BANCA INTESA S.p.A. HONG KONG BRANCH v. FORWARD INDUSTRY LTD

HCA1222/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1222 OF 2004

HCA143/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 143 OF 2005

BETWEEN

_____________________

J U D G M E N T

HCA 1222/2004

1.  In this action, the plaintiff bank sues the defendant, a customer, for money due on five letter of credit transactions.  The bank has issued five letters of credit on the defendant’s application and has paid the sums due on them.  The defendant has not made full payment to the bank.  The bank is now claiming US$252,065.28 as principal and US$27,830.89 as interest accrued up to 31 December 2004.  This is an application for summary judgment by the plaintiff.

Grounds of defence

2.  The defendant denies liability on three grounds.  The first ground is that despite the exact figure of the alleged principal at US$252,065.28, the plaintiff has not adduced any clear-cut basis of indebtedness and detailed calculation. 

3.  The second ground is the lack of basis for the interest rate at 4% over the bank’s US dollar prime lending rate. 

4.  The third ground is that the claim should only be for HK$1.1 million and not the principal and interest as claimed.

Defendant’s knowledge of indebtedness and rate of interest

5.  One Miss Connie Lam, the Vice President and Head of International Desk Corporate Banking Department of the plaintiff, has said on an affirmation made on 12 April 2005 that the defendant has been kept informed of the details of the principal and interest charged by monthly account statements issued to the defendant from time to time. 

6.  The bank on 7 January 2003 demanded payment by the defendant of US$146,062.26.  This demand letter set forth the references of three letters of credit and the amounts due thereunder.  On 21 January 2003, the defendant replied and proposed to settle the debt in two months. 

7.  The defendant wrote to the bank on 11 June 2003 and acknowledged the indebtedness stated in the monthly statement of May 2003 and noted the outstanding amount at US$253,451.02.  The defendant further said in the letter that it would settle the loan. 

8.  There was then a meeting on 15 July 2003 between a representative of the defendant, Mr Yao Chuanrui, and several representatives of the bank, during which Mr Yao agreed to transfer about US$5,710 to the account in question to effect a part payment of the indebtedness.  This is evidenced in a note of meeting produced by Miss Lam in her affirmation.

9.  The bank has on 31 July 2003 written to the defendant, demanding payment of US$252,065.28 as principal and US$353.87 as interest.  The demand letter set out the outstanding principal at US$253,451.02 as at 28 May 2003 with subsequent accruals of interest at different rates from time to time and a part payment of US$5,710.25.  The defendant then paid US$353.87 on 11 August 2003 and US$1,736.45 on 10 September 2003 to cover the further interest accrued up to 31 August 2003. 

Proposed settlement

10.  By a letter dated 19 February 2004, the plaintiff proposed to settle with the defendant by accepting a lesser sum of HK$1.1 million to be paid in four instalments as follows:

(i)	HK$100,000 on 5 March 2004,
(ii)	HK$200,000 on 2 April 2004,
(iii)	HK$350,000 on 3 August 2004, and
(iv)	HK$450,000 on 15 December 2004.

The proposed settlement required interest to be paid at the bank’s Hong Kong dollar prime lending rate on the reducing balance in arrears at the end of each month.

11.  Paragraph 5 of the letter further imposed a condition on default which reads:

“

5.

Default: If you fail to repay any amount in accordance with the terms of this letter, then we shall be entitled to immediately terminate this Settlement arrangement and declare the full Indebtedness amount as described in clause 1 hereof (less amount repaid) due and payable, with interest to be accrued thereon at US dollar prime lending rate plus 4 per cent.”

12.  The plaintiff then received a cheque dated 5 March 2004 for HK$100,000 issued by one Guarantee Electronics Company Limited in favour of the plaintiff.  But there was no indication that this payment was tendered on behalf of the defendant under the proposed settlement.  The plaintiff therefore transferred this sum to an escrow account pending payment instructions from Guarantee Electronics.

13.  On 16 April 2004, the bank received two post-dated cheques from Guarantee Electronics of HK$100,000 each and dated 21 April 2004 and 21 May 2004.  The dates of these cheques were beyond 2 April 2004 which was the due date for the second instalment in the proposed settlement.  These two cheques were also dishonoured upon presentation on 13 May 2004 and 22 May 2004.  So the terms and conditions of the proposed settlement had not been observed.  There was also no instruction from Guarantee Electronics regarding the disposal of the first HK$100,000 purportedly paid for the first instalment of the proposed settlement.

14.  I also note that the general security agreement executed by the defendant on 19 January 1999 states that the defendant has to pay the bank interest on its liabilities from the date on which the liabilities were incurred until the date of discharge.  The definition of “interest” in paragraph 21 of this agreement says that it is at the rate or rates agreed between the bank and the defendant and, in the absence of any agreement, at such rate as the bank shall select.

The first and second grounds of defence

15.  It is thus clear that the defendant has all along been advised by the plaintiff of the amounts due by way of principal and interest and also the rate of interest applicable.  This was done by the monthly statements as well as the demand letters.  The defendant never challenged these figures.  In fact, the defendant has acknowledged them by a letter of 11 June 2003 and part payments.  There is thus no merit in the first and second grounds of defence. 

The third ground of defence

16.  On the third ground, it is clear that the defendant has not performed the terms and conditions of the proposed settlement and the plaintiff has revoked it under paragraph 5.

Summary judgment

17.  On the basis of the above, I do not think the defendant has any defence to the plaintiff’s claim in HCA 1222/2004.  I therefore give judgment in terms of the plaintiff’s summons issued on 12 April 2005.

The defendant’s absence

18.  I also mention that the defendant is absent from today’s hearing.  The defendant’s managing director, the said Mr Yao, had been absent once in a hearing on 9 May this year.  His excuse for the absence was that his visa for coming from the Mainland to Hong Kong had expired on 6 May.  Mr Yao is a resident of the Mainland. 

19.  This hearing was originally scheduled to take place on 7 September this year.  Owing the expiration of another visa for Mr. Yao to come to Hong Kong, this hearing was postponed to today at Mr Yao’s request.  It was to facilitate his attendance under a new visa.

20.  Three days ago, Mr Yao wrote to this court, saying that his new visa was still not ready.  The document accompanying his request for adjournment showed that his visa should be ready on 27 September.  That was two days ago.  He was thus advised to get visa on time so as to take part in this hearing. 

21.  Yesterday afternoon, Mr Yao wrote to this court again, saying that his new visa was still not issued to him and he sought an adjournment.  He did not give any reason as to why his visa was still outstanding.  In the circumstances, I do not see any reason for adjourning today’s hearing.  

HCA 143/2005

22.  In this action, a default judgment has already been entered against Mr Yao wo is a guarantor for the indebtedness incurred by the defendant in HCA 1222/2004.  This is an application by Mr Yao to set aside the default judgment on various grounds.  However, he has failed to appear today and I therefore dismiss his application with costs to the plaintiff.