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HCA015962/1999
HCA 15962/99
Headnote
Application to strike out Amended Writ of Summons and Amended Statement of Claim. The matters raised were matters which could have and should have been raised in earlier proceedings where judgment had been entered and an order for possession had been made. There had been no appeal against the judgment and the orders in the earlier proceedings. Abuse of the process of the court. Amended Writ of Summons and Amended Statement of Claim struck out. Action dismissed with costs.
HCA 15962/99
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 15962 OF 1999
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VANKIN INVESTMENTS LIMITED |
Plaintiff |
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AND |
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WING LUNG BANK LIMITED |
Defendant |
Coram: Hon. Sakhrani J in Chambers
Date of Hearing: 21 February 2000
Date of Judgment: 21 February 2000
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J U D G M E N T
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1. This is an application by the Defendant ("the Bank") to strike out the Amended Writ of Summons and Amended Statement of Claim on the ground that it is frivolous and vexatious and is an abuse of the process of the Court.
2. The background facts are that by a loan agreement dated 24 October 1997, the Bank, as lender, agreed to grant to the Plaintiff ("Vankin"), as borrower, certain loan facilities up to HK$71,250,000 ("the loan agreement"). Under clause 2.02 of the loan agreement, the loan facilities comprised of a Tranche A facility up to the sum of HK$30,000,000 towards the payment or financing of Vankin's costs of payment of construction costs for the completion of the project at the property known as all that piece or parcel of ground registered in the Land Registry as New Kowloon Inland Lot No. 4016 ("the property") and a Tranche B facility up to HK$41,250,000. It was also provided in clause 2.02 that the Bank should not have any responsibility to see to the application of the proceeds by Vankin.
3. On the same day and to secure the indebtedness advanced by the Bank, Vankin executed a mortgage dated 24 October 1997 in favour of the Bank. Under the mortgage, it was expressly stipulated that until certain conditions were complied with by Vankin, the property was not to be a security for the Tranche B loan. There is no dispute that the conditions were not complied with and that the Tranche B loan was not subject to the mortgage. It was only the Tranche A loan that was secured under the mortgage.
4. It is the Bank's case that pursuant to the loan agreement, the Bank advanced to Vankin :
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the sum of HK$5,090.295.18 on 28 April 1998 under the Tranche A facility; and |
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the sum of HK$41,250,000.00 on 25 October 1997 under the Tranche B facility. |
5. Vankin defaulted in repayment of both the Tranche A and Tranche B loans advanced by the Bank under the loan agreement. This led to the Bank instituting High Court Action No. HCA 10038/98 against Vankin and also others as guarantors ("the lst action'). In the Statement of Claim in the 1st action, the Bank expressly pleaded in para. 12 that the amounts advanced to Vankin pursuant to the loan agreement were :
"the sum of HK$5,090,295.18 on 28th April 1998 under the Tranche A facility and the sum of HK$41,250,000.00 on 23rd October 1997 under the Tranche B facility."
And in para. 15 it was expressly pleaded that :
"As at 5th May 1998, the principal amount outstanding under the Tranche A and Tranche B loans were, respectively, HK$5,090,295.18 and HK$32,409,704.82 (the 1st Defendant having repaid part of the principal amount under the Tranche B loan)."
6. Vankin filed a Defence in the 1st Action. It is important to observe that both paras. 12 and 15 of the Statement of Claim as set out above were expressly admitted. In its Defence, Vankin, whilst admitting the Tranche A and Tranche B loans, alleged a Repayment Agreement whereby it was claimed that the Bank in effect had agreed to give it indulgence in making repayment. This allegation was denied by the Bank. The Bank duly brought Order 14 proceedings against Vankin for summary judgment. When the Order 14 application was heard on 9 November 1998, Vankin abandoned the Defence, and through its solicitors attending, submitted to judgment in the 1st Action. On 6 November 1998 Vankin's solicitors had written to the Bank's solicitors informing them that Vankin would not oppose the Order 14 application and would agree to judgment being entered against it.
7. The judgment was filed on 18 November 1998 and it was adjudged that all the defendants, including Vankin, do pay the Bank, inter alia, "(1) the sum of HK$39,027,731.10". The breakdown for that sum is contained in para. 17 of the Statement of Claim and is as follows :
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(A) |
Tranche A Loan (principal amount) |
HK$ |
5,090,295.18 |
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Interest |
HK$ |
53,417.00 |
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(B) |
Tranche B Loan (outstanding principal) |
HK$ |
32,409,704.82 |
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Interest |
HK$ |
1,474,314.10 |
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Total : |
HK$ |
39,027,731.10 |
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This was the sum said to be owing as at 31 May 1998.
8. Apart from the 1st action, the Bank also brought proceedings under the mortgage to take possession of the property with a view to selling the same. An Originating Summons was taken out by the Bank against Vankin in HCMP 863/99 on 8 February 1999 ("the mortgage action").
9. In an affirmation in support filed on behalf of the Bank, the Tranche A and Tranche B loans were expressly referred to. Para. 15 of the affirmation of Chan Kin Hing stated as follows :
"As at 5th May 1998, the principal amount outstanding under the Tranche A and Tranche B loans were, respectively, HK$5,090,295.18 and HK$32,409,704.82 (the Defendant having repaid part of the principal amount under the Tranche B loan)."
These amounts were never disputed by Vankin. On 24 June 1999 Master Jones made an order for possession of the mortgaged property in favour of the Bank. That order was duly executed by a Writ of Possession and the Bank took possession of the mortgaged property on 30 August 1999.
10. Having taken possession of the property, the Bank took steps to sell the property by public tender. The property at that time was a construction site. The public tender was due to close at 12:00 noon on 8 October 1999. Shortly before the closing of the public tender, Vankin took out a summons on 14 September 1999 for a stay of execution of the order of Master Jones alternatively, for a stay of the exercise of the power of sale by the Bank. It is important to note that in the supporting affirmation on behalf of Vankin, Mr. Ma Ka Yan accepted that the mortgage covered only the Tranche A loan and it was accepted by Vankin that the figures set out in the affirmation of Chan Kin Hung, that is HK$5,610,674.28 as at 18 March 1999, was accepted. Mr. Ma went on to say in para. 12 of his affirmation that :
"Whilst the Plaintiff's action cannot be criticized, on behalf of (Vankin), I will like to apply for settlement of the outstanding secured indebtedness of the HK$5,610,674.28 with interest and costs."
Clearly, Vankin was not criticizing the Bank for its action but was merely seeking to make repayment by certain proposed instalments as set out in the affirmation. The hearing of Vankin's application for stay of execution was opposed and was heard by Master Lok on 5 October 1999 and was dismissed. The sale by public tender proceeded and the public tender was closed on 8 October 1999. On the same day, Vankin issued this action and immediately caused the Writ of Summons to be registered in the Land Registry as a lis pendens.
11. Because of the lis pendens, the Bank's application to strike out the original Writ of Summons and Statement of Claim was fixed to be heard before a judge as soon as possible. The matter came before Deputy Judge Longley on 1 November 1999. At that hearing, Counsel then acting for Vankin informed the Court that Vankin would no longer be pursuing a claim against the mortgaged property and would no longer be seeking any relief in terms of prayers 1 and 2 of the original Statement of Claim. Counsel also gave an undertaking to amend the Statement of Claim by deleting prayers 1 and 2 and to vacate the lis pendens. The hearing was then adjourned to a date to be fixed. The Statement of Claim was then amended and prayers 1 and 2 were deleted.
12. As Counsel had informed Deputy Judge Longley that Vankin would no longer be pursuing a claim against the mortgaged property and abandoned prayers 1 and 2 of the prayer for relief, paragraphs 26 to 28 of the Amended Statement of Claim can no longer be relevant.
13. Vankin's remaining claims in this action as set out in the Amended Statement of Claim is for damages. The Amended Statement of Claim does not clearly spell out Vankin's claims and causes of action. However, para. 8 pleads that the Bank owes :
" a contractual and/or tortious duty to the Plaintiff to ensure and/or advance the Tranche A loan and Tranche B loan to be used not just in the amount as agreed but also in accordance with and for the exclusive and specific purpose for which the 2 loans were intended to be advanced and drawndown under the Loan Agreement."
14. The "tortious duty" is neither specified nor particularised. Paras. 9 and 10 plead that the Bank had no right to set off by applying the Tranche A loan to pay off or settle the Tranche B loan or combine the Tranche A loan and Tranche B loan, and that the Bank did not have a general or banker's lien on the Tranche A loan in order for the Bank to set off the indebtedness of Vankin under the Tranche B loan. But nowhere is it pleaded that the Bank has in fact set off, either in law or in equity, the indebtedness of Vankin by applying the Tranche A loan to pay off the Tranche B loan.
15. Paras. 16 to 22 of the Amended Statement of Claim suggest that although the Bank transferred the sum of HK$5,090,295.18 to Vankin's account, this was not a Tranche A loan. This is expressly asserted in para. 22. And in paragraph 24 it is pleaded :
" In the premises, the Plaintiff simply did not owe a Tranche A loan of any amount to the Defendant."
Paragraph 25 also pleads :
" As a result of the Defendant's conduct pleaded in paragraphs 17, 19, 20 and 21 hereof, the construction and development of the Building was substantially and seriously obstructed, and progress withheld. The Plaintiff thereby suffered tremendous loss and damages."
This bare allegation is wholly unparticularized.
16. The crux of the matter in this action is that it is now denied by Vankin that it owes the Tranche A loan to the Bank at all. Apparently, Vankin does not dispute that the sum of HK$5,090,295.18 had been transferred by the Bank into its loan account on about 28 April 1998. However, it now maintains that the advance was not a Tranche A advance. And it seeks damages.
17. The claim for damages based on the allegation that the sums advanced by the Bank were not Tranche A loans are matters that could and should have been raised in the earlier proceedings. They were not raised in the 1st action nor in the mortgage action. Judgment has already been entered in the 1st action. An order for possession has already been made in the mortgage action. Also, there was an application for stay of execution of the order of Master Jones but this was dismissed.
18. It is clear to me that Vankin could have and should have raised any dispute over the Tranche A loan in the earlier proceedings. Vankin has not appealed any of the earlier judgment or decisions made in the earlier proceedings. Vankin is bound by the earlier judgment and orders. Vankin is also bound by the admissions made in the earlier proceedings that a Tranche A loan was advanced by the Bank and the amount thereof. It is not open to Vankin to seek to dispute the Tranche A loan. It is not open to Vankin to relitigate that issue by this action.
19. The law in this regard is settled and clear. The Privy Council in Yat Tung Investment Co. Ltd. v. Dao Heng Bank Ltd. [1975] AC 581 was concerned with what has now been commonly known as res judicata in the wider sense. In the speech of Lord Kilbrandon at p.590, he said this :
" But there is a wider sense in which the doctrine may be applied to, so that it becomes an abuse of the process to raise in subsequent proceedings matters which could and therefore should have been litigated in earlier proceedings. The locus classicus of that aspect of res judicata is the judgment of Wigram V.C. in Henderson v. Henderson (1843)3 Hare 100, 115, where the judge says :
"...... where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time."
The shutting out of a "subject of litigation" - a power which no court should exercise but after a scrupulous examination of all the circumstances - is limited to cases where reasonable diligence would have caused a matter to be earlier raised; moreover, although negligence, inadvertence or even accident will not suffice to excuse, nevertheless "special circumstances" are reserved in case justice should be found to require the non-application of the rule."
20. I would observe that negligence and inadvertence are not sufficient to be classified as "special circumstances" as stated by Lord Kilbrandon.
21. Vankin seeks to put the blame on its former solicitors for its earlier admissions in the 1st action and the mortgage action. It is said that Vankin did not receive proper and accurate legal advice. In the case of Talbot v. Berkshire County Council [1993]3 WLR 708, it was held by the English Court of Appeal that the judge at first instance erroneously sought to divorce the activity of the Plaintiff from its solicitors. As Stuart-Smith L.J. said at p.716 :
"It may not infrequently be the case that the negligence or inadvertence of which Wigram V.C. spoke will be that of the legal advisers instructed by the party rather than the party himself. But the action or inaction of the agent is that of the principal."
22. The reference to Wigram V.C. was a reference to the passage of Wigram V.C. in Henderson v. Henderson [1843]3 Hare 100 at 115 which was quoted by Lord Kilbrandon in Yat Tung Investment Co. Ltd. v. Dao Heng Bank Ltd. as set out above.
23. So, it is clear, in my judgment, that whether or not there was negligence or inadvertence on the part of the former solicitors of Vankin, that is not a matter which is relevant to consider. This is not a "special circumstance" to require the non-application of the rule propounded in Yat Tung Investment Co. Ltd. v. Dao Heng Bank Ltd. as set out above.
24. There must obviously be finality to litigation. I am satisfied that to allow Vankin to continue on with its action against the Bank is an abuse of the process of the court. I make an order that the Amended Writ of Summons and the Amended Statement of Claim be struck out and the action against the Bank be dismissed. Costs of the action including the costs of the application be to the Defendant.
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(Arjan H. Sakhrani) |
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Judge of the Court of First Instance |
Representation:
Ms Candace E. Fong instructed by M/s Cheng, Chan & Co. for Plaintiff
Mr Horace Wong instructed by M/s Johnson, Stokes & Master for Defendant
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