BANK OF COMMUNICATIONS v. OPEN SOURCE DEVELOPMENT LTD AND OTHERS

HCA 4248/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4248 OF 2002

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J U D G M E N T

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1. There are before me two guarantees, one corporate guarantee by the 1st Defendant and one personal guarantee by the 2nd and 3rd Defendants. The 2nd and 3rd Defendants are shareholders and directors of the 1st Defendant. The position of the Defendants is that they have no knowledge of the terms of the guarantees. They say that they do not understand English and the documents were not interpreted to them. So they signed without knowing what liability the guarantees held for them respectively.

2. To my mind, that is not a credible or (for that matter) any meritorious defence. If businessmen, such as the 2nd and 3rd Defendants who are no innocents in the woods, are confronted with a document which they do not understand, it is incumbent on them to ask for an explanation of what the document contains. That is especially the case where the Defendants were represented by Messrs Gallant Y T Ho ("the Firm"), a firm of solicitors (with whom the Defendants say they have had a long-time relationship) in the transaction underlying the guarantees. If they failed to ask the Firm for interpretation or if the Firm failed to interpret to them if they had they asked for interpretation, that is a matter between the Defendants and their solicitors. That is not a concern of the Plaintiff. On the evidence, the guarantees were signed by the Defendants in the presence of a representative from the Firm. There was ample opportunity to seek clarification.

3. I also point out that the personal guarantee signed by the 2nd and 3rd Defendants states that it was interpreted to them. Thus, on the face of the document itself, the 2nd and 3rd Defendants knew perfectly well what they were signing.

4. I am not convinced by the evidence that the 2nd and 3rd Defendants held their shares in the 1st Defendant on trust for PRC Companies. That seems irrelevant on the issue of the effect of signature. If they signed guarantees, they are bound by their signature, regardless of the ultimate beneficial ownership of the 1st Defendant.

5. Mr Au (appearing for the Plaintiff) has explained to me the individual items for which final judgment is sought. But I am not satisfied that the third item sought in paragraph 6 of the Statement of Claim ("account receivable management fees") are properly recoverable. Those apparently concern management fees in relation to the underlying property of the borrower. There does not seem to be any provision in either the original or subsequent facility letter which gives rise to a liability in the 1st, 2nd and 3rd Defendants for such fees.

6. Therefore I make an Order as follows: I give judgment for the outstanding principal of $17,817,743.46. There will be interest on that sum at 9.375% per annum from 22 October 2002 to 7 November 2002 and at 9.25% per annum from 8 November 2002 until today, that is, the date of judgment. Interest is to run on the judgment sum at the judgment rate until payment.

7. I do not award the claim for "account receivable management fees" in the amount of $66,170.00. That claim is disallowed. I give judgment for the amount of the collection charge of $1,500.00 and for $800.00 administration fees. Those last two items will form part of the judgment sum on which interest at the judgment rate is to accrue from date of judgment until payment.