HCA317/2008 GLOBAL BRIDGE ASSETS LTD AND OTHERS v. SUN HUNG KAI SECURITIES LTD - LawHero
HCA317/2008
高等法院（民事訴訟）Suffiad J21/4/2009
HCA317/2008
由此
A A
HCA317/2008
B B
IN THE HIGH COURT OF THE
C HONG KONG SPECIAL ADMINISTRATIVE REGION C
COURT OF FIRST INSTANCE
D D
ACTION NO. 317 OF 2008
E --------------------------------- E
F BETWEEN F
GLOBAL BRIDGE ASSETS LIMITED 1st Plaintiff
G G
LONG PROSPERITY INDUSTRIAL LIMITED 2nd Plaintiff
H H
WALTON ENTERPRISES LIMITED 3rd Plaintiff
I I
and
J J
K SUN HUNG KAI SECURITIES LIMITED Defendant K
-------------------------
L L
M Before : Hon Suffiad J in Chambers M
Date of Hearing : 25 February 2009
N Date of Decision : 22 April 2009 N
O O
---------------------
DECISION
P --------------------- P
Q 1. This is an application by the defendant to strike out the Q
Statement of Claim in respect of the claims by all three plaintiffs.
R R
S S
T T
U U
V V
由此
- 2 -
A A
The pleaded case of the plaintiffs
B B
2. The 1st and 3rd plaintiffs are BVI companies while the
C C
2nd plaintiff is a company incorporated in the Republic of Seychelles.
D D
3. The defendant is a Hong Kong company and part of the Sun
E E
Hung Kai group of companies.
F F
4. In May 1993, there was set up a joint venture (“the JV”)
G G
between the defendant and partner from the People’s Republic of China
H (called “the PRC JV partner”) whereby the defendant held 40% of the JV H
shares while the PRC JV partner held 60%. The JV operated a power
I I
plant in Hubei province of China.
J J
5. By a Supplemental JV Contract on 13 June 1997, with the
K K
agreement and consent of all concerned as well as the government
L authorities, the PRC JV partner transferred 40% of its holdings in the JV to L
the 3rd plaintiff.
M M
N 6. By Article 9 of the JV Memorandum, the defendant was N
obliged to contribute US$10 million to the JV capital but had only
O O
contributed US$7 million.
P P
7. Arbitration proceedings took place in China between the
Q Q
3rd plaintiff and the PRC JV partner in 1999. On 19 July 2000 the
R Arbitration Commission ordered (inter alia) the defendant to contribute the R
outstanding US$3 million, but the defendant had still not complied
S S
therewith.
T T
U U
V V
由此
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A A
8. Before mid-2001, negotiations were ongoing between the
B B
1st plaintiff and Whirlwind Holdings Ltd (“Whirlwind”) for the sale by
C Whirlwind of KPI shares to the 1st plaintiff (KPI being a company C
incorporated in Bermuda but with its shares listed on the Hong Kong Stock
D D
Exchange up to 8 March 2004). Those negotiations were conducted by
E Chin Kam Chiu for the 1st plaintiff and by Cheng Chao Ming, Jenson E
(“Cheng”) and his wife Madam Cheung Lai Na (“Madam Cheung”) for
F F
Whirlwind.
G G
9. Madam Cheung was also armed with a letter of authorization
H H
dated 21 January 1999 from the defendant which authorized her to deal
I with the defendant’s share in the JV. I
J J
10. Resulting from those negotiations, a Sale and Purchase
K Agreement dated 3 August 2001 was entered into between the 1st plaintiff, K
Whirlwind and Cheng whereby Whirlwind sold to the 1st plaintiff
L L
169,500,000 shares of KPI for HK$33,900,000. Cheng acted as
M guarantor and gave a guarantee, covenants and warranties to the M
1st plaintiff as to the affairs of KPI.
N N
O 11. The 1st plaintiff completed the Sale and Purchase Agreement O
on or about 28 September 2001.
P P
Q 12. During the negotiations leading to the Sale and Purchase Q
Agreement, the 1st plaintiff raised concerns it had as to securities or
R R
guarantees if Whirlwind or Cheng failed to perform their obligations in
S respect of the sale of the KPI shares. S
T T
U U
V V
由此
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A A
13. David Hui, a director of the defendant, and Madam Cheung,
B B
both of them acting on behalf of the defendant, gave an oral guarantee on
C behalf of the defendant to the 1st plaintiff that the defendant undertook to C
guarantee due performance by Whirlwind and Cheng of their obligations
D D
arising from the Sale and Purchase Agreement, and that the defendant will
E transfer its 40% holdings in the JV to the 1st plaintiff or its nominee if E
Whirlwind or Cheng failed to perform their obligations (paragraph 17
F F
Statement of Claim refers).
G G
14. It was also pleaded that there was a collateral contract
H H
between the 1st plaintiff and the defendant as well as a collateral warranties
I given by the defendant that the defendant will transfer its 40% shares in I
the JV if Whirlwind or Cheng failed to perform their obligations under the
J J
Sale and Purchase Agreement.
K K
15. It was further pleaded that the defendant warranted and
L L
represented to the plaintiff in July/August 2001 that the defendant was in a
M position to transfer its 40% shares in the JV to the 1 st plaintiff pursuant to M
the guarantee and the collateral contract.
N N
O 16. After the Sale and Purchase Agreement was signed, O
Whirlwind and Cheng failed to perform their obligations thereunder and
P P
st
the 1 plaintiff, by letter dated 13 September 2001 to Whirlwind and the
Q defendant, complained of such breaches and notified the defendant that it Q
would enforce the guarantee and/or collateral contract.
R R
S 17. At a Board Meeting of the JV, the defendant promised that it S
would pay the US$3 million and transfer its 40% holdings in the JV to the
T T
1st plaintiff. The defendant also reiterated the representation that it had
U U
V V
由此
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A A
obtained the written consent of the PRC JV partner to transfer its holdings
B B
in the JV to the 1st plaintiff.
C C
18. In purported performance of the guarantee and/or collateral
D D
contract, the defendant entered into a Capital Transfer Contract with the
E 2nd plaintiff (being the nominee of the 1st plaintiff) on 12 October 2001 E
whereby the defendant agreed to transfer 40% of its shares in the JV to the
F F
2nd plaintiff at the nominal consideration of $1.
G G
19. In May 2003, the 1st and 2nd plaintiffs discovered that the
H H
defendant had never obtained the written consent of the PRC JV partner to
I transfer its holdings in the JV to the 2nd plaintiff, a matter deliberately I
concealed by the defendant before that date.
J J
K 20. The claim by the 1st plaintiff is that the defendant was in K
breach of the guarantee, the collateral contract and the collateral warranty
L L
given by the defendant.
M M
21. It was also pleaded that the representation made by the
N N
defendant was a negligent, reckless or fraudulent misrepresentation by the
O defendant. O
P P
22. The claim by the 2nd plaintiff is that the defendant was in
Q breach of the Capital Transfer Agreement by failing to transfer its 40% Q
shareholdings in the JV to the 2nd plaintiff.
R R
S 23. The claim by the 3rd plaintiff is that the defendant had failed S
to pay the outstanding US$3 million towards the JV capital.
T T
U U
V V
由此
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A A
Application to strike out the claim of the 1st plaintiff
B B
24. The application to strike out the 1st plaintiff’s claim is made
C C
on the basis that the claim by the 1st plaintiff is bad for want of a
D memorandum in writing signed by the defendant. D
E E
25. Reliance is placed on section 13 of Law Amendment and
F Reform (Consolidation) Ordinance (“LARCO”). F
G G
26. In making this application, it was submitted by the defendant
H that effectively the claim by the 1st plaintiff was based on the H
representations or assurances alleged to have been made or given orally by
I I
the defendant concerning the character, conduct, credit, ability trade or
J dealings of Whirlwind or Mr Cheng in the sale of the KPI shares to the J
1st plaintiff under the Sale and Purchase Agreement.
K K
L 27. I am unable to accept that submission by the defendant for the L
following reasons.
M M
N 28. In England, there exist section 4 of the Statute of Frauds 1677 N
which reads as follows :
O O
“No action shall be brought… whereby to charge the defendant
P upon any special promise to answer for the debt default or P
miscarriages of another person… unless the agreement upon
which such action shall be brought or some memorandum or
Q note thereof shall be in writing and signed by the party to be Q
charged therewith or some other person thereunto by him
R lawfully authorized.” R
S S
29. Formerly, section 4 of the Statute of Frauds was introduced
T into Hong Kong by section 12 of LARCO. However, that section was T
U U
V V
由此
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A A
repealed in Hong Kong in 1972. Given that section 12 was repealed in
B B
Hong Kong, it would therefore appear that after its repeal in 1972, a
C guarantee is actionable in Hong Kong even if not evidenced by any C
memorandum in writing signed by the party charged.
D D
E 30. In England, section 4 of the Statute of Fraud was E
supplemented by section 6 of the Statute of Frauds Amendment Act 1828,
F F
commonly known as Lord Tenterden’s Act.
G G
31. Section 6 of the Statute of Frauds Amendment Act 1828 was
H H
introduced because the decision in Pasley v Freeman (1789) 3 Term. Rep. 51
I held that an action would lie for a fraudulent misrepresentation by word of I
mouth only of the credit or solvency of another. This decision therefore
J J
opened the door to evasion of section 4 of the Statute of Frauds 1677.
K K
32. In Hong Kong, section 13 of LARCO, being the equivalent of
L L
section 6 of the Statute of Frauds Amendment Act 1828, is worded as
M follows : M
N “No action shall be brought whereby to charge any person upon N
or by reason of any representation or assurance made or given
concerning or relating to the character, conduct, credit, ability,
O O
trade or dealings of any person, to the intent or purpose that such
other person may obtain credit money or goods thereupon, unless
P such representation or assurance is made in writing, signed by P
the party to be charged therewith.”
Q Q
33. Firstly, I accept the plaintiff’s submission that paragraph 17 of
R R
the Statement of Claim which pleads the oral guarantee relied on by the
S 1st plaintiff in its claim, is no more than a typical guarantee given by a third S
party to guarantee the performance of the obligations by Whirlwind and
T T
U U
V V
由此
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A A
Cheng under the Sale and Purchase Agreement. It contained no
B B
representation or assurance within the ambit of section 13 of LARCO.
C C
34. Therefore given that section 12 of LARCO has now been
D D
repealed from the statute books in Hong Kong, nothing stands in the way
E of the defendant in relying on an oral guarantee as what is pleaded by the E
1st plaintiff in paragraph 17 of the Statement of Claim.
F F
G 35. Secondly, in so far as the Collateral Contract and Collateral G
Warranty relied on and pleaded by the 1st plaintiff in its claim, whatever
H H
representation or assurance given orally by the defendant was warranting
I its own ability (and not that of another person) to transfer or procure the I
transfer of its own 40% shares in the JV in favour of the 1st plaintiff or its
J J
nominee pursuant to the Guarantee given or the Collateral Contract.
K K
36. Therefore since it was not a warranty given in relation to
L L
another person, section 13 of LARCO does not even begin to kick in, and
M has no application. M
N N
37. For these reasons, the defendant’s application to strike out the
O 1st plaintiff’s claim must fail. O
P P
Application to strike out the claim of the 2nd plaintiff
Q Q
38. The application to strike out the claim of the 2nd plaintiff is
R brought on the basis that the claim by the 2nd plaintiff is in breach of the R
Deed of Waiver and Indemnification.
S S
T T
U U
V V
由此
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A A
39. There is no dispute that on the same day that the 2nd plaintiff
B B
entered into the Capital Transfer Agreement with the defendant, they also
C entered into a Deed of Waiver and Indemnification (“the Deed”). C
D D
40. Under the Deed, the 2nd plaintiff covenanted not to sue the
E defendant. The covenant is in very wide terms. E
F F
41. The defendant submitted that the claim now brought by the
G 2nd plaintiff was in breach of the covenant not to sue the defendant. G
H H
42. On the other hand, it was submitted by counsel for the
I plaintiffs that the covenant not to sue only has application where the I
defendant has duly performed its obligation under the Capital Transfer
J J
Agreement.
K K
43. In deciding on the disputed issue between them, I take the
L L
view that the disputed issue is effectively one of construction of the terms
M of the Deed. M
N N
44. In the circumstances, the terms of the Deed will need to be
O looked at. O
P P
45. Firstly, it is to be noted that the Deed refers in its Recital the
Q Capital Transfer Agreement and the JV as well as the interest of the Q
defendant in the JV which is also defined. Moreover, it is stated in the
R R
Recital that it was in consideration of the defendant entering into the
S Capital Transfer Agreement that the 2nd plaintiff agreed to provide the S
waivers and the indemnities set forth in the Deed.
T T
U U
V V
由此
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A A
46. Secondly, the significant wording of the Waiver clause
B B
(clause 1) and the Covenant not to Sue (clause 2) are as follows :
C C
“1 Waiver
D 1.1 [The 2nd plaintiff] hereby releases and forever discharges D
[the defendant] and each of… collectively the ‘Releasees’),
and each of them separately and collectively, from any and
E E
all claims, liens, demands, causes of action, obligations,
damages and liabilities of any nature whatsoever, known or
F unknown, that [the 2nd plaintiff] ever had, now has or may F
hereafter claim to have in respect of any claims (the
‘Released Claims’) arising against any of the Releasees,
G including (but not limited to) claims relating to or arising G
from the Interest, the Joint Venture or any transaction
H related thereto. H
1.2 [The 2nd plaintiff] hereby agrees to cause each of its
I subsidiaries and affiliates to forbear from pursuing any I
Released Claims which they may have against [the
defendant], its subsidiaries or affiliates, or their assets.
J J
2 [The 2nd plaintiff’s] Covenant Not to Sue
K K
[The 2nd plaintiff] covenants and agrees that it will never,
L by itself or with any person or in any way, commence, aid L
in any way, except as required by due legal process,
prosecute or cause or permit to be commenced or
M prosecuted, any action or other proceedings based upon M
any claim which is the subject of the releases set forth in
N
Article I hereof. This Deed shall be deemed breached by N
[the 2nd plaintiff] and a cause of action shall be deemed to
have accrued immediately upon [the 2nd plaintiff]’s
O commencement or prosecution of any action or O
proceedings against any of the Releases contrary to this
Deed.”
P P
Q Q
47. From the wording used in the above two clauses, it is clear
R that the issue in dispute between the parties must necessarily turn upon the R
proper construction of the agreement between them in respect of the
S S
“Released Claims” defined in clause 1 above.
T T
U U
V V
由此
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A A
48. In this connection, it is important to see what has been stated
B B
in the Recital to the Deed. The wording of the Recital is as follows :
C C
“WHEREAS, pursuant to the [Capital Transfer Agreement]
between [the defendant] and [the 2nd plaintiff] of even date, [the
D defendant] has transferred to [the 2 nd plaintiff] any and all D
interest (the ‘Interest’) which it may have in [the JV], a
E Sino-foreign equity joint venture company established in Hubei E
Province, the People’s Republic of China ;
F WHEREAS, in consideration of [the defendant]’s entering into F
the [Capital Transfer Agreement], [the 2 nd plaintiff] agrees to
provide the waivers and indemnities set forth herein to [the
G defendant];” G
H H
49. In the first recital, the sentence which states that pursuant to
I I
the Capital Transfer Agreement, the defendant ‘has transferred’ to the
J 2nd plaintiff any and all interest which it may have in the JV, the use of the J
words “has transferred” would suggest :
K K
(a) not only that the Waiver and the Covenant Not to Sue was
L L
given only upon the defendant fulfilling those obligations of
transferring its interest in the JV to the 2nd plaintiff pursuant to
M M
the Capital Transfer Agreement; but also
N N
(b) that the “Released Claims” would not encompass that
obligation of the defendant to transfer its interests to the
O O
nd
2 plaintiff under the Capital Transfer Agreement, since if
P that obligation has, according to the Recital, been completed, P
it cannot be contemplated by the parties that if the obligation
Q Q
was not fulfilled, the 2nd plaintiff would release the defendant
R from having to meet that obligation. R
S S
50. This application, being in the nature of a striking out
T application, it is not necessary for me to come to any firm decision as to T
U U
V V
由此
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A A
the proper construction to be put on clauses 1 and 2 of the Deed, suffice to
B B
say for present purpose, I only need to come to the conclusion that the
C stance taken by the 2nd plaintiff is arguable. C
D D
51. If the striking out application is to succeed, the defendant will
E have to show that it is a plain and obvious case for striking out. E
F F
52. For the reasons given above, this is far from such a plain and
G obvious case, since I take the view that it is arguable for the plaintiff to put G
forward the argument that it did.
H H
I 53. Accordingly, the application to strike out the claim by the I
2nd plaintiff also fails.
J J
K Application to strike out the claim of the 3rd plaintiff K
L 54. The application to strike out the claim of the 3rd plaintiff for L
the payment of the outstanding US$3 million by the defendant is based on
M M
the 3rd plaintiff having no locus to claim for the outstanding US$3 million.
N N
55. The argument by the defendant relating to the claim by the
O O
3rd plaintiff is that the order of the Arbitration Commission for the
P defendant to make good the outstanding balance of US$3 million was an P
award to the JV and not an award to the 3rd plaintiff. As such the plaintiff
Q Q
has no locus in claiming for the US$3 million.
R R
rd
56. The stance taken by the 3 plaintiff is simply that the
S S
3rd plaintiff, being one of the partners of the JV, has an interest in seeing
T and ensuring that the outstanding contribution by the defendant is duly T
U U
V V
由此
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A A
made to the JV. In this respect, the 3rd plaintiff says that the obligation of
B B
the defendant in paying up its contribution is a continual obligation. The
C 3rd plaintiff is merely seeking to enforce that continuing obligation by the C
defendant and the award of the Arbitration Commission merely confirms
D D
that obligation of the defendant to make good the US$3 million.
E E
57. Whilst I can accept that the 3rd plaintiff, being one of the
F F
partners of the JV has an interest in seeing that the defendant fulfils its
G obligation to make the proper contribution toward the JV, the claim as G
pleaded in the Statement of Claim does not reflect that the claim now by
H H
the 3rd plaintiff is made on behalf of the JV, nor is the JV a party to these
I proceedings. Instead, the way the claim by the 3rd plaintiff is framed I
would appear, on its wording, to be a claim by the 3rd plaintiff itself.
J J
K 58. That, however, can be cured by an amendment to the K
pleadings.
L L
M 59. It is also trite law that if the matter can be cured by an M
amendment to the pleadings, a court would be slow to order striking out.
N N
O 60. The application to strike out the claim by the 3rd plaintiff, O
would, in all the circumstances be such a case.
P P
Q 61. I therefore decline to strike out the claim by the 3rd plaintiff Q
but instead allow 14 days to the plaintiffs to make the necessary
R R
application for amendment in order to put the claim by the 3rd plaintiff on
S its proper footing. S
T T
U U
V V
由此
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A A
Conclusion
B B
62. For the reasons above, the defendant’s application for striking
C C
out the Statement of Claim is dismissed.
D D
Costs
E E
63. There will be a costs order nisi that the defendant pays the
F F
costs of and occasioned by this application to the plaintiffs in any event.
G G
H H
I I
(A.R. Suffiad)
Judge of the Court of First Instance
J J
High Court
K K
Mr Rimsky Yuen, S.C. instructed by Messrs Waller Ma Huang &Yeung,
L for the 1st, 2nd and 3rd Plaintiffs L
M Mr Steven Kwan, instructed by Messrs Leland Chu & Co., M
for the Defendant
N N
O O
P P
Q Q
R R
S S
T T
U U
V V
GLOBAL BRIDGE ASSETS LTD AND OTHERS v. SUN HUNG KAI SECURITIES LTD
由此
A A
HCA317/2008
B B
IN THE HIGH COURT OF THE
C HONG KONG SPECIAL ADMINISTRATIVE REGION C
COURT OF FIRST INSTANCE
D D
ACTION NO. 317 OF 2008
E --------------------------------- E
F BETWEEN F
GLOBAL BRIDGE ASSETS LIMITED 1st Plaintiff
G G
LONG PROSPERITY INDUSTRIAL LIMITED 2nd Plaintiff
H H
WALTON ENTERPRISES LIMITED 3rd Plaintiff
I I
and
J J
K SUN HUNG KAI SECURITIES LIMITED Defendant K
-------------------------
L L
M Before : Hon Suffiad J in Chambers M
Date of Hearing : 25 February 2009
N Date of Decision : 22 April 2009 N
O O
---------------------
DECISION
P --------------------- P
Q 1. This is an application by the defendant to strike out the Q
Statement of Claim in respect of the claims by all three plaintiffs.
R R
S S
T T
U U
V V
由此
- 2 -
A A
The pleaded case of the plaintiffs
B B
2. The 1st and 3rd plaintiffs are BVI companies while the
C C
2nd plaintiff is a company incorporated in the Republic of Seychelles.
D D
3. The defendant is a Hong Kong company and part of the Sun
E E
Hung Kai group of companies.
F F
4. In May 1993, there was set up a joint venture (“the JV”)
G G
between the defendant and partner from the People’s Republic of China
H (called “the PRC JV partner”) whereby the defendant held 40% of the JV H
shares while the PRC JV partner held 60%. The JV operated a power
I I
plant in Hubei province of China.
J J
5. By a Supplemental JV Contract on 13 June 1997, with the
K K
agreement and consent of all concerned as well as the government
L authorities, the PRC JV partner transferred 40% of its holdings in the JV to L
the 3rd plaintiff.
M M
N 6. By Article 9 of the JV Memorandum, the defendant was N
obliged to contribute US$10 million to the JV capital but had only
O O
contributed US$7 million.
P P
7. Arbitration proceedings took place in China between the
Q Q
3rd plaintiff and the PRC JV partner in 1999. On 19 July 2000 the
R Arbitration Commission ordered (inter alia) the defendant to contribute the R
outstanding US$3 million, but the defendant had still not complied
S S
therewith.
T T
U U
V V
由此
- 3 -
A A
8. Before mid-2001, negotiations were ongoing between the
B B
1st plaintiff and Whirlwind Holdings Ltd (“Whirlwind”) for the sale by
C Whirlwind of KPI shares to the 1st plaintiff (KPI being a company C
incorporated in Bermuda but with its shares listed on the Hong Kong Stock
D D
Exchange up to 8 March 2004). Those negotiations were conducted by
E Chin Kam Chiu for the 1st plaintiff and by Cheng Chao Ming, Jenson E
(“Cheng”) and his wife Madam Cheung Lai Na (“Madam Cheung”) for
F F
Whirlwind.
G G
9. Madam Cheung was also armed with a letter of authorization
H H
dated 21 January 1999 from the defendant which authorized her to deal
I with the defendant’s share in the JV. I
J J
10. Resulting from those negotiations, a Sale and Purchase
K Agreement dated 3 August 2001 was entered into between the 1st plaintiff, K
Whirlwind and Cheng whereby Whirlwind sold to the 1st plaintiff
L L
169,500,000 shares of KPI for HK$33,900,000. Cheng acted as
M guarantor and gave a guarantee, covenants and warranties to the M
1st plaintiff as to the affairs of KPI.
N N
O 11. The 1st plaintiff completed the Sale and Purchase Agreement O
on or about 28 September 2001.
P P
Q 12. During the negotiations leading to the Sale and Purchase Q
Agreement, the 1st plaintiff raised concerns it had as to securities or
R R
guarantees if Whirlwind or Cheng failed to perform their obligations in
S respect of the sale of the KPI shares. S
T T
U U
V V
由此
- 4 -
A A
13. David Hui, a director of the defendant, and Madam Cheung,
B B
both of them acting on behalf of the defendant, gave an oral guarantee on
C behalf of the defendant to the 1st plaintiff that the defendant undertook to C
guarantee due performance by Whirlwind and Cheng of their obligations
D D
arising from the Sale and Purchase Agreement, and that the defendant will
E transfer its 40% holdings in the JV to the 1st plaintiff or its nominee if E
Whirlwind or Cheng failed to perform their obligations (paragraph 17
F F
Statement of Claim refers).
G G
14. It was also pleaded that there was a collateral contract
H H
between the 1st plaintiff and the defendant as well as a collateral warranties
I given by the defendant that the defendant will transfer its 40% shares in I
the JV if Whirlwind or Cheng failed to perform their obligations under the
J J
Sale and Purchase Agreement.
K K
15. It was further pleaded that the defendant warranted and
L L
represented to the plaintiff in July/August 2001 that the defendant was in a
M position to transfer its 40% shares in the JV to the 1 st plaintiff pursuant to M
the guarantee and the collateral contract.
N N
O 16. After the Sale and Purchase Agreement was signed, O
Whirlwind and Cheng failed to perform their obligations thereunder and
P P
st
the 1 plaintiff, by letter dated 13 September 2001 to Whirlwind and the
Q defendant, complained of such breaches and notified the defendant that it Q
would enforce the guarantee and/or collateral contract.
R R
S 17. At a Board Meeting of the JV, the defendant promised that it S
would pay the US$3 million and transfer its 40% holdings in the JV to the
T T
1st plaintiff. The defendant also reiterated the representation that it had
U U
V V
由此
- 5 -
A A
obtained the written consent of the PRC JV partner to transfer its holdings
B B
in the JV to the 1st plaintiff.
C C
18. In purported performance of the guarantee and/or collateral
D D
contract, the defendant entered into a Capital Transfer Contract with the
E 2nd plaintiff (being the nominee of the 1st plaintiff) on 12 October 2001 E
whereby the defendant agreed to transfer 40% of its shares in the JV to the
F F
2nd plaintiff at the nominal consideration of $1.
G G
19. In May 2003, the 1st and 2nd plaintiffs discovered that the
H H
defendant had never obtained the written consent of the PRC JV partner to
I transfer its holdings in the JV to the 2nd plaintiff, a matter deliberately I
concealed by the defendant before that date.
J J
K 20. The claim by the 1st plaintiff is that the defendant was in K
breach of the guarantee, the collateral contract and the collateral warranty
L L
given by the defendant.
M M
21. It was also pleaded that the representation made by the
N N
defendant was a negligent, reckless or fraudulent misrepresentation by the
O defendant. O
P P
22. The claim by the 2nd plaintiff is that the defendant was in
Q breach of the Capital Transfer Agreement by failing to transfer its 40% Q
shareholdings in the JV to the 2nd plaintiff.
R R
S 23. The claim by the 3rd plaintiff is that the defendant had failed S
to pay the outstanding US$3 million towards the JV capital.
T T
U U
V V
由此
- 6 -
A A
Application to strike out the claim of the 1st plaintiff
B B
24. The application to strike out the 1st plaintiff’s claim is made
C C
on the basis that the claim by the 1st plaintiff is bad for want of a
D memorandum in writing signed by the defendant. D
E E
25. Reliance is placed on section 13 of Law Amendment and
F Reform (Consolidation) Ordinance (“LARCO”). F
G G
26. In making this application, it was submitted by the defendant
H that effectively the claim by the 1st plaintiff was based on the H
representations or assurances alleged to have been made or given orally by
I I
the defendant concerning the character, conduct, credit, ability trade or
J dealings of Whirlwind or Mr Cheng in the sale of the KPI shares to the J
1st plaintiff under the Sale and Purchase Agreement.
K K
L 27. I am unable to accept that submission by the defendant for the L
following reasons.
M M
N 28. In England, there exist section 4 of the Statute of Frauds 1677 N
which reads as follows :
O O
“No action shall be brought… whereby to charge the defendant
P upon any special promise to answer for the debt default or P
miscarriages of another person… unless the agreement upon
which such action shall be brought or some memorandum or
Q note thereof shall be in writing and signed by the party to be Q
charged therewith or some other person thereunto by him
R lawfully authorized.” R
S S
29. Formerly, section 4 of the Statute of Frauds was introduced
T into Hong Kong by section 12 of LARCO. However, that section was T
U U
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repealed in Hong Kong in 1972. Given that section 12 was repealed in
B B
Hong Kong, it would therefore appear that after its repeal in 1972, a
C guarantee is actionable in Hong Kong even if not evidenced by any C
memorandum in writing signed by the party charged.
D D
E 30. In England, section 4 of the Statute of Fraud was E
supplemented by section 6 of the Statute of Frauds Amendment Act 1828,
F F
commonly known as Lord Tenterden’s Act.
G G
31. Section 6 of the Statute of Frauds Amendment Act 1828 was
H H
introduced because the decision in Pasley v Freeman (1789) 3 Term. Rep. 51
I held that an action would lie for a fraudulent misrepresentation by word of I
mouth only of the credit or solvency of another. This decision therefore
J J
opened the door to evasion of section 4 of the Statute of Frauds 1677.
K K
32. In Hong Kong, section 13 of LARCO, being the equivalent of
L L
section 6 of the Statute of Frauds Amendment Act 1828, is worded as
M follows : M
N “No action shall be brought whereby to charge any person upon N
or by reason of any representation or assurance made or given
concerning or relating to the character, conduct, credit, ability,
O O
trade or dealings of any person, to the intent or purpose that such
other person may obtain credit money or goods thereupon, unless
P such representation or assurance is made in writing, signed by P
the party to be charged therewith.”
Q Q
33. Firstly, I accept the plaintiff’s submission that paragraph 17 of
R R
the Statement of Claim which pleads the oral guarantee relied on by the
S 1st plaintiff in its claim, is no more than a typical guarantee given by a third S
party to guarantee the performance of the obligations by Whirlwind and
T T
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A A
Cheng under the Sale and Purchase Agreement. It contained no
B B
representation or assurance within the ambit of section 13 of LARCO.
C C
34. Therefore given that section 12 of LARCO has now been
D D
repealed from the statute books in Hong Kong, nothing stands in the way
E of the defendant in relying on an oral guarantee as what is pleaded by the E
1st plaintiff in paragraph 17 of the Statement of Claim.
F F
G 35. Secondly, in so far as the Collateral Contract and Collateral G
Warranty relied on and pleaded by the 1st plaintiff in its claim, whatever
H H
representation or assurance given orally by the defendant was warranting
I its own ability (and not that of another person) to transfer or procure the I
transfer of its own 40% shares in the JV in favour of the 1st plaintiff or its
J J
nominee pursuant to the Guarantee given or the Collateral Contract.
K K
36. Therefore since it was not a warranty given in relation to
L L
another person, section 13 of LARCO does not even begin to kick in, and
M has no application. M
N N
37. For these reasons, the defendant’s application to strike out the
O 1st plaintiff’s claim must fail. O
P P
Application to strike out the claim of the 2nd plaintiff
Q Q
38. The application to strike out the claim of the 2nd plaintiff is
R brought on the basis that the claim by the 2nd plaintiff is in breach of the R
Deed of Waiver and Indemnification.
S S
T T
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A A
39. There is no dispute that on the same day that the 2nd plaintiff
B B
entered into the Capital Transfer Agreement with the defendant, they also
C entered into a Deed of Waiver and Indemnification (“the Deed”). C
D D
40. Under the Deed, the 2nd plaintiff covenanted not to sue the
E defendant. The covenant is in very wide terms. E
F F
41. The defendant submitted that the claim now brought by the
G 2nd plaintiff was in breach of the covenant not to sue the defendant. G
H H
42. On the other hand, it was submitted by counsel for the
I plaintiffs that the covenant not to sue only has application where the I
defendant has duly performed its obligation under the Capital Transfer
J J
Agreement.
K K
43. In deciding on the disputed issue between them, I take the
L L
view that the disputed issue is effectively one of construction of the terms
M of the Deed. M
N N
44. In the circumstances, the terms of the Deed will need to be
O looked at. O
P P
45. Firstly, it is to be noted that the Deed refers in its Recital the
Q Capital Transfer Agreement and the JV as well as the interest of the Q
defendant in the JV which is also defined. Moreover, it is stated in the
R R
Recital that it was in consideration of the defendant entering into the
S Capital Transfer Agreement that the 2nd plaintiff agreed to provide the S
waivers and the indemnities set forth in the Deed.
T T
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A A
46. Secondly, the significant wording of the Waiver clause
B B
(clause 1) and the Covenant not to Sue (clause 2) are as follows :
C C
“1 Waiver
D 1.1 [The 2nd plaintiff] hereby releases and forever discharges D
[the defendant] and each of… collectively the ‘Releasees’),
and each of them separately and collectively, from any and
E E
all claims, liens, demands, causes of action, obligations,
damages and liabilities of any nature whatsoever, known or
F unknown, that [the 2nd plaintiff] ever had, now has or may F
hereafter claim to have in respect of any claims (the
‘Released Claims’) arising against any of the Releasees,
G including (but not limited to) claims relating to or arising G
from the Interest, the Joint Venture or any transaction
H related thereto. H
1.2 [The 2nd plaintiff] hereby agrees to cause each of its
I subsidiaries and affiliates to forbear from pursuing any I
Released Claims which they may have against [the
defendant], its subsidiaries or affiliates, or their assets.
J J
2 [The 2nd plaintiff’s] Covenant Not to Sue
K K
[The 2nd plaintiff] covenants and agrees that it will never,
L by itself or with any person or in any way, commence, aid L
in any way, except as required by due legal process,
prosecute or cause or permit to be commenced or
M prosecuted, any action or other proceedings based upon M
any claim which is the subject of the releases set forth in
N
Article I hereof. This Deed shall be deemed breached by N
[the 2nd plaintiff] and a cause of action shall be deemed to
have accrued immediately upon [the 2nd plaintiff]’s
O commencement or prosecution of any action or O
proceedings against any of the Releases contrary to this
Deed.”
P P
Q Q
47. From the wording used in the above two clauses, it is clear
R that the issue in dispute between the parties must necessarily turn upon the R
proper construction of the agreement between them in respect of the
S S
“Released Claims” defined in clause 1 above.
T T
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A A
48. In this connection, it is important to see what has been stated
B B
in the Recital to the Deed. The wording of the Recital is as follows :
C C
“WHEREAS, pursuant to the [Capital Transfer Agreement]
between [the defendant] and [the 2nd plaintiff] of even date, [the
D defendant] has transferred to [the 2 nd plaintiff] any and all D
interest (the ‘Interest’) which it may have in [the JV], a
E Sino-foreign equity joint venture company established in Hubei E
Province, the People’s Republic of China ;
F WHEREAS, in consideration of [the defendant]’s entering into F
the [Capital Transfer Agreement], [the 2 nd plaintiff] agrees to
provide the waivers and indemnities set forth herein to [the
G defendant];” G
H H
49. In the first recital, the sentence which states that pursuant to
I I
the Capital Transfer Agreement, the defendant ‘has transferred’ to the
J 2nd plaintiff any and all interest which it may have in the JV, the use of the J
words “has transferred” would suggest :
K K
(a) not only that the Waiver and the Covenant Not to Sue was
L L
given only upon the defendant fulfilling those obligations of
transferring its interest in the JV to the 2nd plaintiff pursuant to
M M
the Capital Transfer Agreement; but also
N N
(b) that the “Released Claims” would not encompass that
obligation of the defendant to transfer its interests to the
O O
nd
2 plaintiff under the Capital Transfer Agreement, since if
P that obligation has, according to the Recital, been completed, P
it cannot be contemplated by the parties that if the obligation
Q Q
was not fulfilled, the 2nd plaintiff would release the defendant
R from having to meet that obligation. R
S S
50. This application, being in the nature of a striking out
T application, it is not necessary for me to come to any firm decision as to T
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A A
the proper construction to be put on clauses 1 and 2 of the Deed, suffice to
B B
say for present purpose, I only need to come to the conclusion that the
C stance taken by the 2nd plaintiff is arguable. C
D D
51. If the striking out application is to succeed, the defendant will
E have to show that it is a plain and obvious case for striking out. E
F F
52. For the reasons given above, this is far from such a plain and
G obvious case, since I take the view that it is arguable for the plaintiff to put G
forward the argument that it did.
H H
I 53. Accordingly, the application to strike out the claim by the I
2nd plaintiff also fails.
J J
K Application to strike out the claim of the 3rd plaintiff K
L 54. The application to strike out the claim of the 3rd plaintiff for L
the payment of the outstanding US$3 million by the defendant is based on
M M
the 3rd plaintiff having no locus to claim for the outstanding US$3 million.
N N
55. The argument by the defendant relating to the claim by the
O O
3rd plaintiff is that the order of the Arbitration Commission for the
P defendant to make good the outstanding balance of US$3 million was an P
award to the JV and not an award to the 3rd plaintiff. As such the plaintiff
Q Q
has no locus in claiming for the US$3 million.
R R
rd
56. The stance taken by the 3 plaintiff is simply that the
S S
3rd plaintiff, being one of the partners of the JV, has an interest in seeing
T and ensuring that the outstanding contribution by the defendant is duly T
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A A
made to the JV. In this respect, the 3rd plaintiff says that the obligation of
B B
the defendant in paying up its contribution is a continual obligation. The
C 3rd plaintiff is merely seeking to enforce that continuing obligation by the C
defendant and the award of the Arbitration Commission merely confirms
D D
that obligation of the defendant to make good the US$3 million.
E E
57. Whilst I can accept that the 3rd plaintiff, being one of the
F F
partners of the JV has an interest in seeing that the defendant fulfils its
G obligation to make the proper contribution toward the JV, the claim as G
pleaded in the Statement of Claim does not reflect that the claim now by
H H
the 3rd plaintiff is made on behalf of the JV, nor is the JV a party to these
I proceedings. Instead, the way the claim by the 3rd plaintiff is framed I
would appear, on its wording, to be a claim by the 3rd plaintiff itself.
J J
K 58. That, however, can be cured by an amendment to the K
pleadings.
L L
M 59. It is also trite law that if the matter can be cured by an M
amendment to the pleadings, a court would be slow to order striking out.
N N
O 60. The application to strike out the claim by the 3rd plaintiff, O
would, in all the circumstances be such a case.
P P
Q 61. I therefore decline to strike out the claim by the 3rd plaintiff Q
but instead allow 14 days to the plaintiffs to make the necessary
R R
application for amendment in order to put the claim by the 3rd plaintiff on
S its proper footing. S
T T
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A A
Conclusion
B B
62. For the reasons above, the defendant’s application for striking
C C
out the Statement of Claim is dismissed.
D D
Costs
E E
63. There will be a costs order nisi that the defendant pays the
F F
costs of and occasioned by this application to the plaintiffs in any event.
G G
H H
I I
(A.R. Suffiad)
Judge of the Court of First Instance
J J
High Court
K K
Mr Rimsky Yuen, S.C. instructed by Messrs Waller Ma Huang &Yeung,
L for the 1st, 2nd and 3rd Plaintiffs L
M Mr Steven Kwan, instructed by Messrs Leland Chu & Co., M
for the Defendant
N N
O O
P P
Q Q
R R
S S
T T
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