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					                                                                  HCCL28/98
                      IN THE HIGH COURT OF THE
            HONG KONG SPECIAL ADMINISTRATIVE REGION
                       COURT OF FIRST INSTANCE
                   COMMERCIAL LIST NO.28 OF 1998
                                 ---------------

BETWEEN
                  PUMA AG RUDOLF DASSLER SPORT                          Plaintiff
                                     and
                          WONG CHONG SHAN                              Defendant
                                 ---------------

Coram : Hon Mr Justice Stone in Chambers

Dates of Hearing : 22nd April and 11th May 1998

Date of Delivery of Judgment : 11th May 1998

                            
                            JUDGMENT
                            



            I have before me the Plaintiff‟s Order 14 application dated
11th March 1998. In this case, the Plaintiff applies for summary judgment
against the Defendant arising out of the Defendant‟s breach of an Acquisition
Agreement relating to the sale and purchase of shares in Hwa Kay Thai
Holdings Limited, which I gather was a company beneficially owned by the
Defendant and which company, I understand, was heavily involved in the
distribution of Puma merchandise in South East Asia.


            The precise details do not, I think, greatly matter. The
Acquisition Agreement, the breach of which forms the Plaintiff‟s cause of
                                    - 2 -


action, is annexed to the first affidavit of Mr Ulrich Heyd. And I have before
me, as a sum total of the evidence, two affidavits from Mr Heyd and two
affidavits from Mr Laracy in support of this application.


             The matter was first brought on before me on 22nd April 1998.
On that date Mr Coleman appeared, as he does today, on behalf of the Plaintiff,
and Mr Bernard Mak, instructed by Messrs Lau & Chan, appeared for the
Defendant. On that date Mr Mak sought an adjournment of the application.
The Defendant personally could not be reached, he said; I understand that at
that time the Defendant was in Thailand, although apparently he could be
communicated with through his office. In any event, said Mr Mak, the
Defendant‟s previous solicitors had not adequately prepared or indeed
prepared at all the Order 14 application, and effectively therefore Mr Mak was
left holding the baby at what was a very late stage.


             After some deliberation, and in the face of opposition from
Mr Coleman, I allowed the adjournment. It seemed to me appropriate given
the change of solicitors to permit the Defendant to put his case on affidavit. I
thought this was particularly important since by letter dated 7th January 1998
from Hwa Kay Thai Holdings Limited to Puma, the Defendant had said as
follows :
             “At the outset I would like to say that when the agreement
             was made in May last year, I was confident I would be able
             to honour my obligation therein on the first day this year.
             Since then god knows what things have gone to the way
             that I never expected, nor do anybody expect in the whole
             of Asia. In particular, the drastic adverse development in
             economic condition in Thailand has affected me severely …
             I am now a broken man, I may well say „come what may‟.
             I am sure my other creditors is making a similar painful
                                      - 3 -

             decision as to whether to be the first one to pull the plug.
             However, these thoughts give no real answer to the debts
             owed to you under the agreement …”


             The letter then goes on to discuss potential repayment plans
including “the amount owed to you by HKT on the unpaid royalties and the
amount claimed under the agreement”.


             Although the opportunity was afforded to Mr Wong by the Court,
at Mr Mak‟s request, to put his case in order, that opportunity has not been
taken. No affidavit in opposition to this Order 14 application has been filed
by the Defendant or upon his behalf. Indeed, Mr John Kerr, who was
instructed by the Defendant‟s new solicitors Messrs Lau & Chan, appears
before me and says frankly that he is not in a position to consent to judgment,
but that equally he is not in a position to advance any substantive argument on
liability. Such case as he has, or as he does feel able to put forward, revolves
around quantum only. Mr Kerr suggests that the case is not yet properly
pleaded, and that so far as the measure of damages is concerned, the Plaintiff
should give credit for the sale proceeds of the shares which Mr Wong has not
bought back from Puma under the Acquisition Agreement — hence the present
application. Until these matters are formally pleaded, says Mr Kerr, the
Plaintiff is not entitled to a monetary judgment.


             I do not think that the pleading point is a very good point. The
case is eminently clear, and I can see no virtue in the circumstances of making
this Plaintiff go to trial on a case where liability, at least, is beyond doubt.


             That then leaves the question of quantum. The situation is that
since the application was first taken out, and indeed the claim first pleaded, the
                                    - 4 -

shares that had been retained by Puma, and which were due to be resold to
Mr Wong, have been liquidated in the market. As I understand it, the value
of the shares had risen somewhat, and Puma was keen to take advantage of the
amelioration of a potential loss. However, Mr Coleman‟s primary argument
is that out of the debt that is otherwise undoubtedly due by Mr Wong to Puma,
in the amount of US$4,813,307.30, his client does not have to give credit for
the amount received in terms of the proceeds of sale of the shares, which
proceeds, when translated into US Dollar terms at the rate of 7.752, produces
the figure of US$446,685.78. Mr Coleman argues that the measure of
damages should be the difference between the contract price and the market
price of the shares at the contractual date for acceptance (in terms of the “Lock
Up Shares”) and the difference between the contractually agreed sum and the
value of the shares as at the date of the termination with regard to the “Option
Shares”. In other words, says Mr Coleman, the movement in the value of the
shares is causally unconnected to the breach of contract for which his client
claims damages.


             That is all well and good, but for present purposes, and this of
course is a summary judgment application, I am not greatly interested. As far
as I am concerned, Puma has received the proceeds of the sale of the shares,
and although there may or may not be merit in Mr Coleman‟s somewhat
ambitious contention, for the purposes of the current application I am going to
proceed on the basis that Puma is to give credit for the monies received.


             There is only one other fly in the quantum ointment, so to speak.
In the second affidavit of Mr Laracy, which serves to bring the Court up to
date with the full amount of the claim made by Puma against Mr Wong (at
page 2 thereof), Mr Laracy lists therein at paragraph 8, in sub-paras (B), (C),
                                      - 5 -

(D) and (E), different interest calculations which, I am informed by Counsel,
amount in total to US$351,865.24. Mr Coleman suggests that so far as (B)
and (D) are concerned, the interest therein is not true interest, but simply
reflects the enhanced cost of the shares caused by Mr Wong‟s late redemption
thereof. He concedes, I think, that (C) and (E) are true interest sums.
Mr Kerr, anxious no doubt to achieve something from the wreckage of this
case, says stoutly that (B), (C), (D) and (E) are all interest sums, and that if
they were to be included in such principal judgment sum as was to be awarded
against his client, the Defendant herein, this would be the classic case of
interest upon interest.


             I have had a look at the Acquisition Agreement, with the
assistance of Mr Coleman and Mr Kerr (in particular at pages 10-12 thereof
under the heading “Mutual Covenants and Undertakings”), and I have also
examined sub-paras (B) and (C) under Clause 8. The primary „lock up‟
consideration is stated to be US$3,617,009.62, that is the primary
consideration, and Mr Wong could have redeemed those shares by payment to
Puma of that sum on or before 1st January 1998. Sub-para (C) goes on to say
that :

             “Mr Wong shall in addition pay Puma a sum „equivalent to
             interest‟ at the rate of 7% on the lock up consideration, such
             interest to accrue from 1st April 1997 until completion of
             the repurchase of the lock up shares by Mr Wong on
             31st December 1997 whichever is later (the interest).”

             In addition, Clause 8(E)(b) reads :

             “Mr Wong shall deliver to Puma AG a banker‟s draft drawn
             on a licensed bank in Hong Kong for a sum equal to the
             lock up consideration plus the interest up to and including
             the date of the lock up completion.”
                                      - 6 -



             Although I do not, for present purposes, finally have to decide this
interesting point, and whilst, of course, my mind remains open on the final
determination thereof, I am bound to say that I find difficulty in accepting
Mr Coleman‟s argument on the classification to be afforded to sub-paras 8(B)
and (D) of Mr Laracy‟s affidavit, in the sense of these sums constituting not
interest but an integral part of the cost price of the shares. I should be
surprised if I change my mind, but there it is; sometimes this does happen.
For present purposes, however, I content myself with saying that I think this
aspect of the case is arguable. As indeed, in terms of being arguable, is
Mr Coleman‟s more interesting primary contention that credit does not have to
be given to the Defendant for the proceeds of the sale of the shares in question.
Both those matters, it seems to me, can profitably be left for trial, if indeed trial
there is; or to put it in usual Order 14 terms, these two matters constitute, in my
view, triable issues.


             Where then does this leave us? It seems to me that the
appropriate order is that the Plaintiff herein, Puma AG Rudolf Dassler Sport, is
to have summary judgment in the sum of US$4,014,755.76. This sum would
attract interest thereon, at judgment rate from time to time pertaining, from
today‟s date until payment.


             So far as costs are concerned, I think there can be little argument,
but I will hear Counsel in any event.


[Submissions from Counsel]
                                         - 7 -


                I have now had the opportunity to hear Counsel on the issue of
costs. Mr Coleman has asked for the costs of the action to date, such costs to
include the application herein. He further asks that these costs should be
taxed and paid upon an indemnity basis. He seeks to support that by
reference to Clause 22 of the Acquisition Agreement, wherein it is recited that
Mr Wong, the Defendant herein, “shall bear all reasonable costs and expenses
incurred by Puma AG in connection with or arising out of the preparation and
execution of this Agreement and the giving effect to the transactions
contemplated hereby including all reasonable legal fees arising therefrom.”.


                Mr Kerr accepts that the costs of the application must, in the
circumstances, go to the Plaintiff, and indeed since there is not a great deal of
difference between the costs attributable to the application and the costs of the
action, he cannot raise a great deal of enthusiasm to argue against the costs of
the action. Rather, his enthusiasm is directed against the request for
indemnity costs. He suggests that this is not merited either on the basis of
conduct to the action or on the basis of any contractual term.


                On reflection, it seems to me that the proper order and approach is
this :-


          That the Plaintiff is to have the costs of the action to date, including the
          costs of and occasioned by the application herein.


          As to the latter, namely the costs of and occasioned by the Order 14
          application, the Plaintiff is to have these costs, to be taxed and paid on a
          common fund basis. Save as aforesaid, such balance of costs as remain
                                      - 8 -


      (and there must be some) are to be taxed and paid upon the usual party
      and party basis. Naturally there will be no need for taxation if
      agreement can be reached, but in the circumstances of this case, I think
      that is highly unlikely.


              That, I think, deals with all relevant matters today, save that there
is one matter of detail which I have omitted in the course of this brief judgment.
As will be clear, the two submissions of the Plaintiff to which I have not
acceded was a submission that no credit need be given for the proceeds of sale
of the shares, and also the submission that the „interest element‟ in para. 8(C)
and (E) of Mr Laracy‟s second affidavit was not interest but constituted part
and parcel of the purchase price of the shares. For the avoidance of doubt,
and this should be reflected on the face of the Order for which the Plaintiff has
carriage, the Defendant herein is to have unconditional leave to defend this
action upon those two issues.


              Finally, it remains for me to thank both Counsel for their
assistance.


[2:30 pm Court reconvenes]


              After delivering the foregoing short extemporary judgment, and
after reviewing the figures as I had dictated them, it occurred to me that I had
been guilty of an omission in the sense that I did not accord to the Plaintiff the
sums which accrued due in interest on the principal sums. I suspect I did this
out of sheer oversight and it is, I suppose, one of the dangers of computing on
                                     - 9 -


the hoof, so to speak. Be as it may. It is my fault, and I will now repeat
again, for the avoidance of doubt, what the monetary judgment is to be.


             The Plaintiff is to have judgment in the principal sum of
US$4,014,756.47 together with interest quantified up to the date of judgment,
that is today, in the sum of US$351,865.24. Thereafter, interest at the
judgment rate from time to time prevailing will accrue upon the principal sum,
i.e. US$4,014,756.47, until payment.


             That, I hope, clarifies what had been in my mind this morning, but
which, upon reflection, I do not think was truly reflected in the dictated
judgment. I regret bothering Counsel with matters of housekeeping, but this,
I think, is a matter which properly could not have been subject to amendment
under the „slip rule‟.


             That, I think, now finally concludes the matters for decision upon
this Order 14 application.




                                                   (William Stone)
                                         Judge of the Court of First Instance




Mr R Coleman, inst‟d by M/s Sinclair Roche & Temperley, for Plaintiff

Mr J Kerr, inst‟d by M/s Lau & Chan, for Defendant

				
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