UCO BANK v. GRAND WIN GROUP LTD AND OTHERS

HCA 599/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 599 OF 2011

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REASONS FOR DECISION

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1. In this action the plaintiff bank sues the defendants upon a credit facility arrangement whereby the 1^st defendant is the principal indebted to the bank in the sum of US$245,835.78 plus interest running at the rate of 9% per annum.

2. The 1^st defendant company was incorporated in Hong Kong in 2002 and traded in the region from in or about that year according to the letter sent and signed by the 2^nd defendant on behalf of the 1^st defendant company in April 2008, despite an odd and unbelievable assertion by him in one of his affirmations.  I make this a finding of fact at the outset lest there be any misunderstanding.  The 2^nd and 3^rd defendants are the sole directors and shareholders of the company.

3. A credit facility granted by the bank initially in July 2008 was renewed in July 2009.  It was accepted on behalf of the 1^st defendant by the 2^nd defendant, a Mr Haresh Vasandani on both occasions.

4. There were also separate guarantees signed by both defendants on or about 22 July 2008.

5. To complete the relevant documentation at this stage there exists a letter on the 1^st defendant’s headed notepaper bearing the Hong Kong address “1/Floor, Mau Lam Commercial Building, 16‑18, Mau Lam Street, Yau Ma Tei, Kowloon” with an e‑mail address and a web‑site.  The letter is dated 29 April 2008, almost three months before the grant of the facilities.  It is sent to the plaintiff bank and is headed “REG BANK FACILITIES”.

6. The letter bears the 1^st defendant’s chop with the 2^nd defendant’s signature “for and on behalf of the company”.  It also sets out, as one would expect, something of the history and nature of the business.  Some of the contents are worth repeating here:

“We would like to introduce our company as an export company registered in Honkgong (sic) since year 2002 … and now have head office in Hong Kong and representative office in Guangzhou–China since year 2002.”

“All the promoters/directors are well-experienced in export bussiness (sic) and in charge of our company. Mr Harish Vasandani (the 2^nd defendant) have experience of more than 10 years in export trade and marketing …”

7. In view of some of the 2^nd defendant’s later assertions by way of affirmation, the cited contents of the letter signed by him have some significance.

8. On or about 21 March 2011 the bank sent letters to all defendants demanding payment of the indebtedness and, in view of the latters’ failure, commenced proceedings by Writ on 1 April 2011 suing the 2^nd and 3^rd defendants on their respective guarantees.  The 2^nd defendant’s travel records, which are not conclusive, show that he was in Hong Kong from 18 to 26 March so he would have received those letters in the ordinary course of the post.

9. On 4 April 2011 service was effected upon the 1^st defendant company at its registered office by Lau Hoi Man’s personal visit.  That was effective service and the document was not returned.

10. On the same date Mr Lau sent by registered post copies of the Writ to the 2^nd and 3^rd defendants individually, to the same address, being the one from which the 2^nd defendant had written the letter of 29 April 2008 to the bank requesting the facilities in the first instance.  None of the defendants had notified the bank at any stage of any other address at which it could be contacted.  I am satisfied that the address to which the documents were sent was the last known address. 

11. The defendant company did not respond to the Writ and, accordingly, on 9 May 2011 the plaintiff entered final judgment against it.

12. The envelopes, sent to the 2^nd and 3^rd defendants with the Writs inside, were returned by the Post Office on 12 April 2011.  The envelopes had been opened.  The plaintiff has not adduced any other information concerning these envelopes but the fact that they were opened suggests the intended recipients were curious to know what was inside them.

13. Efforts were made to effect personal service on the 2^nd and 3^rd defendants by visits to the company’s registered premises on 12 and 20 May 2011.  Finally appointment letters were sent to the defendants at the same address on 23 May notifying a visit on 30 May.  That visit proved to be unfruitful.  None of these letters was returned.  The 2^nd defendant was certainly in Hong Kong on 2 June only a few days later, according to the travel records.

14. A search at the Land Registry revealed that the 1^st defendant’s registered office was in fact owned by Buttar & Associates Ltd which is the secretary of the defendant company.  That search revealed nothing concerning the 2^nd and 3^rd defendants.

15. On 27 June 2011 Master K K Pang made an order for substituted service by service by ordinary post on the 2^nd and 3^rd defendants to the company’s registered office and by an English language advertisement in “The Standard” newspaper for one issue.  This order was duly complied with on 4 August and on the strength of this the plaintiff obtained final judgment against the 2^nd and 3^rd defendants on 30 August 2011.

16. Subsequent to that neither the 1^st nor the 3^rd defendant took any action.  The 1^st defendant company was wound up on or about 19 October 2011 by the court on the plaintiff’s petition.

17. On 11 June 2012 the 2^nd defendant’s solicitors filed Notice to Act (dated 9 June) on his behalf.  It appears from the 2^nd defendant’s affirmation of 9 June 2012, which is somewhat repetitive in content and raises more questions than it answers, that he became aware of the Default Judgment against him only in late April 2012 (or so he says) from the bankruptcy proceedings taken against him (HCB 1536/2012) by the plaintiff on 9 March 2012.  These had been served at the 1^st defendant’s address on 16 April 2012.  The travel records show that he was in Hong Kong on 16 April.  In his affirmation he asserts without specific detail that he became aware of the bankruptcy proceedings (and the Default Judgment “in late April 2012” and “could only find lawyers to handle the bankruptcy proceeding for me in late April 2012”.  He does not at any stage say how he came by the documents.

18. From the bankruptcy file (which he correctly identifies in that affirmation) the following is clear. 

19. On 12 and 15 March 2012 the plaintiff’s solicitors made inquiries at the last known address without leaving the Bankruptcy Notice.  On 15 March an appointment letter was sent to that address specifying 23 March as the appointment date.  The process serving employer of the plaintiff’s solicitors attended.  The defendant did not.  The letter sent on 15 March was not returned.  The clear inference is that the defendant received it and that it came to his notice.  He was certainly in Hong Kong on 16 and 17 March 2012.

20. An order for substituted service was made on 11 April 2012.  Service was sent by ordinary post and by a single advertisement in The Standard on 16 April.  He was in Hong Kong on 16 April.  Notice to Act was filed by his solicitors on 23 April 2012, one week later.  Notice of Intention to oppose the petition was filed on 4 May 2012.  In his affirmation in support he deposed that he had “not carried on business in Hong Kong in the three years ending 9 March 2012”.  That was another lie.  He had of course signed the facility letter dated 31 July 2009 sent to him at the same last known address.  He had also been in and out of Hong Kong with great frequency over that three year period.  He had been evading (or rather seeking to evade) service over that period.  His assertions and arguments are spurious.

21. When raising the merits of his defence to the plaintiff’s action, the 2^nd defendant makes a number of statements which I do not find credible, such as the following:

“50. … At the time the Personal Guarantee was signed, the Plaintiff did not disclose to me the nature, effect and my liability and potential liability for signing the same. Should the Plaintiff have done so, I would not have signed on the Personal Guarantee. I did not or do not agree to the terms of the Personal Guarantee.

…

52. … The Plaintiff did not inform me before and during the signing of documents that I was required to sign the Personal Guarantee.

…

54.  There was no explanation of the documents or time for me to go through them.  I did not know nor did I have the time and opportunity to seek independent legal advice.  I was not given any copy of the signed documents.”

22. The letter dated 22 July 2008 from the plaintiff clearly set out the position for the 2^nd defendant advising him to take legal advice.  He signed that letter in acknowledgement.

23. Even more astonishing is the content of paragraph 17:

“I have never occupied Unit G, Mau Lam Building. I have not domiciled or ordinarily resident, in Hong Kong. At all material times, I have not carried on business in Hong Kong and have not used the Unit G Mau Lam Building address.”

24. In the light of the travel records to and from Hong Kong one asks the rhetorical question—what was he doing in Hong Kong on all those occasions?

25. These bare assertions are simply not credible.  There is no merit whatsoever in the defence put forward.

26. On 11 June 2012 the 2^nd defendant’s solicitors filed a summons (dated 9 June) seeking to set aside the Default Judgment.  This was followed by a furry of affirmations and exhibits and, on 28 November 2012, by a further summons by the 2^nd defendant to set aside the ex parte order of 27 June 2011 by Master K K Pang.  These two applications then came before Master de Souza on 3 December 2012.  He dismissed both of them with costs.  The 2^nd defendant now appeals against these two decisions.

27. Strictly speaking, the 2^nd defendant should have appealed against Master K K Pang’s order of 27 June 2011, not sought to have it set aside.  However since both matters now come before me by way of appeal, the irregularity in the 2^nd defendant’s proceedings to set aside that order can, in practical, if not in legally correct terms, be dealt with.

28. The 2^nd defendant’s case is based on a number of highly dubious contentions.  His affirmation of 9 June 2012 at paragraph 17, which I have earlier cited, stated, inter alia, “I have not carried on business in Hong Kong and have not used the Unit G Mau Lam Building address”.  This wholly contradicts the contents of his letter of 29 April 2008, seeking banking facilities from the plaintiff.  Although “Unit G” is not specifically printed on the company’s notepaper, it is clearly included in the address of the 1^st defendant company in its annual returns from 2007 to 2011.  Although these returns contain an address in India and Indonesia for the 2^nd and 3^rd defendants respectively, they were not obtained by the plaintiff’s solicitors until after July 2011.

29. The business registration search with the Inland Revenue Department was made on 26 June 2012.  That disclosed the full address of the defendant company—including “Flat/RM G”—by way of an amendment on 20 June 2005.

30. The letter of 29 April 2008 referred to by me, signed by the 2^nd defendant, clearly states that the company of which he is recorded as shareholder and director is “an export company registered in Hong Kong since year 2002 … and now have head office in Hong Kong”.  The facility letters of 10 July 2008 and 31 July 2009 sent to the defendant company at the Mau Lam Building address were returned signed by the 2^nd defendant. The letter of 22 July 2008 sending the original guarantees for signature was signed by the 2^nd defendant.  It had been sent to him care of the 1^st defendant at the Mau Lam Building address, with the guarantees to be signed by him and the 3^rd defendant.  They signed them.

31. Secondly, the 2^nd defendant suggests that he had no business address in Hong Kong and was not in any event in Hong Kong on any of the material dates relating to the postal service of documents upon him.  By way of support for his contention he produced entry and exit records relating to his visits via various points of entry.  I am not satisfied that these are complete or necessarily tell the whole story.  In any case they cannot contradict the information provided by the 2^nd defendant to the plaintiff bank and they clearly show the likelihood of frequent travel in and out of Hong Kong.

32. He further suggests that service should have been made upon him personally either at a Guangzhou address—which he does not identify until his affirmation—or an address in India, which he does not say were communicated by him to the plaintiff but relies instead upon what the post-facto searches at the Companies Registry research in relation to the address in India.  Neither of these contentions holds water.  In any event neither was the “last known address”.

33. The contents of an e‑mail from the plaintiff on 24 January 2011 merely refer to the need to make telephone contact with the 2^nd defendant whilst he was in Jakarta and then Delhi.  It was common knowledge that the business in which he was engaged, involved travel to Indonesia.  Even he does not suggest that he lived in Jakarta or Delhi in any document before his affirmations in these proceedings came into existence.  Mr Ko, on behalf of the 2^nd defendant, suggests that the reference to telephone numbers indicates that he was not based in Hong Kong and had addresses at these places for service.  It does nothing of the sort.  It merely indicates that he travelled to such places on business as he had indirectly informed the plaintiff in the letter of 29 April 2008.

34. Mr Ko also argues that Order 10, rule 1 has not been complied with and that therefore the purported substituted service is defective.  The 2^nd defendant should have appealed against this order and strictly is not entitled to challenge it in the way he has.  Nonetheless as I indicated earlier I will deal with it.

35. Service was effected at the last known address of the 2^nd defendant. This can be the last known business address—“address” is not confined to a person’s residential address.  It was not returned through the Post Office undelivered to the addressee.  That is good prima facie evidence that it has been duly delivered to the addressee.

36. The court took the view, on unimpeachable grounds, that service under Order 10, rule 1 was impracticable.  The registered letters containing the Writs had been returned.  Accordingly under Order 65, rule 4 it made an order for substituted service.  There was good reason for believing that the 2^nd defendant was seeking to evade service even though, in my view, there were good grounds for believing that he had received the earlier documents and the letters sent in May 2011.  It is interesting that in April 2012 when bankruptcy proceedings were served at the same address that he was galvanized into activity within a week of service; even so there was a lapse of over one month before an effort was made to challenge the proceedings.

37. Mr Ko referred me to a number of decisions in support of his contention.  However the circumstances vary in each case, and each can readily be distinguished upon the facts.  I do not need to set these out specifically in view of my findings of fact.  The 2^nd defendant was seeking to evade service upon him.  I do not believe his assertions in his affirmations. Some are palpably absurd.  He was within the jurisdiction.  The documents came to his notice.  He sought to ignore them until the Bankruptcy Petition was served upon him, again pursuant to an order for Substituted Service.  I am satisfied that there was no irregularity of the service under Order 65, rule 4—indeed nor any irregularity of the earlier service upon which the plaintiff did not seek to rely.

38. The allegations that the plaintiff or plaintiff’s solicitors failed to disclose material matters also have no merit whatsoever.  The Guangzhou address, even if known to the plaintiff (and it was not disclosed other than as the site of a Representative Office in the letter of 29 April) was never held out to be an address at which the 2^nd defendant could be contacted.  It did not feature on the 1^st defendant’s notepaper.  The 2^nd defendant does not suggest that he has informed the plaintiff that he had left Hong Kong or had terminated his business here (if he ever did).

39. The e‑mail from the plaintiff bank does no more than indicate that it was in possession of two telephone numbers, one in Jakarta, one in Delhi, at which the 2^nd defendant said he could be contacted.  He did not even suggest that he had an address in Delhi.  It is unreasonable to elevate the limited contents of that e‑mail to the inference which the 2^nd defendant seeks to draw.  It merely indicated that the defendant was travelling on business.

40. It is equally unacceptable to suggest that the plaintiff was not entitled to rely upon the company’s Head Office as the address for service.  It was not only the last known address, it was the only address used by the 2^nd defendant as his contact address.  Although it is implicit in the foregoing I am also satisfied that much of the content of the 2^nd defendant’s affirmation is irrelevant; what is vaguely relevant is quite disingenuous, verging on the dishonest.

41. Master de Souza’s decisions were entirely correct.  These appeals are dismissed with costs to the plaintiff.

42. It is agreed that I should made a summary costs order.  The hearing lasted less than two hours.  The total costs to be paid by the 2^nd defendant are $58,000, being $35,000 counsel fee and $23,000 solicitors costs.