DAH SING BANK, LTD v. GOLDSTAR ASIA GROUP LTD AND OTHERS

HCMP 583/2017

[2018] HKCFI 957

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 583 OF 2017

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J U D G M E N T

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A. INTRODUCTION

1.  By order of Master M Wong dated 14 September 2017, judgment was entered against each of the defendants on the plaintiff’s claims in this mortgagee action.  Under the said order, the defendants are jointly and severally liable to pay the plaintiff the sum of HK$11,749,112.15 (plus interest).  Further, the 2^nd defendant is liable as owner to deliver to the plaintiff vacant possession of the property known as Flat A on the 6/F of Block 12 together with Car Park No. 132 and 133, Constellation Cove, 1 Hung Lam Drive, Tai Po, New Territories (the “Property”).

2.  On or about 4 October 2017, the 3^rd defendant and the 4^th defendant respectively issued separate Notices of Appeal to appeal against the said order, albeit out of time.  I would grant leave for the 3^rd defendant and the 4^th defendant to do so, having regard to the length of delay being only 6 days and the 3^rd and 4^th defendants not having the benefit of legal representation. 

3.  It is trite that the present appeal from a Master to a Judge in Chambers operates as a de novo hearing.

4.  No appeal has been lodged in respect of the judgment entered against the 1^st defendant and the 2^nd defendant.  In the circumstances, the present appeal only concerns the personal liabilities of the 3^rd defendant and the 4^th defendant as guarantors under the relevant and corresponding instruments.

B.  PLAINTIFF’S CASE AGAINST THE DEFENDANTS

B1. The Principal and Interest

5.  At all material times, the 3^rd defendant claims to be the spouse of the 4^th defendant (although this was denied at the hearing of this appeal).  The 3^rd defendant was the sole director of the 2^nd defendant and the 4^th defendant was the sole director of the 1^st defendant.

6.  The 2^nd defendant is the registered owner of the Property.

7.  In or about April and May 2014, the 1^st defendant and the 2^nd defendant were granted various facilities by the plaintiff against a charge on the Property and personal guarantees provided by the 3^rd defendant and the 4^th defendant as follows: –

(1)  The plaintiff issued as lender and the defendants countersigned as principal and guarantors respectively thereunder three facility letters dated respectively 14 April 2014, 14 April 2014 and 7 May 2014 for various loans and facilities in favour of the 1^st defendant and the 2^nd defendant.  The terms of the respective facility letters required amongst others (i) a legal charge against the Property and (ii) the provision of personal guarantees from each of the 3^rd defendant and the 4^th defendant.

(2)  Further, the 1^st defendant and the 2^nd defendant each executed Commercial Business Agreements respectively and thereby undertook to pay to the plaintiff on demand all moneys advanced or paid at any time due owing or incurred together with interest.

(3)  Pursuant to the terms of the said facility letters, the 3^rd defendant and the 4^th defendant each executed two separate instruments of guarantee in favour of the plaintiff dated 24 April 2014 respectively in respect of due payment of all liabilities of the 1^st defendant and the 2^nd defendant for unlimited amount for those executed by the 3^rd defendant (“D3’s Guarantees”) and up to HK$22,000,000.00 for those executed by the 4^th defendant (“D4’s Guarantees”).

(4)  Pursuant to the terms of the said facility letters, the 1^st defendant and the 2^nd defendant as principal and the 2^nd defendant as mortgagor also executed a mortgage in favour of the plaintiff dated 9 May 2014 (“Mortgage”) in respect of the Property as security for due payment of all moneys owing to the plaintiff by the 1^st defendant and the 2^nd defendant payable together with interest thereon.

8.  On 8 August 2015, the plaintiff revised the banking facilities to the 1^st defendant and the 2^nd defendant and issued another facility letter which was again endorsed by the 3^rd defendant and the 4^th defendant in their personal capacities and for and on behalf of the 1^st defendant and the 2^nd defendant.

9.  On 25 January 2016, the plaintiff again revised the banking facilities and issued the subject facility letter (the “2016 Facility Letter”) to the 1^st defendant and the 2^nd defendant, executed by the 1^st to 4^th defendants, containing inter alia the following material terms: –

(1)  the plaintiff granted the 1^st defendant’s Instalment Loan in the amount of HK$7,502,000.00 to the 1^st defendant to be repaid by 240 equal and consecutive monthly instalments at the interest rate of 1.5% below prime;

(2)  the plaintiff granted the 2^nd defendant’s Instalment Loan in the amount of HK$4,076,119.81 to the 2^nd defendant to be repaid by 160 monthly instalments at the interest rate of 2.85% below prime;

(3)  the facility was secured against a legal charge on the Property stamped for unlimited amount of general banking facilities;

(4)  the facility was secured against cross-guarantee by the 1^st defendant and the 2^nd defendant for unlimited amount;

(5)  the facility was secured against the personal guarantee executed by the 3^rd defendant for unlimited amount (i.e., D3’s Guarantees);

(6)  the facility was secured against the personal guarantee executed by the 4^th defendant up to HK$22,000,000.00 (i.e., D4’s Guarantees); and

(7)  any amount which is due but not paid on the due date(s) will be subjected to charge of overdue interest at the plaintiff’s prevailing rate (i.e., 13.25%, at the Prime Rate of 5.25% + 8%).

10.  Pursuant to the 2016 Facility Letter, the 1^st defendant and the 2^nd defendant were respectively granted loans by the plaintiff which they had subsequently defaulted.  The defendants failed to repay the outstanding sum thereunder despite various demands by the plaintiff. The fact that the 1^st defendant and the 2^nd defendant defaulted in repayment of their respectively loans under the 2016 Facility Letter does not appear to be in issue. 

11.  By reason of the matters stated above, the plaintiff contends that the defendants are jointly and severally indebted to the plaintiff in the total principal sum of HK$11,298,516.01 together with interest as at the commencement of these proceedings on 15 March 2017 as follows: –

Item	Principal (HK$)	Interest (HK$)
D1’s Instalment Loan	7,374,801.50	185,950.76
D2’s Instalment Loan	3,923,714.51	64,059.34
Total:	11,298,516.01	250,010.10

12.  The total outstanding principal balance together with interest due to the plaintiff as at 24 August 2017 (date of the 2^nd Affirmation of Tsang Wai Kuen) was HK$11,749,112.15. Again, these calculations have not been and are not being challenged.

C.  DEFENDANTS’ PURPORTED DEFENCE

13.  It remains unclear even now what is the precise factual/legal basis of their purported defence.

14.  I agree that on a proper reading of the 3^rd defendant’s evidence below, the 3^rd defendant plainly conceded that she was (i) aware of the fact she was a guarantor to the debts of the 1^st defendant and the 2^nd defendant; and (ii) aware of her obligations thereunder (despite her unparticularized contentions that the terms are ‘hard to understand’ and ‘more favourable to the bank’).  There is otherwise no allegation of non-est factum or undue influence or the like.

15.  The 3^rd defendant and the 4^th defendant also repeatedly made unparticularized complaints about the unsuccessful application for a HKMC SFGS loan under a previous facility letter.  I agree with the plaintiff that there is no substance in that either.

16.  To begin with, the present claims by the plaintiff are based on the 2016 Facility Letter executed in 2016 by which time the previous facility letter relating to the HKMC SFGS loan had long lapsed.  Accordingly, the alleged “lies” by the plaintiff (which is denied by the plaintiff) would be wholly irrelevant to their execution of the 2016 Facility Letter some two years later.  In any event, D3’s Guarantees, D4’s Guarantees and the Mortgage were required under the 2016 Facility Letter, which the 3^rd defendant and the 4^th defendant were prepared to provide again in 2016 by endorsing their signatures thereon for and on behalf of the 1^st defendant and the 2^nd defendant, and further in their personal capacity as guarantors.

17.  I agree that the learned Master was clearly right in brushing aside their unmeritorious allegations and to enter judgment in favour of the plaintiff.  The 3^rd and 4^th defendants’ complaints against the Master’s decision cannot be made out.

D.  CONCLUSION

18.  For the reasons stated above, the appeal by the 3^rd defendant and the 4^th defendant against the order of Master M Wong is dismissed.

19.  I see no reason why costs should not follow the event.  Accordingly, I order that the 3^rd defendant and the 4^th defendant do pay the plaintiff the costs of this appeal.  Such costs shall be taxed on the indemnity basis (pursuant to contractual terms in each of the guarantees), if not agreed.

20.  The above order as to costs is nisi and shall become absolute in the absence of any application within 14 days to vary the same.

21.  Should the 3^rd defendant and/or the 4^th defendant require translation of this judgment into the Punti language, they can contact my clerk to arrange an appointment for a court interpreter to verbally translate this judgment to them at the High Court at a mutually convenient date and time.