Mak Hung v. Ng Yick Fung

DCCJ 20459 /2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 20459 OF 2001

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BETWEEN

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Coram:  Deputy District Judge S. T. Poon in Court

Dates of Hearing: 19^th May 2006 and 22^nd May 2006

Date of Handing Down Judgment: 7^th July 2006

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JUDGMENT

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Background

1.The Plaintiff and the Defendant were shareholders and directors of Yick Fung Metal Materials Company Limited (“Yick Fung”) which carried on business of making and selling metal parts and semi-finished metal products and was established in 1993.  The Plaintiff had transferred all his shares in Yick Fung to the Defendant and resigned from his directorship in 1999. 

2.According to the Plaintiff, the Defendant proposed to him in 1994 to purchase steel materials from Japan and Italy for re-sale in Mainland.  The Defendant would be responsible for finding the source of supply and buyers and the Plaintiff was to provide the monetary resources. The Defendant would be entitled to 10% of the net profit.  The Plaintiff agreed.

3.Pursuant to the above agreement, the Plaintiff procured a letter of credit in the sum of US$1,181,800 for the purchase of 3,800 metric tons of steel materials from Italy (“the Italian Steels”).  The Italian Steels were then sold to customers of the Defendant in Mainland. 

4.In early 1995 the Defendant informed the Plaintiff that he was unable to collect all the proceeds of the re-sale from the buyers.  As at December 1995, there were still 3 buyers failing to settle the purchase prices amounting to altogether RMB 2,170,165. 

5.The Plaintiff then requested the Defendant to arrange a meeting with the buyers so that the Plaintiff could personally press for payment.  However, the Defendant refused the request but agreed to guarantee payment by himself in return for the Plaintiff’s promise not to take action to recover the proceeds from the buyers.  As a result, the Defendant signed an acknowledgment of debt (“the Acknowledgment”) dated 30^th December 1995 for the sum of HK$1,950,000 being the equivalent of the outstanding purchase price in Hong Kong currency. 

6.Relying on the Acknowledgment, the Plaintiff now claims against the Defendant the sum of RMB 491,663.15 being the balance of the debt.

7.The case of the Defendant is that, he was never a part of the trading of the Italian Steels.  He only helped the Plaintiff on good will without asking for any reward.  The Acknowledgment was signed upon the Plaintiff’s misrepresentation that it would be used for accounting purpose only and not be used to pursue against him in future.

Evidence

8.Apart from the Plaintiff and the Defendant, the personal assistance of the Plaintiff Mr. Leung Yee Hon (“Leung”) also gave evidence.  Leung was the one doing the bookkeeping for companies controlled by the Plaintiff.  He was also the one who prepared the Acknowledgment on instructions of the Plaintiff.

9.Leung gave evidence that the Defendant was the one who arranged the Italian Steels to be transported from Hong Kong to Mainland.  The Defendant also made arrangements for import quota in respect of the delivery of the Italian Steels to Mainland and for the inspection and custom clearance by the Mainland authorities. 

10.The Defendant produced to Leung some lists showing the quantities of the Italian Steel sold and also the expenses relating to the transportation and sale of them with supporting documents.  The Defendant also produced to him at different times from September 1995 to March 1998 receipts showing the various amounts paid by him at the Plaintiff’s request to third parties.  With these data from the Defendant, Leung prepared statements showing the breakdowns of sales, proceeds, expenses and receivables in respect of the Italian Steels copies of which had been provided to the Defendant.

11.It was the evidence of Leung that after deducting all the expenses of the Defendant and sums paid by the Defendant to third parties at the Plaintiff’s request, a balance of RMB 491,663.15 was due from the Defendant to the Plaintiff. 

Findings of fact

12.Mr. Ng, counsel for the Defendant, submitted that the Plaintiff’s version should not be believed.  He commented that the case of the Plaintiff had been changing since the filing of the Statement of Claim.  There was no mention of any agreement of guarantee or personal payment of the sales proceeds by the Defendant in the Statement of Claim.  It was only mentioned in the Reply.  Furthermore, even what was pleaded in the Reply was different from the Plaintiff’s case in the opening submission of his counsel.  It was pleaded that “the Defendant agreed to guarantee payment” whereas counsel submitted that D agreed to be personally liable.

13.Mr. Ng also set out some aspects on which the Plaintiff had given inconsistent evidence including, for instances, the day when the acknowledgment of debt was given to the Defendant to sign and whether any staff member of the Plaintiff had met the buyers.

14.Besides, Mr. Ng submitted that, should the Plaintiff have promised not to take action against the buyers, such term would have been included in the Acknowledgment.  Mr. Ng also commented that the Acknowledgment was too simple to represent the agreement as alleged by the Plaintiff that the Defendant agreed to guarantee payment of or personally pay the outstanding purchase price.

15.After considering the evidence and submissions from counsel, I have no hesitation in preferring the Plaintiff’s version to that of the Defendant.

16.The Defendant gave evidence that he was misled when he signed the Acknowledgment.  He said the Plaintiff said the Acknowledgment was to be used for accounting purpose only.  When the Defendant was cross-examined, he could not tell what the accounting purpose was and he admitted that did not ask what it was.  The Acknowledgment is just a simple note recording that the Defendant owed the Plaintiff HK$1,950,000 and the Defendant promised to repay before 31^st March 1996, it does not specify the nature of the debt and when the debt was created.  It is inconceivable as to what accounting purpose it could serve and it is equally inconceivable as to why the Defendant, who was an experienced businessman, would not ask what the purpose was and why he was asked to sign.

17.Moreover, the Defendant gave evidence that he had had concern about the possibility that the Plaintiff might use the Acknowledgment to pursue against him.  It would be contrary to commonsense that with such concern in mind, he would agree to sign the Acknowledgment simply relying on the Plaintiff’s oral promise not to use it against him without insisting on having such promise recorded anywhere.  If the intention of parties was that the Acknowledgment was not to be used against the Defendant, there is no reason why a deadline for repayment was put down on it.

18.The Defendant’s account of the circumstances under which he signed the Acknowledgment is incredible and I reject it completely.

19.I am satisfied that the reason why the Defendant agreed to sign the Acknowledgment was, as testified by the Plaintiff, that he wanted to prevent the Plaintiff from pursuing against the buyers direct. 

20.I am of the view that, in proposing to the Plaintiff to invest on trading the Italian Steels, the Defendant assumed the responsibility of retrieving purchase prices from buyers who were introduced by him.    For some reasons that I do not propose to speculate here, the Defendant had been unwilling to allow the Plaintiff to have direct contact with the buyers.

21.If the role of the Defendant in the trading of the Italian Steels was merely a volunteer, the Defendant would not have been so involved to the extent that he took legal action against the buyers in his own name in Mainland for the outstanding purchase price.  As submitted by Mr. Yim, counsel for the Plaintiff, this also shows that the Defendant had agreed to be personally liable to the debt owed by the buyers to the Plaintiff.

22.Although the Statement of Claim was not drafted desirably, the Plaintiff did spell out the whole basis of his claim in the Reply.  It is also true that the wordings used under the Reply were guarantee payment rather than personally liable to pay, but I would say it does not really affect the credibility of the Plaintiff which is the main issue in this action. 

23.I am of the view that the words “guarantee payment” were used in the Reply not to refer to the legal concept of a personal guarantee.  The Plaintiff’s case was that the Defendant promised to bear the liability of repayment of debts owed by the buyers, it was stated clearly on the Acknowledgment that the Defendant himself owes money to the Plaintiff.  This had been spelt out under the same paragraph of the Reply that “to the intent that the Defendant shall be personally liable to the Plaintiff for such amount in place of the said companies…”.

24.I note the inconsistencies complained of by Mr. Ng on the Plaintiff’s evidence.  However, these so-called inconsistencies are just minor details of the sequence of events that normally occur in evidence concerning matters happened in a long period of time.  When compared to the inherent improbability of the Defendant’s version as explained above, I do not think they can shaken the evidence of the Plaintiff in any way.

25.As to Mr. Ng’s comment on the simplicity of the Acknowledgment, my short answer is that there is no incentive on the Plaintiff’s part to record what he has promised and what was put down on it was sufficient for the purpose of recording the Defendant’s promise to be personally liable to the debt.

26.Lastly, I am also satisfied that Leung is an honest and reliable witness and I accept all his evidence as accurate including the accounting records he prepared.

Conclusion

27.Accordingly, judgment be entered against the Defendant for the sum of RMB 491,663.15 or its equivalent in Hong Kong currency at the time of payment together with interests thereon at judgment rate from the date of writ until payment.

28.There is a Costs order nisi that the Defendant shall pay the costs of the Plaintiff’s action to be taxed if not agreed, with certificate of counsel. This order nisi will become absolute upon the expiry of 14 days from the handing down of this judgment.

Mr. Eugene Yim instructed by Messrs Philip T. F. Wong & Co. for the Plaintiff.

Mr. Benjamin Ng instructed by Messrs Benson Li & Co. for the Defendant.