NG SIU KING AND ANOTHER v. SKY MARKET LTD AND OTHERS

HCA 167/2021

[2021] HKCFI 3258

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 167 OF 2021

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BETWEEN

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JUDGMENT

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A. Introduction

1.  This is the assessment of damages following a Final and Interlocutory Judgment entered against the Defendants on 22 March 2021 (“22.3.2021 Judgment”).

2.  The Plaintiffs (“Ps”) are mortgagors who provided their property (“Property”) to secure a loan from one Great View Finance Ltd (“Great View”) to the 1^st Defendant (“D1”). The 2^nd Defendant (“D2”), the 3^rd Defendant (“D3”), and one Tong Ying Chiu (“Chiu”) are a family (together the “Tongs”) who held substantial interests ina listed company called Sun Cheong, and D1 was used by them as a vehicle to obtain financing for Sun Cheong. Ps are relatives of the Tongs (P1 is the elder sister of D2, and P2 is the daughter of P1).

3.  In short, Ps’ claim in this action is that:

3.1 D2 and D3 have each respectively entered into oral agreements with Ps agreeing to ensure that D1 would make repayment to Great View on time, and in return, Ps agreed to provide their property for a mortgage in favour of Great View, and/or to maintain the mortgage when the loan was later restructured. Ps claim damages for breach of D2 / D3’s promises.

3.2 Ps also claim against D1 for an indemnity for the amounts Ps (as mortgagors / sureties) have made to Great View (creditor) in repayment of the loan owed by D1 (principal debtor).

4.  The Defendants failed to give notice of intention to defend, and a Final and Interlocutory Judgment was entered against the Defendants on 22 March 2021, i.e. the 22.3.2021 Judgment. The 22.3.2021 Judgment provided:

4.1 D1 do pay P1 and P2 the sum of HK$4,274,399.23 together with interest and costs.

4.2 D2 do pay to P1 and P2 damages to be assessed and costs to be taxed.

4.3 D3 do pay to P1 and P2 damages to be assessed and costs to be taxed.

5.  This hearing is held to assess the damages awarded under §§4.2 & 4.3 above.

6.  D2 and D3 did not attend the hearing.

B. Background and Ps’ claim against D2 & D3 as pleaded

7.  As judgment has already been entered against D2 and D3 for damages, this means that I am to proceed on the basis that Ps have established liability against D2 and D3 on the basis of Ps’ pleaded case. I am only concerned with the quantum of damages based on such pleaded case.

8.  In order to understand the damages claim, one must consider Ps’ pleaded case in the Statement of Claim, to which I now turn.

9.  By 2 loan agreements both dated 22 September 2017, Great View granted loans in the total sum of HK$4,480,000 to D1 (“Loans”). For both Loans, the drawdown date was 6 December 2017, and the maturity date was 6 December 2018.

10.  Ps were told by Ds that the Loans were to provide finance for the IPO of Sun Cheong.

11.  As security for the 2 loans, Ps executed a legal charge dated 6 December 2017 over the Property (“Mortgage”). The Mortgage contains terms to the effect that the Property would be security for all moneys owing by D1 to Great View from time to time (which would include liability under the Loans). It also contain personal covenants by Ps to make repayment.

12.  D3 also provided a personal guarantee (dated 6 December 2017) in favour of Great View.

13.  It is Ps’ pleaded case that:

13.1 Prior to the entering into the Mortgage, D2 orally undertook to Ps (with P1 representing P2), to the effect that:

(a) The Loans (including interests, costs and expenses) would be duly and timely repaid (according to their terms).

(b) The Property would be released from the Mortgage upon expiry of the Loans, which would be shortly after the completion of the IPO.

(c) Ps and the Property would be held harmless against all liabilities of the Mortgage (including interests, costs and expenses).

13.2 On the basis of such undertaking, Ps agreed to enter into the Mortgage. Thus, it is said that D2’s undertaking amounted to a binding contract with Ps (“D2’s Undertaking”).

14.  Shortly before the maturity date of the Loans (which was 6 December 2016), D3 told P1 that: (1) the Loans could not be fully repaid on time and the Property would not be released on the maturity date; (2) the Tongs were trying to agree with Great View time extensions for the Loans.

15.  It is Ps’ pleaded case that:

15.1 On this occasion and another occasion after the maturity date, D3 orally undertook to Ps (with P1 representing P2 as well) to the effect that:

(a) The Loans (including interests, costs and expenses) would be duly and timely repaid (according to the terms of the time extension).

(b) The Property would be released from the Mortgage upon expiry of the Loans (as extended).

(c) Ps and the Property would be held harmless against all liabilities of the Mortgage (including interests, costs and expenses).

15.2 Great View and D1 were eventually able to agree to a restructure of the Loans, which extended the repayment date to 15 May 2020 (the other terms of which are not important for present purposes), and the Mortgage would continue to be security for the Loans. An agreement was signed (“Restructure Loan Agreement”). On the basis of D3’s undertaking, Ps agreed to the terms of the restructure and signed on the same (as mortgagors).

15.3 Thus, it is said that D3’s undertaking amounted to a binding contract with Ps (“D3’s Undertaking”). It is also pleaded that D3’s Undertaking was in addition to the D2’s Undertaking.

C. Ps’ damages claim

16.  In terms of the damages claim, Ps’ case can be summarised as follows:

16.1 Despite that D1 had made some repayment instalments, D1 had not made full repayment of its liability to Great View. As a result, Great View commenced proceedings under HCMP 1888/2019 against Ps, D1, D3 for repayment of the Loans, and also to enforce the Mortgage against the Property.

16.2 Despite making some instalment payments, Ds continued to fail to meet the full liability owed to Great View and has put forward no defence to the proceedings under HCMP 1888/2019.

16.3 As a result, Ps had no choice but to sell the Property and to use the proceeds to make repayment to Great View of the outstanding liability under the Loans. Great View consented to the sale.

16.4 The losses suffered by Ps as a result of the breach of the D2 Undertaking and the D3 Undertaking are, in essence: (1) the amounts paid by Ps to Great View to discharge the amounts owing under the Loans (and any costs incurred by Great View in its recovery proceedings); (2) the costs incurred by Ps in HCMP 1888/2019 and in selling off the Property.

17.  For the purpose of their damages claim, Ps need to establish that: (1) these amounts were incurred by Ps as a result of the breaches of the D2 Undertaking and D3 Undertaking; (2) if the D2 Undertaking or D3 Undertaking had been performed, P would not have to incur these amounts.

C1. Amounts paid to Great View by Ps

18.  Ps claim the following sums as moneys they paid to Great View in order to discharge the outstanding liability under the Loans:

18.1 HK$616,500, paid on 31 July 2020 from the deposits received for the sale of the Property.

18.2 HK$3,602,899.23, paid on 12 October 2020 from the sale proceeds from the sale of the Property.

18.3 HK$40,000, paid on 12 October 2020 from the sale proceeds from the sale of the Property.

18.4 HK$15,000, paid on 12 October 2020 from the sale proceeds from the sale of the Property.

The total amount comes to HK$4,274,399.23.

19.  P1 gave evidence for Ps. Ps have produced: (1) correspondence which shows that Great View demanded from Ps and Ds various sums for repayment of the outstanding amounts under the Loans; and (2) payment evidence and receipts issued by Great View. I accept her evidence that each of these amounts were paid by Ps to Great View:

19.1 For the sum at §18.1 above, see: [B/472-473, 486] at the hearing bundle.

19.2 For the sum at §18.2 above, see: [B/492-493, 502-504].

19.3 For the sums at §§18.3 & 18.4 above, see: [B/492-493, 502-504].

20.  The correspondence also shows that, as a result, Great View agreed to discontinue HCMP 1888/2019: see [B/505].

21.  I find that these amounts were paid by Ps to Great View as a result of the breaches of the D2 Undertaking and D3 Undertaking. Ps had to pay these amounts to Great View because D1 failed to pay, and D2 and D3 failed to ensure that the Loans would be fully repaid. Had D2/D3 ensured that full repayment be made, Ps would not have to pay these amounts to Great View.

22.  On the sums at §§18.3 & 18.4 above, they were agreed amounts of Great View’s legal costs and expenses in connection with HCMP 1888/2019 and the sale of the Property. I accept that these amounts fall within the claim, since: (1) the legal costs of HCMP 1888/2019 would fall within D1’s liability to Great View (D1 was also a defendant), and also because Ps would not have to be sued and be liable for such costs but for D2/D3’s breaches; (2) Great View’s costs in connection with the sale of the Property falls within Clause 2(x) of the Mortgage.

23.  I should add that I do not consider it needs to be shown that the individual amounts were properly due under the Loans. This is not required for establishing causation. In the circumstances, since D2 / D3 did not put forward any defence to Great View’s claims, it was reasonable for Ps to accept the prima facie correct figures put forward and demanded by Great View to settle the Loans and HCMP 1888/2019. This in my view is sufficient to establish causation.

24.  I therefore find this head of the damages claim in the amount of HK$4,274,399.23 established.

C2. Expenses incurred in the sale of the Property

25.  Ps claim the following sums as moneys they themselves incurred in HCMP 1888/2019 and in relation to the sale of the Property:

25.1 HK$122,980, as legal costs incurred by Ps and expenses in HCMP 1888/2019.

25.2 HK$16,250, as legal costs incurred by Ps in the sale of the Property.

25.3 HK$61,650, as commission of the estate agent paid by Ps in the sale of the Property.

The total adds up to HK$200,800.

26.  For the sum at §25.1 above, Ps have produced the bills issued by their own solicitors and also evidence of payment by Ps to their solicitors for costs on account: see [C/599-612, 614-616]. From these documents, it appears that the legal costs incurred by Ps did amount to HK$122,980, but that a sum of HK30,600 was paid for by the purchasers instead of by Ps: [C/618-619, 621]. Mr Cheng has explained to me, and I accept, that this amount was paid using part of the purchase price – they appear to come from the purchasers because the purchase price was paid under a split cheque arrangement. Since the purchase price are the sale proceeds and belonged to Ps, this means that this amount was paid for from Ps’ own money.

27.  For the sum at §25.2 above, similarly, this sum, while paid for with a cheque from the purchaser’s solicitors, came from the purchase price and were paid under a split cheque arrangement: see [C/617, 618-619, 621].

28. The same also applies for the sum at §25.3 above, the vendors’ share of the estate agent’s commission (see [B/556]), while paid for by a cheque from the purchaser’s solicitors, came from the purchase price and were paid under a split cheque arrangement: see [C/613, 618-619, 620, 623].

29.  But for the breaches of the D2 Undertaking and the D3 Undertaking, Ps would not have to be sued, or would not have to pay for any costs in defending the proceedings, and would not have to sell the Property (and incur the legal and estate agent fees). I therefore find that these items were incurred by Ps as a result of D2/D3’s breaches.

30.  I therefore find that Ps have established the damages claim under this head to the extent of HK$200,800.

C3. Pre-judgment interest

31.  Mr Cheng for Ps asks the Court to order pre-judgment interest. Such interest is usually awarded at 1% over the prime rate: see Waddington Limited v Chan Chun Hoo Thomas and Others, CACV 10/2014, 20 May 2016, §§172-186; Tadjudin Sunny v Bank of America, National Association, CACV 12/2015, 20 May 2016, §§179-184. And I so order.

D. Conclusion

32.  In conclusion, I order that the 2^nd and 3^rd Defendants do pay the Plaintiffs damages in the sum of HK$4,475,279.23, together with interest on such sum at 1% over the prime rate of HSBC from the date of the Writ to the date of this judgment, and thereafter at judgment rate until payment in full.

33.  There is no reason why Ps should not be entitled to the costs of this action and the assessment. I have directed Ps to submit a written statement for summary assessment, and I have assessed the amount of such costs at HK$172,000. Since D2 and D3 are not present at the hearing, I make a cost order nisi that the 2^nd and 3^rd Defendants do pay the Plaintiffs costs of this action including the assessment of damages in the amount of HK$172,000. Unless any party applies to vary the same by Summons, the costs order nisi shall be made absolute 14 days from today.