Polar Furs Ltd and Another v. International Fur Co Ltd and Others

HCA 2042/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2042 OF 2005

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BETWEEN

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Before : Mr Recorder Fok, SC in Chambers

Date of Hearing : 9 February 2007

Date of Judgment (Handed Down) : 15 February 2007

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J U D G M E N T

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Introduction

1.This is an appeal by the 2^nd Defendant against the summary judgment granted in favour of the Plaintiffs by Master Yu on 10 January 2007.

2.The Master ordered that judgment be entered against the 2^nd Defendant for the sum of USD250,697.38 being the amount claimed in the Amended Statement of Claim plus interest.  He also ordered that 50% of the costs of the application before him be paid by the 2^nd Defendant to the Plaintiffs, to be taxed if not agreed.

3.The 2^nd Defendant seeks an order rescinding the above orders and asks for unconditional leave to defend the action.  Save to the extent the claim is admitted (as to which see below).

4.On the hearing of the O.14 application, the Master gave unconditional leave to the 1^st and 3^rd Defendants to defend the action.

5.The Plaintiffs do not seek to cross-appeal against that part of the Master’s order.

Application to admit further evidence

6.At the commencement of the appeal, the 2^nd Defendant sought leave to adduce further evidence in the form of an affirmation from Ms Ng Ka Man, the Accounts Manageress of the 2^nd Defendant.

7.The Plaintiffs did not oppose this application and so I gave leave to the 2^nd Defendant to adduce this evidence and I have taken it into account in determining the appeal.

The Plaintiffs’ claims

8.The Plaintiffs’ claims are for outstanding sums due under a fur purchase and credit facility agreement (“the Agreement”) evidenced by an unsigned letter dated 1 November 2001.

9.The evidence of Mr Timothy Everest, the 2^nd Plaintiff’s managing director, is that both the Defendants began utilising the credit facility under the Agreement as from November 2001.

10.The Plaintiffs claim that since late May 2002, the Defendants failed to maintain their interest payments to the Plaintiffs under the Agreement.  It is the Plaintiffs’ case that, on 20 November 2004, the Defendants repaid the principal loan of the credit facility but did not pay the outstanding interest and finance charges.

11.The Plaintiffs claim that, as at the date the proceedings were commenced, the total amount of outstanding interest and finance charges was USD250,697.38.

The 2^nd Defendant’s defence

12.The 2^nd Defendant admits that certain sums were owed to the Plaintiffs.  However, the 2^nd Defendant says that the sums that are admittedly due and owing to the Plaintiffs are USD7,632.22 and USD14,256.54 and accepts that judgment should be entered for those sums.

13.However, the 2^nd Defendant says that there are triable issues as to the balance of the sum claimed to be due and owing to the Plaintiffs.

14.The 2^nd Defendant makes a number of points in support of the appeal against summary judgment:-

(1)	It contends that, despite having filed a number of affidavits, the Plaintiffs have failed to adduce evidence as to how the sum claimed was calculated.
(2)	Further, it says that having conducted a wholesale re-examination of the invoices rendered by the Plaintiffs, it has discovered that:-
	(a)	The Plaintiffs’ invoices were miscalculated in that under clause 2 of the Agreement interest and finance charges ought not to have been applied to the buying commission; and
	(b)	The Plaintiffs have already charged and the 2nd Defendant has already paid certain amounts of interest, so those payments should be set off against the Plaintiffs’ claimed sum.
(3)	It says that the amounts properly due are shown in two tables exhibited as “FCW-4” and “FCW-5” to the affirmation of Mr Dennis Fong Chi Wang, the Defendants’ manager.  These tables, says the 2nd Defendant, show that the sums claimed by the Plaintiffs are overstated and that the proper sums due are the lesser sums of USD7,632.22 and USD14,256.54.

The applicable principles

15.The principles applicable to an application under O.14 have not been in dispute between the parties.  There is no dispute that the case is within the scope of O.14 and that the Plaintiffs have satisfied the preliminary requirements of the procedure.  It is therefore accepted that the burden is on the 2^nd Defendant to satisfy the Court why judgment should not be given against it.  To do so, the 2^nd Defendant must show that there are triable issues or that there ought for some other reason to be a trial of the claim.

16.The following passages in Note 14/4/9 of Hong Kong Civil Procedure 2007 (Vol.1) at p.177-178 are helpful in setting out the approach to evaluating an asserted defence:-

“	As Bokhary JA said in Re Safe Rich Industries Ltd. ([1994] HKLY 183):
	‘	The test at the summary stage is indeed as simple as whether the defendant’s assertions are believable.  But it must be recognized – because failure to recognize it would create a debt-dodger’s charter – that whether the defendant’s assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as [is] either undisputed or beyond reasonable dispute.’
	…
	It is trite law that the mere assertion in an affidavit of a given situation does not, ipso facto, provide leave to defend, since the defendant must satisfy the court that he has a fair or reasonable probability of showing a real or bona fide defence, i.e. that his evidence is reasonably capable of belief …
	… if the evidence of the defendant is incredible in any material respect, it cannot be said that there is a fair or reasonable probability that the defendant has a real or bona fide defence and judgment will be given to the plaintiff …”

Has the 2^nd Defendant raised a triable issue?

17.I have set out the gist of the 2^nd Defendant’s defence above.

18.I can deal briefly with the first point taken by the 2^nd Defendant, namely that the Plaintiff has failed to adduce evidence as to how the sum claimed was calculated.

19.In my judgment, that argument is wrong because it reverses the burden of proof under O.14.  On an application under O.14, all that a plaintiff is required to do to establish a prima facie case is to verify the facts stated in the Statement of Claim.  As Note 14/2/6 in Hong Kong Civil Procedure 2007 (Vol.1) at p.173 states:-

“The affidavit need not set out all the particulars, nor verify the facts except by reference to the statement of claim (May v. Chidley [1894] 1 QB 451, and see Murphy v. Nolan 18 LR Ir 468), even when they have been added by amendment (Roberts v. Plant [1895] 1 QB 597).”

Since the Plaintiffs have established a prima facie case, the burden is on the 2^nd Defendant to satisfy the Court why judgment should not be given against it.

20.I turn next to deal with the 2^nd Defendant’s submission that the Plaintiffs’ invoices were miscalculated and have failed to take into account interest payments already made by the 2^nd Defendant, so that the amounts actually due are USD7,632.22 and USD14,256.54.

21.In order to put this contention of the 2^nd Defendant into its proper context, it is necessary to review some of the correspondence between the parties.

(1)	On 10 May 2002, in response to requests from the Plaintiffs to settle the outstanding principal, charges and interest due, the 2nd Defendant[1] wrote and stated:-
	“	… I totally agree to make the payments under the new schedule, and would like to add a side note to this arrangement, that all interest charged will be paid on the last statement due by Jan 03 and should not be compounded after the respective balances have been paid off.”
(2)	On 23 May 2002, the 1st Plaintiff wrote to the 2nd Defendant and stated:-
	“	On my earlier fax I stated that the total interest amount of US$114,298.44 was due to us by 31st January 2002 as agreed.  It should have read by 31st January 2003”.
(3)	On 9 June 2003, the 2nd Plaintiff wrote to the 2nd Defendant stating that, as at the end of January 2003, interest “stood at US$114,298.44”.
(4)	On 17 December 2004, the 2nd Plaintiff wrote to the 2nd Defendant and stated:-
	“	We thank you for your last payment which completed the repayment of the capital amount owing to us.  We have at last reached the point where we need to recoup the cost of your protracted payment delays because we have been paying interest to our bank for the money that was tied up in merchandise purchased by you.
		As you will see from the interest statement attached, the amount due to us is US$217,930.54.  We have been extremely supportive of International Fur Company over the years and we have waited patiently for you to trade your way out of the amounts that you owed to us.  Now we ask that you make arrangements to settle the interest as well so that we can all move on to more constructive business matters. …”
	The fax letter enclosed a four page interest statement showing the various invoices constituting the outstanding interest as at 23 November 2004 in the sum of USD217,930.54.
(5)	On 6 May 2005, the 1st Plaintiff wrote to the 2nd Defendant and, after referring to a meeting in Helsinki between Mr Zilberkweit of the 1st Plaintiff and the 3rd Defendant the previous month, stated:-
	“	… Unfortunately our discussions about the interests owed by International Fur Co. to Polar Furs remain unresolved.
	Whilst we are sympathetic to your request to settle this through future trading we feel that the amount USD217,930.54 (as per our statement 23/11/04 and now enclosed again) is too large to be settled in this way.”

22.The Plaintiffs point out that, notwithstanding these clear statements as to the scale of the outstanding indebtedness due, there was neither any dispute nor any question raised by any of the Defendants.

23.Further, in the Plaintiffs’ solicitors’ letter before action dated 29 July 2005, addressed to the 1^st Defendant, demand was made for the then outstanding interest payment and finance charge in the sum of USD246,355.78.

24.The response to that letter before action was a simple reply denying that the 1^st Defendant had any transactions with the Plaintiffs.  There was no suggestion that the amount of the outstanding interest and finance charges was overstated.

25.Notwithstanding that this is an application for summary judgment, it is right, in my view, to have regard to the above correspondence in evaluating the 2^nd Defendant’s alleged defence that the Plaintiffs’ claim is miscalculated or has failed to take certain credits into account.  If the true position were that the 2^nd Defendant only owed the sums of USD7,632.22 and USD14,256.54, it simply beggars belief, in my view, that it would have not have queried or protested the Plaintiffs’ allegations that, by November 2004, a sum in excess of USD200,000 was due.

26.As to the 2^nd Defendant’s alleged defence that the Plaintiffs’ invoices were wrongly computed because interest and finance charges ought not to have been applied to the buying commissions, I do not think there is any merit in this allegation for the following reasons:-

(1)	The 2nd Defendant has not discharged the burden of showing that the Plaintiffs have in fact applied interest and finance charges to the buying commissions in arriving at the outstanding interest and finance charges claimed.
(2)	The only invoices that the 2nd Defendant referred to in support of this complaint were invoices dated before the Agreement and, accordingly, would not appear to be relevant to the issue of whether interest on facilities under the Agreement were invoiced in accordance with its terms.
(3)	In any event, under clause 2(B) of the letter, buying commission on goods financed by the Plaintiffs was to be calculated at “Auction House Invoice Value”, whilst finance charges were to be levied on “total invoice value” which would appear to include buying commission.  Moreover, under clauses 5 and 6, interest was to be charged on outstanding amounts which would also appear to include buying commission.

27.As to the tables exhibited as “FCW-4” and “FCW-5” to the affirmation of Mr Dennis Fong Chi Wang:-

(1)	These were specifically prepared by the 2nd Defendant for the purposes of defending these proceedings and are not contemporary documents.  There was no evidence as to when the “wholesale re-examination of the invoices” rendered by the Plaintiffs was undertaken by the 2nd Defendant but it is clear that it was after the commencement of these proceedings.  In the light of the failure to query or protest any of the Plaintiffs’ earlier computations going back to as early as May 2002, the Court must, in my view, be highly circumspect in relying on this exercise now undertaken by the 2nd Defendant.
(2)	Insofar as they purport to show sums overpaid by the 2nd Defendant, these are bare assertions without any explanation as to how the sums in question were paid and how they constitute overpayments.
(3)	It was not possible to see how the alleged total sum of USD2,076,178.04 said to have been identified in the Plaintiffs’ schedule as of 23 November 2004 was comprised of “many” of the invoices set out in those tables.  The Plaintiffs’ schedule appears to represent interest outstanding as from 25 May 2002 at the earliest, whereas most of the invoices listed in “FCW-4” and “FCW-5” are dated prior to that date.
(4)	The fresh evidence in the form of the summary of invoices prepared by Ms Ng does not, in my view, shed any further light on how the tables at “FCW-4” and “FCW-5” demonstrate that there is a triable issue as to the correct amount of the Plaintiffs’ claim.

28.Having considered the submissions advanced by Mr Jonathan Wong, counsel for the 2^nd Defendant, I am not satisfied that the 2^nd Defendant has demonstrated that there is a triable issue as to the amount of the outstanding interest and finance charges claimed by the Plaintiffs in this action.

Conclusion

29.For the reasons set out above, I therefore dismiss this appeal.

30.As to costs, I make an order nisi that the costs of the appeal be paid by the 2^nd Defendant to the Plaintiffs to be taxed if not agreed.

31.There was no independent appeal against the costs order made by the Master and so, this appeal being dismissed, that costs order is not affected.

Mr Abraham Chan, instructed by Messrs Jonathan Rostron, for the Plaintiffs

Mr Jonathan Wong, instructed by Messrs King & Co., for the Defendants

[1] For present purposes, in light of the dispute as to whether the 1^st and 3^rd Defendants were counterparties to the transactions with the Plaintiffs and the 2^nd Defendant’s case that it was the only counterparty, I shall attribute all correspondence from or to any of the Defendants as being from or to the 2^nd Defendant.