HWANG YIOU KWA, VICTOR AND ANOTHER v. MORGAN GUARANTY TRUST COMPANY OF NEW YORK

Courts practice and procedure - summary procedure under 0.14 - conditional leave to defend.

Since it would be a wrong exercise of discretion under R.S.C. 0.14 to impose on a defendant, as a condition of granting him leave to defend, a financial condition impossible for him to fulfil (M.V. Yorke Motors v. Edwards [1982] 1 W.L.R. 444), in appropriate cases the Court should give a reasonable opportunity to the defendant to adduce evidence to that end.

The Court of Appeal, having read affirmations showing the defendants' means, reduced the sum to be paid into Court (or in respect of which security was to be furnished), from $11,600,000 to $500,000.

IN THE COURT OF APPEAL

BETWEEN

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JUDGMENT

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Kempster, J.A. (delivering the judgment of the Court):

1. By Writ indorsed with Statement of Claim issued on 27th December 1984 the plaintiffs, who are bankers, claimed from the first defendants as borrowers the sum of HK$47,500,000 with interest and like sums from the second, third and fourth defendants as guarantors.

2. The claims derived from the terms of an agreement in writing dated 16th June 1982 as modified by supplemental agreements dated 27th June and 3rd December 1983; all confirmed in writing by the second, third and fourth defendants.

3. On 19th January of this year the plaintiffs issued a Summons for summary judgment as against the first, third and fourth defendants, pursuant to which - evidence having been filed only on behalf of the plaintiffs and of the third defendants - Master Hansen entered judgment against the first defendant on 4th February. He ordered that as regards the third and fourth defendants the summons be adjourned for hearing by a judge.

4. On 22nd March judgment was signed against the second defendants in default of notice of intention to defend.

5. Then on 24th April Mayo, J. gave the third and fourth defendants conditional leave to defend and gave directions. He found himself almost minded to enter judgment against them but said that Mr. Richard Mills-Owens, who appeared for those defendants, had satisfied him that there were triable issues. But the defences, he thought, were shadowy and he intimated that he was about to impose onerous conditions. At that juncture, Mr. Mills Owens invited the learned judge to take one of two alternative courses; either to stand the matter over for two weeks so that evidence as to the means of these two defendants might be filed or alternatively to make an order and give liberty to apply in relation to their ability to meet such conditions as were imposed. That invitation was either not understood or not accepted by the learned judge. He was invited by Mr. Faulkner on behalf of the plaintiffs to make his conditional order forth with and that he did. The order was that the third and fourth defendants should have leave to defend providing they paid into court or provided adequate security in, the sum of HK$11,600,000 within 30 days. That period of 30 days has been extended by Mayo, J. until today.

6. The basis upon which the application was made for the judge to consider the means of these defendants was that if an impossible condition were imposed the judge would be defeating his own conclusion that there were issues warranting trial. When granting leave to defend on condition that money be paid into court or that security be given the figures in question must be such as are within the capacity of the defendant to meet.  M.V. Yorke Motors v. Edwards ⁽¹⁾. That principle is applicable to the terms of the instant case as this court has already indicated by giving the third and fourth defendants leave here to adduce the evidence as to their means which they had wished to place before Mayo, J.

7. As we explained when ruling in relation to evidence it must not be thought that every imposition of onerous conditions calls for the meticulous examination of the financial resources of the defendant nor as a general rule, should those advising parties seeking leave to defend commit their clients to the expense of preparing such evidence prior to an intimation from the Court that it intends to take that course.

8. The plaintiffs have had the principal affirmations of the defendants for a week. At its face value this evidence shows a joint ability to give security in the sum of HK$½ million and no more. Mr. Ching, for the plaintiffs, invites us not to take this evidence at its face value. He implicitly, at least, refers us to that part of Lord Diplock's speech at p. 449 where he indorsed the terms of the respondent's written case in that appeal. It read:

Since there was no material before the learned judge which would have enabled him to exercise a discretion in relation to this aspect of the matter we, having read evidence, must exercise that discretion ourselves. We have considered the possibility that men who may have no capital or little income may be able to raise substantial sums by reason of their business associations or the affections and wealth of their families; factors obviously very much in the mind of those who drafted the evidence which has been read. We have considered the submissions made by Mr. Ching in relation to this evidence and in particular his emphasis on certain lacunae, on certain discrepancies and on such odd circumstances as the two defendants having their living and entertainment expenses paid for by another family company linked to the first defendants. The key issue for us is whether or not these two defendants have put sufficient and proper evidence before us and have made full and frank disclosure. That is their obligation if they seek to invoke the principle laid down by the House of Lords in the Yorke Motors' case ⁽¹⁾. It is true that their current assets are wholly inappropriate for guarantors of such large sums as were lent by the plaintiffs. But we are entitled to take judicial notice of the fact that in Hong Kong, over the last two or three years, the incomes of individuals as well as of corporations have fluctuated violently. Doing the best we can we feel bound to accept the evidence put before us and accordingly to allow the appeal and to substitute a figure of HK$500,000 for that imposed by the learned judge; such security to be given either by payment in or to the satisfaction of the Registrar within 14 days.

(1)    [1982] 1 W.L.R. 444