BANK OF CHINA, MACAU BRANCH v. CHAN YEUK WAI AND ANOTHER

HCA745/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.745 OF 2003

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J U D G M E N T

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1. This is the 1^st defendant’s appeal against summary judgment given against him by Master J. Wong on 21 June 2004.  The plaintiff is a bank and the 1^st defendant is sued as a guarantor under a guarantee or certificate dated 20 December 1996 which was in the Chinese language.

2. It is common ground that the guarantee is governed by the law of Macau.  At the hearing I refused leave to the 1^st defendant to adduce evidence on the law of Macau for the purpose of the appeal.  The reasons for that refusal would be handed down together with the judgment. 

3. So for the purpose of this appeal, there is no evidence from the 1^st defendant that the law of Macau is in any material way different from the law of Hong Kong. 

4. Essentially, Mr Maurice Ng who appeared for the 1^st defendant relied on two points.  He did not rely on the other grounds set out in his skeleton submissions.  First, that there had not been sufficient verification of the plaintiff’s claim.  He has referred to me to paras. 4, 7 and 8 of the affirmation of Leong Weng Chio, the manager of the plaintiff :

“4.   According to the Legal Opinion dated 1^st November 2003 (the ‘Macau Legal Opinion’) issued by Mr Leonel Alberto Alives, a lawyer qualified to practice in Macau Special Administrative Region (the ‘Macau Lawyer’), the Plaintiff is entitled to claim against both the 1^st and 2^nd Defendants being guarantors for the outstanding debt expenses and the losses, including the stamp duty on interest payable to Macau Government at the rate of 1% on the total accrued interest until the date of actual payment in full.  There is now produced and shown to me marked ‘LWC-3’, a copy of the said Macau Legal Opinion.  The Plaintiff claims further stamp duty to be payable at 1% on the accrued interest until full payment.

…

7.    I have read and reviewed a copy of the 1^st Defendant’s Defence.  I am advised by the Plaintiff’s solicitors and Counsel that the argument raised in the Defence has no merits in law.  I understand that legal submissions will be made by the Plaintiff’s Counsel at the hearing of the Plaintiff’s present application in this respect.

8.    In the premises, I verily believe that there is no defence on the part of the 1^st Defendant to the Plaintiff’s claim.  I respectfully submit that summary judgment ought to be granted against the 1^st Defendant.”

5. Mr Ng referred me to Order 41, rule 5(2) :

“…

(2)   An affidavit sworn for the purpose of being used in interlocutory proceedings may contain statements of information or belief with the sources and grounds thereof.”

He then referred me to the legal opinion which is at p.122 of the appeal bundle, in particular to the conclusion at p.124 :

“IN CONCLUSION, the Plaintiff is entitled to claim against the 1^st and 2^nd Defendants for the outstanding debt expenses and the losses, which is including the stamp duty on interest payable to the Macau Government at the rate of 1% on the total accrued interest until the date of actual payment in full.”

6. Mr Ng made the point that the legal opinion of Mr Alves did not say that the defendants had no defence and that in Mr Leong’s affirmation he did not say when he referred to the legal opinion of Mr Alves that he “verily believed” the opinion of Mr Alves to be correct.

7. Even if the form in which the legal opinion was chosen to be produced on behalf of the plaintiff required one to regard it as hearsay evidence, I do not believe that the way that Mr Leong dealt with the legal opinion made it inadmissible or that on the basis of the legal opinion, he could not conclude that he verily believed that the defendant had no defence to the plaintiff’s claim.  Now in an application for summary judgment, the plaintiff must depose to the belief that there was no defence.  That Mr Leong had done.  But whether there was in fact no defence is for the court to decide.  In other words, even if the plaintiff in the supporting affidavit were to depose to the belief that there was no defence on grounds which turned out to be wrong, the court might nevertheless give summary judgment if indeed the defendant had no defence.  Here, there being no evidence that the law in Macau is in any way different from the law of Hong Kong, the master was right in concluding that there was no triaable for issue.

8. The other point relied upon by Mr Ng was this : he referred to clause 1 of the guarantee :

“一、本借據於立約日已按本約所訂如數交付與借款人不另立收據。”

He then referred me to certain breakdown which was provided by the plaintiff in the course of the hearing before the master.  They were supplied because the 1^st defendant in his affirmation filed on 19 December 2003 said :

“9.    I also note that the loan was granted on 20 December 1996 for a term of 3 years expiring on 20 December 1999.  Legal proceedings were only started on 27 February 2003.  There is a lapse of over 3 years.  As a result, substantial interest has accrued on the principal debt which is prejudicial to me.  I have not received any statements of accounts from the Plaintiff and I have no idea whether the interest charged is correct.”

9. So the defendant required the breakdown to show whether the interest charged was correct.  The breakdowns were supplied and they are to be found at pages 136 to 141 of the appeal bundle.  And from the breakdown, it is seen that for the purpose of the calculation of interest, there were three loans, Loan I, Loan II and Loan III.  Mr Ng made the point before the master and repeated it before me that as the breakdown showed three loans instead of one loan, the plaintiff had failed to establish a prima facie case against the 1^st defendant.  For that he referred me to clause 1 of the guarantee which referred to one draw down. 

10. Mr M.K. Liu who appeared on behalf of the plaintiff explained that there was only one draw down but that for the bank’s internal purposes, it was divided into three loans.  There was no evidence to this effect because the point was not taken prior to the supply of the breakdown on 21 June 2004.  Now, on an application for summary judgment, the primary obligation is on the defendant to satisfy the court that there is a triable issue or question or that there ought to be a trial for some other reasons.  This point had not been made by or on behalf of the 1^st defendant at any time at all prior to the hearing before the master.  That is notwithstanding that the defendant had filed its defence on 4 April 2003 and that there were earlier letters from the bank demanding payment sent to the 1^st defendant dated 16 May 2002, 18 June 2002 and 19 December 2002 in relation to which there was no reply.  I do not believe the 1^st defendant has raised a triable issue.  If it is the 1^st defendant’s case that there was more than one draw down and that it was material to his liability, he ought to have made that point clearly and condescend upon particulars.  The making of a forensic point at the end of the hearing before the master was not sufficient. 

11. After the hearing before the master, the 1^st defendant enquired about the sale of the mortgaged properties.  In response the 4^th affirmation of Yiu Ka Tung was filed on behalf of the plaintiff, providing details :

“3.    On 1 November 2004, Messrs Johnny K.K. Leung & Co., the solicitors for the 1^st Defendant, issued a letter to our firm asking, inter alia, for information of the sale proceeds of the mortgaged properties sold in Macau by the Borrower.  By a reply letter to Messrs Johnny K.K. Leung & Co dated 2^nd November 2004, our firm informed them, inter alia, that the updated status of the mortgaged properties / car parks of the Borrower are as follows:

‘(i)     In respect of the mortgaged car parks in Macau, the sale of the same was completed in early July 2004 and the sale price (before deduction of tax be paid to Macau government) is in the sum of HK$9,500,000.00.

(ii)     In respect of the mortgaged properties in Fei Tong Industrial Building (飛通工業大廈) in Macau, the sale was completed on or about 11 October 2004 whereby the net sale proceeds received by our client was in the sum of HK$45,200,000.00.’

There are now produced and shown to me marked ‘YKT-5’, copies of the letter from Messrs Johnny K.K. Leung & Co. dated 1 November 2004 and our firm’s reply letter dated 2 November 2004.”

12. Had the same enquiry been made about the draw down, no doubt the explanation given to me by Mr Liu could have been given.  

13. I have been supplied with calculation showing what was the net amount outstanding as of 21 October 2004.  The breakdown had also been supplied to the 1^st defendant.  The 1^st defendant had not challenged the accuracy of this breakdown.  Now that the net amount outstanding has been ascertained, I think I should make an order in favour of the plaintiff for that amount and I do so.  The plaintiff is to supply a figure brought to the date of this judgment.  I also order interest in favour of the plaintiff thereafter at the judgment rate.  As for the costs of this application, I make an order nisi that the plaintiff is to have the costs of this application, to be taxed if not agreed.