ALRIGHT FAR EAST LTD v. NANYANG COMMERCIAL BANK LTD

HCA5310/2000

IN THE HIGH COURT OF THE

 HONG KONG SPECIAL ADMINISTRATIVE REGION

 COURT OF FIRST INSTANCE

ACTION NO.5310 OF 2000

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AND

HCMP2623/2000

MISCELLANEOUS PROCEEDINGS NO.2623 OF 2000

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BETWEEN

(Consolidated with HCA 5310 of 2000 as the Leading Action
by the Order of Master C.B. Chan dated 8 February 2002)

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REASONS  FOR  JUDGMENT

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1. For convenience sake, I will, in this Reasons for Judgment, refer to Alright Far East Ltd as the plaintiff and the Nanyang Commercial Bank Ltd as the defendant.

2. At the trial of the above matters (consolidated as per the Order of Master C.B. Chan), the defendant was represented by counsel.  However, the plaintiff was not legally represented, their former solicitors having obtained an order to cease to act for the plaintiff in this matter, neither was any director or representative of the plaintiff present at court.

3. The trial therefore proceeded in the absence of the plaintiff.

4. In the absence of any evidence adduced by the plaintiff, and having heard the evidence adduced by the defendant, I dismissed the plaintiff’s claim and gave judgment to the defendant on its counterclaim with interests and costs on an indemnity basis indicating that I will give detailed reasons in due course.

5. I now give the reasons for my judgment.

Background

6. By a Loan Agreement dated 5 June 1997 as supplemented by a Supplemental Agreement dated 16 November 1998, both made between the plaintiff as borrower, and the defendant as lender, the defendant agreed to make an advance in the sum of HK$198 million to the plaintiff subject to the terms and conditions of the Loan Agreement and Supplemental Agreement.

7. By an Assignment Memorial No.7138100 dated 6 June 1997, the plaintiff was assigned and became the registered owner of Inland Lot Nos.5569, 5570, and 5571 with the building erected thereon known as No.9 Chiu Lung Street, Central, Hong Kong (“the Building”).  The Building comprises 24 storeys from the ground floor to the 23^rd floor.

8. The aforesaid loan of the $198 million advanced to the plaintiff by the defendant was secured by a legal charge being Legal Charge Memorial No.7138101 dated 6 June 1997, by which the plaintiff charged all the 24 storeys of the Building to the defendant.

9. By a Partial Release and Confirmatory Charge Memorial No.7653228 dated 16 November 1998 the defendant as the chargee of the Building released the ground floor and the 1^st to 3^rd  floors of the Building from the Legal Charge.  The 4^th floor to the 23^rd floors inclusive of the Building remained charged to the defendant under the Legal Charge.

10. On 17 September 1999 at a directors meeting of the plaintiff, the plaintiff acknowledged that it was unable to meet the indebtedness due to the defendant under the Loan Agreement and Supplemental Agreement secured by the Legal Charge.  The plaintiff resolved that possession of the 4^th to 23^rd floors of the Building be delivered up to the defendant.

11. On the same day by a surrender letter, the plaintiff surrendered the 4^th to 23^rd floors of the Building to the defendant as chargee.  The defendant took possession of the 4^th to 23^rd floors of the Building on 20 September 1999.

12. In February 2000, the defendant as chargee purported to sell the 4^th to 23^rd floors of the building at the price of HK$85 million which the plaintiff objected to as being below market value.

13. On 1 March 2000 the defendant entered into a Provisional Agreement for Sale and Purchase with Ripkin Ltd to sell the 4^th to 23^rd floors of the Building for HK$85.5 million.  Completion took place on 17 April 2000.

The plaintiff’s claim

14. The pleaded claim of the plaintiff in this matter was a claim for damages on the grounds that the sale by the defendant of the 4^th to 23^rd floors of the Building to Ripkin Ltd for HK$85.5 million was far below the market value thus causing loss to the plaintiff.

15. In the absence of any evidence being led by the plaintiff who was absent from the trial, the plaintiff’s claim was therefore dismissed.

The defendant’s counterclaim

16. The counterclaim of the defendant, being the counterclaim in HCA5310/2000 (which was also the claim by them as plaintiff in HCMP2623/2000) was for money due and owing by the plaintiff under the Loan Agreement as supplemented by the Supplemental Agreement.

17. The defendant relies on the terms, conditions and clauses in the Loan Agreement and Supplemental Agreement to the effect that :

(a)	overdue interests will be charged at the rate of 5.5% p.a. over the prime lending rate until receipt of full payment;
(b)	entries made in the accounts maintained by the defendant shall be conclusive evidence of the existence and amounts of the plaintiff’s obligations; and
(c)	the defendant is entitled to claim all costs and expenses (including legal fees on a full indemnity basis) incurred by the defendant in exercising or enforcing any rights under the Loan Agreement against the plaintiff.

18. The evidence adduced by the defendant in support of its counterclaim was to the effect that due to the inability of the plaintiff to settle the indebtedness owed to the defendant, the plaintiff surrendered and delivered vacant possession of the 4^th to 23^rd floors of the Building to the defendant under the Legal Charge.

19. On or about 1 March 2000, the defendant sold the 4^th to 23^rd floors of the Building for HK$85.5 million.  That sale was completed on 17 April 2000.  The sale proceeds, after deducting the legal costs and agency fees to the estate agent, were applied to settle the then overdue interests and part of the principal.

20. The outstanding balance as at 8 July 2005 was HK$88,893,998.90 (being the aggregate of the outstanding principal sum of HK$59,122,168.76 and interests accrued thereon of HK$29,771,803.14). Further interests has accrued and would continue to accrue on the said principal at the rate of 5.5% p.a. over the prime lending rate of the defendant.

21. Upon such evidence, judgment was given in favour of the defendant on its counterclaim with interests on such rates and costs on such basis as agreed by the parties in the Loan Agreement and Supplemental Agreement.