HABIB BANK ZURICH (HONG KONG) LTD (formerly known as HBZ Finance Limited) v. TEE VEE BRANDS INTERNATIONAL LTD AND OTHERS

HCMP 1059/2024

[2025] HKCFI 2100

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1059 OF 2024

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BETWEEN

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J U D G M E N T

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Introduction and Background

1.  This is the substantive hearing of an application by the Plaintiff (“P”), by Originating Summons filed on 20 June 2024 (“OS”), against the 1^st Defendant (“D1”), 2^nd Defendant (“D2”), 3^rd Defendant (“D3”) and 4^th Defendant (“D4”) (collectively, “Ds”) pursuant to O.88 of the Rules of the High Court, Cap. 4A (“RHC”) for payment of monies and delivery of vacant possession of the mortgaged property (“the Property”).

2.  The following affirmations were filed in relation to the OS:

(1) Affirmation of Abedi Syed Raza Hasan (“Hasan”) on 22 July 2024 on behalf of P in support of the OS;

(2) Affirmation of Advani Gulab Motiram on 12 November 2024 and Affirmation of Advani Kunal Gulab on 12 November 2024 (“D4’s Aff”) on behalf of Ds opposing the OS (collectively, “Ds’ Affs”); and

(3) 2^nd Affirmation of Hasan on 26 November 2024 in reply to Ds’ Affs.

3.  By letter dated 17 April 2025, Messrs Oldham, Li & Nie, solicitors for Ds (“Ds’ Solicitors”) wrote to this court to inform that their firm has taken out a summons to apply to the court for leave to cease to act for Ds in these proceedings and to be removed from the court record. I was informed that that summons is fixed for hearing on 2 May 2025. It was further mentioned therein that as their firm has no instructions to proceed with these proceedings, no skeleton submissions would be filed. Notwithstanding Ds’ Solicitors sought to be excused from attending today’s hearing, I declined to excuse them as they still remained on the record as Ds’ solicitors.

4.  Miss Wong, solicitors, appeared today on behalf of D1 and D2. D3 and D4 had respectively filed a Notice to Act in Person today. D4 appeared in person and D3 is absent today.

5.  Although Miss Wong confirmed that she had no instructions to make any submissions in respect of the OS (but D4 would wished to make submissions acting in person), her only instructions from D1 and D2 were to make an application for adjournment of today’s hearing.

6.  The application for adjournment was not made by Summons supported by affirmation as it should have been. From the bar table, Miss Wong informed me that the basis for seeking adjournment are that D3, the sole director of D1 and D2 wishes to make an application to represent D1 and D2 in these proceedings and act in person, or they may wish to engage other legal representatives, and that D3 is currently not in Hong Kong. However, I refused the application for the reasons orally given at the beginning of today’s hearing (essentially, the lateness of the application, the fact that Ds have previously (whilst legally represented) filed evidence in opposition to the OS and their position could hardly be improved by acting in person, and a change of legal representation is never a good justification for an adjournment).

7.  Mr Chow, counsel, appeared for P. I also heard the oral submissions of D4.

Applicable Principles

8.  The approach of the court to summarily dispose of an originating summons issued under O.88 of RHC was set out by the Court of Appeal in Golden Rich Finance Limited v Lam Sau Fa [2018] HKCA 952 at §2:

“…At the hearing of the originating summons, the matter may be disposed of summarily where the Court is satisfied that there are no triable issues. As pointed out by the authorities, this is akin to an application for summary judgment under Order 14, namely, once the plaintiff’s entitlement to summary judgment is demonstrated on the face of the evidence, the burden falls on the defendant to show that she has a credible defence to the claim. This is to be tested against the evidence adduced in the case such as whether the defence is inconsistent with the contemporaneous documents or the defendant’s previous admissions and stand. The Court should also consider the inherent probability of the defence. But what is not permitted is for the Court to conduct a mini-trial of the case on the affidavit evidence. If the Court does not deal with the originating summons summarily, it may order the proceedings to continue as if the matter had begun by writ (Order 28, rule 8) or give further directions for the conduct of the case (Order 28, rule 4(2)).”

9.  Accordingly, if I am satisfied that P is entitled to summary judgment on the face of the evidence, I then need to consider whether Ds have discharged their burden to show a credible defence.

Discussion and Disposition

10.  It is not disputed that P had granted various credit facilities to D2 for which the following documents were executed:

(1) The General Commercial Agreement dated 26 November 2019 (“GCA”) was executed by D2 in consideration of P granting or continuing various facilities or services to D2;

(2) In exchange for general banking facilities to be granted to D2, a Mortgage dated 10 February 2020 (“the Mortgage”) was executed between D1 as mortgagor, D2 as borrower and P as lender, whereby inter alia D1 and D2 covenanted to pay all sums of money owing to P and the Property was charged as security for the due payment of all monies payable by D2 to P;

(3) In consideration of P granting, continuing or extending facilities at the request of D1 to D2, a Guarantee and Indemnity dated 26 November 2019 (“the CG”) was executed whereby D1 shall jointly and severally guarantee to P the payment on demand of all moneys and liabilities owing by D2 which shall be unlimited;

(4) The Individual Guarantee and Indemnity dated 7 February 2014 (“the PG”) was executed by D3 and D4 in favour of P whereby they shall jointly and severally guarantee to P the payment of all monies due or owing by D2 which shall be unlimited; and

(5) The facility letter dated 11 July 2023 (“the Facility Letter”) was executed by D2 as borrower, D1 as security provider and corporate guarantor, and D3 and D4 as personal guarantors, as a condition precedent to P considering requests by D2 to grant facilities (which include import invoice financing up to HK$19.7M and term loan facility up to HK$2.885M).

11.  It is P’s case that D2 had repeatedly failed to make timely repayments over the years resulting in P’s downgrading D2’s account and eventually prompting P to terminate the facilities pursuant to clause 7.5 of the Facility Letter[1] by letters dated 23 May 2024 and 29 May 2024.

12.  On 20 June 2024, P commenced these proceedings by the OS. According to P, as of the date of the OS, the sums of: (1) HK$2,580,774.35 (being outstanding balance for a term loan and overdraft in the Imprest Account (HKD) together with accrued interest); and (2) US$2,492,432.88 (being the outstanding balance of the invoice financing and overdraft in the Imprest Account (USD) together with accrued interest) are outstanding. In Hasan’s Affirmation, these figures are updated up to July 2024.

13.  I am satisfied from the documents before me that the sums claimed by P are due and owing. Hasan, on behalf of P, has stated on oath the amount of outstanding indebtedness. Any argument to dispute the sums stated to be owing from Ds, is precluded by the “conclusive evidence” provisions in the GCA (clause 15(e)), the CG (clause 24), the PG (clause 1.03).

14.  Furthermore, I am satisfied from the documents before me that P has made out a prima face case that at the very least:

(1) D1, under the CG and the Mortgage, is liable to make payment to P for all monies owing to P by D2;

(2) D2 is liable to pay to P on demand sums indebted to P under the GCA, the CG and the Mortgage;

(3) D3 and D4, as guarantors under the PG, are liable to make payment to P of all monies owing by D2 to P; and

(4) The right to possession of the Property under the Mortgage has arisen by reason of D1’s and/or D2’s default.

15.  In Ds’ Affs it was raised that there was no obligation to make repayment as at P’s demand in May 2024 and by the time of the OS. In particular, it was stated that the current balance of the invoice financing is not due until July and August 2024 based on the drawdown date under clause 3.1.1(c) of the Facility Letter (which provides for up to 120 days from the date of payment).[2]

16.  However, it is plain that P has exercised its contractual right to terminate the credit facilities under clause 7.5 of the Facility Letter and is entitled to demand payment in respect of all liabilities due and payable at any time: see e.g. clause 7.3 of the Facility Letter[3] and clause 11 of GCA[4].

17.  Moreover, I am satisfied from the authorities cited to me by Mr Chow that any suggestion that P’s exercise of the contractual provision under clause 7.5 is subject to any duty of good faith and not to exercise such power irrationally, arbitrarily and/or capriciously is not arguable[5]. See Habib Bank Zurich (Hong Kong) Limited v Creation Castle Limited & Ors [2020] HKCFI 1062 per DHCJ Dawes SC at §§63-70 as recently summarised and affirmed by Au-Yeung J in The Hongkong and Shanghai Banking Corporation Limited v King Wai Piece Goods Company Limited & Ors [2025] HKCFI 1371 at §90:

“Having reviewed the authorities, DHCJ Dawes SC held that:

(1) The bank’s contractual right to withdraw its credit facilities and demand repayment of all outstanding sums is not subject to any implied limitation that it should not be exercised irrationally (§63);

(2) Where a contract allocates only to one party a power to make decisions under the contract which may have an effect on both parties, it is plain from the authorities that this discretion “will be limited, as a matter of necessary implication, by concepts of honesty, good faith, and genuineness, and the need for the absence of arbitrariness, capriciousness, perversity and irrationality”: Socimer International Bank Ltd (in liquidation) v Standard Bank London Ltd [2008] Bus LR 1304, §66 (§64);

(3) A clause which grants a bank the contractual right to cancel credit facilities and demand immediate repayment (under which the bank has a discretion as to how it chooses to exercise this right) is materially distinguishable from one which grants a contracting party the power to make a discretionary assessment on behalf of both parties (as was the case in Socimer and Braganza v BP Shipping Ltd [2015] 1 WLR 1661, §30), and that a Socimer-type implied term is not reasonably necessary to give business efficacy to the contract insofar as the former category of contractual terms is concerned (§67); and

(4) It is trite that the court will not imply terms which are inconsistent with the express terms of the contract or the nature of the contractual relationship between the parties. It was fundamental to the relationship between the lender bank and the borrower company that the credit facilities were terminable on demand, and it was part of the bargain between the parties (§69).”

18.  As for the assertion that P’s reliance on clause 7.5 may render the clause a penalty clause[6], it is based on the premise that the outstanding sums are not yet due but this premise is groundless for the reasons already given.

19.  Besides, any argument that the underlying liabilities of D2 is invalid or enforceable is not open to Ds as they are liable as primary debtors and are liable to indemnify P against any costs, loss or liability it incurs as a result of D2 not paying any amount which would, but for the unenforceability, invalidity or illegality have been payable by D2: see clause 2 of the CG, clause 6 of the PG and clause 19.02 of the Mortgage.

20.  For the above reasons, I am satisfied that no credible arguable defence has been shown by Ds and it is appropriate to dispose of these proceedings summarily under O. 28, r.4 of RHC.

21.  The original of the Mortgage was produced and shown to me. I am satisfied that the requirements under O.88, r.5 of RHC have been complied with.

22.  Accordingly, I will make an order in terms of the draft Order as amended by me (to give 28 days for vacant possession of the Property to be given).

[Discussion on costs]

23.  Mr Chow sought costs on an indemnity basis and summary assessment of P’s costs. I am satisfied that contractually, P is entitled to costs of these proceedings against Ds on an indemnity basis: see the Mortgage (clause 18.01), the GCA (clause 16) and the PG (clause 1.01(c)).

24.  Having considered P’s Statement of Costs submitted to me, and D4’s objections, adopting a broadbrush approach, I have summarily assessed P’s costs of these proceedings at HK$320,000.

25.  I am grateful for Mr Chow’s assistance.