BANK OF COMMUNICATIONS, HONG KONG BRANCH v. YENWIN INVESTMENTS LTD. AND OTHERS

H.C.A. No. 6014/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 6014 OF 1999

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ASSESSMENT OF DAMAGES

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Background

1. By a Writ of Summons dated 13th April 1999, the Plaintiff bank claimed against the 1st defendant as the borrower and the 2nd, 3rd, 4th and 5th Defendants as guarantors the sums of HK$12,589,817.26 and US$395,704.86 together with interest and costs. By an Inter-Parties Summons dated 20th July 1999, the Plaintiff sought Summary Judgment against the 1st Defendant. On 25th November 1999, Master Lung granted Interlocutory Judgment against the 1st Defendant after hearing arguments and ordered for damages to be assessed. The learned master also gave directions as to the filing and serving of affidavits for the purpose of the assessment.

2. Mr. Wong, counsel for the Plaintiff informed the court upon the assessment hearing that neither parties would be calling evidence whereupon Ms. Chan, counsel for the 1st Defendant indicated that she wished to cross-examine the Plaintiff's witnesses. Although Master Lung gave directions for the filing and serving of affidavits, he has not made any order pursuant to Order 38 rule 2(1) of the Rules of the High Court for such affidavits to be read at the trial. Consequently, the affidavits are no more than "statements" from both parties indicating the issues in dispute. The need of calling witnesses to substantiate any particular point or issue has not been dispensed with.

Mr. Wong then asked for the case was to be stood down for the Plaintiff to arrange for their witnesses to attend court. In the end, only one witness was called for the Plaintiff and the Defendant did not call any. I will deal with the evidence of this witness at a later stage.

3. It is common ground that as a result of the 1st Defendant executing a Facility letter dated 11th December 1997 and an Undertaking for Repayment of Overdraft dated 12th January 1998, the Plaintiff granted banking facilities to the 1st Defendant which include the following two accounts: (i) a current account with overdraft facility up to the extent of $1,000,000 ("current account"); (ii) a bills account ("bills account") for trust receipts facility up to the extent of $15,000,000. According to the said facility letter (p.34-37 of the bundle), the interest on the overdraft was to be charged at 3% per annum over the best lending rate while the interest on the Trust Receipt facility varies from 1% to 5.5% depending on the tenor of the bills.

Although the 1st Defendant did, pursuant to the order of Master Lung, file an affirmation through one of its directors, Yim Wai Ning ("Yim"), on 7th March 2000 to challenge the Plaintiff's claim; in particular the Plaintiff's right of charging the interest incurred on the bills account to the current account and charging compound interest, the fact remains that the 1st Defendant elected not to give evidence. The 1st Defendant's said affidavit is therefore not evidence before me for my consideration. However, since the allegations made by Yim were in fact answered by the sole witness called by the Plaintiff, the 1st Defendant did put across its grounds of objections, though in a somewhat roundabout fashion.

Evidence

4. Mr. Lam Wing Keung, a Senior Officer of the Commercial banking Department of the Plaintiff confirmed that the contents of his affirmation filed on 23rd March 2000 were true and correct. Mr. Lam did not personally handle the granting of the banking facilities in early 1998, (having only worked for the Plaintiff since mid-1998). At the beginning of 2000, he joined a team dealing with the 1st Defendant's accounts with the Plaintiff and became conversant with the matter. He confirmed that the facts he deposed to in his affirmation were either through personal knowledge or obtained from reviewing documents in the Plaintiff's possession in relation to the present action. Mr. Lam confirmed that the reasons and bases to justify charging the interest on the bills account to the current account were as deposed by Pun Sum Nin ("Pun") in paragraph 12 of his affirmation dated 9th December 1999 (p. 155 of the bundle).

5. Paragraph 12 of Pun's affirmation referred to a course of dealing between the Plaintiff and the 1st Defendant since the opening of the bills account on 9th January 1998. He deposed that the interest accrued on the bills account has all along been settled monthly by the sum to be drawn from the current account. The 1st Defendant has never raised any objection thereto. Pun also referred to Clause 7.02 of the General Security Agreement, (exhibited to 5th affirmation of Wong Wai Hong ("Wong") as "WWH-9") (p. 109 of the bundle) which authorized the Plaintiff to debit the account of the 1st Defendant with all sums owing by or chargeable to the 1st Defendant.

6. Although neither Pun nor Wong was called by the Plaintiff to give evidence, Mr. Lam, who was a Senior Officer, testified that he had reviewed the documents in the Plaintiff's possession to come to the conclusion that the reasons and bases deposed by Pun were correct. Not only that Mr. Lam was not cross-examined on this issue, the 1st Defendant did not call any evidence to the contrary. I accept the evidence of Mr. Lam and am satisfied that the Plaintiff did have the bases to charge the interest accrued on the bills account to the credit account.

7. As to the allegation that the Plaintiff is not entitled to charge compound interest. Mr. Lam dealt with this issue under paragraph 4 of his affirmation. He referred to Clause 4 of the Undertaking which provides for the charging of compound interest. Defence counsel has neither cross-examine Mr. Lam on this point nor did she advance any legal argument as to why this particular clause is not enforceable. I find that the Plaintiff has satisfied me that it is entitled to charge compound interest.

8. Coming to the interest accrued on the current account, Mr. Lam confirmed that the amount claimed, i.e. $12,238.42 was correct. He testified that according to the practice of the Plaintiff, for "non-performing loans" such as the facilities granted to 1st Defendant, the Plaintiff may elect to suspend the calculation of interest on the loans by computer system and the interest would then be calculated by the Plaintiff manually. The Plaintiff had so suspended the calculation by computer on 19th March 1999, hence the statement of account (exhibited to 5th affirmation of Yim as "YWN-16") (p. 191 of the bundle) showed the interest at $11,125.83 as at 18th March 1999. Although Mr. Lam could not advance any logical reason why the Plaintiff adopt such a policy, I do find Mr. Lam an honest witness and I accept his evidence that the Plaintiff did have such a policy. I find that the correct interest up to 20th March 1999 under the current account was indeed $12,238.42.

9. Lastly, in dealing with the 1st Defendant's challenge (under paragraph 8 of Yim's affirmation) that the information provided by the Plaintiff's solicitors gave a breakdown of $471,426.74 as opposed to $571,965.86 claimed by the Plaintiff, Mr. Lam testified that the 1st Defendant has omitted to take into account two principal sums, i.e. US$341,126.40 and US$50,256.94. Ms. Chan conceded during her submission that the 1st Defendant did omit the include the same.

10. For these reasons, I find that the Plaintiff has proved that it is entitled to claim against the 1st Defendant the principals and interest as stated in the Statement of Claim.

ORDER

1. Judgment for the Plaintiff against the 1st Defendant for the sums of HK$12,589,817.26 and US$395,704.86;

2. Interest as from 21st March 1999:-

(a) on the outstanding principal of Overdraft facility of

(i) HK$1,000,000.00 at 11.75% per annum and

(ii) HK$481,951.17 at 17.75% per annum;

(b) on the outstanding principal of Trust Receipt facility of

(i) HK$10,516,261.81 at 14.25% per annum and

(ii) US$391,383.34 at 13.25% per annum

up to date of Judgment and thereafter at Judgment rate until full payment.

3. Cost of this Assessment be to the Plaintiff with certificate for counsel, to be taxed if not agreed. Such costs order is a nisi one, to be made absolute should no application to review is made within 14 days hereof.