DAIMLERCHRYSLER SERVICES CHINA LTD v. HARBOUR UNION INVESTMENTS LTD AND OTHERS

HCCL 34/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 34 OF 2002

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J U D G M E N T

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The action

1. This is an action by the plaintiff, a finance company, to recover sums due under a Loan Agreement For Purchase of a Vessel, dated 19 March 1999, entered into between the plaintiff and the 1^st defendant, a Hong Kong Company, and under a Guarantee and Indemnity of like date, entered into between the plaintiff and the 2^nd defendant, one Ho Kwan Chuen.

2. The 3^rd defendant, Falcon Insurance Company Ltd, was the insurer of the vessel, and had been the subject of a claim by the plaintiff; it also had been the subject of a claim in Third Party Proceedings brought against it by the defendants.

3. In the event, save for the action outstanding between the plaintiff and the 1^st and 2^nd defendants, all other claims, whether in the main action or in the Third Party proceedings, have been compromised by agreement.

4. All that remains is the plaintiff’s claim under the Loan Agreement and Guarantee.  In this regard the court has been informed by letter dated 13 February 2006 from Messrs Ho & Partners (of which firm the 2^nd defendant is a Consultant) that in connection with the plaintiff’s claim against the 1^st and 2^nd defendants “our clients will not put forward any defence for the case and therefore we shall not attend the trial to be held on 13 March 2006”.

5. Accordingly the trial of this action has taken place in the absence of the 1^st and 2^nd defendants, the plaintiff having been required formally to prove its case.

The plaintiff’s case

6. On 19 March 1999 the plaintiff advanced the principal sum of HK$5 million to the 1^st defendant for the purchase of a pleasure boat.

7. The loan was secured by a Vessel Mortgage, also dated 19 March 1999, over the boat, and by the personal Guarantee of the 2^nd defendant with regard to the loan.

8. The loan was repayable by monthly instalments of HK$110,214.21.

9. The last instalment in fact paid was on 18 July 2000.  Since that date, the 1^st defendant has ceased to make repayment under the loan.  On 27 August 2000 the boat which had been purchased with that loan was reported to have been stolen.

10. The plaintiff now seeks judgment under the loan and under the guarantee collateral to that loan.

11. Two witnesses were called on behalf of the plaintiff.

12. They were Ms Lam Ka Wan and Ms Ho Yuet Sheung.

13. Ms Lam had been the Account Receivable Officer at the plaintiff until she ceased employment with the plaintiff in or about April 2005; as I understand the position, this case had been her responsibility.

14. She gave evidence in accordance with her witness statement in which, inter alia, she said that since 18 July 2000 the 1^st defendant, Harbour Union, had not paid any further instalments under the loan.  She said that as at 18 July 2000 the outstanding principal due and owing was HK$3,934,781.67. 

15. She further explained the manner in which interest had been calculated at the contractual rate of 11.6% pa, plus an additional contractual 2% on unpaid amounts, which for the period from 18 July 2000 to 18 December 2003 (the date of her witness statement) amounted to HK$1,785,722.50; she also noted that late payment of instalments in the period from April 1999 to July 2000, that is, prior to the date of cessation of payment, amounted to 58 overdue days, which came to HK$2,381.83.

16. I accept this evidence.

17. Ms Ho, currently employed in the Client Risk Department of the plaintiff as Assistant Manager, Credit Risk, and responsible for debt collection within the plaintiff, gave supplementary evidence to that of Ms Lam, who no longer was employed by the plaintiff.

18. Essentially Ms Ho updated the calculations in terms of interest outstanding at the rate of 13.6% on the unpaid principal, and gave evidence that as at 13 March 2006, that is, the trial date, the amount of interest unpaid was HK$3,024,585.82, thus producing the figure for the total amount outstanding, and now claimed by the plaintiff, as at 13 March 2006, to HK$6,961,749.32 (that is, HK$3,934,781.67 + HK$2,381.83 + HK$3,024,585.82).

19. I accept Ms Ho’s evidence also.

20. No evidence was adduced on behalf of the 1^st and 2^nd defendants whom, as earlier indicated, have declined to attend the trial.

21. I find that the 1^st defendant is liable under the Loan Agreement to make repayment of the sum claimed, and that the 2^nd defendant is liable under the Guarantee and Indemnity to make repayment of the like sum.

Order

22. Judgment is to be entered in favour of the plaintiff against the 1^st and 2^nd defendants in the sum of HK$6,961,749.32.

23. Interest is to accrue upon the said sum at the judgment rate from time to time prevailing until payment.

24. As to costs, I decline Mr Ling’s application for costs on an indemnity basis.  I recognize that I have a discretion and that the contractual stipulation as to indemnity costs is not binding on the court (see, for example, Bank of Baroda v. Panessar and Ors [1987] 1 Ch 335 at 355, per Walton J).

25. In the circumstances, I have come to the view that the appropriate order as to costs in this case is that the costs of this action are to be paid to the plaintiff by the 1^st and 2^nd defendants on a common fund basis, such costs to be taxed if not agreed.  I so order.