mr. Wang Yue Hung (“Peter Wang”), a director of the Plaintiff, and Richard Kwan admitted that there were considerations not stated in the Deed, which rendered the agreed payment and acceptance of $800,000. Therefore there must be ambiguity in the Deed which need to be resolved by oral evidence. In the case of Mak Kee Ltd. v Sam Woo Bore Pile Foundation Ltd.: HCSA No. 4/2002, the Court held that oral evidence was admissible to find out the background circumstances leading to a settlement agreement, and then to see if one can conclude on an objective basis what was intended to be within the scope of the settlement. 7.Peter Wang maintained that the settlement agreement reached between the parties was to settle all the items of accounts recorded in the Plaintiff’s statement of account, and eventually the parties had accepted a sum of $800,000 rounded down from the final balance $847,316.65. He maintained that at the meeting on 13th March 2003 with a Mr. Leung of MTC, Leung had informed him that MTC would purchase HS881 by 5th April 2003, and so both of them had signed on various places recording down the deadline, the calculation of the purchase price etc. I accept his evidence. 8.On the statement of account, it is stated “Net balance due to Peter Wang (847,316.65) A + B + C + D”. A, B, C and D are the sums of 1,841.478.27, (1,548,488.87), (1,920,306.04) and 780,000 respectively. When these 4 sums are added up, the total sum is (847,316.65). For D in the sum of $780,000, the statement is “Assuming HS881 (#181.123) can be sold at 1,200,000.00 65%”. The Defendant had an interest of 65% in HS881 whereas the Plaintiff had an interest of 35% in HS881. Therefore if HS881 can be sold at $1,200,000, 65% of the interest equals to $780,000 ($1,200,000 x 65%). At the end of the Statement of Account were words written by Richard Kwan, namely,
9.Richard Kwan was asked while the figure of 1,548,477.87 was not in dispute, why he inserted “Party B disputes the said claim” at the end of Recital (1) of the Deed of Settlement. He said that this was because Peter Wang asked for another sum $710,139 as overdraft interest. 10.When asked why in the Deed of Settlement, the undisputed figure of $1,548,477.87 was deducted to $800,000, Peter Kwan replied that it was because in the statement of account the Plaintiff had charged the Defendant $710,139 for the item “Less: Accrued interest on KEL’s O/D facility”, but the Defendant had never agreed to this figure. Richard Kwan was asked to explain how the figures of $1,548,488.87 and $710,139 under two different headings could be considered at the same time, Kwan replied that it was because he did not agree that $710,139 payable to the Plaintiff and it was something about accounting. 11.Richard Kwan was then asked when these two sums, namely ($1,548,488.87) and ($710,139) both in bracket should be sums payable by the Defendant to the Plaintiff, how these 2 figures could reach a result of $800,000 odd, he was enable to explain. 12.Richard Kwan admitted that the Defendant had never paid the sum of $710,139. When asked while there was no payment of the sum of $710,139, how could it be deducted from the Plaintiff’s entitlement to the undisputed $1,548,488.87, he was unable to explain. 13.When Richard Kwan tried to explain that $710,139 was considered in other accounts between the parties, he was unable to show such account or where such account could be found. 14.Richard Kwan admitted that he had written down “$800,000 by 4 instalment. End April, May, June, July” on the statement at the end of the discussion and negotiation with Peter Wang. But he did not highlight on the statement $710,139, which he had disputed, and he made no indication that his endorsement was simply referring to the sum of $1,548,488.87. 15.When Richard Kwan came to know the sale of Crane HS881 in April or May, 2003, the Defendant would be entitled from the Plaintiff $780,000, but the outstanding balance under the Deed of Settlement at that time was only $700,000. If the sale of HS881 had not been settled by the parties as alleged by him, it is incredible that the Defendant had not made demand of payment from the Plaintiff but continued to make payment to the Plaintiff in May and June 2003, pursuant to the Deed of Settlement. 16.Peter Wang said that $800,000 was rounded down from the final balance of $847,316.65 in the statement of account. The figure of $800,000 is a settlement of all items of dealings recorded in the statement of account, which included the assumed sale of HS881. 17.Richard Kwan said that the figure of $800,000 was rounded up from the difference between two items in the statement of account, namely, $1,548,488.87 and $710,139. He could not show how this could be done in order to arrive at the figure of $800,000. 18.I accept the evidence of Peter Wang regarding the contents of the negotiation for settlement between the parties. His version is credible. I accept his evidence. The evidence of Richard Kwan in this respect is wholly incredible. I reject his evidence. Jurisdiction 19.The Defendant avers that this Court has no jurisdiction to rectify the Deed of Settlement. Section 37 of the District Court Ordinance provides:-
20.The “damage sustained” by the Plaintiff as a result of the mistake is the damage actually sustained. If the Deed of Settlement is not rectified, the damage sustained by it would be $780,000. This is the amount claimed in the counterclaim. Thus the present case is within the maximum limit of $1,000,000. The Defendant alleged that it had other entitlements from the Plaintiff and there is nothing to stop at from claiming against the Plaintiff the sum of $4,030,575.65. This argument cannot stand, because there has been no such claim. 21.I therefore make an order the following orders:-
Costs 22.I make an order nisi, to be made absolute in 14 days’ time, that the Defendant do pay the Plaintiff the costs of this action, with certificate for Counsel, to be taxed, if not agreed.
The Plaintiff : represented by Mr. Sue Jonathan, instructed by M/S Erwin Young, Chu & Law, Solicitors. The Defendant : represented by Mr. Paul Leung, instructed by M/S A.M. Mui & Kwan | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||