THE BANK OF TOKYO, LTD AND OTHERS v. REGENTCOURT LTD AND OTHERS

Headnote

1. The giving of particulars by reference to identified discovered documents containing detailed complex calculations may be both convenient and proper.

2. "Person" in section 22 of the former Deposit-taking Companies ordinance (Cap 328) means individual.

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J U D G M E N T

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1. On 1st February 1988 Jones J made a number of interrogatory ruling's in this case. Initially four were the subject matter of appeal to this Court. But having argued two of them, and having heard the Court said that it shed to hear no argument in reply, Mr. Waung wisely and conveniently abandoned two of the applications. So only two of them have to be dealt with now.

2. The first is the defendants' outstanding appeal against the judge's refusal of their application for further and better particulars of the Amended Statement of Claim. The second is the plaintiffs' appeal against the judge' s grant of leave to re-amend the amended defence. I will, take the defendants appeal first.

3. The request for particulars launched by the defendants is for particulars of the sums claimed by way of interest and damages, or more precisely of the derivation of those sums. In order to understand the request, it is necessary to say a little about the action.

4. The plaintiff are a syndicate of sixteen banks and deposit-taking companies who entered into a loan agreement with the defendants dated 17th August 1981. Under that agreement the plaintiffs collectively, but acting severally, agreed to provide three capital facilities to the first defendant which was the borrower named in the agreement.

5. The first is what is described in the agreement as a premium facility. This was a loan of money to enable the first defendant to complete the purchase of the development land in question. The money was put up both in US and in Hong Kong dollars, and the total sums now said to have peen provided are HK$160m and US$31.

6. The second was a construction facility drawn on from time to time as the work proceeded. Here it is alleged that HK$105.2m was provided in total. That facility was all rut up in Hong Kong dollars.

7. Thirdly, there was an overdraft facility of just over HK$44.5m provided solely by the lead bank in the syndicate, the first plaintiff, the Bank of Tokyo.

8. Those were the collective sums advanced by the plaintiff banks. But they were acting severally, their liability was several, and they are making individual claims for their due proportions of the sums so provided. The totals of their claims and those proportions are set out in a schedule annexed to the Amended Statement of Claim which goes into considerable detail as to the precise sums claimed by each defendant by way of capital and interest the interest; calculation being done as on 30th October 1986.

9. The interest calculation is complicated because the agreement provided for three methods of assessment of interest.

10. First, in respect of the premium facility paid in US dollars the interest was to be assessed under LIBOR, the London inter bank rate. In relation to the Hong Kong dollar advances both in respect to the premium facility and in the construction facility, there were two different bases. The first is HIBOR, the Hong Kong inter bank rate; and the second BLR which is the Hong Kong banks' best lending rate. So that one has to apply one or other of three different methods of assessment in the interest calculations.

11. The contract contained in clause elaborate provision for the fixing by the lead banker, the Bank of Tokyo, of appropriate rate of interest derived from these three methods. Correspondingly one finds in clause 20 of the contract, a clause which in effect makes that bank's assessment conclusive in the absence of manifest error. No manifest error has so far been alleged. There is also in clause 15 of the contract equally elaborate provision for the assessment of what is called default date where movies are not paid on the due date. There have been elaborate calculations put forward of default interest payable on interest payments which first fell into default in November 1983.

12. In sum total one has here a claim put forward by these plaintiffs as a group, but maintained by each plaintiff individually, for unpaid capital and interest.  It is th plaintiffs' overall case, that default was made by these defendants first in payment of interest then in payment of capital, that the money was called in, and that very considerable sums are now outstanding in respect of capital and interest.  The only recoveries which the plaintiffs have property succeeded in making so far are the proceeds of sale of the property and some recovery from one of the parties under a scheme of arragement.

13. The defendants are all parties to the loan agreement. The claims against them fall broadly into three categories. First, thy first defendant is the only borrower in the agreement and the claim against that company is for unpaid capital and interest. Secondly, there is a group of defendants, from the second to sixth defendant who were guarantors named in the agreement. They guaranteed due performance of the agreement by the first defendant in certain fixed proportions. There is a claim against them as guarantors for their due proportion of the unpaid capital and interest. The third and larger group, which includes both the guarantors and person's described in the agreement as shareholders and ultimate shareholders, is for breach of covenants entered into by them in the agreement, to procure funds for the first defendant. The claim against them is by way of damages for breach of covenant. So the sums specified in the schedule are claimed against some defendants expressly as capital and interest, and against others as damages measured by reference to capital and interest.

14. At a comparatively late stage in the action, namely some three years after it started, the request for particulars of quantum was made. Up to then the defendants' appear to have concentrated upon issues of liability. A long and complicated request for particulars was made of the individual sums in the schedule attached to the Amended Statement of Claim.

15. The first claim related to particulars of the construction facility. There was no issue about the provision of the premium facility, namely that the sum was provided on a particular date shortly after the loan agreement was made. The construction facility was drawn upon in the course of works. In answer to that request a schedule, which extends over two and a half pages of closely typed print was given, showing exactly what was provided by each of the banks, and when, and whether that was provided under HIBOR or BLR.

16. The request of particulars then goes on way of example the first request:

"4(1) Of the alleged unpaid interest in the sum of HK$23,480,125.77 outstanding as at 30th October 1986 in favour of the 1st Plaintiff under the column UNPAID INTEREST and under the sub-column HK$, give the detailed breakdown of how that unpaid interest sum is arrived at and in particular :-

(a) identify each advance under which paid interest is being claimed;

(b) state the date of such advance;

(c) identify the facility under which advance was made and in the case of HK dollar advance, state the of facility advanced (ie BLR or HIBOR)

(d) state the relevant interest rate for each interest period, and give all facts and matters relied upon in support of the relevant rate being applied;

(e) identify the relevant in rate period;

(f) identify, the precise provisions in the Loan Agreement under which each interest amount in respect of each interest period was being charged."

There follow sixteen other requests which follow exactly the same pattern in respect of Hong Kong dollars interest This is followed under request 5 by a further sixteen requests which follow exactly the same pattern in respect of unpaid interest of US dollars.

17. The answer given by the plaintiffs to cover all these requests was this:-

"Discovery will be given of the statements showing the calculation of unpaid interest due to each plaintiff under the Hong Kong dollars and US dollar proportions. Such other particulars to which the defendants are entitled had been supplied under the answers above".

That was a reference to the schedule setting all the advances Contemporaneously with the delivery of particulars in those terms, the plaintiffs filed a supplemental list of documents where the entry under the paragraph 2 reads as follows :

Those particulars having been supplied, the defendants' attitude was that they were quite insufficient, and the whole of the request was repeated before this Court. That request is met by answer from the plaintiffs, that the defendants have everything to which they are entitled. So I come back to the request for the particulars.

18. The first three sub-headings (a), (b) & (c) all relate to particulars, of the advances. I cannot see why that request was repeated. The advances are precisely particularised under the schedule already given under the earlier particulars. Then it is said that the information about the relevant interest rates and interest periods is inadequate. It is therefore necessary to consider a specimen of one of the documents out of these 9 box files to see what they contained. In this context one has to remember the crucial part paid by the lead bank the Bank of Tokyo. It had imposed upon it the obligation to make these assessments; to determine what the total interest payable should be upon the outstanding amounts; and then to apportion that interest appropriately between the contributing bankers.

19. The specimen document to which our attention has been directed is a letter dated 4th November 1984. That date has been chosen because that is the last letter which went out before the calculation date of 30th October 1986. It was addressed to the 2nd plaintiff, the Banking Berhad. It records the total advances. It records the interest due to them for the period 30th September to 31st October 1986. It shows the interest due on the two proportions HIBOR and LIBOR payable that month. The total unpaid interest is set out later in the letter. Attached to that letter is a detailed computation showing unpaid interest on those two proportions going back to November 1983. The monthly calculations are set out up to September. To these figures, those in the letter are added, and this produces the figure which appears in the schedule.

20. We have been told that this was a monthly process. It went on month by month. Each month the Bank of Tokyo did the calculations, and told the contributing bankers what the sums were. These are the figures which are to be found in these 9 box files. In the light of that information I am totally at loss to understand how these defendants can complain to be in the dark as to any interest calculation, any rate of interest, or any interest period which has been applied by the Bank of Tokyo. It must be manifest to them what has happened and the calculation which has been done. So there can be no further information which needs to be supplied in respect to interest rates or interest periods.

21. There were two matters to which the plaintiffs object to giving any further particulars. The first relates to sub-paragraph (d) "and give all facts and matters relied upon in support of the relevant rate being applied". If they had to go into that, they would have to go into many many calculations of interest conducted during this period by the Bank of Tokyo, and set out precisely how each of those was done by reference to the various rates and the reference banks in accordance with the formula set out in clause 7. Having regard to the fact that there has not been any suggestion of manifest error, and having regard to the provisions of clause 20 of this contract that would be a monumental exercise and a monumental waste of time to which these defendants have shown no shadow of entitlement to date.

22. The other particulars which the plaintiffs are objecting to giving is (f), where they are invited to identify the precise provisions in the Loan Agreement relied upon. That is not the function of particulars at all. It is prefectly permissible for a party to point to the terms of the contract upon which he relies; to plead the relevant facts; to plead his calculation, and then at the hearing take up the line that he will justify the calculation by reference to clauses 7, or 15 or both. That is the stance which these plaintiffs have adopted. They are not required by way of particulars to set out their full reasoning behind all their interest calculations. The document is not as skeleton agrument. Still less is it plaintiffs' brief on trial. It is further and better particulars. So, it seems to me that these particulars tell these defendants everything that they are entitled to know.

23. It is objected that the form is an unorthodox, because it has been done by reference to discovery, and that the plaintiffs have not pinned themselves down. There is no substance in that. These two documents, the particulars and the additional discovery, are intended to be and must be read together. They plainly show that calculations by way of particular are to be found in those 9 box files. Then it said that discovery an particulars are different functions, that they should not overlap in this way, and that this is unusual. In my experience, this method of giving particulars is not unusual in a complicated case like this. In this case, where you have got the provisions of clause 20, the giving a particulars by reference to contemporary documents, and cumulative contemporary documents, showing the build-up of the interest rates and the interest amounts month by month is plainly the most sensible way of giving these particulars. Conversely to do what the defendants say the plaintiffs should now be required to do, would constitute a massive waste of time and a massive waste of money, and give these defendants no more information than they already have. It is a little difficult, having regard to the vigor with which this application has been pursued to exclude entirely from one's mind that a massive waste of time might have been one of the purposes behind this request.

24. Everything that I have said about request (4) applies equally to request (5). I can deal more shortly with requests (6) and (7). They related to calculations of default interest in the schedule, and were likewise answered reference to discovery and paragraphs 3 and 4 in the further discovery. Paragraph 3 refers to 4 box files consisting of statements from the 1st plaintiff to the 1st defendant showing accrued default interest on unpaid interest referred to in paragraph 6. Paragraph 4 refers to another box file between the same parties dealing with the unpaid interest in paragraph 7. The period of time covered by these documents is December 1984 to August 1988 in both cases.

25. Our attention has been directed to an example of this. It is the calculation delivered by the Bank of Tokyo dated 4th November 1986 to 1st defendant. It starts at page 58 in bundle C before us. It goes on to page 93. It comprises therefore some 35 pages of very closely typed information. It is as detailed a computation as could be devised. It starts with the first outstanding default of interest in November 1983. It sets out sometimes almost day by day but certainly month by month, what the calculation of interest is on that outstanding sum; first of all, on the LIBOR proportion, then on the HIBOR proportion, and finally on the BLR proportion. That calculation itself takes five pages. What has happened each month is that this calculation is sent to the 1st defendant with the next month addition added. Then the whole thing goes on cumulatively in this way. It gives these defendants every conceivable piece of information they can possibly ask rate, period, everything. If any mistake has been made by the application of the wrong rate or the wrong periods of rest, it will stand out from this calculation.

26. When I first saw this document I was amazed how anyone could have suggested that this was inadequate. It appeared to me that the only complaint that could be made was that this did not show the apportionment. Indeed it does not. What had to happen each month was that the computation had to be done by the Bank of Tokyo and then apportioned by that Bank between various lenders. That gives rise to the individual claims for the various lenders. What I failed to observe is that the apportion was staring one of the face, in the actual schedule already part of the Statement of Claim. One can see at a glance from that how the apportionment of those figures is made, and was made by this Bank to at the lending bankers. The apportionment is in fact not very difficult because although there were sixteen bankers they fell into a much fewer number of categories, because a number of them provided identical sums on identical terms. The apportionment also emerges from individual quantifications likewise sent by the Bank of Tokyo to the plaintiffs. Again I am quite at a loss to see how there can be any complaint about the inadequacy of the particulars given under this head. The defendants have asserted that? "it is because our clients are genuinely in the dark" that they repeated this request. They are in my view in no circumstances "genuinely in the dark". This is a case where none is so blind as those who do not want to see. There is no substance in this application. In my judgment, the judge was right to refuse it.

27. I then turn to the plaintiffs appeal against the grant of leave to amend. This gives rise to an additional defence and counterclaim sought to be raised against one of the plaintiffs, the 3rd plaintiff Hang Seng Finance Limited, under section 22 of the Deposit-taking Companies Ordinance (Cap 328), since repealed. Section 22(1) read :-

"22 (1) A registered deposit-taxing company shall not grant or permit to be outstanding to any one person, firm, corporation or company, or to any group of companies or persons which such person, firm, corporation or company is able to control or influence, any advances, loans or credit facilities, ..... in excess of 25 per cent of the paid up capital and reserves of tine registered deposit-taking company".

It can be seen that this section operations under limbs. The first prohibition is against lending more than 25 percent to "any one person, firm, corporation or company."  The second limb is against lending to any group of companies more than 25 per cent "which such person and that must be such one person, "firm, corporation or company is aid to control or influence". In the existing amended defence the defendants have prayed this section in aid against five plaintiffs, all of whom (they asserts) lent to the 1st defendant, under the provision of this loan agreement a sum greater than the 25 per cent of their total capital and reserves. By this amendment they are seeking to rely upon the second aggregation limb against Hang Seng Finance.

28. It is pleaded that the total of Hang Seng Finance's capital reserves is HK$229.4m, and that the 25 per cent total is thus HK$57.35m. The Hang Seng loan in this case is only HK$50m. So the first limb does not, operate. That explains paragraph 30DD which reads as follows:-

"At the time of the making of the loan agreement the borrower Regentcourt Limited was controlled or influenced by the Chung group. At that time the Chung group also controlled or influenced the following companies being borrowers of the following loans from Hang Seng Finance Limited".

There are set out the names of seven companies to whom Hang Seng Finance are alleged to have loaned a total of HK$476m. So that if the aggregation exercise is sound then plainly more than 25 per cent was loaned. There follow these crucial words:

"In the premises, at the time of the making of the loan agreement, the aggregate of the advances or loans granted by Hang Seng Finance to the group of companies controlled or influenced by the Chung group exceeded 25 per cent of the paid up capital and reserves of Hang Seng Finance".

The question therefore is whether the Chung group constitute "one person, firm, corporation or company" within section 22. The pleader defines Chung group for the purposes of the pleading in paragraph 1 of the defence in these terms:

"At all the material time the 2nd defendant, Associated Hotels Limited hereafter referred as AHL, was part of a group of companies, which were property developers in Hong Kong, controlled by the Chung family, headed by Chung Kon Hai, Chung [Ming Fai, Chung Chung Man, hereinafter referred to as the Chung group".

At first reading that looks to me like an assertion that the Chung group are a group of companies that the Chung group a is controlled by the Chung family; and that that family is headed by three named individuals.

29. This matter raises a pure question of law, namely the true construction of section 22 of the former Deposit-taking Companies ordinance. Likewise it seems to me that this is a question of law which when matters reach the Court of Appeal in circumstances like this, the Court should decide. The rival issues can shortly be summarised. For the plaintiff Miss Li argued in effect that in section 22 "one" means one. "Person" means individual. "Firm means a group of people or possibly an individual trading as one firm. "Corporation" means a corporation, not a limited corporation in this case but the sort of corporation sole that you get in public bodies. "Company" means a limited company because that is a definition that one finds in section 2 of the ordinance. It means a company registered under part I or part IX of the Company Ordinance, or if incorporated outside Hong Kong which has complied with part XI. So you have those three categories of legal entities expressly set out. She submits that the Chung group is first of all a group of companies not one company; and that it is controlled by a family and a family is not one person any more than the three named Chungs are one person. This claim does not start to leave the ground upon that basis.

30. In answer Mr Waung relies principally upon the Interpretation and General Clauses Ordinance (Cap 1) which gives general definitions of words :

"2. (1) Save where the contrary intention appears either from this ordinance or from the context of any other Ordinance or instrument, ...".

The definition of "person" which is given in section 3 is that "it includes any public body and any body of persons, corporate or unincorporate". He argues that "person" here therefore includes a body of persons, corporate or unincorporate and that covers the three Chungs or the Chung family.

31. I have no doubt in my mind that Miss Li is right. It is impossible in this context to read in the general definition in Cap 1, because the legislature has gone out of its way expressly and separately to include the very bodies which would be covered by the extended reading of the word "person" suggested by Cap 1. So if you try to read that extended meaning in, you will end up with both tautology and conflict. There is simply no room for giving a wider meaning to the word "person" including "public body", and "corporate or unincorporated" bodies, when the section specifically picks out "firm corporation or company". It seems to that this section is quite clearly and deliberately drawn to make a clear contrast between legal entities, between on the one hand the legal entity of a human person, and on the other hand the legal entity resulting from incorporation or other legal process or usage, be it a firm, a corporation or a company; in other words between the individual and other legal entities. "Person" here can only mean an individual. Mr Waung conceded that if person here means individual then his claim is unarguable.

32. Secondly, if you seek to apply these words to the Chung group as defined in this pleading, it does not start to fall with any of the categories. The most generous reading of paragraph 1 for which Mr Waung contended, concentrated on the three Chungs. But they are not one person; they are three. The second alternative was the Chung family. As was pointed out Hong Kong families are somewhat extensive and in no way can be described as one person. On what I regard as the true reading, the Chung group is defined, as a "group of companies". A group of companies is simply not one company. In my judgment this claim cannot possibly succeed. Accordingly the Master was right and the judge fell into error in allowing it. I would allow this part of the appeal and refuse leave to amend to these defendants.

33. Finally I would say this. This action was started in June 1965. It was first fixed for trial in December 1986. There have been repeated postponements to which the defendants appear to have contributed. I would only point out that they can hardly do that and still complain, (and this may be a justifiable complaint) about the difference between the rates of interests allowed them in the calculations on recoveries and the rates of interest charged them under the agreement. It seems to me plain and obvious that the sooner this matter is resolved by a trial one way or the other the better.

34. In summary, I would dismiss the defendants' appeal and allow that of the plaintiffs.

Mayo, J

35. I agree and have nothing to add.

Barnes, J

36. I too agree.