England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice London.
		24th May 2001

MR JUSTICE AIKENS:

1. This is an application by Mobil Oil (Hong Kong) Ltd ("MHK") and Mobil Sales & Supply Corporation ("MSS") for summary judgment against Sinochem International Oil Co. Ltd ("Sinochem Beijing"), pursuant to CPR Part 24, in relation to two claims made pursuant to Part 20 of the CPR. The first Part 20 claim is, effectively, for a declaration that MHK and MSS are entitled to set off the balance due under three contracts for the sale of quantities of low sulphur fuel oil, concluded in May and March, 1998, which have been called the Hong Kong Contracts ("HK Contracts") against sums due from MSS to Sinochem International Oil (London) Co. Ltd., ("Sinochem London") pursuant to a crude oil contract made on 29th October, 1998. If MHK and MSS are entitled to set off the sums to you under the HK contracts then there will still be a small balance due to Sinochem London. The second Part 20 claim is made by Sinochem Beijing against MHK. It is made by Sinochem Beijing in response to the first Part 20 claim. Sinochem Beijing claims to be entitled to the return of sums paid to MHK which are more or less equal to the sums outstanding on the HK contracts. MSS says that this claim and the defence to the first Part 20 claim have no real prospect of success and so summary judgment under CPR Part 24 ought to be given in relation to both of them.
2. THE PROCEDURAL BACKGROUND

The writ and statement of claim were issued on 20th January, 1999. In these the claimant was Sinochem London. It claimed a balance of $8.8-odd from MSS under the crude oil contract dated 29th October. That has been called the "London Contract".

3. The defence and counterclaim were served on 26th March, 1999. In that MSS admitted that the sum was due under the London contract, but pleaded that it was entitled to set off the sums due under the HK contracts between MHK as seller, and Sinochem Beijing as buyer. MSS said that it was entitled to make the set off of sums due from a different Sinochem company to a different Mobil company by virtue of the set off clause in the London contract. That right to set off was disputed by Sinochem London, but the right to set off was upheld by a majority of the Court of Appeal. The sums to be set off are, as I have said, claimed as due to MHK under the three HK contracts. Those contracts were for the sale of low sulphur fuel oil ("LSFO") to be shipped from California, USA. Under the terms of the contracts payment was due 60 days after the date of the notice of readiness of the carrying vessel. The oil was shipped on board the "Sea Falcon" for carriage to Huangpu. The contract was subject to MSS's standard terms and conditions. Clause 6 of those conditions permitted MHK to assign its right under the HK contracts to MSS. That is what MHK did under an assignment dated 24th March, 1999.
4. MHK and MSS pleaded that only US$1.6 million of the contract price of the LSFO sold under the HK contracts have been paid to MHK. They claimed that the balance of US$7,790,482.62 plus interest was due on those contracts. (5) Because MHK and MSS asserted in the Part 20 claim that the HK contracts were with Sinochem Beijing, MHK and MSS needed permission to serve the Part 20 claim on Sinochem Beijing out of the jurisdiction. That was granted, but then was challenged and the permission was eventually upheld by Rix J.
6. Sinochem Beijing served its defence to the Part 20 claim of MHK and MSS in April, 1999. In that defence Sinochem Beijing made two main sets of pleas. The first was in relation to the first Part 20 claim. The second set up the second Part 20 claim, by Sinochem Beijing itself, against MSS.
7. In relation to the first Part 20 claim, Sinochem Beijing pleaded first that it was either not a party to the HK contracts, or it was not liable for the price of the oil sold under them. The pleading in paragraph 4 of the defence made the following points on this issue:

(1) That in February/March 1998 there was an oral agreement between Messrs. Guo and Ye Cong on behalf of Guangdong, Guo's Brothers Enterprise (Group) Co. Ltd. ("Guo's Bros".) and three of its associated companies, Mr Yang of Sinochem Singapore and Mr Chan and Mr Johnson Ng of MHK, that MHK would sell to Guo Bros 90,000 metric tonnes of low sulphur fuel oil on CFR Huangpu terms, for shipment between 1st and 15th April, 1998.

(2) That, as part of this agreement, written contracts would be issued in the name of Sinochem Beijing as buyers from MHK, and further written contracts would be issued in the name of Sinochem Beijing or its associated company as sellers to Guo's Bros on terms that Sinochem Beijing would receive a commission of 0.05 per cent. of the purchase price.

(3) As part of the same oral agreement, payment would be made directly from Guo's Bros, either by itself or via associated companies to MHK and that Sinochem Beijing's role would be as agent only and that it would be not liable for the price to MHK.

(4) The contracts of 25th February, 27th February and 3rd March, 1998, (that is the HK contracts), which appear on their face to be contracts between MHK as sellers, and Sinochem Beijing as buyers, were signed "pursuant to and in accordance with the terms of the said oral agreement made in February and/or March, 1998".

(5). Therefore the HK contracts were entered into by Sinochem Beijing as agent only for Guo's Bros, and its three associated companies as disclosed principals as buyers, and/or "do not accurately evidence the agreement made in February and/or March, 1988".

(6). Alternatively, if the three HK contracts were between MHK as sellers and Sinochem as buyers as principals, then MHK and Sinochem Beijing, through Sinochem Singapore, (Mr Yang), entered into a collateral contract that Sinochem Beijing would not be liable to MHK for the price but Guo's Bros would be.

(7) It was also alleged that there was a meeting at the Holiday Inn in Zongshan in June, 1998 between the Guo brothers and Mr Ye Cong on behalf of Guo's Bros, and Mr Yang of Sinochem Singapore, and Mr Chan, Mr Johnson Ng and Mr Zing of MHK where it was agreed that Guo's Bros would itself pay for the oil shipped under the HK contracts and it would do so by August 1998. It is alleged by Sinochem Beijing that there were other agreements at that meeting, that they relate to the second part 20 claim made by Sinochem Beijing.

8. It should be noted that there are a number of inconsistencies in that pleading. First, it is asserted that there is a contract between MHK and Guo's Bros itself and that it was a term of that contract that Sinochem documents would be produced showing the contract for the sale of the LSFO between MHK and Sinochem Beijing, contrary to the true position. Secondly, it is said that Sinochem Beijing acted as an agent for Guo's Bros who were principals to a contract with MHK. Thirdly, the pleading asserts that there were contracts between Sinochem Beijing and MHK that there was a "collateral contract" between MHK and Sinochem Beijing that was contrary to the terms of the principal contracts. The collateral contracts making Guo's Bros but not Sinochem Beijing responsible for the price of the oil. Lastly, there was a further contract between MHK and Guo's Bros and made at the Holiday Inn meeting in June, 1998 that replaced or modified the earlier contract and made Guo's Bros liable for the price. I note that there is no plea for the rectification of the three HK contracts so as to reflect their true terms, whatever they may have been.
9. The next plea, taken against MHK by Sinochem Beijing, in relation to the HK contracts, was that the goods shipped pursuant to the three HK contracts did not match the description of "low sulphur fuel oil". There was also a plea that the shipping documents were not sent to Sinochem, Beijing. An allegation that MHK were in fact trying to smuggle in gasoil, under a description of low sulphur fuel oil, is not pursued for the purposes of the present hearing.
10. In relation to the second Part 20 claim, Sinochem Beijing pleads that there was a further agreement made at the Holiday Inn meeting in June, 1998. It is said that there was an agreement between MHK and Sinochem Singapore, and/or Sinochem Beijing, that Sinochem Singapore would sign a back dated and altered contract for the purchase of 77,000 metric tonnes of fuel oil from MHK. It is alleged that it is agreed that Guo's Bros would be liable for the price of the 77,000 metric tonnes of that fuel oil. That oil, however, had been shipped during May, 1998 and received directly by Guo's Bros. However, the original contract had been for the sale of only 10,000 metric tonnes of fuel oil.
11. It is pleaded that pursuant to this agreement and the back dated contract of 8th May, 1988, Mr James Ma, then employed by Sinochem Singapore arranged and authorised the payment by Sinochem Singapore of $7,445,531.70 on 28th August to MHK. It is said that that payment represented the price of the 77,000 metric tonnes of fuel oil shipped during May.
12. The original pleading, stated that the sum was not, in fact, due from Sinochem, Singapore, as opposed to Guo's Bros, and so was recoverable as being paid under a mistake of fact or law. Alternatively, that it had been paid as the result of a negligent mis-statement made by MHK in a letter dated 31st July, 1998.
13. In a proposed amended pleading, Sinochem Beijing asserts that the payment made on 28th August, 1998 was also authorised by Mr Wang, who also showed the mistaken belief of Mr Ma that the sum was due to MHK from Sinochem Singapore rather than Guo's Bros.
14. In response to these pleas, MHK pleaded in reply that:

(1) There was no oral agreement in February or March, 1998 as alleged.

(2) The goods under the HK contracts were not "off spec". and in any event there was a "final and binding" provision in clause 12 of the MSS standard terms by which the buyers would be bound by the certificates of quality and quantity produced by Inspectorate BV of the load port.

(3) There was no oral agreement as alleged at the Holiday Inn meeting relating to who should pay for the oil shipped under the HK contracts.

(4) There was no oral agreement at the Holiday Inn meeting that Sinochem Singapore would not be liable for the price of the 77,000 metric tonnes shipped during May, 1998, but Guo's Bros would be.

15. THE PRINCIPLES ON A CPR PART 24 APPLICATION

CPR Part 24.2 provides as follows:

"The court may give summary judgment against a claimant or defendant on the whole of the claim or on a particular issue if:

(a) it considers that:

(i) that claimant has no real prospect of succeeding on the claim or issue; or

(ii) that defendant has no real prospect of successfully defending the claim or issue; and

(b) there is no other compelling why the case or issue should be disposed of at any trial".

Both Mr Hollander QC (appearing for MHK and MSS) and Mr Hamblen QC (appearing for Sinochem Beijing) accept that the general principle is that there will not be summary judgment if the respondent to the application can show a "real prospect" of success. That means that there has to be both a prospect of success and that the prospect has to be realistic, that is to say not fanciful or imaginary.

16. There was some discussion as to the approach that the court should adopt when there was a conflict of evidence on fact in the witness statements produced by both sides for the purposes of the summary judgment hearing. Mr Hollander accepted that if there is a genuine issue of fact that is disclosed by the witness statements, then the court cannot grant summary judgment. He accepted that the court is not in a position to assess rival, genuine, differences of evidence on factual issues at such a hearing. This must be so, he accepted, when the issues appear either on the contemporaneous documents or in the witness evidence.
17. But I asked what the approach of the court should be under the CPR if it were suggested by one side that the witness statements of the other should not be believed as they appeared to be inconsistent with contemporaneous documents, inherently implausible, or inconsistent with one another. Under the old rules the Court of Appeal had stated that the test was: is the evidence put forward by the party resisting summary judgment credible? If, taken overall, it was not credible then there was no fair or reasonable probability of the defendant having a defence. (See National Westminster Bank v Daniel [1993] 1WLR 1453 at 1457E per Glidewell LJ).

Under the present regime I think that the test is are the facts being asserted by the respondents to the application apparently credible or not. If they are then there must be a real prospect of success and no summary judgment should be given. However, if there is inherent improbability in what is being asserted or there is convincing extraneous evidence that contradicts the assertion, it then that might demonstrate that there is not a realistic prospect of success and so summary judgment may be given.

18. THE SUBMISSIONS OF MHK AND MSS ON THE FIRST PART 20 CLAIM.

Mr Hollander QC submits in relation to the first Part 20 claim that there is no dispute that the price of the oil must, on the face of things, be due from the buyer, as property had passed. That property in the oil had passed to the buyer is not disputed. As to the assertion by Sinochem Beijing that it is not liable for the price Mr Hollander submits that:

(1) The three HK contracts are in writing; they are signed by the authorised representatives of the sellers, (MHK), and the buyers, (Sinochem Beijing), and make it clear on their face that the price is to be paid for by the buyer and not by some other party. There is an "entire agreement" clause in the standard terms of MSS that form a part of the three contracts and that clause precludes there being any alteration of the terms of the written contract or a collateral contract of the sort alleged. In any event those terms pleaded are mutually inconsistent as well as being contrary to the written contracts.

(2) The invoices for the contracts are all addressed to Sinochem Beijing.

(3) There is a shipping instruction fax of 4th March, from Miss Song Tong, a trader of Sinochem Beijing, indicating that all the shipping documents are to be sent to Sinochem Beijing.

(4) The bills of lading are made out to the order of Sinochem Beijing.

(5) A letter of 26th June 1998 relating to the issue of the specification of the cargo is from Sinochem Beijing and it refers to Guo's Bros's "our end user" and that "we, (i.e. Sinochem Beijing) requested you [MHK]" to provide low sulphur fuel oil.

(6) Correspondence for the payment of the price of the oil between September and December, 1998 is from MHK to Sinochem Beijing and demands the price from the latter company. There is no denial that it is not liable for the price at that stage. Indeed, in a fax from Sinochem Beijing received by MHK on about 23rd September 1998 Mr Mar and Mr Jang Hailong of Sinochem Beijing, apparently recognised the liability of Sinochem Beijing for the price. But they point out that the receivers have incurred great loss as a result of the dispute with the Chinese authorities over the specification of the cargo and ask that the suppliers take back the cargo.

(7) An internal memo within MHK dated 23rd March 1998 states that the sale is to Sinochem Beijing and not some other party, or that some other party is to be liable for the price.

(8) There is evidence from Mr Li, the Supply and Commercial Manager of MHK, that there are no further documents to be disclosed from MHK that might indicate an arrangement of the type suggested by Sinochem Beijing.

(9) The first time that the defence now relied on had been raised was only in the Autumn of 1999, some 18 months after the shipment.

19. On the other principal issue, the "off-spec" issue, Mr Hollander pointed out that there was no evidence submitted by Sinochem Beijing to support their allegation that the oil was "off-spec". In any event there was the "conclusive evidence" clause in the contracts which precluded Sinochem Beijing from relying on some survey at the discharge port to establish that the oil was "off spec". Therefore, that issue had to be disregarded.
20. In response, Mr Hamblen submitted that there are clear disputes of fact so that the court must refuse the application for summary judgment. In more detail on the first main point he submits:

(1) That the evidence of Mr Ye Cong, the former financial officer of Guo's Bros is credible, and demonstrates the following:

(a) That there had been previous contracts for a different type of oil called MIDW between MHK and Sinochem Beijing, or Sinochem Singapore where there would be two sets of contracts; one between MHK and one of the Sinochem companies, and the other between, one or other of those companies and a Guo's Bros related company in Singapore. Under those contracts the price would be paid directly by the Guo's Bros company to MHK, as it was understood that the Sinochem company concerned would not be liable to MHK for the price. Mr Hamblen says that there is a document that supports this arrangement, being a fax dated 22nd June, 1998 emanating from Song Tong of Sinochem Beijing.

(b) By February, 1998 the account with MHK through Sinochem Singapore owed MHK some $40 million. Also Guo's Bros owed Sinochem Singapore the same sum. In order to reduce these deficits the plan was to enable Guo's Bros to make a substantial profit on a particular shipment provided by Mobil from the USA that would enable Guo's Bros to "trade out of the problem and so reduce the account receivable, (Mr Ye witness statement para 14). Mr Ye goes on to say that there were negotiations between the chairman of Guo's Bros, (who has since disappeared), and Mr Ng and Mr Chan of MHK. The chairman told Mr Ye of these negotiations after they had occurred, because Mr Ye was in charge of operations. The witness statement of Mr Ye goes on to say in paragraph 14: "As I recall it it was proposed that Guo's would pay Mobil (directly) about 60 days after the arrival of the vessel and with the intention that we would have enough time to refine the product.... sell the product and it is expected 30% to 50% profit and then arrange to pay Mobil directly for the shipment". This was to be done by importing LSFO and then refining it into gasoil on which a substantial profit could be made on a resale.

(c) These discussions were over a period of time and were by telephone and fax. Faxes from the Guo's Bros side were sent by a dedicated fax machine of the Chairman on a unique fax number. The faxes were sent to Mr Ng and Mr Chan of MHK and were frequently preceded by telephone conversations between Mr Ye or the Chairman and Mr Ng or Mr Chan.

(d) The HK contracts were to proceed in the same way as the MIDW contracts. Paragraph 17 of Mr Ye's witness statement continues: "On this occasion Mobil would prepare contracts in favour of Sinochem Beijing. They were chosen this time because the credit line of Guo with Sinochem Singapore had been exhausted and Mr Yang Chao Feng did not have any authority to conclude any new business with Guo. Therefore, Sinochem Beijing was to be the intermediary. Wudfull Petroleum PTE in Singapore was chosen, so that Yang Chao Feng would make some commission from the deal and Sinochem Guangdong was to be the import agent." Mr Ye goes on to say: "Sinochem Beijing were not to be responsible to Mobil for the payment", but he was fairly sure that no one in Sinochem Beijing was aware of the true nature of the arrangements of the shipment, and the proposed transaction because it was negotiated directly between Guo's Bros and Mobil.

(2) The second submission of Mr Hamblen is that this evidence is supported by other evidence from further witnesses.

(a) First there is the hearsay statement in Mr Blow's witness statement that he was told by his partner at Holman Fenwick & Willan in Singapore, Mr Davidson, that Mr Yang, the Chairman of Guo, had informed Mr Davidson in December, 1998 that the arrangement was that Guo's Bros would make payment for the shipment directly to Mobil. However, the day after Mr Yang told Mr Davidson those facts he disappeared.

(b) Secondly, the evidence of Mr Ma of Sinochem Beijing. He says that he was called by Mr Yang of Guo's Bros in February/March, 1998 and asked if Sinochem Beijing would be interested in a deal whereby a sale would be made by Mobil to Sinochem Beijing and then from Sinochem Beijing to Guo's Bros. He says that he was assured by Mr Yang that Sinochem Beijing would not be responsible for the operation of the payment of the price to Mobil and would simply receive a small commission. He agreed to those terms and signed the contracts produced. He says that Song Tong was not involved in the negotiations. (There is no direct evidence from her, although there is some through Mr Blows of HFW.)

(c) Thirdly, there is the hearsay evidence of Mr Blows that Song Tong has told him that she did not send the fax of 4th March relating to the shipping arrangements; that she had no contact with Mr Johnson Ng of MHK; that it was her understanding that as between MHK, Sinochem Beijing and Guo's Bros, Sinochem Beijing was not to be responsible for the price of the LSFO cargo on board the "Sea Falcon"; and that she never received the shipping documents or the invoices relating to the shipment.

(3) Thirdly, Mr Hamblen submits that the documents relating to the earlier Wudfull contract indicating a direct payment by it for oil sold by MHK indicates that there was a practice of the end receiver paying directly.

(4) Fourthly, he submits that none of the documents relied on by MHK and MSS are inconsistent with the case as put forward by Sinochem Beijing.

(5) Fifthly, he submits that taken overall it cannot be said that the evidence of Sinochem Beijing is so implausible or so inconsistent with contemporaneous documents that the court is driven to the conclusion that it is incredible, so that there is not a "real prospect" that the case of Sinochem Beijing will not succeed.

21. In relation to the off spec issue Mr Hamblen says that there is a report from the Chinese side indicating that the fuel oil is "off spec". That cannot be ignored. If it was "off spec" then there is a legal argument as to whether MHK can rely on the "final and binding" clause. That, he submits, is an arguable point of law.
22. On the second Part 20 claim, Mr Hollander makes two main submissions. First he says that there is a contractual prohibition of set offs or counterclaims of sums due under Clause 12 of the HK contracts and Article 8(a) of the Mobil CIF and CFR terms. Secondly, he submitted that it is clear that MHK entered into a contract dated 8th May for the sale of 87,000 metric tonnes of fuel oil with Sinochem Singapore. All the contractual documentation is consistent with this. Thirdly, the evidence of Mr Ma of Sinochem Beijing on this issue indicates that Mr Yang of Sinochem Singapore had himself authorised payment of the sum on 28th August, 1998. But Mr Ma did not negotiate with the original contract in May 1998 and there is no evidence from the person that did, Mr Yang. So there is no evidence to explain why Mr Yang, who had negotiated the original contract, or the senior accountant of Sinochem Singapore were under some "mistake" when they authorised the payment on 28th August, 1998. Furthermore, the allegation that the payment was made under a mistake was not raised until two years after the payment, and only when the first Part 20 claim was put forward. The evidence of Mr Ye, that an agreement was made at the Holiday Inn meeting that Sinochem Singapore would agree to take an extra 77,000 metric tonnes and back date the contract, on terms that only Guo's Bros would be liable for the price, is inconsistent with shipping documentation of May, 1998 that the cargo had been sold to Sinochem Singapore. Furthermore there was a back to back agreement between Sinochem Singapore and Guo's Bros for the sale to the latter of 87,000 metric tonnes, as evidenced by Jenny Ng's statement.
23. Mr Hamblen accepts that the case of Sinochem Beijing on the second Part 20 claim is closely bound up with the Holiday Inn meeting in June, 1998. He says that there are no documents relating to the negotiations of the alleged 8th May agreement for the sale of 87,000 metric tonnes. There is some evidence that this was not a routine sale. He submits that the witness evidence of Mr Ma and Mr Ye on the Holiday Inn meeting cannot be dismissed as being incredible.
24. ASSESSMENT OF THE CASE ON THE FIRST PART 20 CLAIM.

It seems to me that the proper way to approach this case is to ask: has Sinochem Beijing put forward a credible case and credible evidence to counter the apparently clear and unambiguous documents showing contracts for which Sinochem, Beijing is liable to pay MHK the price of the oil? If the case and the evidence is not credible, then there can be no "real prospect" of Sinochem Beijing succeeding in its defence on this claim, and summary judgment should be given.

25. If the case and evidence are credible then there is a "real prospect" and summary judgment should be refused, although conditions may be attached if the grip on reality is small, or the prospect is shady. But in making the assessment of whether the evidence is credible I must not attempt to conduct a mini-trial on documents without discovery and without oral evidence. That is not the object of Part 24 of the CPR. (See: the comments of Lord Hope of Craighead in re: Three Rivers case at paragraph 95 of his speech).
26. Looking first at the basic case put forward by Sinochem Beijing, it certainly appears very odd. First, there is nothing in the documents to suggest that Sinochem Beijing was contracting as "agent only" and without personal liability. Nor do any of the Sinochem witnesses' statements say as much in terms. At best this is a legal analysis forced on the evidence of the Sinochem witnesses. Secondly there is no documentary evidence that directly supports the case that Sinochem contracted as a principal but without any liability to pay the price because there was some collateral contract that Guo's Bros would do so. There is difficulty in analysing who the collateral contract would be with. If MHK was to be able to enforce the right to obtain the price from a party other than the named buyer in the written contract, then there would have to be collateral contract with that party i.e. Guo's Bros. But such a collateral contract is not pleaded, although I think Mr Hamblen asserted one in argument. Nor is that the effect of Mr Ye's evidence as I read it. I have already pointed out that there is no plea for rectification of the written contracts, yet it is clear that Sinochem Beijing is arguing that the written contracts do not represent the true agreement between MHK and Sinochem Beijing and/or Guo's Bros.
27. So far as the witness evidence is concerned, that of Mr Ye is difficult to accept at face value. First of all for the rationale for the oral agreement, set out in paragraph 14 of his witness statement, is said to be that Guo's Bros owed Sinochem, Singapore, some $40 million,and Sinochem Singapore owed the same amount approximately to MHK as at February 1998. That assertion is not corroborated by the documents. Indeed it appears from the documents that Sinochem Singapore was actually in credit with MHK at that time. Moreover, if Guo's Bros was so in debt why would MHK choose an impecunious counterparty, rather than Sinochem Beijing, with whom to contract?
28. Furthermore, the suggested reasons for MHK choosing Sinochem Beijing as the nominal counterparty, given in Mr Ye's paragraph 17, do not add up. Why should MHK be concerned with the question of whether Guo's Bros' credit with Sinochem Singapore was exhausted or not if MHK were to rely on Guo's Bros for the price.
29. Mr Ye's evidence is that the discussions leading to the oral agreement on which Sinochem Beijing relies took place over a period of time. He says that they were handled by the Chairman of Guo's Bros, who has now disappeared, and himself. Faxes were sent by the Chairman on a special fax number and were sent to Mr Chan or Mr Ng of MHK. MHK do not have any of these alleged faxes. Indeed, MHK say that all discovery relating to this issue has already been given. [Mr Li, paragraph 30] So the evidence of such negotiations is not corroborated by any documents, but I have to add it is not specifically refuted by them either.
30. The evidence of Mr Ye that the final decision on behalf of MHK was made by Mr Stephen Chow, or Zhou [paragraph 18] is denied by Mr Barry Li of MHK in his statement [paragraph 11], where he says that he has talked to Mr Chow, who denies any meeting with the chairman of Guo's Bros. However, this is something that can be tested only by seeing and hearing the witnesses, in particular Mr Ye.
30. The other main evidence on which Sinochem Beijing relies to undermine the contractual documents is the hearsay evidence of Mr Blows which reports what he was told by Zong Tong. It is most unsatisfactory that there is no statement from her. But the evidence from her, through Mr Blows, is that she did not negotiate the HK contracts with Mr Chan and Mr Ng and she did not send the fax of 4th March. Those are, in my view, important matters which can only be finally determined at a hearing.
31. Mr Hollander sought to demonstrate how many of the statements of Mr Ye or Mr Blows did not accord with contemporaneous documents. Many of the points he made were forceful and apparently correct. The more he engaged in this exercise, the more I have been driven to the conclusion that I was being asked to conduct a "mini-trial". I was being asked to compare witness statements with each other and with documents and to come to final conclusions on the many points that arose on them. Ultimately I concluded that even if the MHK case appeared very strong I should not continue the exercise Mr Hollander invited me to undertake, because it would amount to making decisions in a mini-trial on paper.
32. However, there are also two positive reasons why I have also concluded that there is just enough for Sinochem Beijing to pass the "real prospect" test on this aspect of this case. The first reason is the acceptance by Mr Li that it was not uncommon that contracts between MHK and Sinochem Beijing for payments to be made direct to MHK by the ultimate user. [First statement para.17; second statement para.10] That lends some plausibility to the case of Sinochem Beijing. The second reason is that the documents at page 290 and 293 of the main bundle 2 suggests that there was an arrangement for that particular consignment of diesel that is similar to the one being asserted by Sinochem Beijing in relation to the "Sea Falcon" cargo.
33. In relation to the "off-spec" point, once again the evidence in support of Sinochem Beijing's case on the facts is slight. It has the additional difficulty of the "final and binding" clause. But that does raise a matter of law that is arguable.
34. Taken overall, there is in my view just enough for Sinochem Beijing to pass the "real prospect" test, but only just. Therefore the application for summary judgment will not be granted and Sinochem Beijing will be permitted to defend the first Part 20 claim, but only on conditions. I will consider these after I have dealt with the second Part 20 claim.
35. ASSESSMENT OF THE CASE ON THE SECOND PART 20 CLAIM.

In this case also I think that there should not be summary judgment in favour of MHK/MSS against Sinochem Beijing. My reasons for this conclusion are as follows. (1) Although there may be a set off and no counterclaim provision in the HK contracts, the exact ambit of that is something which is arguable. It is arguable that a counterclaim for the return of the money, said to have been paid under a mistake, is something which does not fall foul of that provision. (2) On the face of it there was a written contract dated 8th May, 1998 for the sale of 87,000 metric tonnes of fuel oil by MHK to Sinochem Singapore. But that is disputed by Sinochem witnesses. To some extent they receive support from Mr Chan at MHK, who states that the contract started as one for 10,000 metric tonnes, but was amended so as to be one for 87,000 metric tonnes in the course of May, 1998. He accepts that the contract dated 8th May was actually signed later in May at a time when some shipments at least had already occurred.

(3) There is an issue on this contract as two who was liable for the price. That brings in the meeting at the Holiday Inn which took place some time in June. There are issues as to what was discussed and agreed at that meeting. In my view that cannot be resolved at a summary judgment hearing. At present I find the case of Sinochem Beijing very unconvincing but I am not prepared wholly to dismiss it. The allegations that there was an agreement at the Holiday Inn meeting that Sinochem Singapore would not be liable but Guo's Bros would and that the payment would be deferred until the end of August must be tested at a full trial.

36. That leaves the conditions which I should attach to the permission to Sinochem Beijing to defend the first Part 20 claim, and to pursue the second Part 20 claim as well. Mr Hamblen accepts that under CPR Part 24.6(b) and CPR Part 3.1(3) I have the power to attach conditions to an order giving Sinochem Beijing permission to proceed. In my view, the prospects of Sinochem Beijing being successful on either or both of the Part 20 claims is sufficiently small that, as a matter of discretion, I should attach conditions so that the case is dealt with quickly and the position of MHK and MSS is not prejudiced.
36. As I have stated in argument, in the unusual circumstances of this case it would not be appropriate to make an order that permission to proceed should depend on Sinochem Beijing bringing the sum in dispute in the first Part 20 claim into court, or otherwise providing security for that claim by MHK and MSS. In the circumstances of this case, I have concluded that I should order that Sinochem Beijing provides full security for the costs of MHK and MSS in dealing with the Part 20 claims, which are the only disputed parts in the action. I will hear counsel on the detailed form of the order, but I propose that it should be along the lines that Sinochem Beijing will post security for MHK and MSS' costs in a form and an amount that is satisfactory to MHK and MSS within 28 days of today. If the form and the amount cannot be agreed, then I will have to determine what it should be.
38. I will also order that the determination of the Part 20 claims should be expedited. Again I will hear counsel on the details of the timetable leading towards an expedited hearing.
39. For these reasons Mobil's application for summary Judgment will be refused.

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