XCHRX DASHIN SECURITIES LTD. v. SUPER SINO INVESTMENTS LTD. AND OTHERS

HCA 9614/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9614 OF 2000

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REASONS FOR DECISION

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1. This is an appeal from an order of Master Mary Yuen given on 20 February 2001when she gave leave for the 2nd defendant to defend these proceedings on condition that payment into court of $10,200,000.00 was made. That order was later stayed pending outcome of this appeal. When this matter came before me on 2 April 2001, I dismissed the appeal and ordered the decision of the Master to stand, and ordered the 2nd defendant to pay the costs of the appeal. I now give my reasons for so doing.

2. The facts pleaded by the plaintiff in the statement of claim are briefly these: the plaintiff is a dealer and broker in securities and provides credit or financial facilities for such trading; on 3 July 2000 an account was opened for the 1st defendant, a British Virgin Islands company, by way of a client's margin agreement, signed by the 2nd defendant on behalf of the 1st defendant as director; on the same day the 2nd defendant executed a guarantee in favour of the plaintiff guaranteeing the repayment of any debts and liabilities owing by the 1st defendant including any costs and interest; on 18th September 2000 the plaintiff agreed to grant further credit facilities on condition the existing debit balance of a little over $7,000,000.00 was settled, and a cheque drawn by a Mr W.K. Wong was given to the plaintiff and paid into its account, whereupon further credit facilities were granted; the next day the cheque was dishonoured, leaving a debit balance in the account of $10,526,649.26 and interest; the plaintiff demanded payment of the sum due but only $170,000.00 was paid on 29 September 2000 and a cash dividend from shares of $136,996.00 credited on 10 October, leaving a debit balance as at 10 October 2000 of $10,344,347.74. Meanwhile a further guarantee was executed by the 3rd defendant. Judgment in default has been entered against the 1st and 3rd defendants.

3. In her defence, the 2nd defendant pleads ignorance of the whole matter. She says that she never consented to be a director of the 1st defendant, although it is noted that she does not deny being a director, merely does not admit it and puts the plaintiff to proof, and denies signing the guarantee, claiming that the signature is a forgery.

4. The affidavit in support of the application was made by Mr Siu Kwun Luen, the managing director of the plaintiff. He verifies the claim made in the statement of claim and states that he believes that there is no defence. However, Mr Lam for the 2nd defendant contends that this affidavit is defective and the application should have been dismissed. He says that the evidence in this affidavit is inadmissible as he had no direct knowledge of the signing of the guarantee, not having personally dealt with the 2nd defendant, this being apparently done by a Mr Lam Fei Hung. I regret that I have little sympathy with this argument. Mr Siu clearly makes the affidavit in his capacity as managing director, and states that the information he relates was obtained from the plaintiff's records, and in one case, in his second affidavit, from information obtained from Mr Lam. There is ample evidence here, not only in the names in the documents, but in the copy of the 2nd defendant's identity card and an electricity bill to verify her address. This latter is given also as the business address of the 1st defendant and is the one to which the statements of account were sent. Further, he exhibits letters received from a firm of solicitors who say they act for the 2nd defendant asking for copies of the relevant documents, and informing him that the directorship of the 1st plaintiff has been changed from 2nd defendant to Kenson Management Ltd. All this evidence is admissible under the provisions of Order 14, under which the court has wide discretion to accept statements of information and belief provided that the source and grounds thereof are stated. The evidence here fully complies with that requirement and the plaintiff establishes a clear prima facie case.

5. The 2nd defendant's response to that case is frankly less than fully open and comprehensive, to the extent that large parts are not answered at all. Apart from restating that she never signed the documents exhibited, and producing what she says are copies of her correct signature, her affidavit in opposition is a mere denial. She does not say why she should receive an electricity bill for premises which are on the face of it the business address of the 1st defendant, or explain further when a search reveals that at least part of that property is owned by her daughter, does not say she did not receive the monthly statements, merely that she would not understand them, and denies giving instructions to the solicitors, in spite of their later confirmation to the plaintiff's solicitors that they had a long conference with her and her daughter about the matter, and acted for her until her present solicitors took over. She further does not explain her, or her family's, connection with the 1st defendant, in spite of the evidence of its address and her directorship, nor why her daughter should have approached the plaintiff with negotiations for a settlement, depositing 5 million shares to show sincerity.

6. In short there is clear evidence here of a close connection between the 2nd defendant and her family and the 1st defendant, evidence that the 1st defendant must have had knowledge at least of these matters, and no immediate denial of the debt or liability for it, until these proceedings began. All this demands answers and a full explanation in an affidavit which should condescend upon particulars. All I have before me is little more than a bare denial and bare assertions, and that is no proper answer to the plaintiff's case, which by contrast looks overwhelming.

7. On reflection it may well have been overgenerous for the Master to have given leave to defend at all, but I cannot criticise her decision to make that leave conditional. In supporting the order I take into account what the 2nd defendant has put forward as to her means, and the submission of Mr Lau that it would effectively mean an end to the case as she cannot afford to pay. The evidence overall does not persuade me that I am dealing with a poor and lonely lady with no access to assets. Her family have at least two properties, that which she resides in, owned by her sons, and that of her daughter at the address of the 1st defendant. In view of the evidence connecting her and her family to the 1st defendant, I incline to the view that I have not heard the whole truth about her means either.

8. For these reasons the 2nd defendant's appeal was dismissed.