XCHRX WUI FU DEVELOPMENT CO LTD. v. TAK YUENCONSTRUCTION CO LTD.

1998, No. CT40

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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JUDGMENT

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1. On 27 November 1997, Sears, J. made an order in the following terms -

"AND UPON the Defendant by its Counsel's undertaking that the Defendant as from 28th November 1997 will not whether by itself; its directors, servants or agents or otherwise howsoever remain on, or interfere with the Plaintiff's enjoyment of; the site/property at Nos.39-41 Hill Road, Hong Kong until the trial of this action.

AND UPON the Plaintiff by its Counsel's undertaking to this Court (1) to abide by any Order this Court may make as to damages in case this Court shall hereafter be of opinion that the Defendant by reason of this Order shall have sustained any which the Plaintiff ought to pay; and (2) during the pendency of these proceedings to have the bank guarantees referred to in paragraph (1) of this Order renewed from time to time or to provide alternative sufficient securities in a form either to be agreed between the parties or failing agreement to be decided by the Court.

IT IS ORDERED AND DIRECTED that

1. The Plaintiff do provide a bank guarantee in the sum of HK$l.4M for potential claim by the Defendant and do provide fortification of the Plaintiff's undertaking as to damages in the sum of HK$1M by way of a bank guarantee;

2. There be liberty to apply . . ."

2. In spite of the fact that, as can be seen from its terms, the order was granted on the basis of a mutual exchange of undertakings, and that Mr Chain admits that the plaintiff's financial position has worsened since the order was made, the plaintiff now seeks to be released, wholly and partly, from its undertaking and for the order to varied accordingly. Mr Chain says that the basis of his application is that, if the release is granted and the order varied, "the evidence shows that the defendant will have the same degree of protection". The emphasis is mine. What the plaintiff proposes in place of the guarantees is that Mr Wong, the principal shareholder of the plaintiff, would undertake not to recall the sum of $18.6 million owed to him by the plaintiff, that the plaintiff would not further charge its only substantial asset and that steps be taken to cause the sum of $2.4 million, after paying the mortgagees, to be held as a stake by the plaintiff's solicitors. Even assuming everything in doubt in favour of the plaintiff, the fact of the matter is that the plaintiff is not, according to its audited accounts as at 31 October 1998, in a healthy financial state, and there is, in my view, a considerable risk, given the volatile nature of the Hong Kong real property market, that the plaintiff may not have sufficient assets to cover the sum presently guaranteed at the end of the day. Certainly, it cannot be accepted that, if the guarantees disappear, the defendant will have the same degree of protection as it would have with the guarantees.

3. It seems to me, in these circumstances, especially having regard to the fact that the only change in the situation since the undertaking to supply the guarantees was given is that the plaintiff's financial position has deteriorated so that the need for the guarantees is all the greater, that it would be quite wrong to require the defendant to continue to be bound by the order but without the reciprocal guarantees undertaken by the plaintiff.

4. In the result, the plaintiff's application is dismissed. I make an order nisi that the plaintiff pay the defendant's costs of this application.