WING HANG BANK LTD v. KIT CHOY DEVELOPMENT LTD AND ANOTHER

HCMP5172/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 5172 OF 2002

_________________

_________________

____________

R U L I N G

____________

1. Today was meant to be the first day of the trial of these Originating Summons proceedings.  The proceedings are brought by the Wing Hang Bank Limited (“the Bank”) against two defendants, Kit Choy Development Limited (“Kit Choy”) and Mr Choy Bing-wing (“Mr Choy”), who is the major shareholder of Kit Choy.  The claim against Kit Choy is based on a legal charge which Kit Choy gave to the Bank over certain properties which it owned.  The claim against Mr Choy is based on various guarantees which he provided to the Bank.

2. The legal charge relied upon by the Bank is dated 30 October 1993.  According to the Bank, it was granted in respect of all moneys owing to the Bank under any facility that it might grant to Kit Choy from time to time in the future.  At the time that it was entered into, there was in fact a facility by way of an instalment loan which was granted for the purpose of acquiring certain property.

3. As far as the claim against Mr Choy is concerned, it is based principally on a guarantee dated 28 January 1999, which was limited to the sum of $2,223,000, although there has been reference also to certain other letters of guarantee executed by Mr Choy in favour of the Bank. 

4. A more detailed history of these proceedings has been largely set out in an earlier judgment which I gave in this matter on 23 July 2004, on the Defendants unsuccessful application to strike out the Bank’s claim.  That judgment was subsequently unsuccessfully appealed to the Court of Appeal. 

5. The Plaintiff’s case in essence is that, at the request of Kit Choy, it issued its own irrevocable guarantees in favour of two groups of persons who were parties to litigation in favour of whom orders for provision of security for costs had been made.  Although Kit Choy and Mr Choy were not themselves parties to those legal proceedings, they appear to have entered into some arrangement with the parties who had been ordered to provide security, whereby they (i.e. Kit Choy and Mr Choy) would secure the provision of the necessary security on their behalf.  To do so, says the Bank, they approached the Bank and asked the Bank to provide the irrevocable guarantees as a facility granted to Kit Choy, albeit the guarantees were to be issued effectively for the benefit of some other party. 

6. The Defendants deny liability.  A number of affirmations have been filed by Mr Choy on behalf of both himself and Kit Choy.  In his first affirmation, which was filed as long ago as 12 June 2002, he put forward three principal defences.  The first was that it was not in fact agreed between Kit Choy and the Bank that the legal charge of 30 October 1993 should stand as security for any facilities beyond the original instalment loan in respect of which it was given.  The second line of defence was that even if that were not right and the legal charge was capable of and was intended to stand as security for the facilities advanced to Kit Choy by way of the provision of the irrevocable guarantees that I have mentioned, those facilities were in fact cancelled by the mutual consent of the parties, that is to say, the Bank and the Defendants.  In this regard, reference was made to various documents, including a facility letter of 17 January 2001, by which Kit Choy was asked to confirm the renewal of facilities relating to the three letters of guarantee, which Kit Choy never signed by way of confirmation.  The third ground of defence that can be discerned from the affidavit is that it is alleged that the judgments obtained by the successful parties in the litigation in respect of which the security for costs was provided were obtained by fraud on the part of those parties and that the Bank, having been put on notice of such fraud by Mr Choy, should not have paid out under the irrevocable guarantees which it had provided by way of security for costs and that, having done so, it had done so at its own risk and could not have recourse either to Kit Choy or to Mr Choy under his personal guarantee.

7. In a later affirmation filed on 4 July 2003, Mr Choy alleged that the failure on the part of the Bank and its officer, a Miss Sheh Ching-man, to disclose. in her evidence in support of the Originating Summons, the documents which he had referred to as evidencing, the cancellation of the facilities, and the consequent assertion by the Bank that the facilities remained valid and subsisting, amounted to perjury on the part of Miss Sheh.

8. The Bank, it has to be said, does not deny that the documents which Mr Choy has referred to exist.  It acknowledges their existence and accepts that the documents were available to it at all material times.  However, it contends that the documents are immaterial or irrelevant to the outcome of the proceedings and do not, in any way, affect its claims against Mr Choy and Kit Choy Development. 

9. Before the start of the trial, it was necessary to deal with two summonses that were recently issued by Mr Choy. 

10. The first seeks an order that the documents in the possession of the Bank relating to the facility and, in particular, the unsigned facility letter of 17 January 2001, should be made available to Mr Choy for the purpose of carrying out forensic examinations with a view to obtaining evidence from an expert in fingerprinting.

11. The second application was for directions to be given as to the trial of a proposed counterclaim by Mr Choy in these proceedings, arising out of the alleged perjury of Miss Sheh.  As I understood it, the claim was that by putting forward of the affirmation without disclosing the later documents relied upon by Mr Choy as showing that the facilities had been cancelled, Ms Sheh was guilty of perjury, and that this gave rise to a claim for damages in favour of Mr Choy and Kit Choy, in respect of the costs which they had been ordered to pay on their unsuccessful application to strike out, and subsequent appeal.

12. I regret that I am unable to accede to either of these applications. 

13. It is important to understand the nature of these proceedings between the parties. 

14. The present proceedings are inter partes proceedings commenced by way of Originating Summons by a Plaintiff, the Bank, against two Defendants, Kit Choy and Mr Choy.  In such proceedings, there is, in my view, no absolute duty of disclosure of all material facts such as would be the case in an ex parte application for ex parte relief, such as a Mareva injunction or Anton Piller order.  In cases such as those, it is well known that the court insists on the observance by the applicant of the highest standards of disclosure.  The reason for this is that the other party against whom a draconian order is to be made is not present and has no opportunity to put its own case before the court.  That is not the case here.

15. In inter partes proceedings, subject to a possible duty not to mislead the court and not to put forward a knowingly false case, it seems to me that a party is perfectly entitled to put before the court only such material as it thinks is necessary in order for it to establish its own case.

16. It is clear from the Bank’s case that it acknowledges the existence of the documents that Mr Choy has referred to, and in particular the letter of 17 January 2001, but is of the view, which it asserts, that these documents are quite irrelevant to the question of its entitlement to succeed in the proceedings which it has brought. 

17. In my view, it is not the obligation of a plaintiff in inter partes proceedings to put forward documents which it considers to be irrelevant and of no effect in relation to the claim which it brings against a defendant.  In any event, it is clear that there has been no prejudice caused to Mr Choy by the failure to disclose those documents in the first round of evidence filed by the Bank.  This is because the documents were clearly in Mr Choy’s own possession - at least, versions of them which were identical to those which may be found on the file of the Bank had been received by him and kept by him.  They were no doubt received by him shortly after they were sent, and he certainly had them as at 12 June 2002, when he in fact referred to these documents himself in his first affirmation in opposition to the Bank’s claim. 

18. It therefore seems to me that, in so far as Mr Choy wishes to make a point which he expressed before me this morning, that the claim based on the mortgage had to fail because, he said, the letter of 17 January 2002 not being signed, there was no sufficient contract in writing signed by either him or, I suppose, Kit Choy, which could form the basis of the Bank’s claim. 

19. It seems to me that that is an argument which is perfectly open to Mr Choy to make in the course of these proceedings.  I do not see that any question of forensic examination of documents is likely to arise in that context, particularly as the Bank acknowledges that the documents in question exist, were on its file, but considers that they are irrelevant. 

20. Mr Choy, for his part, kept insisting that the document was only produced as recently as 10 July 2006, some 16 days ago.  It is true that that was perhaps the first time that the Bank provided Mr Choy with the opportunity to inspect its file of original documents in which its copy of these documents were maintained.  But that does not detract from the fact that the document was clearly available to Mr Choy from the time that it was sent to Kit Choy back in 2001.  And it is quite clear, as I have said, from the fact that he has been able to refer to the document in his own evidence, that he was well aware of its existence, having deployed it for use in these proceedings. 

21. None of the cases that Mr Choy cited to me this morning assist him.  A number of the cases, such as Guess v Lee Seck Mon,concerned the parties’ duty to make discovery, but that is of no real relevance in these proceedings which, being commenced by originating summons, would not call for discovery unless an order for discovery were made in the course of the proceedings.  No such order was made; nor was any applied for by Mr Choy at any stage of these proceedings.  As it is, and in any event, there is no prejudice that I can see to Mr Choy in the failure to make discovery, given that all material documents appear to be before the Court.

22. Mr Choy also referred to the well known case of Myers v Elman and the case of Vernon v Bosley No. 2 to suggest that a party  was under a duty not to knowingly put forward a false case and that, if through inadvertence a case were put forward and was subsequently discovered to be false, it was the duty of the party and those representing it to put that right by bringing the true facts to the attention of the Court and the other party.  But as to that, it seems to me that, given that the Bank acknowledges the existence of these documents but says that they are immaterial, it would be difficult to see how, if at all, it could be suggested that they have somehow deliberately engaged in a course of conduct calculated to mislead the Court and the other party.  As I have already said, Mr Choy clearly had in his possession all the relevant documentation to enable him to put forward whatever defences he wished to, and has done so.  In those circumstances, I do not see that there is any real question of a possible breach by the Bank of such a duty arising.  But even if there were, it is difficult to see how the process of taking fingerprinting evidence or forensic evidence relating to an examination of the documents is likely to advance Mr Choy’s and Kit Choy’s case in this respect. 

23. In the circumstances, I can see no justification whatsoever for ordering the release of the documents for the purpose of forensic analysis and I decline so to order.

24. As to the counterclaim that Mr Choy proposed to put forward, it seems to me that there is no reason why it should be permitted to be put forward in these proceedings at this very, very late stage.

25. The proceedings were commenced as early as 2002.  The trial was originally scheduled to take place in October 2005.  It was adjourned shortly before the trial as Mr Choy made a successful application that deponents should be produced for cross-examination and, in those circumstances, the originally fixed date for trial was not likely to prove sufficient for the matter to be concluded and the Bank took the view that it would be desirable to have the matter dealt with at one go at a later date, which is today. 

26. But there is no reason that I can see why this counterclaim, if it were one which Mr Choy genuinely wished to pursue, was not put forward any earlier in these proceedings.  As I have observed, the material which Mr Choy and Kit Choy would wish to rely upon in relation to such counterclaim was available to them from the outset.  It was referred to in his first affirmation in June 2002.  More pertinently, as early as July 2004, in Mr Choy’s third affirmation in relation to these proceedings, he made the point (in paragraph 3) that in failing to disclose the relevant documents which Mr Choy asserted amounted to a cancellation of the facility, Miss Sheh was guilty of perjury.  Mr Choy having come to that view as early as July 2004, there has been absolutely no explanation for his failure to have sought to raise the purported counterclaim until now, some two years later, towards the end of July 2006. 

27. Although it is possible for a defendant to originating summons proceedings to mount a counterclaim in the proceedings, with the court giving such directions for the conduct of the counterclaim as it thinks appropriate in the circumstances, RHC Order 28 rule 7(2) makes it clear that such a counterclaim, if it is desired to raise one, should be raised at the earliest opportunity.  In my view, it would clearly not be right to allow such a counterclaim to be raised at such a late stage in the proceedings when the trial has been adjourned once, and there has been no warning of the intention to make the counterclaim until the issuance of Mr Choy’s summons just a few days ago.  If the counterclaim is one with any merit - as to which, I must confess, I have reservations - it is a matter which Mr Choy will have to pursue in other proceedings. 

28. For these reasons, I decline also to give directions for the further conduct of the alleged counterclaim which Mr Choy wishes to raise.

29. In the circumstances, I shall dismiss both applications with costs against the Defendants, and proceed with the trial.