ANTWERP DIAMOND BANK N.V v. PIYUSH BHAGCHAND KALA t/a “BEAUTY DIAM”

HCA2476/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2476 OF 2009

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JUDGMENT

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1.  This is an appeal by the defendant, appearing in person at this hearing, against the order of the Master given on 26 January 2011 ordering a Charging Order to be made absolute in respect of a property in which the defendant has a beneficial interest.

2.  At the same time, by the same Notice of Appeal dated 8 February 2011, the defendant seeks to appeal out of time against a judgment entered into by consent between the parties on 23 July 2010 giving judgment to the plaintiff on a Bill of Exchange in the amount of US$220,385.85 together with interests and costs.  At the time of the consent judgment, the defendant was represented by Messrs Wilkinson and Grist.  The judgment was perfected and filed herein on 9 August 2010.

Background

3.  The plaintiff claimed against the defendant on a Bill of Exchange drawn by Rupam Impex upon the defendant for the amount of US$220,385.85 (“the Bill”) which was made to the order of the plaintiff and payable at 120 days after acceptance.  The plaintiff became the holder of the Bill after paying Rupam Impex a sum of money on 6 April 2009

4.  The defendant accepted the Bill in Hong Kong on 7 April 2009.

5.  On the due date for payment, namely, 4 August 2009, the plaintiff presented the Bill to the defendant at his address in Hong Kong for payment but the defendant failed or refused to honour payment of same.

6.  In the Statement of Claim, the plaintiff also claimed against the defendant a further sum of US$1,291,993.50 under a Deed of Hypothecation dated 23 October 2006 in respect of five invoices issued by Rupam Impex to the defendant variously dated in 2008 and 2009.  However, this claim under the Deed of Hypothecation has not proceeded after filing of the Defence by the defendant nor has it been tried.  This claim is therefore still pending.

7.  A Defence was filed by the defendant on 5 February 2010.

8.  On 3 May 2010 the plaintiff issued an application for summary judgment under Order 14 but only in respect of the plaintiff’s claim on the Bill.  That application for summary judgment was fixed to be heard on 27 July 2010 before a Master.

9.  On 23 July 2010, a Consent Summons was filed herein in which the defendant, then represented by Messrs Wilkinson & Grist, solicitors, consented to judgment being entered against the defendant for the sum of US$220,385.85 (“the Judgment Sum”) being the amount claimed on the Bill together with interests at the rate stated therein and costs.

10.  On 23 July 2010 the Master made an order in terms of the Consent Summons and judgment was duly entered in favour of the plaintiff against the defendant as per the Consent Summons.  The Judgment was drawn up and filed on 9 August 2010 (“the Consent Judgment”).  It should be pointed out that the Judgment filed was wrongly dated 9 August 2010 when it should properly have been dated 23 July 2010 but nothing turns on this point in this appeal.

11.  The judgment not having been satisfied by the defendant, the plaintiff applied on 26 August 2010 under Order 49B, rule 1A of the Rules of the High Court to examine the defendant as a judgment debtor. The order was made thereon on 1 September 2010.

12.  On 22 December 2010 a Charging Order nisi was made in respect of Flat F on 47^th floor with Balcony and Utility Platform, Tower 2 of Grand Waterfront, No. 38 San Ma Tau Street, Kowloon, (“the Property”) being a property in which the defendant has a beneficial interest, and the defendant was ordered to show cause as to why a Charging Order absolute should not be made.

13.  The Charging Order was made absolute by order of Master de Souza on 26 January 2011.

14.  The defendant now appeals against the Charging Order Absolute made by the Master on 26 January 2011 and also seeks to appeal out of time against the Consent Judgment as ordered by the Master on 23 July 2010 pursuant to the Consent Summons dated the same date.

Appeal by the defendant

15.  In his Notice of Appeal, the defendant basically relied on two grounds of appeal :

(a) that the plaintiff has obtained judgment in the Debt Recovery Tribunal in Mumbai, India for an amount of Rs.24,90,69,487.18 which reads as Rupees Twenty Four Crores Ninety Lacs Sixty Nine Thousand Four Hundred Eighty Seven and Paise Eighteen only (if properly translated into English it should read as two hundred forty-nine million sixty-nine thousand four hundred eighty-seven rupees and eighteen paise ) with interests against Rupam Impex (this amount in Indian rupees is equivalent to about US$5.4 million); and

(b) there has been deliberate non-disclosure by the plaintiff as well as lies told by the plaintiff on oath.

16.  At the hearing, the defendant indicated a further ground of appeal which is that the Master when making the Charging Order Absolute had failed to take into account the fact that the Property had been mortgaged to the DBS Bank.

17.  It was submitted by the defendant that the judgment obtained by the plaintiff in Mumbai against Rupam Impex (by way of Settlement) was a judgment dated 25 October 2010 and the the defendant only came to know of the proceedings in Mumbai after it had consented to Judgment for the Judgment Sum.  That judgment clearly provided the means by which the plaintiff is to receive the judgment sum and the value of the security held by the plaintiff in the present Indian property market is much more than the original sanctioned loan.

18.  It was further submitted by the defendant that the judgment and the proceedings in India were never disclosed by the plaintiff to the court in Hong Kong, nor were the Hong Kong proceedings and Consent Judgment made known to the court in Mumbai.

19.  The defendant further relies on a document (being Annexe 2 to the defendant’s Notice of Appeal) used in the proceedings in the courts of Mumbai, in which the plaintiff had in fact stated by way of Declaration that :

“The Applicant [plaintiff herein] further declares that the matter regarding which this Application has been made is not pending before any Court of Law or any other Authority, or any other Bench or the Tribunal.”

20.  The defendant submits that this declaration by the plaintiff in the Mumbai courts show that the plaintiff has lied under oath and hiding material facts and also shows that the plaintiff wants to recover the money from both parties for the Bill.

21.  It was also submitted by the defendant that the borrower in India having declined to furnish a Power of Attorney to the plaintiff to pursue the claim in Hong Kong, the plaintiff was not entitled to recover the Judgment Sum from the defendant under the Deed of Hypothecation since jurisdiction was limited to India, the Deed of Hypothecation having been signed in India.  In this respect, it is the defendant’s contention that the Deed of Hypothecation is the basis for the plaintiff’s claim on the Bill.

Plaintiff’s contention

22.  The plaintiff opposes this appeal by the defendant totally.

23.  In opposing this appeal by the defendant, the plaintiff has, quite rightly in my view, taken no point as to the defendant being out of time in respect of the appeal against the Consent Judgment.  The plaintiff was content to rely on the substantive merits of the case in submitting that the appeal should be dismissed.

24.  It is not disputed by the plaintiff that the plaintiff has obtained a judgment in the Debt Recovery Tribunal of Mumbai India against Rupam Impex.  It is also not disputed by the plaintiff that the judgment obtained in Mumbai includes the claim against Rupam Impex as drawer of the Bill.

25.  However the plaintiff submits that the fact that judgment has been obtained in Mumbai against the drawer of the Bill cannot affect the Consent Judgment obtained against the defendant as acceptor of the Bill of Exchange since the acceptor and drawer of a bill of exchange are severally liable under it.

26.  As for the Charging Order Absolute, the plaintiff submits that there is no evidence to show that the plaintiff has actually recovered the Judgment Sum in India against Rupam Impex.  The fact that a judgment has been entered in Mumbai does not equate with successful recovery under that judgment.

27.  In this respect, the plaintiff was prepared to give an undertaking to file a further affidavit to the effect that it had not recovered the Judgment Sum to date under the judgment obtained in Mumbai and also to undertake to the court that should the plaintiff be successful in recovering the Judgment Sum in India before enforcing the Charging Order Absolute, the plaintiff will apply of its own accord to discharge the Charging Order Absolute.

28.  The plaintiff therefore submits that there is no basis to set aside the Charging Order Absolute.

29.  As for the alleged deliberate non-disclosure of facts, it was submitted by the plaintiff that the alleged non-disclosure by the defendant, in so far as it relates to the declaration made by the plaintiff in the Mumbai court is demonstrably untrue on the facts by reason of the fact that the proceedings in Mumbai were commenced in August 2009 while the present proceedings were only commenced in Hong Kong on 15 December 2009.

30.  Therefore the plaintiff submits that the declaration made in the proceedings in Mumbai were entirely true at the time it was made.

31.  As for the non-disclosure of the Deed of Hypothecation, it was submitted that document has no bearing on the plaintiff’s claim under the Bill, and therefore the Consent Judgment as well as the Charging Order as well.

32.  Therefore the allegations of non-disclosure by the defendant are wholly irrelevant.

33.  As to the additional ground of appeal relied on by the defendant, namely that the Master had failed to take into account the fact that the Property in respect of which the Charging Order Absolute is made is already mortgaged to the DBS Bank, the plaintiff submits that the Charging Order Absolute will simply has to rank in priority to the mortgage to the DBS Bank and is therefore not a factor or reason for not making absolute the Charging Order nisi.

34.  The plaintiff asks that the appeal by the defendant be dismissed.

Decision

35.  The plaintiff, at the hearing of the appeal has given an undertaking through its counsel to file the affidavit of Fung Wing Yin Valarie exhibiting the 2^nd Affirmation of Vinod Kumar Sharma which was affirmed on 22 February 2011 in Mumbai and which is to the effect that although the plaintiff has obtained a judgment in Mumbai against Rupam Impex, Rupam Impex has failed to pay any of the instalments of the judgment sum ordered and that the plaintiff has not recovered any money under the Mumbai judgment at all.  Furthermore the plaintiff has undertaken in that 2^nd Affirmation of Vinor Kumar Sharma not to double recover the Judgment Sum from the defendant under the Consent Judgment and from Rupam Impex under the Mumbai judgment, by not taking any step to enforce the Charging Order Absolute if it can successfully recover full payment from Rupam Impex under the Mumbai judgment.

36.  Upon that undertaking being given to the court, the defendant’s appeal must be dismissed.

37.  The Consent Judgment herein relates only to the plaintiff’s claim on the Bill against the defendant as the acceptor of the Bill.  As such the defendant is primarily liable for the Bill which was accepted by the defendant on 7 April 2009 when it was presented to the defendant for acceptance.

38.  The cause of action on the Bill is a wholly separate cause of action and distinctly separate from the claim on the Deed of Hypothecation.  The bases for the two claims are also separate and distinct.

39.  If I understood the defendant correctly, it was submitted by him that since no Power of Attorney was given to the plaintiff under the Deed of Hypothecation by Rupam Impex, the plaintiff was not entitled to bring any claim in the Hong Kong courts, even on the Bill since the Bill is based on the Deed of Hypothecation.

40.  This submission by the defendant is wholly misconceived.

41.  The claim on the Bill is based on the acceptance of the Bill by the defendant and its subsequent dishonor by the defendant and the fact that the Bill was made payable to the plaintiff and the plaintiff was the holder of the Bill at the time when it was dishonoured by the defendant, which is beyond dispute.

42.  I also accept the submission by the plaintiff that the drawer and the acceptor of a bill of exchange are severally liable for the bill.  (see Chan Chiu Hung v Pantex Garment Factory (Unreported, DCCJ164/1973.  10 January 1974) at para. 10–11 per HH Judge Davies, citing Duncan Fox & Co. v North & South Wales Bank (1880) 6 App Cas 11).

43.  In this respect, there can be no complaint that a claim was made in the Mumbai court against Rupam Impex as drawer of the Bill and a different claim made in Hong Kong against the defendant as the acceptor of the Bill.  The claim in the Mumbai court against Rupam Impex as the drawer should not affect the liability of the defendant to the plaintiff as the acceptor under the Bill.

44.  As for the Charging Order Absolute, the only possible concern which arises is that there should be no double recovery.

45.  Now that the undertakings referred to above has been given by the plaintiff, this matter has been taken care of and would regulate itself in the sense that if there should in future be any evidence to show double recovery, the matter can be brought back to the court to deal with on the basis of the undertakings given.

46.  As for the non-disclosure alleged by the defendant, once again I have no hesitation in accepting the submissions of the plaintiff on this point in its entirety.

47.  In so far as the declaration given in the Mumbai court is concerned, that order containing the declaration was dated 25 October 2009, a time before the Hong Kong proceedings were started. As such that declaration at the time it was made can only be true.

48.  As for the alleged non-disclosure of the Deed of Hypothecation in these proceedings, for the reasons already given above, that document can have no bearing to the plaintiff’s claim on the Bill and therefore irrelevant to the Consent Judgment and the Charging Order Absolute.

49.  Finally, the plaintiff is also correct in its submission on the point that the Charging Order Absolute will have to rank in its priority behind the mortgage to the DBS Bank in relation to the Property.

50.  For the above reasons, there is no good grounds upon which I should set aside the Consent Judgment or the Charging Order Absolute.

51.  Accordingly this appeal by the defendant is dismissed and all the orders made by the Masters below in relation to the Consent Judgment and the Charging Order Absolute will stand.

Costs

52.  I can see no good reason why costs should not follow the event in respect of this appeal.

53.  Accordingly, there will be a costs order nisi that the defendant pays the plaintiff its costs of this appeal to be taxed if not agreed.

54.  For the benefit of the defendant who appears in person, this costs order nisi will automatically be made absolute if within 14 days after this Judgment is delivered/handed down, there is no application made to vary the terms thereof.