ECOSUCCESS LTD v. WONG MAN KAM PATRICK AND ANOTHER

bjbj HCA 1491/2021 [2023] HKCFI 910 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 1491 OF 2021 BETWEEN ECOSUCCESS LIMITED Plaintiff AND WONG MAN KAM PATRICK 1st Defendant LEUNG CHI KIN 2nd Defendant Before: Deputy High Court Judge Leung in Chambers Date of Hearing: 11 May 2022 Date of Decision: 31 March 2023 Decision The plaintiff ( Ecosuccess ) claims for outstanding indebtedness owed by Bintan Mining Corporation ( Bintan Mining ), which the 1st uccess application for summary determination of the issue of construction of the relevant terms of the Agreement, and summary judgment against the defendants. There is also the application by the defendants to strike out certain part of Ecosuccess affirmation evidence filed for the purpose of its application. BACKGROUND The Agreement was between Pacific Bulk Enterprises Company Limited ( Pacific Bulk ) and Bintan Mining, of which the defendants were at the material times shareholders and directors in control. The recital of the Agreement provided for the following background: (1) Bintan Mining is developing a bauxite project on Rennell Island of the Soloman Islands (the Project (3) Pacific Bulk is a marine transportation company that provides marine transportation services to its clients, including Bintan Mining. (4) Bintan Mining urgently needs additional cash for their operations in relation to the Project. (5) Upon Bintan Mining undertaking to use Pacific Bulk, subject to the Shipping Agreement u various other investigations into navigation safety for marine vessels in the vicinity of Rennell Island. It continued with the following substantive terms: 1. THE SERVICES BY PACIFIC BULK AND THE FACILITY Subject to the Shipping agreement under clause more economic value to excavate, whichever earlier. 3. PAYMENTS TO PACIFIC BULK BASED ON BAUXITE EXPORTED In consideration of Pacific Bulk becoming Bintan Mining s exclusive transportation services provider, its entering into this Agreement and its funding of a portion of the operational expenditures of the Project by way of the Facility, Bintan Mining shall pay to Pacific Bulk an amount equivalent to the total of US$1.00 per dry metric ton of bauxite exported from the Project and imported at any ports in the People s Republic of China (the Payments The Payments shall be paid by Bintan Mining to Pacific Bulk until the Final Repayment Date. The total amount of the Payments payable to Bintan Mining during this period shall not exceed US$30,000,000 in aggregate. The first sums of Payments up to US$500,000 shall not constitute repayment of principal of the Advance or payment of any interest accrued thereon in the event a repayment is triggered under clause Supramax Co Ltd and Bintan Mining (HCMP 1190/2020). In that action, the learned Deputy Judge granted to Pacific Bulk a Mareva injunction against Bintan Mining in aid of 16 ongoing arbitrations between them. Ecosuccess seeks to rely on the various remarks and findings made by the learned Deputy Judge regarding the credibility and integrity of Bintan Mining and Wong. A copy of the learned Deputy Judge s decision [2021] HKCFI 680 was exhibited as Exhibit ceedings and outcomes in HCSD 50/2020 and 51/2020. Second, nothing in the affirmation in opposition filed by the defendants gave rise to any factual issue calling for reply by reference to that decision in HCMP 1190/2020. The only possible bearing of the decision was the adverse remarks and findings, which Ecosuccess seeks to rely on for casting doubt on the general credibility of Bintan Mining and the defendants, and thus their assertions. The submission on behalf of Ecosuccess made that clear. That however does not found the relevance of such evidence, and thus its introduction by way of reply or at all. In the circumstances, I would allow 1 of the defendants summons. 2 of the summons is consequential, an effectively tit for tat response of the defendants. This is not justified nor necessary, in liability to pay interest and accrual of such interest. The principles governing contractual interpretation are also trite. To ascertain the intention of the parties, the court reads the terms of the contract as a whole, giving the words used by the parties their natural and ordinary meaning in the context of the agreement, the parties relationship and all the relevant facts surrounding the transaction so far as known to the parties. To ascertain the parties intentions, the court does not inquire into th natural language, has worked out badly, or even disastrously, for one of the parties is not a reason for departing from the natural language. A court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight. The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed. It is not the function of a court when interpreting an agreement to relieve a party from the consequences of his imprudence or poor advice. When interpreting a contract, the court should avoid rewriting it in an attempt to assist an unwise party or to penalise an p (2020) 23 HKCFAR 487 at 43-45. Whether the O14A jurisdiction should be invoked for determining the construction issue Essentially, the defendants argue that the Agreement has to be construed in context. This is indisputable as a matter of principle. In case of a contract which is marked by informality, brevity or the absence of skilled professional assistance, correct construction may be achieved by a greater emphasis on its factual matrix: see Eminent Investments (Asia Pacific) Ltd (above) at 43-45. This, the defendants argue, is such a case but the necessary factual matrix is lacking or incomplete without trial. Therefore, the questions for construction are not suitable for O14A determination. Insofar as the alleged lack of or incomplete factual matrix is concerned, the defendants argue that the Agreement was poorly drafted without the intervention of legal professional. They refer to instances such as the lack of consistency in the use of the terms facility and advance in the Agreement. However, these, in my judgment, fall far short of the circumstances material enough to render the relevant terms of the Agreement ambiguous. In my judgment, the defendants fail to identify the precise relevant elements that are missing from, or uncertain in, the factual matrix which would really compromise the context in which the relevant part of the Agreement has to be construed. As mentioned, the relevant part of the Agreement is the term in respect of the obligation to pay interest and the accrual of such interest in the event of default. To the extent that the defendants seek to rely on the factual dispute they raise by reference to the alleged pre-contractual oral representation or promise made by Sun in respect of the accrual of interest, the discussion further below refers. Suffice to say for the present purpose that such attempt is rejected both in principle and in substance. In my judgment, I see nothing material standing in the way of the exercise of the O14A jurisdiction of this court in respect of have accrued on the outstanding balance of the advance. Clause 4(b) provides that interest shall be deemed to have accrued daily and shall be payable together with repayment of the outstanding principal of the advance on the date that such repayment becomes due . If the construction contended by the defendants were correct, one would have expected that interest shall accrue on the date when the outstanding principal becomes repayable. There would have been no need for the deeming of a state of affairs regarding interest, and second, and more importantly, there should be no accrued interest repayable on that date together with the outstanding principal as, according to the defendants, interest should merely start to accrue. The defendants contended construction flouts the actual wordings of the relevant clauses. In their arguments, the defendants also made the following points: the Facility was not advanced with a view of giving profit/security in the form of interest to Ecosuccess; Ecosuccess had already received substantial payments totalling some US$83.8 million under the Agreement; the circumstances surrounding how the Agreement came to be finalised support their understanding of the relevant terms; their construction is in line with business common sense; and the contra proferentum rule operates against Ecosuccess as the drafter of Agreement. First, it is factually incorrect to categorise the term regarding payment of interest or the calculation of such interest from the date of the advance as security or profit for Pacific Bulk/Ecosuccess. That Pacific Bulk would obtain contractual return for the transportation services as the exclusive provider as well as contractual entitlement to interest on the Facility as the lender under the Agreement were not mutually exclusive. The former was the return for services whereas the latter was the compensation for the loss of use of money over time. As regards its entitlement to such compensation for the loss of use of money over time, whether or not Pacifi The reasonableness or adequacy of the reciprocal consideration from Pacific Bulk/Ecosuccess, and thus whether or not it was a bad deal for the defendants, is not relevant to the construction of the relevant terms. Third, the attempt by the defendants to rely on pre-contractual negotiation and drafts agreements exchanged between the parties could not aid the construction of the Agreement. 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