XCHRX CHEMICAL BANK v. LEUNG HON WAH RICKY and Another

1996, No. A2469

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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REASONS FOR JUDGMENT

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1. This is an appeal against the decisions of Master Woolley refusing the Defendants' application for a stay of these proceedings and allowing the Plaintiffs application for summary judgment under Order 14.

2. The Plaintiffs claim is shortly stated. It is for monies due under guarantees by the Defendants. There is no dispute of the validity of the guarantees nor that, prima facie, the debtor owes the money to the Plaintiff. The sole ground for a stay advanced by the Defendants is that they have issued proceedings in New York claiming money due to the company from the Plaintiffs on the premise that the Plaintiffs, in realising the company's assets, failed to carry out their duty to realise the best price available. Had they done so, it is contended, there would have been no call upon the guarantors. Accordingly the proceedings in Hong Kong should be stayed pending resolution of the proceedings in New York.

3. The first Defendant is resident in Hong Kong. The second Defendant has its place of business here. Neither has assets in New York. In the guarantee the guarantor "submits (irrevocably) .... to the non-exclusive jurisdiction over it and its property of any court of competent jurisdiction in Hong Kong and agrees to suit being brought in such courts, as the Bank may elect".

4. Mr. Chain, on behalf of the Defendants, has essentially based this appeal on the argument that the Defendants have a credible defence to the Plaintiffs claim, in that the Plaintiffs were in breach of their duty to realise the best price for the assets. If his argument succeeds, he says, the action in New York should proceed; if he fails, there is no basis for a stay in any event, as the Plaintiffs will have a judgment for the sum due under the guarantees.

5. The Defendants' case is based on affidavit evidence from three persons. I will deal with it under the headings of those three deponents.

Frank Nunziata (.p 111-114)

6. This deponent does not give his occupation or his relationship to or with the Defendants. He merely says he is not a party to the proceedings. The only information as to his status emerges in paragraph 3(c) of the second Affidavit of Jay Gartlan (p. 128) where it is stated that he is 5% shareholder and Vice-President of JMI - later stated to be an officer and salesman of JMI - "very familiar with the components and values of JMI's inventory". But Mr. Nunziata's affirmation is solely concerned with hearsay - what he says Mr. Petersen told him. He certainly does not depose to any matter relating to his own familiarity with "the components and values of JMI's inventory". Nor does he tell us anything about Petersen. Once again we have to go to Gartlan's affirmation to find out who he is. At paragraph 3(d) it is stated that he is Vice-President of JMI and "familiar with the components and values of JMI's inventory." He was later employed by a customer of JMI, "regularly purchased inventory from JMI and thus was fully familiar with the nature and retail selling prices of JMI's inventory". Surprisingly there is no affidavit by Petersen and therefore no first hand evidence of the matters of which he is alleged to be particularly experienced. Mr. Nunziata's affirmation is , I regret to have to say, quite useless.

Jay Gartlan

7. He is the 1st Defendant's attorney. He has sworn to two affirmations; one on 5th September 1996 and the other on the 7th November 1996. In the first (Pp. 115-118) he reviews the position of JMI and the guarantors. He makes statements as to the value of JMI's inventory without any supporting documentation or authoritative statements. He rehearses the argument and speaks of his interviews with a Ms. Leftkowitz and Ms. Nudlemen. In his second affirmation he identifies these two persons. There are no affirmations or statements by them, nor is there any explanation from Mr. Gartlan for this state of affairs. At paragraph 9 of that affirmation (p. 117) he opines - "If the finder of fact in the New York action is persuaded by the testimony of Mr. Nunziata, Ms. Leftkowitz and Ms. Nudlemen, ..... there will be no unpaid liability of the companies to Chemical Bank and thus no liability of Mr. Leung under his guarantee." But there is as yet no testimony from Ms. Leftkowitz and Ms. Nudlemen, and Mr. Nunziata's is worthless. Mr. Gartlan's first affirmation is singularly uninformative.

8. The second affidavit contains no evidence which supports the Defendants' argument. He does however refer to proceedings in the Supreme Court of the State of New York which he touched upon in paragraph 13 in the first affirmation. The affidavit of his "paralegal", Ms. Sudeshna Nayan to which he refers as accompanying his, is not in fact in the bundle and has not been presented to this court.

9. A copy of what purports to be proceedings by way of a complaint in the Supreme Court of the State of New York is attached to Mr. Gartlan's first affirmation. It has a date stamp of 20th June 1996. There is no record of any service of it on the Plaintiffs in this action. Indeed Mr. Hundsworth on behalf of the Plaintiffs has told me that according to his latest instructions there has still been no service on them.

10. Finally I turn to the affirmation of the 1st Defendant. It is very short and lacking in substance. It is largely concerned with "proceedings in the Supreme Court of the State of New York" exhibiting "copy complaint issued and served on the 18th February 1996." That affirmation was sworn on the 29th March 1996. Mr. Chain has confirmed that proceedings were issued on 20th June 1996 not the 18th February 1996. The 1st Defendant was clearly alleging a state of affairs which did not exist. I have put that in as neutral an expression as possible. So much for the evidence of the 1st Defendant.

11. There is also another aspect of the matter which Mr. Hundsworth has thrown into the arena. That is the Defendants' delaying tactics. This he says is just a ploy to avoid having to meet a judgment to which the Plaintiffs are entitled.

12. The Defendants' current solicitors asked for documentation which had previously been supplied to Gartlan in New York. The letters (p. 91 - 7th August 1995) from the Defendants' solicitors expressed surprise at the Plaintiff's demand. But Gartlan had been involved for the Defendants since March 1995 at the latest, and the Defendants' solicitors by letter of 14th December 1995 seemed to suggest that Gartlan had been consulted in the past but that he had never supplied the Defendants with the documentation; on the 14th February 1996 the Plaintiffs solicitors nevertheless supplied a further bundle of copy documents. As appeared from the 1st Defendants affirmation, a complaint had been "issued and served" by Gartlan on the 18th February 1996, four days later. The reasonable inference to be drawn is that Gartlan was continuing to be instructed by the Defendants who well knew what was going on and were not at all surprised by the Plaintiff's claim. It is probable that they were surprised by the plaintiffs "hot pursuit" in Hong Kong. In any event we know that the contention as to proceedings in New York was quite misleading.

13. If there is merit in the Defendants argument so as to raise a credible defence, I should not disregard it simply because the Defendants have not been straightforward or have been dilatory. Mr. Chain on their behalf concedes that they may have dragged their feet, that the 1st Defendant's affirmation is clearly defective, that at best the Defendants' evidence is hearsay, and that there are shortcomings in the Defendants' case, but invites me to conclude that there is merit in the Defence from the very fact of the liquidation sale to a single person. There is no evidence to support this. Mr. Gartlan sets out the principles involved in broad common place terms. There is no dispute about that. The dubious assertions about the New York proceedings are not in themselves crucial to the test I must apply. They may simply be a tactical ploy but I do question the "bona fides" generally in relation to this aspect. I have no hesitation in saying that I do not consider that the Defendants have a credible defence. The evidence does not even approach that standard and, if there were substance in the defence contended for, I see no reason why there should not have been at least one affirmation setting out valid authoritative material. There is none. Mr. Chain has valiantly tried to make bricks with straw but ultimately it is apparent that his material has let him down.

14. Accordingly these appeals are dismissed with costs.