RE LO MEI YUK ALISON

CACV 102/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 102 OF 2004

(ON APPEAL FROM HCB NO. 22070 OF 2003)

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REASONS  FOR  JUDGMENT

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Hon Tang JA (giving the reasons for judgment of the Court):

1.  On 22 March 2004, Deputy Judge To made a bankruptcy order against the appellant, Madam Lo Mei Yuk Alison, on the petition of the respondent.  The respondent, Bank of China (Hong Kong) Ltd (“BOC”) is the successor corporation to, amongst others, the Yien Yieh Commercial Bank Limited (“Yien Yieh”) and the Kincheng Banking Corporation (another predecessor of the respondent) (“Kincheng”).  The petition was based on a statutory demand dated 19 November 2003 for a debt which arose out of a mortgage of a property, namely, Flat E, 19^th Floor, Block 12, Sea Crest Villa, Phase 4, No. 44 Castle Peak Road, Tsing Lung Tau, New Territories (the “Sea Crest Property”) to Yien Yieh dated17 April 1998.  The outstanding debt was said to be HK$2,245,130.10 together with further interest on the outstanding principal of HK$3,018,688.94 at the rate of 6% per annum over prime rate from time to time as quoted by the respondent from 20 November 2003.

2.  This is the appellant’s appeal.

3.  She complained of bias and said the judge had not given her sufficient time to put forward her case.  In opposition to the petition she had filed 2 affirmations dated 12 March 2004 and 17 March 2004 respectively.  Affirmations had also been filed by the respondent.  She complained that the hearing before the judge took only 20 minutes.  But as the judge would have read the documents filed, 20 minutes was not an unreasonably short time.  More importantly, the appellant has not been able to say what it was that she would have said to the judge but was unable to do so due to insufficient time.  So this ground of appeal must fail.  Indeed, it is clear to us her real complaint is that the judge had not accepted her arguments.

4.  We turn to consider her other arguments.

5.  In order to understand the appellant’s arguments, it is necessary to mention 2 other proceedings,

(1)	HCA 3572/2001.  This claim arose out of a mortgage of a property on Watford Road, the Peak, made by Hill Bright International Ltd (Hill Bright) in favour of Kincheng.        HCA 3572/01 was a claim brought by Kincheng against the appellant, together with one Wong Wai Chi (“Wong”) as guarantors.  On 17 September 2001, judgment in default of defence was entered against the appellant, for the sum of HK$68,218,048.40.  After judgment, the Watford Road Property was sold, leaving a deficit in the sum of HK$38,498,450.18 together with interest.
(2)	HCB 14948/2003 is a bankruptcy petition against the Appellant brought by Kincheng based on the balance of the judgment in HCA 3572/2001.

6.  The appellant opposed the petition in HCB 14948/2003 on the ground that she would apply to set aside the judgment in HCA 3572/2001.  She took out a summons to do so on 10 October 2003.  That application is still outstanding.  In support of her application to set aside the appellant has alleged that she became a guarantor as a result of the misrepresentation by certain bank officers. 

7.  Be that as it may, as Ms Tong, counsel for the BOC has rightly pointed out in her skeleton submission, even if the appellant succeeds in setting aside the guarantees the result would only be that she would not be liable thereunder.  It would not relieve her of her obligation as mortgagor in respect of the Sea Crest Property.  The appellant has also alleged that the judgment in HCA 3572/2001 has been set aside.  That is incorrect.  Moreover, she has also alleged that the present petition was an abuse of process.  But there is no evidence to support such allegation.  So this ground must also fail.

8.  Then, the appellant alleged that Yien Yieh by its official one Lau Pak On had on 5 March 2003, agreed with her to compound the debt.  This is what the appellant said in her affirmation:

“2.  … On 5^th March 2003, I attended a meeting with Mr Wong, Defendant of HCA 3572/2001, with BOC to further discuss the loan re-arrangement on various mortgaged properties, including properties which covered in HCA 3572/2001 and HCB 22070/2003.  During that meeting, Mr Lau Pak On, (“Mr Lau”) representative of the Special Assets Management Department, asked me to keep on paying the interest until a new loan is granted.  I issued a letter to BOC to seek their confirmation in respect of the granting of a new loan and had issued a cheque as instructed to pay the interest.  There is now produced and shown to me marked “AL-1” a copy of that letter.  Up till 29^th March, 2003 no response was received.  I further wrote to Mr Lau of BOC to chase for a feedback.  There is now produced and shown to me marked “AL-2” a copy of that letter.  On 9^th April, 2003, I received a letter from Gallant Y.T. Ho & Co, enclosing a returned cheque in the sum of HK$6,500.00 being my interest payment.  They acted on behalf of BOC to deny their client’s making any agreement and/or agreement with me about the new loan.  There is now produced and shown to me marked “AL-3” a copy of that letter.”

The letter AL-1 is dated 17 March 2003.  By that letter, the appellant enclosed a cheque for $6,500 said to be interest for 16 March to 31 March 2003, and alleged that “you will proceed and grant a new loan at normal home mortgage interest expecting P-2.75% p.a. at 25 years atmortization (sic).  Hoping that above would meeting your approval”.  AL-2 is a letter dated 29 March 2003 asking for a response to the letter dated 17 March 2003.  The reply from BOC was given by their solicitors, Gallant Y T Ho & Co., dated 9 April 2003, denying any agreement.  

9.  It is quite clear to us that the appellant cannot bring herself within section 6D(3) of the Bankruptcy Ordinance, Cap. 6.  In other word, this is not a case where one can say that the appellant has made an offer which has been unreasonably refused.  This is not a case where we can say that the offer was such that no reasonable hypothetical creditor, in light of the circumstances of the case, would have refused the offer (Cheung Wah v China State Bank Ltd [1994] HKC 185 at 190-191).

10.  So, we have to consider whether the appellant’s claim that there has been an agreement raises a genuine and serious argument that the debt has been compounded.  In our opinion, the appellant has failed to satisfy us that there is a genuine and serious argument based on any such agreement.  There is simply no evidence as to the terms of the alleged agreement. 

11.  As Ms Tong put it in her skeleton:

“	12.	At §3 of Lo’s 1st Affirmation, she asserts that she has a “genuine intention” to enter into a loan re-arrangement with the Bank [20].  Further, at §11 of Lo’s 2nd Affirmation [25], it is alleged that at the Meeting, Lo was merely “given the impression” that a new loan would be granted to her.  Such evidence contradicts an allegation of a definite agreement having been reached between the parties at the Meeting.
	13.	Further, the letters from Lo to the Bank dated 17 March 2003 [77] and 29 March 2003 [79] also do not provide evidence of any concluded agreement between the parties.  In fact, the Bank expressly denied the existence of any such agreement by a letter from its solicitors to Lo dated 9 April 2003 [80].

12.  In her oral submission before us, the appellant complained that BOC had converted the loan to her, which was denominated in Japanese yen into Hong Kong dollars, as a result of which a much higher rate of interest was payable.  She submitted that BOC was not entitled to do so.  She has referred us to Clause 11(a) of the mortgage which provides:

“… It is hereby further agreed that if the Mortgagee shall have given notice to the Mortgagor to pay off the moneys for the time being owing on the security of this Mortgage and default shall have been made in payment of such moneys or some part thereof at the expiration of such notice, then without prejudice to other rights and powers of the Mortgagee hereunder, the Mortgagee may thereafter at any time or times and from time to time if and whenever the Mortgagee considers it desirable convert the amount then owing to the Mortgagee hereunder or part thereof to some other currency or currencies (hereinafter called “the Converted Currency or Currencies”) and in regard to such conversion or conversions the following provisions shall apply:-
(a)	The conversion shall be effected by notice in writing served by the Mortgagee on the Mortgagor which shall state the effective date of such conversion and the conversion rate which shall be the rate determined by the Mortgagee to be the effective rate applicable in force on the date of such conversion and whose determination shall be conclusive save in the event of manifest error.
(b)	As from the effective date of conversion, the Mortgagee shall be entitled to recover from the Mortgagor the amounts owing hereunder or such part thereof as had been converted in manner aforesaid in the Converted Currency or Currencies and to enforce the terms and conditions of this Mortgage as if the moneys advanced or liabilities incurred or part thereof had been made in the Converted Currency or Currencies.”

13.  It appears from the documents before us that by letter dated 28 December 2002, BOC (through their solicitors) demanded payment under the mortgage within 14 days of the demand, failing which the appellant was told that BOC “shall be entitled to convert the amount owing by you under the mortgage or part thereof to some other currency or currencies without further notice to you”.  Later by letter dated 18 February 2003, the appellant was informed by the solicitors that conversion from Japanese yen into Hong Kong dollars had taken place on 7 February 2003.

14.  The appellant’s complaint is that under Clause 11(a) the effective date should not be a date earlier than the date of the letter of 18 February 2003.  Even if this is correct, the fact remains that the appellant is indebted to the respondent for very substantial sums in respect of which the appellant has no genuine and/or serious defence.  So, there is nothing in this point either.

15.  The appellant further complained that the valuation relied on by BOC in the affirmation of Lau Pak On dated 18 March 2004 was too low.  This is what Lau Pak On said:

“	17.	As mentioned above, the Petitioner hold security of the Property for the payment of the Mortgage Loan.  However, the estimated value of the Property as at 16th August 2003 is around HK$1,130,000.00 and the Petition herein is not made in respect of the secured part of the debt.
	18.	On or about 12th February 2004, the Petitioner has obtained a verbal valuation of the Property from the surveyor and noted that the estimated open market value and force sale value of the Property is HK$1,950,000.00 andHK$1,460,000.00 respectively.  In any event, the value of the security is still far below the Outstanding Loan owed by the Debtor to the Petitioner.”

16.  In the petition, BOC estimated the value of the mortgage security to be HK$1,130,000 as at 16 August 2003.  Thus, “the petition is not made in respect of the secured part of our debt”.  Even if the appellant is right that HK$1,130,000 was too low, it does not affect the validity of the petition.  This is not a case where the appellant could have paid off any substantial part of the debt.  As the report from the Official Receiver dated 25 July 2005 shows, the appellant has minimal assets and is in fact hopelessly insolvent. 

17.  For the above reasons, at the conclusion of the hearing, we have dismissed the appeal with costs.