CREDIT AGRICOLE v. CROSSLAND INDUSTRIES CORPORATION AND ANOTHER

1987, No. A6554

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. The 1st Defendant herein is a company registered in Vancouver, Canada. It is the case for the Plaintiff that on the 6th November 1986 it entered into a loan agreement with the Plaintiff in Hong Kong under which the sum of US$300,000 has been advanced. Interest was to be at 1½% above LIBOR, a term defined in the agreement. On the 3rd November the 2nd Defendant entered into an agreement whereby he guaranteed payment of any amount owing to the Plaintiff to the 1st Defendant under the loan agreement. The loan agreement which is in the form of a letter addressed to the 1st Defendant purports to be signed by one William S. Chi as confirming agreement to the terms set out, on behalf of the 1st Defendant.

2. The loan agreement provided for immediate repayment if any of certain events was to occur and the Plaintiff says in its claim that all of these did in fact occur on or before the 12th August 1987 and notice was given to the 1st Defendant calling for repayment of the amount advanced. It has not been so repaid and on the 28th August 1987 the Plaintiff so informed the 2nd Defendant and gave him notice that it demanded payment from him pursuant to the guarantee.

3. Clause 22 of the loan agreement provides that it shall be governed by the laws of Hong Kong and the borrower (the defendant) submits to the jurisdiction of the Hong Bong Courts. It provides an address for service in Hong Kong of any process issued by the Courts of Hong Kong. The writ was accordingly issued in Hong Kong and so served on the 1st Defendant in Hong Kong on the 24th November 1987, and on the 2nd Defendant at his address, as set out in the guarantee, in New York, U.S.A., which was his residential address and also at his business address on the 24th November 1987 and the 3rd December 1987 respectively. This was done pursuant to an order by Master O'Donnell granting leave to so serve he 2nd Defendant out of the jurisdiction.

4. An acknowledgment of service on behalf of both Defendants was filed by their solicitors, Woo, Kwan, Lee and Lo, on the 24th December 1987, it being endorsed "without prejudice to the Defendants' right to dispute service and jurisdiction".

5. No defence has been filed by either Defendant.

6. A summons was issued on the 23rd December 1987 under Order 14 rule 1 for judgment for the Plaintiff for the amount claimed plus interest, on the basis that there was no defence to the claim. It was supported by an affidavit by Miss Anne Lai, the Plaintiff's credit manager. This was heard on the 25th January 1988 but in the meantime the Defendants had issued a summons for an order that the proceedings be stayed and both summons were adjourned to be heard by a judge in chambers. Both then came before me on the 25th February 1927. The Defendants filed two lengthy affidavits sworn by Mr. Daniel Overmyer, a consultant to the 1st Defendant. He deposed that he had negotiated the loan on behalf of the 1st Defendant, though a Mr. William Chi was also involved "to a limited degree". Mr. Overmyer said he had not agreed to the terms of the loan agreement which he refers to as a "facility letter" and goes on to say that "I have asked William Chi if he had signed the facility letter on behalf of the 1st Defendant. He informed me and I verily believe that he could not remember whether or not he signed the facility letter".

7. Mr. Overmyer goes on to say that he negotiated the loan agreement with Mr. Jesse Chang, an officer of the 1st Defendant's Hong Kong office. The amount advanced of US$300,000 was paid as to US$57,000 in Hong Kong. US$50,000 was paid in Beijing and the balance in New York. The purpose of the loan was to finance a joint-venture between the 1st Defendant and a Chinese company for the production of marble and tiles in China. He says that the 1st Defendant has no employees in Hong Kong and its registered office is in New York, where the 2nd Defendant is also resident, though Mr. Overmyer does not purport to speak on his behalf. He suggests that it would be "highly inconvenient" for the 1st and 2nd Defendants to litigate in Hong Kong as the 1st and 2nd Defendants are not physically here, all relevant records as to the loan agreement are in Denver, Colorado, U.S.A. and other relevant records are either in Denver or in Beijing.

8. Mr. Overmyer's second affidavit is in reply to the Plaintiff's application for judgment under Order 14 rule 1. He says that the 1st Defendant received a letter from the Plaintiff dated the 6th November 1986 which was "almost identificial to the facility letter" but did not agree to any of the terms stated in that letter. He reiterates what Mr. Chi has told him.

9. Mr. Overmyer says that agreement was reached between the Plaintiff and the 1st Defendant on or about the 4th November. It was for a total loan of US$1,000,000 to be made available of which US$300,000 was advanced immediately. That is as set out in the loan agreement which makes Mr. Overmyer's evidence that the 1st Defendant did not agree to any of the agreements terms difficult to understand. He goes on to say that Mr. Chang and he agreed verbally that interest would be 1½% above LIBOR but would not be payable until 7th February 1987 at the earliest and even then, interest could be further accumulated and deferred. He exhibits some statements from the Plaintiff which he suggests support this. He further denys any agreement whereby the Plaintiff could by written notice declare the amount of the loan repayable immediately and goes on to say that the agreement for the joint-venture between the 1st Defendant and the Chinese company is still extant and has not been cancelled.

10. A draft defence to the claim has also been exhibited to Mr. Overmyer's affidavit in which the Defendants admit that there was an agreement with the Plaintiff to advance the sum of US$1,000,000 and US$300,000 was in fact so advanced but deny the terms alleged for repayment. The Defendants in particular deny that the terms in the loan agreement were ever agreed by them. The defence does not, however, specifically deny that Mr. William Chi signed the agreement or that, if he did so, he had no authority to do so.

11. Mr. Chi has sworn an affidavit, having read those of Mr. Overmyer. He says he was employed as Vice-President of the 1st Defendant and General Manager of the joint-venture from September 1985. In February 1986 he resigned as Vice-President but became the 1st Defendant's full-time consultant and remained as General Manager of the joint-venture. He states that he does remember a meeting between himself and officers of the Plaintiff and that he signed the loan agreement on behalf of the 1st Defendant. The agreement was also signed by Mr. Mare Mayer, the Chief Manager and Regional Manager of the Plaintiff.

12. Miss Anne Lai has sworn a second affirmation in which she states that she was present on the 6th November and saw Mr. Chi signed the loan agreement. She also exhibits a resolution of the 1st Defendant, signed by Mr. Overmyer, Mr. John Powers and Mr. Peter Hill as Directors, authorising him to do so. The copy of the agreement which is exhibited to Mr. Overmyer's affidavit is the one given to the 1st Defendant which was not signed by Mr. Chi: however the 1st Defendant's copy on which they rely, was so signed. She exhibits a copy of a letter of the 20th December 1986 from the 1st Defendant's then solicitors which refers to the loan agreement in a way which seems to clearly indicate it was executed and in force. Miss Lai draws attention to Clause 22 of the agreement which says that the 1st Defendant "hereby irrevocably submits to the non-exclusive jurisdiction of the Hong Kong Courts", and that the agreement will be governed by and construed in accordance with the laws of Hong Kong. Miss Lai also sets out in detail four events which individually would give the plaintiff right, under the terms of the loan agreement, to call in the loan immediately. I need not go into those in detail.

13. Mr. F.R. Enock, the 1st Defendant's solicitor, has sworn an affidavit which exhibits an extract from proceedings conducted in Vancouver under the Securities Act of British Columbia in relation to the 1st Defendant. During the course of those proceedings Mr. Overmyer gave evidence and said, inter alia, "The Credit Agricole loan was executed on 6th November 1986 by Mr. Chi in Hong Kong. Subsequently over a period of time 300,000 or trannch one, as described in the loan agreement, was drawn down".

14. Mr. Wudy Heung has sworn that in 1986 and 1987 he was employed as a legal consultant on U.S. law by Messrs. Baker and McKenzie, Solicitors, 14th Floor, Hutchison House, Hong Kong. He was present at a meeting in the offices of the Plaintiff and saw Mr. Chi sign the loan agreement on behalf of the 1st Defendant in the presence of Miss Lai.

15. Mr. Overmyer has sworn a third affidavit in reply to those of Miss Lai and Mr. William Chi.  He reiterates what he says Mr. Chi told him about not being able to remember signing the agreement and says that in any event Mr. Chi was dismissed as joint-venture general manager in August 1987 and now has a hostile attitude to the 1st Defendant. He said that his testimony in Vancouver was in relation to Mr. Chi's execution of other documents, not the loan agreement.

16. The writ was served on the 2nd Defendant by Mr. J.H. Charles, an employee of a firm of attorneys in New York. After repeated efforts to serve him personally the documents were left with a person who appeared to be the receptionist at the apartment block which is the address for service stated in the guarantee executed by the 2nd Defendant. The copies of the documents were also sent to him there by post. The 2nd Defendant sought to file an affidavit in reply to that, sworn by a Mr. R.M. Tilton, a New York attorney. This affidavit was filed out of time and I refused leave to receive it. In any event it seeks to say that service on the 2nd Defendant does not comply with New York law. That does not seem relevant and I am satisfied that the 2nd Defendant was properly served.

17. As it is germane to both summonses I am satisfied and find as a face that the loan agreement of 6th November 1905 was signed by Mr. William Chi, that he did so on behalf of the 1st Defendant and was so authorised. I am satisfied that Mr. Overmyer meant exactly that when he gave evidence in Vancouver and I accept the evidence of Miss Lai and Mr. Chi, which is strongly supported by the documents exhibited. I find it inconceivable that the Plaintiff would have made a loan of this size without an executed agreement containing the terms of the loan, which is what Mr. Overmyer is saying it must have done. I see not the slightest reason to doubt the evidence of Miss Lau, Mr. Heung and Mr. Chi himself. What Mr. Overmyer says Mr. Chi told him is hearsay and equivocal. It would be quite extraordinary if Mr. Chi could not remember whether or not he signed a loan agreement for US$1,000,000!

18. The agreement provides for the action to be governed by the laws of Hong Kong and to be litigated here. Even if that were not so I accept entirely that this is the most convenient forum. The agreement was executed here, most of the crucial witnesses are here and it would be quite wrong if the Plaintiff, albeit having its head office overseas, but having an office in Hong Kong from which it conducts substantial business, were to be forced to pursue the Defendants for recovery of this loan in the Courts of the U.S.A.

19. The Defendants' application for a stay of proceedings is dismissed.

20. Turning to the Plaintiff's summons under Order 14 I am also satisfied that there is no defence to this action, not even shadowy, and the Plaintiff is entitled to judgment against both Defendants. There is no dispute that the amount of US$300,000 has been lent to the 1st Defendant by the Plaintiff and I am satisfied that repayment of that loan, plus interest, was guaranted by the 2nd Defendant if default in repayment was made by the 1st Defendant. There seems no doubt at all that the loan has become repayable on the happening of several events, such as the failure of the joint-venture but the one on which there seems overwhelming evidence is the entry of judgment against the 1st Defendant by Paddington Drove International Ltd. on 9th March 1987 and that a Garnishee Order under that judgment remains unsatisfied. Mr. Overmyer has exhibited a further "roll-over" letter which he alleges shows that the amount of the loan and interest are still not payable. I do not consider it does so. In my view it simply sets out the 1st Defendant's indebtedness at that date, i.e. the 26th January 1988.

21. There will therefore be judgment for the Plaintiff against each Defendant in the sum of US$318.842.09 plus interest from the 12th August 1987 in terms of the loan agreement, to be settled by a master if not agreed.

22. The Plaintiff is entitled to the costs of both summons, to be taxed if not agreed.