Kok Meau Ngor, Jennifer v. Eberhard Schoneburg
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DCCJ 4897/2005 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 4897 OF 2005 --------------------- BETWEEN
---------------------- Coram : Deputy District Judge K. Lo in Court Dates of Hearing : 2nd and 3rd August 2007 Date of Handing Down Judgment : 30thOctober 2007 --------------------- J U D G M E N T ---------------------- BACKGROUND 1.Kok had, as evidenced by a Loan Agreement dated 1 March 2003, advanced $900,000 to Schoneburg, her former boyfriend, at annual interest rate of 5% per annum for 6 months. 2.Under the Loan Agreement, Schoneburg can prolong the loan for 6 months thereafter, extending the grant period with the same terms and conditions in case he is not able to pay back the loan or any part of it within the 6 months after the grant date i.e. 1 March 2003. 3.Kok said Schoneburg owed her a further loan of $100,000 being the agreed contribution from Schoneburg for household expenses, recreational expenses and travel expenses. 4.Parties had cohabited during year 2002 and year 2003, during which household expenses etc. were incurred. 5.It was not in dispute that Schoneburg had subsequent to 1 March 2003 paid a total of $504,000 (i.e. total of $254,000 and $250,000) to Kok. 6.Kok now claimed the sum of $604,987.92 being outstanding loans and accrued interest due from Schoneburg. 7.She also sought, in the alternative, an order compelling Schoneburg to pledge and deliver 500,000 shares in his common stock of Artificial Life Inc., a NASDAQ listed public US corporation of which he is the founder, Chairman and Chief Executive Officer, to Kok as security for the loan. 8.She also sought in the further alternative that Schoneburg be compelled to procure the allotment of and pay for 85,000 shares in Artificial to Kok. ISSUES
(1) Did Kok have the right to seek the remedies she sought for at 4 October 2005, i.e. time of claim? 9.Schoneburg says that as deadline for repayment under the Loan Agreement was repeatedly extended by agreement of Kok until 31 August 2005, he had a further 12 months to repay the outstanding balance. He says therefore the whole claim is premature. 10.He relied on paragraph 5 of the Loan Agreement which reads:-
11.On Mr Schoneburg’s own admission after repeated extensions, the grant period of the Loan Agreement was extended till 31 August 2005. Since that day, he had failed to settle the outstanding loan and interest and thereafter, he is already in default since that time. 12.Accordingly, Kok has the right to claim him for the outstanding loan at time she lodged her claim i.e. 4 October 2005. 13.On natural reading of paragraph 5, Schoneburg was obliged to pledge 500,000 shares of common stock in Artificial on or before 31 August 2006, i.e. within 12 months after he is in default. 14.It follows therefore that whilst Kok was entitled to sue Schoneburg for repayment of the outstanding loan and interest, at time of claim, her right to seek order compelling Schoneburg to pledge the shares has not yet arisen. 15.It must be said however that the extension of the deadline was solely due to the agreement of Kok and not as Schoneburg said in his email 23 February 2004 that he was then entitled to exercise his option. Surely though Schoneburg had the right to extend the original 6 months grant period once for a further 6 months, the option must be exercised prior to or on the expiration of the 6 months grant period which expired on 31 August 2003. 16.Although Kok said she did not agree to extend the grant period since January 2004, yet in her email March 1, 2004 to Schoneburg, she said “the last date of the Agreement should be August 31 or September 1.” 17.Further, on 26 August 2004, Kok acknowledged by email that “our contract ends on Sept 1 [2004] and not 31.” 18.Again on 7 September 2004, Kok informed Schoneburg to “pay me back within two months meaning by Oct 31, 2004 …” 19.On 30 August 2005, Kok wrote an email to Schoneburg, “As you know, the loan agreement will be due tomorrow.” 20.It is absurd to suggest that under the Loan Agreement, Schoneburg could exercise the option to extend by 6 months indefinitely, as then, Schoneburg will never be in default. This could not be so. 21.In addition, there is nothing in the Loan Agreement that suggest any termination notice requirement by Kok, as suggested by Schoneburg. Once the grant period expires, the debts becomes due and owing. 22.As for Kok’s alternative claim for allotment of shares, I will deal with it later. (2) Was an extra $100,000 as alleged by Kok due from Schoneburg to Kok? (apart from $900,000 covered in the Loan Agreement) 23.Kok said $100,000 was the agreed contribution payable by Schoneburg for household expenses, recreational expenses, travel expenses etc. incurred by the parties whilst they cohabited. 24.Schoneburg in his defence pleaded that he had already paid his half share during their cohabitation. 25.Nevertheless, the 3rd paragraph of the email dated 17 March 2004 10:13 am from Kok to Schoneburg reads “For 2004 total, I took the total sum of 2003 including interest and add on the additional 100K as agreed previously for living expenses.” 26.When Schoneburg replied this email on the same day at 10:28 am, there was no denial of the agreed 100K share of living expenses. The saying by Schoneburg that he had paid his fair share was not believable in the circumstances. 27.Further in court, Schoneburg admitted that he was very cash tight at the time and he moved in and resided with Kok. I find this saying also improbable. 28.Schoneburg had himself admitted that he had drafted an agreement acknowledging this $100,000 when he tried to settle the case with Kok, he explained he did so to pay and get rid of Kok. I do not accept this as true. 29.The total amount of loans between the parties are therefore $1,000,000.00. (3) Can Kok at any time before the actual completion of sale and purchase of shares revoke her application for share allotment and withdraw from the Allotment Agreement? 30.In or about June 30, 2004, parties reached an oral Allotment Agreement whereby Kok would apply via private placement for 85,000 shares in common stock in Artificial and Schoneburg would procure the allotment and also pay for it in full satisfaction of the monies he owed to Kok. 31.Kok completed a private placement order form accordingly but had mistakenly put the wrong date on the order form. Later, she revoked her application for private placement. 32.Kok alleged that it was a term of the Allotment Agreement that she could back out of the deal any time before the completion of sale and purchase of the shares. 33.Schoneburg denied this. 34.I find Kok’s saying quite improbable. Why would anyone include in an Agreement for allotment of shares the right to revoke such application? I do not accept this as true. (4) Did Schoneburg agree to cancel the Allotment Agreement to allot shares after Kok revoked her application? 35.Schoneburg insisted that they had not accepted unilateral cancellation of the Allotment Agreement. In fact, shortly before the claim, Artificial had issued a demand letter to Kok demanding for US$51,000 being the purchase price for the 85,000 shares in common stock of Artificial. 36.Schoneburg in court admitted that the order form was wrongly dated and that the application of Kok had not been formally considered nor approved by the Board of Artificial. 37.Schoneburg pleaded Kok had breached the oral agreement and he says his obligations to Kok under the Allotment Agreement was extinguished. 38.He said that as Kok had breached the Allotment Agreement, he was no longer bound to repay the outstanding monies. 39.He said his subsequent payments totalling $250,000 were merely ex gratia payments. 40.He also said even if he had to repay the loans, he needed only to repay when he could afford to do so without any fixed deadline and that Kok had to give notice to him to terminate the Grant Period. He also said under the Loan Agreement, he had a further 12 months following such termination notice to pay back the loan before the same is enforceable. 41.As said earlier, I could not, even using the most liberal method of construction, construe the Loan Agreement in the way as argued by Schoneburg. The debt was payable once the deadline expired. 42.Further, after the renovation by Kok, in the 2 August 2004 email from Schoneburg to Kok says:
43.Again, in his email to Kok on 26 August 2004 at 11:52 am, he says “I will repay end of September according to the contract.” 44.There is no email in protest of Kok’s revocation. 45.Further, apart from the demand letter from Artificial shortly before action, there is no action by Artificial subsequent to Kok’s revocation. 46.Clearly from these emails, one could see Schoneburg has agreed to treat the prior Allotment Agreement cancelled. These were his acknowledgement that the obligations under the Loan Agreement remained as before. The payments he made subsequent to the cancellation of the Allotment Agreement were therefore not ex gratia payments. CONCLUSION 47.Kok in Schedule 2 of the amended Statement of Claim set out how the sum of $604,987.92 was arrived at. Schoneburg did not dispute the computation save that he said he was under no further legal obligation to repay subsequent to the Allotment Agreement, which for reasons said, I do not agree. 48.In passing, I would add that Kok also sought, as an alternative, pledge of 500,000 shares of common stock which again for reasons said, should be dismissed as her right to apply for the same had not yet arisen at the date of the claim. 49.As for the other remedy sought, i.e. the allotment of the 85,000 shares in common stock, it is trite law that once parties have agreed to cancel the agreement, no party shall sue or be sued on the agreement. Accordingly, such claim is ill conceived. 50.I therefore find the claim of Kok proved in sum of $604,987.92 and I so order that Schoneburg shall pay Kok
51.I also make an order nisi for 14 days that costs of the action, including certificate for counsel, taxed if not agreed in favour of Kok.
Mr Jose-Antonio Maurellet, instructed by Messrs Oldham, Li & Nie, for the Plaintiff Mr Edward Alder, instructed by Messrs Richards Butler, for the Defendant |
Further hearings and rulings under DCCJ 4897/2005