EDS WELLNESS HOLDINGS LTD v. SHUM YEUNG AND OTHERS

HCMP 1234/2015 &
HCMP 1401/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO1234 OF 2015

____________

_____________

AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1401 OF 2015

_____________

_____________

_____________

D E C I S I O N

_____________

1. The task before me this morning is to decide whether the bank guarantee being proposed by the 1^st defendant pursuant to my order dated 23 September 2015 as an alternative for payment into court should be approved by the court given that the form of guarantee proposed has not been agreed to by the plaintiff.

2. There are a number of issues between the parties.

3. The first point is that at the moment the guarantee offered will last only for one year.  Upon expiry the plaintiff is prepared to accept an arrangement whereby if the guarantee is not renewed in the same form then the bank should pay the money into court, whereas the defendant proposes an arrangement whereby if the guarantee is not renewed by the bank then he will pay the money into court.

4. For the reasons submitted by Mr Kwong, I think the defendant’s position cannot be accepted.  The point of the payment into court or the bank guarantee is to give the plaintiff security.  There is no security if the bank guarantee is to expire within a year simply to be replaced by the personal obligation of the 1^st defendant to pay the judgment sum. 

5. Even though Ms Wong offers for the restraint under paragraph 5 of my order to be extended, I do not think that gives sufficient let alone equivalent protection to the plaintiff even on the basis that the 1^st defendant adheres to the restraint.  There are too many uncertainties, unknown circumstances, including market movements, changes in the economic environment and the consequent business fortunes of the 1^st defendant for it to be acceptable, effectively to delay the plaintiff’s right to execute the judgment for a year. 

6. The other major point of contention is that the plaintiff wants the bank guarantee to be transferable or assignable.  The proper way of looking at it is not the assignability of the bank guarantee as such, but to see whether the bank guarantee can offer sufficient protection in favour of the plaintiff, including the plaintiff after a change of name, or a merger, or a transfer or a transmission of the cause of action.

7. I think that in principle, the security has to be capable of operating in favour of a party who is substituted into the position of the present plaintiff.  In fact, the present plaintiff was a plaintiff by substitution after taking an assignment from Blu Spa (Hong Kong) Limited.  If for any genuine commercial or banking reason that cannot be done, then there should at least be a mechanism whereby the bank will pay the money into court.

8. There is another dispute about whether the demand under the bank guarantee must be made through a bank and the money collected through a bank.

9. At the moment, I do not see why a firm of solicitors cannot present the documents to the bank.  The money will have to be paid into a bank account in any event, there being no suggestion that actual banknotes in cash will be transferred on presentation of the bank guarantee.  But I suspect this is not an insuperable difficulty, for example, if Hang Seng Bank, which has insisted upon this requirement itself, can act also as the banker of the beneficiary of the bank guarantee.

10. There is a point raised about the costs and expenses of the plaintiff potentially to be incurred in enforcing the guarantee.  That, as I see it, is an argument about the costs of the legal proceedings and not a matter that I should include as part of the argument on whether the form of guarantee proposed is to be approved by the court or not.

11. For these reasons I am unable to approve the latest form of the bank guarantee proposed by the 1^st defendant.

(Submissions as to costs)

12. The 1^st defendant do pay the plaintiff’s costs forthwith with certificate for counsel.