THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD v. KING WAI PIECE GOODS COMPANY LTD AND OTHERS

HCMP 1246/2024

[2025] HKCFI 1371

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1246 OF 2024

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J U D G M E N T

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A.  INTRODUCTION

1.  This is the substantive hearing of the originating summons issued on 18 July 2024 (“OS”) by the Plaintiff mortgagee (“HSBC”) against the Defendants (“Mortgagors”), pursuant to Order 88 of the Rules of the High Court (Cap. 4A) (“RHC”) for payment of monies and delivery of possession of the mortgaged properties.

2.  There is no dispute that since the grant of the mortgages in 2019, the borrower has never defaulted in any monthly instalment. HSBC, however, relies on its unrestricted discretion to terminate the facilities and right of repayment on demand under its facility letter to call in the loans.

3.  The Defendants’ case is that the facility letter is unenforceable for misrepresentation in that HSBC represented that there was no final maturity date earlier than the dates of the last instalment under the repayment schedules of the facilities; and HSBC’s representative did not mention any clause to the contrary effect during their oral conversations. HSBC’s representation was false in that HSBC had in fact inserted a deadline into the facility letter. Further or alternatively, the facility letter is voidable for economic duress, in that the threat to immediately call in the loan was illegitimate and the Borrower had no realistic alternative but to execute the facility letter.

4.  On 27 December 2024, the Defendants filed a summons (“Conversion Summons”) seeking, amongst others, (i) to convert these proceedings into a writ action due to substantial dispute of facts and; (ii) for leave to file and serve the 3^rd Affirmation of Chan Tan Tan Cherish dated 27 December 2024 (“Cherish Chan-3^rd”).

5.  At the hearing, HSBC did not oppose the Defendants’ filing of Cherish Chan-3^rd and I granted leave to the Defendants to file the same.

6.  Accordingly, what remains to be dealt with is whether judgment should be given against the Defendants, or there are issues to be tried which would require the filing of pleadings.

B.  FACTUAL BACKGROUND

7.  The following facts are not disputed or indisputable. I adopt the summaries helpfully compiled by counsel on both sides.

8.  King Wai Enterprise Holdings Company Limited (“KW Enterprise”) is and was at all material times a company which invested and still invests in residential and commercial real estate in major Chinese cities in the Mainland. It was and is the Borrower.

9.  KW Enterprise and the 1^st and 2^nd Defendants belong to a group of companies known as the King Wai Group. Ms Cherish Chan was the company secretary and the general manager of the 1^st and 2^nd Defendants. She is also the daughter of the 3^rd Defendant (“Mr Chan King Wai”).

10.  KW Enterprise and the Defendants had a long-term business relationship with HSBC. For periods prior to September 2021 and from January 2023, Mr Jimmy Ng (an employee of HSBC) had been handling KW Enterprise’s relationship and accounts with HSBC in respect of its banking facilities.

11.  By a facility letter dated 16 September 2019 (“2019 Facility Letter”), HSBC granted KW Enterprises and King Wai Asset Management Company Limited (“KWAM”) as borrowers banking facilities in the total sum of HK$30,000,000, including (i) a loan of HK$20,000,000 at Hong Kong Interbank Offer Rate (“HIBOR”), and (ii) a revolving loan of HK$10,000,000 (“Revolving Loan”).

12.  By a facility letter dated 11 November 2019 (“Amended 2019 Facility Letter”, together with the 2019 Facility Letter, the “2019 Facility Letters”), the 2019 Facility Letter was amended to, amongst others, exclude KWAM as a borrower, and provide an additional HIBOR loan of HK$20,000,000 to KW Enterprise. Accordingly, the total amount of banking facilities was increased to HK$50,000,000. The repayment dates of each loan ranged from no specified repayment date to December 2023 (i.e. with a tenor of 3 years).

13.  By a facility letter dated 3 September 2020 (“2020 Facility Letter”), the facilities were changed to, amongst others, (i) increase the Revolving Loan from HK$10,000,000 to HK$70,000,000, (ii) include a HIBOR Loan (II) of HK$64,000,000, and (iii) include a property mortgaged loan of HK$97,000,000 (“Property Mortgaged Loan”). The total amount of banking facilities was thus increased to HK$271,000,000. The repayment dates of each loan ranged from no specified repayment date to around October 2027 (i.e. with a tenor of 7 years).

14.  The 1^st to 3^rd Defendants signed and executed 5 mortgages dated 12 October 2020 (“Mortgages”) in respect of properties registered in their respective names as security for the banking facilities granted under the 2020 Facility Letter in favour of HSBC, identified in the OS as Property 1-5 respectively.

15.  Each of the Mortgages contains Clause 2.01(a) which provides that the Mortgagor and KW Enterprise jointly and severally covenant with HSBC that they will on demand, by notice in writing of HSBC made to the Mortgagor and/or the Borrower pay all monies outstanding to HSBC.

16.  There is no dispute that since execution of the 2020 Facility Letter and the Mortgages, KW Enterprise has made monthly repayments in accordance with HSBC’s instructions without default.

17.  On 21 March 2023, Mr Chan King Wai, acting on behalf of KW Enterprise, signed and executed the subject facility letter dated 23 February 2023 (“2023 Facility Letter”). It increased the loan facilities to about HK$198 million, including (i) HIBOR Loan (I) up to a limit of HK$2,243,870, (ii) Revolving Loan up to a limit of HK$70,000,000, (iii) HIBOR Loan (II) up to a limit of HK$35,200,000, and (iv) Property Mortgaged Loan up to a limit of HK$89,455,568.

18.  The 2023 Facility Letter contains the following express terms:

(1)  “The Facility Letter shall replace and supersede any previous facility letter issued by the Bank in connection with the facilities and from the date of acceptance by the Borrower(s) of the Facility Letter, all existing liabilities in respect of the facilities of the Borrower(s) and the rights and obligations of the Borrower and the Bank shall be governed by and construed in accordance with the provisions of the Facility Letter”;

(2)  “The Bank’s ability to demand repayment at any time shall not be affected” by “the payment schedule as described” or “the repayment schedule as aforesaid”;

(3)  “[I]n any event, all facilities will be fully repaid by 30 September 2023 (“September Deadline”)”; and

(4)  KW Enterprise undertook “refinancing of all facilities by other bank by 31 July 2023 (“Refinancing Deadline”). A further 60-day extension could be considered if there was sufficient proof that the facilities takeover or property disposal was under progress (eg. other bank’s facility letter / S&P agreement signed)” (“Refinancing or Disposal Extension”).

19.  Each of the 2019 Facility Letter, the Amended 2019 Facility Letter, the 2020 Facility Letter, and the 2023 Facility Letter stipulates that,

“The Bank shall have an unrestricted discretion to cancel, reduce or suspend, or determine whether or not to permit drawings in relations to, the facilities. The facilities are subject to review at any time, and also subject to the Bank’s overriding right of repayment on demand including the right to call for cash cover on demand for prospective and contingent liabilities” (“the Overriding Right Clause”).

In the 2023 Facility Letter, the Overriding Right Clause appeared on 9 other pages.

20.  By the Refinancing Deadline, KW Enterprise had failed to (i) refinance all of its facilities with the Bank or (ii) give the Bank any proof of refinancing / property disposal in order to benefit from the Refinancing or Disposal Extension.

21.  On 26 September 2023 (which was shortly prior to the September Deadline), KW Enterprise (under the letterhead of “King Wai Group”) wrote to the Bank seeking an extension of time to 21 December 2023 for full payment of the facilities secured by the Properties then in the amount of about HK$170 million (“Request for Indulgence Letter”):

“… … 本公司向滙豐銀行申請延期至 12 月 21 日前，全額支付經緯集團於滙豐銀行 170,790,170.09 的借貸項目，抵押品包括現時估值 288,000,000 的和福道 28 號 (i.e. Property 4)、估價 4,000 萬深水埗鴨寮街 124 號 (i.e. Property 5)、估價 4,200 萬火炭坳背灣街富騰工業大廈304 室、306 室 (i.e. Property 1)丶308 室物業 (i.e. Property 3)。

期望滙豐銀行積極考慮並批准本公司貸款於2023 年12 月21 號前全額贖回。”

22.  KW Enterprise did not repay by the September Deadline, but HSBC granted it an extension to 11 December 2023 (“December Deadline”) pursuant to the Request for Indulgence Letter. HSBC’s email dated 3 October 2023 warned that failing such repayment, HSBC “will retrospective charge back the overdue interest rate from Day 1 of overdue and proceed with further actions”.

23.  On 3 January 2024, HSBC issued a demand letter to KW Enterprise, exercising HSBC’s rights under the 2023 Facility Letter and demanding immediate repayment of the outstanding amount of HK$173,714,007.47 as at 2 January 2024.

24.  On 8 January 2024, pursuant to Clause 2.01 of the Mortgages, HSBC issued demand letters to the Defendants demanding immediate repayment of that sum.

25.  HSBC also granted KW Enterprise and the Defendants a further extension to the end of May 2024, failing which HSBC “will proceed with enforcement action, including but not limited to repossession of properties immediately”.

26.  HSBC’s demands were not met.

27.  On 18 July 2024, HSBC commenced the present action against the Defendants for repayment of the outstanding sums and delivery of vacant possession of the Properties.

C.  PARTIES’ RESPECTIVE CASE

28.  HSBC seeks to enforce payment of the outstanding indebtedness under the 2023 Facility Letter and the Mortgages. It will be more convenient to set out the Defendants’ case first before HSBC’s.

C1.  The Defendants’ case

29.  The Defendants’ case is that the 2023 Facility Letter is unenforceable by reason of misrepresentation, in that HSBC has expressly and/or by conduct misrepresented the terms of the letter. Further and/or alternatively, the 2023 Facility Letter is voidable for economic duress.

30.  In or around mid-June 2022, HSBC’s handler of KW Enterprise’s accounts changed from Jimmy Ng to Sally Kwan and Vicky Ng. They informed Ms Cherish Chan that HSBC had a change of strategy and wished to reduce its involvements in Chinese real estate-related industries. As such, companies with a portfolio of investments in Mainland Chinese real estates were no longer HSBC’s appetite.

31.  KW Enterprise, the Defendants and HSBC had discussions regarding the future handling of the banking facilities granted by HSBC to KW Enterprise. In this regard, HSBC provided draft revised facility letters dated 7 September and 29 December 2022 (“Draft September 2022 Facility Letter” and “Draft December 2022 Facility Letter”, collectively “Draft 2022 Facility Letters”).

32.  Similar to the previous facility letters, the Draft 2022 Facility Letters do not contain specific final repayment or maturity dates earlier than the dates of final instalment under the repayment schedules. Under the then prevailing repayment schedules, the date of final instalment of various loans remain to be around October 2027.

33.  KW Enterprise’s relationship with Sally Kwan and Vicky Ng deteriorated during the negotiations and discussions. The Draft 2022 Facility Letters were not accepted by KW Enterprise, and were not signed.

34.  In or around January 2023, upon Ms Cherish Chan’s complaint, Jimmy Ng resumed management of KW Enterprise’s accounts and banking facilities.

35.  After Jimmy Ng took over, Ms Cherish Chan informed him that KW Enterprise in any event intended to refinance the banking facilities granted by HSBC. Jimmy Ng suggested that KW Enterprise should sign a new facility letter with HSBC so as to prevent HSBC from demanding full payment.

36.  Prior to the execution of the 2023 Facility Letter, during two WeChat calls on 10 February 2023 between Ms Cherish Chan (on behalf of KW Enterprise) and Jimmy Ng (on behalf of HSBC):

(1)  Jimmy Ng agreed with and/or represented to Ms Cherish Chan that if KW Enterprise were to repay around HK$30,000,000 additional to the pre-existing schedules under the 2020 Facility Letter in accordance with HSBC’s instructions, HSBC would not take action to call in the loan (“the Non-Enforcement Representation”).

(2)  Jimmy Ng also briefly explained to Ms Cherish Chan the terms of the 2023 Facility Letter without mentioning any final maturity date earlier than the dates of the final instalment under the repayment schedule(s), ie around October 2027 (“Repayment Date Representation”).

(3)  Jimmy Ng further agreed or represented that HSBC would facilitate the refinancing of the banking facilities granted to KW Enterprise (“Facilitate Refinancing Representation”).

(collectively, the “Representations”).

37.  In reliance on the Representations, and in order to prevent HSBC from calling in the loans, KW Enterprise signed and executed the 2023 Facility Letter. Further, KW Enterprise had also repaid around HK$30,000,000 in accordance with HSBC’s instructions.

38.  Since the execution of the 2023 Facility Letter, KW Enterprise has made monthly repayments to HSBC without default. In the meantime, in or around April 2023, KW Enterprise started to seek refinancing from other banking institutions.

39.  In or around September 2023, despite repeated requests from KW Enterprise for payment instructions, HSBC did not provide such instructions. Instead, in or around October 2023, HSBC claimed that the full amount under the 2023 Facility Letter had become overdue.

40.  Between October and December 2023, after repeated complaints to HSBC and HSBC’s reply, Ms Cherish Chan realized the existence of the September Deadline Clause in the 2023 Facility Letter. Ms Cherish Chan complained to HSBC that the Clause was not properly communicated to her, and she relied on Jimmy Ng’s verbal explanation of the 2023 Facility Letter, which did not mention the September Deadline at all. That Clause was so onerous and unusual that the Defendants should not be bound by it.

41.  Despite her repeated complaints, HSBC issued the demand letters in January 2024.

42.  The Defendants say that by reason of the matters aforesaid, the September Deadline was not incorporated into the 2023 Facility Letter.

43.  Further, between March and June 2024, despite repeated requests made by Ms Cherish Chan to HSBC for documents for the purpose of securing refinancing from other banking institutions including Bank of China, HSBC has failed to provide the requested documents promptly.

44.  The Defendants also say that Mortgages 1, 2, 3 and 5 should not be enforced because Mortgage 4 would be sufficient to cover all indebtedness due and owing.

C2.  HSBC’s case

45.  HSBC submits that the defences defy common sense and legal principles and are directly contradicted by contemporaneous documents.

46.  Prior to the execution of the 2023 Facility Letter, on or around 3 and 6 February 2023, Jimmy Ng together with other representatives of HSBC had discussions with Ms Cherish Chan, during which Jimmy Ng informed Ms Cherish Chan of certain terms which were later set out in an email dated 9 February 2023 from Jimmy Ng to Ms Cherish Chan (“9 February 2023 Email”):

“… … As spoken last Friday (3Feb2023) and this Monday (6Feb2023), we would like to recap our agreed action points as below:

…

2) All HSBC facilities will be repaid by other bank’s financing on or before 31 Jul 2023 [ie the Refinancing Deadline]. We could consider a further 60-day extension if there is sufficient proof, e.g. facility letter, that the facilities takeover is under progress. …

3) In any event, all HSBC facilities will be fully repaid by 30 Sept 2023 [ie the September Deadline] at the latest.

Facility letter for the above adjustments would be sent out to you later. … …”

These items ended up in the 2023 Facility Letter.

47.  By an email dated 15 February 2023 titled “Banking Service (Our ref. 30131172)” sent from HSBC to Ms Cherish Chan (“15 February 2023 Email”), HSBC expressly affirmed the material terms stated in the 9 February 2023 Email and alerted KW Enterprise and the Defendants to the Overriding Right Clause:

“…. With reference to the facility letter, the revolving loan is repayable on demand by the Bank at any point of time. The relevant term from facility letter is set out below for your easy reference: [the Overriding Right Clause was quoted in full.]

… …

We note that a repayment plan has been agreed during phone conversations on 3 February 2023 and 6 February 2023, between yourself and our Jimmy NG and Sam LAM. An email stating the repayment plan details was sent to you on 9 February 2023. We understand the loan repayment may inconvenience King Wai, however, after a series of reviews and assessments, it remains HSBC’s decision that it is necessary to reduce the facilities.” (underline added)

48.  The quoted items ended up in the 2023 Facility Letter.

49.  After the execution of the 2023 Facility Letter on 21 March 2023, between April and July 2023, HSBC repeatedly reminded KW Enterprise and the Defendants of the Refinancing Deadline. For instance:

(1)  By an email dated 5 May 2023, Jimmy Ng requested Ms Cherish Chan to provide proof that facilities takeover was under progress and that “would be required for further 60-days extension over re-financing of all facilities by other bank by 31 July 2023 (undertaking item 8 of facility letter).”

(2)  By an email dated 18 May 2023 sent from Jimmy Ng to Ms Cherish Chan, it was stated that “We would require the action to be taken & completed by no later than 31 July 2023 [i.e. the Refinancing Deadline], failing which we will consider taking future actions, including but not limited to repossession of pledged properties.”

50.  By a letter dated 17 August 2023, when HSBC informed KW Enterprise that credit oversight of its accounts with HSBC had been transferred to Sam Lam of HSBC, it was expressly stated in the letter that “the loan will be matured (sic) on 30 September 2023 [i.e. the September Deadline]”.

51.  The King Wai Group issued the Request for Indulgence Letter. The September Deadline passed and so did the December Deadline.

D.  THE ISSUES

52.  The issues are:

(1)  Whether HSBC has expressly and/or by conduct mispresented the terms of the 2023 Facility Letter (“Misrepresentation Issue”)?

(2)  Whether the 2023 Facility Letter is voidable for economic duress (“Economic Duress Issue”)?

(3)  Whether the September Deadline Clause is so onerous and unusual such that the Defendants are not bound by it (“September Deadline Clause Issue”)?

(4)  Whether HSBC had delayed in the provision of documents to the Defendants to facilitate refinancing (“Facilitate Refinancing Issue”)? and

(5)  Whether Mortgage 4 was sufficient to pay off all indebtedness of the Borrower (“Mortgage 4 Issue”).

E.  LEGAL PRINCIPLES

E1.  For Order 88 application

53.  The legal principles applicable to Order 88 actions are well-established. As summarised by this Court in China Great Wall AMC (International) Holdings Co Ltd v Royal Bond Investment Ltd & Ors [2022] 1 HKC 1 at §§14-15:

(1)  Unlike Order 14 applications where the defendant is obliged to provide sufficient grounds to justify the action continuing to trial, the burden in summary judgment applications under the originating summons procedure is on HSBC to justify its entitlement to summary judgment.

(2)  However, once this is prima facie demonstrated on the evidence, it is then up to the defendant to show that he does have a defence or defences to the claim.

(3)  In this way, there may in practice be little difference between an application for summary judgment in originating summonses and an application for summary judgment under RHC, Order 14.

(4)  If the Defendants can show that there are factual issues which cannot be resolved on the affirmations, then a trial is inevitable.

54.  Insofar as the defendants’ discharge of their evidential burden is concerned, they are expected to condescend upon particulars as a defendant must do in resisting a summary judgment application: United Overseas Bank Limited v Gracewood International Limited [2021] HKCFI 2950, §20, DHCJ Leung (as he then was).

55.  Where oral representations are alleged, the defendants’ assertions are to be taken in the context of the background which is either undisputed or beyond reasonable dispute. This means that they should be tested against contemporaneous documents or circumstances to see if they are so incredible or contradicted that it becomes clear that the defence is a sham: Chow Tai Fook Nominee Limited v Diamond City Limited [2021] HKCFI 3019, §42, Wilson Chan J (in the context of Order 14).

56.  One also bears in mind that it is rare in modern commercial litigation to encounter a claim based on an agreement which is not only said to have been oral but of which there is no contemporaneous documentary record of any kind. The prevalence of emails, text messages and other forms of electronic communication is such that most agreements or discussions which are of legal significance, even if not embodied in writing, leave some form of electronic imprint. Because the value of a written record is understood by anyone with business experience, its absence may, depending on the circumstances, tend to suggest that no contract was concluded. Human memory is unreliable. The best approach for a judge to adopt at the trial of a commercial case is to place little if any reliance on witnesses’ recollection of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. See Leung Chin Shing Rabo v Ko Chun Hay Kelvin [2021] HKCFI 2242, §§42-44, DHCJ Jin Pao SC.

E2.  On Conversion of originating summons into writ action

57.  Order 28, rule 8(1) provides as follows:

“Where, in the case of a cause or matter begun by originating summons, it appears to the Court at any stage of the proceedings that the proceedings should for any reason be continued as if the cause or matter had been begun by writ, it may order the proceedings to continue as if the cause or matter had been so begun and may, in particular, order that any affidavits shall stand as pleadings, with or without liberty to any of the parties to add thereto or to apply for particulars thereof.”

58.  In Re Estate of Chiu Keung [2020] 3 HKLRD 779, §59, Chu JA (as Chu VP then was) summarized the principles on ordering proceedings to be continued as if the cause or matter had been begun by writ:

(1)  There is no hard and fast rule as to what cases can properly be dealt with by the originating summons procedure.

(2)  It is not the case that the existence of factual disputes will invariably render the originating summons procedure inappropriate, although it is a factor to be taken into account when exercising the discretion.

(3)  Other relevant considerations include whether the procedural advantages of an action begun by writ, such as delivery of pleadings and discovery, justify the exercise of the power under O.28 r.8 and whether in so ordering the ultimate resolution of the dispute would be significantly delayed.

(4)  If the issues of fact have been identified and can be properly resolved or the disputes of fact are not central to the court’s determination, the court is entitled to proceed to determine the action without converting it into a writ action.

(5)  With regard to whether to hear the summons on oral evidence, what the court has to consider, as stipulated in Order 28 rule 4(3), is what is required for the just, expeditious or economical disposal of the proceedings.

F.  ISSUE 1: MISREPRESENTATION ISSUE

F1.  Legal principles on misrepresentation

59.  The principles on misrepresentation are well-established.

(1)  A statement of fact or law has been made on which it was reasonable to believe the misrepresentee was intended to rely;

(2)  The statement must have been at least substantially untrue; and

(3)  The statement must have induced the misrepresentee to enter into the contract.

See Chitty on Contracts, 35^th edition, §10-006.

60.  From time to time one party to a contract misrepresents to the other the contents or effect of the document which is intended to embody the agreement. In such cases it has been held that the party making the representation is prevented from enforcing the contract in accordance with its terms: Tin Wan Tung v Wong See Yin [2018] HKCFI 1143, §109, Wilson Chan J.

F2.  The Non-Enforcement Representation and Repayment Date Representation (collectively “the 2 Representations”)

61.  The Defendants allege that those 2 Representations were made by HSBC in a telephone call on 10 February 2023 expressly or by silence. According to Cherish Chan-1^st, Jimmy Ng had briefly explained to her the terms of the 2023 Facility Letter. And yet, the subsequent 2023 Facility Letter expressly provided that, “In any event, all facilities will be fully repaid by 30 September 2023 [ie the September Deadline].”

62.  Mr Michael Ng, counsel for the Defendants, submits that the following circumstances constituted express representations and/or representations by conduct on the part of HSBC that there would be no maturity date earlier than the date of final instalment:

(1)  The Draft 2022 Facility Letters were provided shortly before the date of the 2023 Facility Letter, which contained no reference to any final maturity date earlier than the dates of the final instalment under the respective repayment schedules; and

(2)  During the WeChat calls between Ms Cherish Chan and Jimmy Ng, the latter similarly did not mention the same.

63.  The Non-Enforcement Representation and Repayment Date Representation were false.

64.  Further, it was Ms Cherish Chan’s evidence that she was not aware of the 9 February 2023 Email (copy of which shows it was not delivered or read by Ms Cherish Chan) and the 15 February 2023 Email (copy of which did not track any person’s mail), which touched on the September Deadline. That was why she never responded to those emails.

65.  Mr Ng submits that in the premises, HSBC is not entitled to enforce the Mortgages by reason of the 2 Representations, or that there are factual matters which should be properly investigated at trial.

66.  With respect to Mr Michael Ng, I am unable to agree with him for the following reasons.

67.  Firstly, the assertion that KW Enterprise was not aware of the September Deadline flies in the face of the Request for Indulgence Letter. The explanation put forward belatedly in Cherish Chan-3^rd that the Request for Indulgence Letter was sent with a view to appeasing HSBC and without knowledge of the September Deadline is simply incredible.

68.  Secondly, I agree with Ms Ha, counsel for HSBC, that the Defendants’ case on the Repayment Date Representation appears to change and evolve over time in the Defendants’ affirmations, which makes their case even more unbelievable:

(1)  In Cherish Chan-1^st, the alleged representation was that there would be no maturity date earlier than the date of final instalment in accordance with the parties’ previous course of dealings. She deposed to different dates of final instalment for different loan facilities with HSBC.

(2)  In Cherish Chan-2^nd, she alleged that the September Deadline was never properly brought to her attention and that KW Enterprise and the Mortgagors had always proceeded on the basis and believed that the final instalment payment date would be in or around October 2027. However, that was the final instalment payment date for the Property Mortgaged Loan only, without reference to the final instalment payment dates for other loans.

(3)  In Cherish Chan-3^rd, she admitted that “the HSBC team did mention moving the final maturity date earlier without a precise date”. It was expressly rejected by her as the September Deadline was 4 years earlier than the original maturity date in October 2027.

69.  Thirdly, as a matter of law, the defence of misrepresentation does not apply to future facts or an honest statement of intention: Misrepresentation, Mistake and Non-disclosure, 6^th edition, §3-44. The Non-Enforcement Representation contains a representation on whether HSBC would enforce the 2023 Facility Letter or the Mortgages after payment of the HK$30 million on an unspecified date. The 2023 Facility Letter was yet to be drafted or agreed upon. These fell short of being a misrepresentation of facts.

70.  Mr Michael Ng submits that even if the 2023 Facility Letter had not been drafted, a statement of intention may be looked upon as a misrepresentation of existing fact, if at the time when it was made, the person making the statement did not intend to do what he said or knew that he did not have the ability to put the intention into effect: Chitty, §10-017.

71.  I am unable to accept that Jimmy Ng / HSBC did not intend to do what they said when the subsequent 2023 Facility Letter and subsequent emails spelt out the September Deadline and Overriding Right Clause.

72.  Fourthly, the 2023 Facility Letter was entered into after the Non-Enforcement Representation and Repayment Date Representation. It expressly stated that it was to “replace and supersede any previous facility letter issued by the Bank in connection with the facilities and from the date of acceptance by the Borrower(s) of the Facility Letter, all existing liabilities in respect of the facilities of the Borrower(s) and the rights and obligations of the Borrower and the Bank shall be governed by and construed in accordance with the provisions of the Facility Letter.”

73.  Fifthly, in such a heavily documented course of dealings, there was not a single reference to the Non-Enforcement Representation or Repayment Date Representation: Leung Chin Shing Rabo v Ko Chun Hay Kelvin (§56 above). To the contrary, the contemporaneous documents flatly refuted the existence of those Representations.

(1)  The 9 February 2023 Email clearly referred to the Refinancing Deadline and September Deadline. It also stated that a facility letter with those adjustments would be sent out to Ms Cherish Chan later, and it was so sent out. However it appears that this email was not delivered to or read by her.

(2)  Even assuming that the 2 Representations were made on 10 February 2023, or 15 February 2023, HSBC expressly affirmed the material terms stated in the 9 February 2023 email. The same email expressly alerted the Defendants to the Overriding Right Clause in its previous facility letters. It is therefore hard to understand what continuing representation could have been made by HSBC after 10 February 2023.

(3)  The 2023 Facility Letter was mailed out to KW Enterprise on 27 February 2023 but only executed on 21 March 2023. In the meantime, Jimmy Ng had, through WeChat messages asked Ms Cherish Chan to check the facility letter and arrange calls to discuss. The Defendants had had 3 weeks time to consider the same.

(4)  Between April and July 2023, HSBC repeatedly reminded Ms Cherish Chan of the Refinancing Deadline.

(5)  After lapse of the Refinancing Deadline but before the September Deadline, Mr Sam Lam sent a letter to remind KW Enterprise that the loan would mature on 30 September 2023.

(6)  KW Enterprise and the Defendants themselves acknowledged the approaching September Deadline in their Request for Indulgence Letter to HSBC.

74.  Sixthly, in any event, the allegation is also bound to fail on the law. It is not sufficient for a party alleging misrepresentation to show that other party withheld information which, had he known it, would have affected his decision to enter into the contract. It is not even sufficient that the party shows that the other party deliberately withheld information: Misrepresentation, Mistake and Non-Disclosure, 6^th edition, §17-01. Hence, even putting the Defendants’ case to the highest, HSBC’s failure to mention the September Deadline could not constitute actionable misrepresentation.

75.  Finally, even if the Non-Enforcement Representation and Repayment Date Representation were made, there was no evidence that the Defendants had made a payment of around HK$30,000,000. Any repayment made was only in accordance with what was already in the repayment schedule. Reliance and detriment are not established to constitute actionable misrepresentation.

76.  In the premises, I find that there is nothing triable on the Misrepresentation Issue.

G.  ISSUE 2: ECONOMIC DURESS ISSUE

G1.  Legal principles on economic duress

77.  For a contract to be set aside on the ground of duress the claimant must establish two essential elements. The first is a threat (or pressure exerted) by the other party that is illegitimate. The second is that that illegitimate threat (or pressure) caused the claimant to enter into the contract. In the context of economic duress there is a third element, namely that the claimant must have had no reasonable alternative but to give in to the illegitimate pressure: Duress, Undue Influence and Unconscionable Dealing, 4^th edition, §§2-002, 2-003.

78.  A threat to break a contract will generally be regarded as illegitimate, particularly where the defendant must know that it would be in breach of contract if the threat were implemented: Zebra Industries (Orogenesis Nova) Ltd v Wah Tong Paper Products Group Ltd (unrep. HCMP 436/2013, 31 August 2015), §84, G Lam J (as he then was), citing Kolmar Group AG v Traxpo Enterprises Pvt Ltd [2011] 1 All ER (Comm) 46, §92, Christopher Clarke J.

79.  Judges and academics have propounded different formulations of the requirement of causation for economic duress. In Esquire (Electronics) Ltd v The Hong Kong and Shanghai Banking Corp Ltd [2007] 3 HKLRD 439 at §157, Stock JA (as he then was) observed that authorities have summarized the tests as whether all that had to be shown was that the illegitimate pressure must constitute “a” reason for the weaker party to have entered in the agreement now sought to be vitiated, or (assuming there to be a difference, which Stock JA does not think there is) a “significant cause” “a predominant cause” or the “but for” test.

80.  It is not enough to refuse relief that there was an alternative at the time the disputed contract was made. The alternative must be a practical or reasonable one, in the sense that it is adequate for the claimant’s purpose in the circumstances. If there is an alternative (such as a claim for damages for breach of contract) but it is merely theoretical and would be of no practical use to the claimant, then the court will not expect him to take that alternative instead of submitting to the illegitimate pressure: Duress, Undue Influence and Unconscionable Dealing (supra), §4-020.

G2.  Analysis of the alleged duress

81.  It is the Mortgagors’ case that the 2023 Facility Letter is voidable for economic duress as HSBC has threatened to call in the loans if KW Enterprise would not sign and execute the 2023 Facility Letter. As stated in Ms Cherish Chan’s email dated 11 December 2023:

“… 主要原因Jimmy表示不答應的話匯豐銀行會即時take action call loan. 雖然基本現在已經是多次電話中口述要求我們全數還款及行為但正式出文件我們就不得不還，雖然我們不明白什麼原因導致匯豐銀行有這樣的舉動，但為了不被銀主盤及不即時call loan我們還是答應匯豐銀行的要求。”

82.  Mr Michael Ng’s submissions on the Economic Duress Issue can be broadly summarized as follows:

(1)  HSBC’s Overriding Right Clause is subject to an implied term that HSBC shall only exercise such discretionary power reasonably, rationally, and/or consistently with its commercial purpose, or that it shall not exercise it capriciously or arbitrarily. In threatening to demand repayment of all outstanding sums in full immediately when KW Enterprise had been making monthly repayments to HSBC without a single default over the years, HSBC’s threat constituted a threatened breach of the implied term, and would be regarded as illegitimate.

(2)  The illegitimate threat was at least one reason that caused KW Enterprise to enter into the 2023 Facility Letter, to prevent HSBC from calling in the loans immediately.

(3)  KW Enterprise had no reasonable alternative, as it would have been impossible for KW Enterprise to secure any refinancing or otherwise then to pay off the facilities.

83.  With respect, I am unable to accept the submission for the following reasons.

84.  Firstly, the allegation of economic duress was not raised in Cherish Chan-1^st or 2^nd but only belatedly in Cherish Chan-3^rd. The allegation is contrary to contemporaneous documents and even to the Defendants’ own evidence.

85.  In Cherish Chan-1^st, Ms Cherish Chan stated that it was at Jimmy Ng’s “suggestion” that KW Enterprise should sign a new facility letter so as to prevent HSBC from demanding full payment from KW Enterprise, that Ms Cherish Chan “started discussions” with Jimmy Ng in reliance on the “Agreement/Representation” made (not threat or pressure), KW Enterprise signed and executed the 2023 Facility Letter.

86.  KW Enterprise did not accept or sign the Draft 2022 Facility Letters, showing that it did not give in to any alleged threat or pressure exerted on it.

87.  Secondly, the 2023 Facility Letter itself did not contain the requirement for repayment of a sum of HK$30,000,000.

88.  Thirdly, the 2023 Facility Letter was sent to KW Enterprise on 23 February 2023, but it was only executed on 21 March 2023. KW Enterprise had the opportunity to consider the 2023 Facility Letter for 3 weeks before signing.

89.  Fourthly, in any event, a bank’s exercise of its overriding right of repayment on demand is a right instead of exercise of discretion. In this respect, Mr Michael Ng has fairly drawn my attention to Habib Bank Zurich (Hong Kong) Limited v Creation Castle Limited [2020] HKCFI 1062, where submission similar to his was raised (at §59) and considered in the context of a summary judgment application. During his oral submission, Mr Ng agreed that the subject clause in Habib Bank is in substance quite similar to the Overriding Right Clause in the present case.

90.  Having reviewed the authorities, DHCJ Dawes SC held that:

(1)  The bank’s contractual right to withdraw its credit facilities and demand repayment of all outstanding sums is not subject to any implied limitation that it should not be exercised irrationally (§63);

(2)  Where a contract allocates only to one party a power to make decisions under the contract which may have an effect on both parties, it is plain from the authorities that this discretion “will be limited, as a matter of necessary implication, by concepts of honesty, good faith, and genuineness, and the need for the absence of arbitrariness, capriciousness, perversity and irrationality”: Socimer International Bank Ltd (in liquidation) v Standard Bank London Ltd [2008] Bus LR 1304, §66 (§64);

(3)  A clause which grants a bank the contractual right to cancel credit facilities and demand immediate repayment (under which the bank has a discretion as to how it chooses to exercise this right) is materially distinguishable from one which grants a contracting party the power to make a discretionary assessment on behalf of both parties (as was the case in Socimer and Braganza v BP Shipping Ltd [2015] 1 WLR 1661, §30), and that a Socimer-type implied term is not reasonably necessary to give business efficacy to the contract insofar as the former category of contractual terms is concerned (§67); and

(4)  It is trite that the court will not imply terms which are inconsistent with the express terms of the contract or the nature of the contractual relationship between the parties. It was fundamental to the relationship between the lender bank and the borrower company that the credit facilities were terminable on demand, and it was part of the bargain between the parties (§69).

91.  Applying Habib Bank, even if HSBC had somehow threatened or pressurized the Defendant into signing the 2023 Facility Letter by expressing a possibility to call in the loans, HSBC’s overriding right to demand repayment is fundamental to the relationship between HSBC, KW Enterprise and the Defendants. It was part of the bargain among them.

92.  Fifthly, even if there was pressure or threat exerted on the Defendants, illegitimacy has to be proved. In Esquire (Electronics) Ltd v Hong Kong and Shanghai Banking Corp Ltd [2007] 3 HKLRD 439, Stock JA (as he then was) held that:

“154. The key to proving economic duress is proof of the illegitimacy of the suggested pressure. Much commercial activity necessarily involves pressure, often considerable and sometimes overwhelming, exercised by parties who find themselves in powerful bargaining positions. But that of itself is not illegitimate. …”

93.  There is no illegitimacy shown in this case, apart from the great economic pressure felt by the Defendants.

94.  In the premises, the Economic Duress Issue is not triable.

H.  ISSUE 3: SEPTEMBER DEADLINE CLAUSE ISSUE

95.  Mr Michael Ng submits that the September Deadline Clause was onerous and unusual in the present case. It accelerated the final repayment date of the loans (in particular, the Property Mortgaged Loans by 4 years), which would have substantial impact on KW Enterprise and the Mortgagors’ operations.

96.  He relies on Ocean Chemical Transport Inc v Exnor Craggs Ltd [2000] 1 Lloyd’s Rep 446, §§48-49 and submits that while a party is generally bound by his signature, in extreme cases within extremely narrow limits, the Court may conclude that the party who has signed the document is not bound by his signature if the onerous and unusual clause was not properly drawn to its attention. He submits that there are factual disputes as to whether HSBC had sufficiently drawn KW Enterprise’s attention to the September Deadline Clause.

97.  The facts in Ocean Chemical are special. The claimants entered into a contract for the supply of bunkers with the defendants by an exchange of faxes, which referred to the defendants’ general terms and conditions. The issue was whether the claimants’ claim for breach of contract was time-barred by virtue of a 6-month limitation provision contained in Clause 10 of the general terms and conditions. The trial judge held in favour of the defendants, and his judgment was upheld by the English Court of Appeal. Evans LJ stated at §§48-49 as follows:

“48. … … It seems to me that Mr Charkham could be right in what might be regarded as an extreme case, where a signature was obtained under pressure of time or other circumstances, and where it was possible to satisfy the Interfoto test; that is to say, that the clause was one which was particularly onerous or unusual for incorporation in the contract in question. I would prefer to put the matter more broadly and to say that the question is whether the defendants have discharged the duty which lies upon them of bringing the existence of the clause upon which they rely (and, if Mr Charkham is right, of the effect of that particular clause) to the notice of the other party in the circumstances of the particular case.

49. As I have indicated, in some extreme circumstances, even a signature might not be enough. On the other hand, in the present case there was an express acknowledgement. It seems to me that, given the nature of this term and condition and its effect, as relied upon by the respondents, it cannot be said that the respondents failed in their duty to bring the existence of that term to the notice of the buyers, through, of course, their agents, to whom the term had been long available for their perusal. Mr Charkham does not hesitate to submit that the clause in question should have had, as he puts it, the red hand approach. I would doubt very much whether that is practical in the context of a commercial contract such as this. In my view, the respondents did, in this particular case, where there was an express acknowledgement of the existence of the terms, certainly discharge their duty of bringing it sufficiently to the notice of the buyers for the clause to form part of the contract. That makes it unnecessary to make any explicit findings, as the learned judge did, as to whether this clause was properly to be regarded as onerous or unusual; but, as I have already indicated, I have taken account of the effect of this clause in reaching the conclusion which I have already stated. It seems to me that there is in fact no evidence which supports the proposition that this clause is in any way extreme or totally unexpected to be found in a contract such as this.” (underlines added)

98.  In Ocean Chemical, the limitation provision was not actually contained in the documents signed by the parties. Even so, the English Court of Appeal did not find any extreme circumstances.

99.  In the present case, the September Deadline Clause was expressly stated in the 2023 Facility Letter. The Clause and the 2023 Facility Letter itself had long been available for KW Enterprise’s perusal in late February 2023 until its execution one month later. It can hardly be said that this is an extreme case within the extremely narrow limits as envisaged by Evans LJ.

100.  More importantly, as observed by DHCJ Marlene Ng (as she then was) in DBS Bank (Hong Kong) Limited v Sit Pan Jit (unrep., HCA 382/2009, 2 April 2015) at §389, such observations of Evans LJ were obiter. He did not appear to have considered the principles that where a person of full age and understanding has signed a document which purports to have legal effect, it is not enough to show that he signed without knowing its contents for the document to be disavowed. He is held to that document unless there is shown to be a recognized legal basis for concluding that his apparent consent has been in some way vitiated or that reliance on that document by some other person falls into some category of unconscionable conduct justifying relief in equity: Ming Shiu Chung & Ors v Ming Shiu Sum & Ors (2006) 9 HKCFAR 334, §§84-87, which are binding on this Court.

101.  The September Deadline Clause Issue is not triable.

I.  ISSUE 4: FACILITATION OF REFINANCING ISSUE

102.  Mr Michael Ng submits that HSBC agreed or represented to KW Enterprise and/or the Defendants that HSBC would facilitate the refinancing of the banking facilities granted to KW Enterprise. In breach of such a “collateral agreement”, HSBC has failed to provide or delayed in providing the full repayment records and account statements requested to facilitate the refinancing. Mr Ng says this is hotly disputed by HSBC, and as such there are triable factual disputes as to whether HSBC should be precluded from taking advantage of its own wrong: Hua Hui Investment (Holdings) Ltd v Lifestyle Centre Holdings Ltd [2019] HKCFI 999, §§65-67, DHCJ Richard Khaw SC.

103.  I find no legal basis for this alleged collateral agreement. Even if I am wrong, and HSBC breached the alleged collateral agreement, the net result would not affect its overriding legal right to demand repayment or to enforce the Mortgages.

104.  Further, each of the Borrower’s requests for documents in Cherish Chan-1^st §41 concerned different requests for different documents on different dates between May and December 2024, rather than repeated requests for the same documents that were ignored: see Ng 1^st §53; namely, copies of the Facility Letters, the outstanding amount, total repayment record. The documents were sent to Ms Cherish Chan within a few days or even on the same day of her requests.

105.  Worse still, Cherish Chan 2^nd §§6-8 refers to the Defendants’ specific discovery request for “the Borrower’s Account Statements”, to support this issue, when such account statements had never been requested by the Defendants for refinancing. The request came only for the first time 3 months after these proceedings commenced, when Cherish Chan-1^st was filed.

106.  There is no triable factual dispute on the Facilitation of Refinancing Issue.

J.  ISSUE 5: MORTGAGE 4 ISSUE

107.  For the sake of completeness, I have taken into account the Defendant’s assertion that the market value of Property 4 far exceeds any outstanding indebtedness owed by KW Enterprise to HSBC, and so no order should be granted in relation to the other 4 properties. This point has not been taken up in Mr Ng’s written or oral submissions.

108.  HSBC has tendered valuation evidence to show that the value of Property 4 might not be sufficient to cover the outstanding facilities.

109.  Despite the dispute over valuation, as rightly pointed out by Ms Ha, it is well-established that when a creditor has multiple securities, as is HSBC’s case here, the creditor is entitled to enforce them at the same time, any time, simultaneously, contemporaneously or successively or not at all: China and South Sea Bank v Tan Soon G in [1990] 1 AC 536 at 545C.

110.  The Mortgage 4 Issue is not triable.

K.  CONCLUSION AND COSTS

111.  None of the defences are triable. There is no dispute on quantum or that default in repayment constituted an event of default entitling HSBC to possession of the Properties. HSBC is entitled to judgment.

112.  Mr Michael Ng asks for time for the 1^st Defendant to deliver vacant possession of Properties 1 to 3 to be 42 days after service upon it of the sealed order.

113.  The usual timeframe is 28 days for delivery up of residential property and 14 days for non-residential property. As there are several properties involved, the Defendants do need time to put their properties into a vacant stage. For easy computation of time, I shall not use the date of service. Instead, I give 2 months from the date of this judgment for all the Defendants to deliver up vacant possession of their respective property.

114.  Costs should follow the event and be paid by the Defendants to HSBC. Pursuant to Clause 18.01(b) of each of the Mortgages, HSBC is entitled to all reasonable expenses (including legal expenses on solicitors and own client basis) incurred by HSBC in suing for or recovering any sum due from the Defendants in connection with the enforcement of the Mortgages.

115.  Where parties have entered into a commercial transaction on a certain basis, the Court should be slow to disturb their agreement, unless the circumstances are such as to cause the Court in the exercise of its discretion to intervene: Bank of China (Hong Kong) Ltd v Twin Profit Ltd (2012) 15 HKCFAR 560, §19, Ribeiro PJ.

116.  In the present case, I find that there are no circumstances warranting the Court’s intervention. I summarily assess the Plaintiff’s costs at HK$500,000 and make an order nisi accordingly.

117.  I order as follows:

(1)  Leave be granted to the Defendants to file the 3^rd Affirmation of Chan Tan Tan Cherish dated 27 December 2024;

(2)  Paragraph 1 of the Conversion Summons be dismissed;

(3)  The Defendants shall pay HSBC the sum of HK$ 186,740,651.47, with daily interest at HK$ 65,791.13 from 18 July 2024 until payment;

(4)  The 1^st Defendant shall deliver up vacant possession of:

(a)  Unit 6 on 3/F, Fo Tan Industrial Centre, Nos. 26-28 Au Pui Wan Street, Fo Tan, Shatin, New Territories;

(b)  Unit 7 on 3/F, Fo Tan Industrial Centre, Nos. 26-28 Au Pui Wan Street, Fo Tan, Shatin, New Territories;

(c)  Unit 8 on 3/F with flat roof of Fo Tan Industrial Centre, Nos.26-28 Au Pui Wan Street, Fo Tan, Shati, New Territories;

within 2 months of this judgment;

(5)  The 2^nd Defendant shall deliver up vacant possession of No. 28 Watford Road together with the garden and the car park appertaining thereto of Watford Villas, Nos. 18-28 Watford Road, Hong Kong within 2 months of this judgment;

(6)  The 3^rd Defendant shall deliver up vacant possession of Flat C on Ground Floor and Mezzanine Floor (Ground Floor and Mezzanine Floor, No. 124 Apliu Street) Nos. 120, 122, 122A and 124 Apliu Street, Kowloon within 2 months of this judgment;

(7)  On a nisi basis, there be costs to HSBC on the OS and the Defendants’ Conversion Summons on solicitor-client basis, including all costs reserved, summarily assessed and allowed at HK$500,000, to be borne jointly and severally by each Defendant; and

(8)  There be liberty to apply.

118.  I thank Ms Ha and Mr Ng for their thorough preparation and able assistance.