CHINA CITIC BANK INTERNATIONAL LTD (formerly known as CITIC BANK INTERNATIONAL LTD) v. CHU CHI CHUNG AND OTHERS

HCMP 1087/2018

[2021] HKCFI 1604

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1087 OF 2018

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R E A S O N S  F O R  J U D G M E N T

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1.  By an originating summons dated 16 July 2018 (“OS”) the plaintiff, China Citic Bank International Limited (formerly known as Citic Bank International Limited) (“P”), claims against the 1^st defendant, Mr Chu Chi Chung (“D1”), the 2^nd defendant, Madam Kong Siu Yee (“D2”), and the 3^rd defendant, Unicon Limited (“D3”) (collectively “Ds”) for payment of all money due and owing by D3 to P, as secured by (1) a Tripartite Legal Charge/Mortgage dated 9 November 2012[1] (“Mortgage”) executed by D1-D2 in respect of Flat B, 6^th Floor, Hong Wang Court (Block 4), Healthy Village Phases I & II, No 192 Tsat Tsz Mui Road, Hong Kong (“Property”); and (2) a guarantee dated 23 April 2014 whereby D1 agreed to pay on demand all money due and owing by D3 to P (“Guarantee”).

2.  After hearing all the evidence and submissions made by P and D1, I give judgment for P.  These are the reasons for my judgment.   

Preliminary matters

3.  Until 26 May 2020, Ds were represented by Messrs CLY Lawyers and counsel. D1 and D3 have not filed any affirmation in these proceedings.  D2 filed an affirmation dated 21 September 2018 in opposition to the OS.  She admits that the Mortgage was executed by her but denies liability on the grounds that she “was mispresented and unduly influenced by” D1 when she executed the Mortgage and the various facility letters.

4.  Pursuant to the joint application of P and Ds, an order was made by consent on 10 January 2019 that:

(1)   the deponents of the affidavit of Ng Chun Kong Calvin (“Ng”) and the affirmation of Wong Hon Lun (“Wong”)[2] and D2 do attend the substantive hearing of the OS for cross-examination, failing which their affirmations shall not be admitted as evidence in these proceedings;

(2)   the 1^st and 2^nd affirmations of Choy Siu Tak filed on 14 August 2018 and 1 November 2018 respectively and the affirmation of Hau Wing Shing Vincent filed on 1 November 2018 be adduced as evidence at the substantive hearing of the OS without calling the affirmants thereof; and

(3)   the substantive hearing of the OS be heard before a judge with 4 days reserved. 

5.  D3 was wound up by the Court on 17 July 2019 in HCCW 146/2019 while D1 was adjudged bankrupt on 31 July 2019 in HCB 3435/2019.  P obtained leave to proceed its claims against D3 and D1 on 2 October 2019 and 18 October 2019 respectively. 

6.  The trial of the OS was scheduled to be heard before DHCJ Laurence Li SC on 1 June 2020.  However, owing to D2’s belated application for legal aid made on 28 May 2020, there was automatic stay of all proceedings for 42 days.  The judge adjourned the trial and ordered the OS be re-fixed with 3 days reserved.   

7.  On 6 July 2020, D2’s application for legal aid was refused.  The present trial dates were fixed on 5 August 2020.  Notice of adjourned hearing was served on Ds on 23 November 2020. 

8.  Shortly before the commencement of the present trial, on 26 May 2021, D1 and D2 applied for legal aid which triggered an automatic stay of these proceedings for 42 days.  Mr Adrian Leung, counsel for P, lodged written submissions on 28 May 2021 to invite the Court to lift the stay.  He submits that the application was not made for bona fide purposes but was calculated to disrupt and cause further delay and adjournment of these proceedings.  In light of the history of this matter in particular, (1) the previous adjournment of the trial occasioned by a last minute application for legal aid made by D2; (2) D2’s application for legal aid has already been refused; (3) the absence of any defence on the part of D1 in opposing the OS; (4) the inordinate and inexplicable delay on the part of D1 in making the application, and (5) D1 does not have any real interest in the outcome of these proceedings[3], I make an order to lift the stay and the trial proceeds. 

9.  At trial, only D1 appears.  D2 and D3 are absent.

10.  P calls Ng and Wong to give evidence on its behalf.  Their evidence has not been challenged by D1. 

11.  As D2 does not attend trial, her affirmation is not admissible.  There is therefore no evidence to contradict the facts and matters stated in the affirmations filed on behalf of P.  Nor is there any evidence in opposition to the OS. 

Factual background

12.  P is a licensed bank in Hong Kong.  D1 is the son of D2.  They hold the Property as joint tenants.  D1 was a director of D3 and holds 50% of its issued shares. 

13.  The Mortgage was executed by P (as mortgagee) and D1 and D2 (as mortgagors) and D3 (as borrower).  Under the Mortgage, D1 and D2 agreed, inter alia:

(1)   to jointly and severally covenant with P that they will, on demand, pay and discharge to P “all sums of monies obligations and liabilities whether past, present or future, actual or contingent which are now or may at any time thereafter be or become from time to time due and owing or incurred to [P] anywhere by [D3]” (clause 2.01);

(2)   to charge to P by way of first legal charge the Property as continuing security for the due fulfilment by D1-D2 and D3 of their obligations under the Mortgage (clauses 3.01, 4.01);

(3)   to forthwith quit and deliver vacant possession of the Property to P if the power of sale become exercisable by P and upon being given notice to do so by P (clause 6.04);

(4)   that P may upon the occurrence of an event of default enforce the security created by the Mortgage and P shall have the power to, inter alia, enter into and take possession of the Property and sell the Property on such terms and conditions as it may think fit (clauses 8.01, 8.05);

(5)   to pay to or reimburse P for all reasonable costs, charges and expenses (including legal and other fees on a full indemnity basis) incurred by P in exercising any of its rights and powers under the Mortgage (clause 10.01(b));

(6)   that any statement of account purporting to show an amount due from D3 to P or from D1-D2 and signed as correct by a duly authorised officer of P shall, in the absence of manifest error, be conclusive evidence of the amount so due (clause 15.01);

(7)   to be deemed a principal debtor in respect of the secured indebtedness (clause 23.01); and

(8)   to declare and warrant that the Property is occupied and controlled by D1-D2 alone and there is no agreement whereby any other person firm or corporation is or will be entitled to use, occupy or possess the Property other than bare licencees whose licence can be terminated by notice at will by D1-D2 (clause 25.01).

14.  Under the Guarantee, D1 agreed to guarantee to P the payment on demand of all money or liability due or owing to P from D3 then or at anytime thereafter.

15.  P advanced 2 facilities to D3 namely:

(1)   A Revolving Loan Facility of HK$6,000,000 pursuant to the facility letter dated 15 April 2014 (as varied by the supplemental facility letter dated 18 December 2017).

(2)   An Overdraft Facility of HK$3,500,000 pursuant to the facility letter dated 1 December 2015 (as varied by the facility letter dated 30 November 2016 and the facility letter dated 18 December 2017).

16.  By demand letters dated 29 June 2018 to Ds, P through its solicitors demanded payment of the amount then due and owing by D3 to P.  Ds failed to pay the amount due or any part thereof.

17.  As at 13 August 2018, the amount due and payable to P was HK$9,027,631.08.

18.  To date, D2 still resides at the Property.   

Discussion

19.  It is well established that a person of full age and understanding is bound by the documents he signed unless he can establish a recognised legal basis to disown such documents (Ming Shiu Chung & ors v Ming Shiu Sum & ors (2006) 9 HKCFAR 334, §§84-87, per Ribeiro PJ). 

20.  The Mortgage was signed by D1 and D2.  In addition, D1 signed the Mortgage on behalf of D3.  He also signed the Guarantee.  As Ds have not adduced any evidence to establish a legal basis to disown the Mortgage or the Guarantee, they must be taken to have agreed to their terms. 

21.  P has in the affirmations provided detailed breakdown on the calculation of the amounts advanced to D3 under the Revolving Loan Facility and the Overdraft Facility.  In short, as at 13 August 2018:

(1)   The amount due under the Revolving Loan Facility was HK$6,060,696.42, being the outstanding principal, interest (at 7.75% p.a.) and default interest (at 9.75% p.a.).  From 14 August 2018, default interest accrues on the outstanding principal at 9.75% (equivalent to HK$1,589.38/day). 

(2)   The amount due under the Overdraft Facility was HK$2,966,934.66, being the outstanding principal, interest (8.25% p.a.) and default interest (13.75% p.a.).  From 14 August 2018, default interest accrues on the outstanding principal at 13.75% p.a.  (equivalent to HK$1,091.94/day).

(3)   The aggregate amount due and owing to P was HK$9,027,631.08.

22.  I am satisfied that P has complied with the requirements stipulated in Order 88 rule 5(2)-(4) and has served all relevant documents on Ds.  The evidence adduced by P shows that it is entitled to judgment for the amount claimed and an order for possession of the Property.  As for interest, P is entitled to claim default interest (as stated in §21(1)-(2) above) up to date of judgment and, thereafter, interest at judgment rate until payment. 

23.  As for costs, I order Ds to pay the costs of this action including all costs reserved, to be taxed if not agreed on an indemnity basis.  This accords with what the parties agreed under the Mortgage.