BANK OF AYUDHYA PUBLIC CO LTD v. SUNTEC FOOTWEAR CORPORATION LTD AND ANOTHER

HCA709/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 709 OF 2005

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J U D G M E N T

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1.  This is an appeal by rehearing from an Order 14 summary judgment ordered by a Master.  The plaintiff, whom I shall call variously “the plaintiff” or the “the bank”, is a bank of Thailand licensed to operate in Hong Kong.  The 1st defendant, whom I shall call variously “the 1st defendant” or “Suntec” has, at all material times, been and is currently a customer of the bank carrying on business in Hong Kong.

2.  From time to time, Suntec has received financial accommodation of various sorts from the bank, and this has been the position to date.

3.  In recent months, Suntec has defaulted in meeting the terms of repayment of amounts borrowed.  There is no issue taken about that.  Nor is there any issue taken as to the amount of principal outstanding and interest accrued and accruing.  To that end, there has been a demand and, in the absence of payment, the bank issued these proceedings.

4.  There is a second defendant named in the action, a purported personal guarantor of Suntec’s commitments, but the action against him has, for whatever reason, been deferred.

5.  The writ having issued, the bank brought the Order 14 application, supported by an affidavit from an officer of the bank setting out the history of the relationship between the parties, the amount of moneys borrowed and due and confirming that there had been to date no payment or reduction of the amount outstanding.

6.  By the time the matter came on before the Master, Suntec had filed, by way of a defence, only a bare denial, and there was no affidavit in opposition.  As I understand the situation, at the hearing before the Master, counsel or a solicitor representing Suntec asked for leave to file an affidavit out of time in opposition.  I do not believe an affidavit was available for filing, in which case the matter would have had to go off but, in the event, the Master declined to give leave.  The matter proceeded thus on the basis of what was before him; namely, the statement of claim, the affidavit in support of the application for summary judgment and only a bare denial in the defence.  Unsurprisingly, therefore, he entered judgment in favour of the bank.

7.  There was a prelude to the hearing of the appeal; namely, a fresh application for leave by Suntec to file an affidavit in opposition.  That affidavit has been completed and has been filed, presumably in anticipation or in the hope that leave would be granted.  The application is opposed by the bank, but in the event that I were to grant the application, the bank has filed a further affidavit by a bank officer to answer the issues raised.

8.  As I informed counsel before me at the outset, I proposed then not to deal with the application for leave but, rather, to have the affidavits before me de bene esse so that I could consider the merits of the defence as propounded and, at the conclusion, rule on the issue of whether those affidavits should come in; as I indicated, this on the basis that if I decided, having read the same and heard submissions, that the 1st defendant’s affidavit advanced its case no further, then there would be little point in allowing it in, but if Suntec was able to establish arguable grounds, then the likelihood would be that leave would be granted.

9.  What has been put forward by Suntec and introduced in this lately-filed affidavit is that Suntec is partly owned by a public listed company in Thailand called Bangkok Rubber Public Company Limited, which I will refer to for short as Bangkok Rubber.  Suntec is described as an affiliated company and no issue is taken by the bank with that description.

10. It is apparent from documents exhibited that Suntec is but one of a number of affiliates of Bangkok Rubber, and it is also apparent that Bangkok Rubber is itself a customer of the plaintiff, no doubt the plaintiff’s head office in Bangkok.  It is further apparent that habitually, no doubt, by agreement that goes back, Bangkok Rubber guarantees repayment of all debts due by affiliates to the bank and that Suntec being an affiliate, its indebtedness to the plaintiff is similarly the subject of a guarantee.

11. Documents exhibited in the affidavit filed on behalf of Suntec reveal that some two or three years ago Bangkok Rubber was in financial difficulty and unable to meet its debts as they fell due.  It is apparent that there was then a pool of creditors who joined forces together to pursue payment in the manner presumably best thought fit and, to that end, a debt-restructuring exercise was pursued, called over there a “Business Reorganisation Plan” which, simply put, was an agreement between this body of creditors and Bangkok Rubber that Bangkok Rubber would be restructured.  This included a programme for debt repayment undertaken in terms as agreed to the effect that, over a passage of time, the creditors would be either repaid or paid such of the debt that could feasibly be met given, presumably, all the circumstances.  One assumes, in the way of these things, that it was regarded by the creditors that their chances of being repaid in whole or in part would be greater, at least as to quantum, than pursuing the other more drastic alternative of filing in bankruptcy.

12. Why this has all been brought before me is that it is Suntec’s case that the debt-restructuring exercise included payment of those debts that Bangkok Rubber had guaranteed to meet that were due, in the first instance, by its affiliates, and it is Suntec’s case that because of this debt-restructuring plan in which the plaintiff is a major participant, the obligation by Suntec as the primary debtor of the debts due by it to the plaintiff has been superseded and taken over by the parent company, by Bangkok Rubber, and that the plaintiff has agreed to this course as being the best and appropriate way to recover its indebtedness.

13. The difficulty about that argument is that nowhere in the documentation can one find any indication that, in consideration for the debt-restructuring exercise, the likes of Suntec have been discharged from liability as primary debtors.  Realistically, one would find it extraordinary that a creditor bank would forego this obvious avenue of recovery, given the apparent financial difficulties of the guarantor.  Of course it would be entirely different if the guarantor, whether or not invited, elected to pay off the debt.  Then, naturally, the debt would be expunged and the obligation by the head debtor would be discharged, at least for the amount paid, because a creditor cannot be paid more than once - that is fundamental.  But quite the contrary.  There is no indication that any money has been paid by Bangkok Rubber in reduction of this debt of Suntec and, in fact, in the affidavit in reply to the defence affidavit that is before me de bene esse, the actual reverse is deposed to - there has not been any repayment at all.

14. That all said, it must by now be apparent that I do not regard the debt due by Suntec to have been discharged or in any way affected by the debt reorganisation that has been put in place in Bangkok involving the plaintiff, the bank, on the one hand, and Bangkok Rubber on the other.

15. As I find, the additional evidence prospectively to be adduced takes the defence no further towards demonstrating that it has an arguable defence and, that being so, there is no point in my having such matter before me as evidence.

16. Accordingly, I decline leave to the 1st defendant to file an affidavit and that application is dismissed, with costs to the plaintiff.  It follows that the appeal is dismissed, with costs to the plaintiff.