XCHRX In re First, Bangkok City Finance Ltd. and Thai Mercantile Development Finance Ltd.

IN THE SUPREME COURT OF HONG KONG

COMPANIES WINDING-UP

NOS. 202 & 215 OF 1986

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J U D G M E N T

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1. This is an application by Sunee Sirilapanun and Jinda Sirilapanun against the decision of the Official Receiver made on the 12th July 1991 rejecting their proof of debt for $1,825,497.80 in the liquidation of the Thai Mercantile Development Finance Limited (TMDF) for US$250,000 each. Jinda Sirilapanun who is also known as Chinda Sirilapanun, is the wife of Anan Sirilapanun and Sunee Sirilapanun is their daughter.

2. At the date of the winding up order of TMDF on the 15th September 1986 Anan and Chinda Sirilapanun held two fixed deposits each for US$250,000. The two deposits were made to secure loans of corresponding amounts to two companies incorporated in Thailand, Thai Resin Chemical Industry Co. Ltd. (Thai Resin) and L. Anandha Trading (1975) Co. Ltd. (Anandha). Interest earned on the two deposits was transferred to six other accounts which were also held in the joint names of Anan and Chinda Sirilapanun.

3. Subsequently on the 15th April 1986 the monies from these six accounts were transferred into the joint names of Jinda and Sunee Sirilapanun.

4. On the 30th July 1986, letters were sent by the Official Receiver to Thai Resin and Anandha demanding repayment of the loan of the two loans but no payments have been made.

5. The issue before me for determination as submitted on behalf of the Official Receiver is whether the loans to Thai Resin and Anandha, were not only secured by the two fixed deposits in the joint names of Anan and Chinda Sirilapanun but also by the joint account in the names of Jinda and Sunee Sirilapanun.

6. Letters of lien were signed by Anan and Chinda in respect of the two fixed deposits which are in identical terms and read as follows :-

"We have pleasure in enclosing herewith your fixed deposit receipt number UO460 for US$250,000 in our name to be placed in your company as collateral to guarantee the loan facilities extended to Thai Resin up to the sum of US$250,000.

In the event that we fail to repay or default the loan facilities on notice or on demand, you are hereby authorised to transfer part or whole of the principal and interest of our fixed deposit to the said account for repayment."

Mr Cheung, counsel for the applicants, submitted that upon the true reading of the letter of lien that the loans are only secured by the money in Anan and Chinda Sirilapanun's accounts.

7. Mr Cheung went on to say that Jinda and Sunee had never agreed to provide any security in respect of the loans to Thai Resin and Anandha. Accordingly, they cannot have contracted any liability as surety unless there was a novation of the contract, or they entered into a new guarantee agreement with the bank which they never did.

8. Mr Smith, counsel on behalf of the Official Receiver, submitted that the deposits that were made as security for the loans amount to an equitable mortgage by deposit. Accordingly, the depositer has a chose in action. He further submitted that the rights of TMDF over the deposits can only be extinguished by a purchaser for value without notice of those rights and that the applicants were not purchasers for value. However, no authority was cited for this proposition.

9. In my judgment, having regard to the plain language of the letters of lien, I do not accept the submission advanced on behalf of the Official Receiver. Neither Jinda nor Sunee Sirilapanun entered into any agreement with TMDF to secure the loans to Thai Resin or Anandha. Their fixed deposits are separate and independent transactions from the fixed deposits of Anna and Chinda Sirilapanun. The liability to TMDF is therefore restricted to the two deposits in the names of Anan and Chinda.

10. As a result, there will be an order for the applicants' proof to be admitted. The applicants are also entitled to an order nisi for costs.