BANK OF CHINA (HONG KONG) LTD v. CHAN KWONG SANG

HCA9415/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9415 OF 2000

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D E C I S I O N

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1. On 5 January 1998 the defendant signed a Deed of Guarantee, in his personal capacity, in respect of his company’s debts with the Hua Chiao Commerical Bank.  His company was Kwong Hing International (Holdings) Ltd (“Kwong Hing”).  The indebtedness which he guaranteed was approximately $4.9 million. The bank, for litigation purposes, became the plaintiff in 2001.

2. Payment has been demanded under the guarantee but not paid.  In November 2000 the defendant filed a defence alleging “non est factum”.  He claims he should not be bound by his signature because he did not know or understand what he was signing or its contents.

3. In January 2001 the plaintiff took out a summons to strike out the defence but this was later withdrawn by consent in the course of negotiations between the parties.  The matter was revived in November 2003 when the plaintiff commenced Order 14 proceedings.  Pursuant to such proceedings Master Levy entered judgment against the defendant in the sum of $4,893,967.36 plus interest on 5 January 2004.  On that occasion the defendant was represented by Mr John Ku (then of Messrs John Ho & Tsui).  Mr Ku had no instructions from the defendant and so he neither opposed nor consented to the application.  He was present but, in effect, said nothing.

4. Based on the above judgment bankruptcy proceedings were commenced in July 2005.  The amount due and owing by the defendant to the plaintiff as at 19 May 2004 as stated in the bankruptcy proceedings is $3,930,836.09.  

5. The defendant seems to have re-entered the picture in 2006.  He applied to set aside the Order 14 judgment.  Master Ho refused that application on 17 October 2006.

6. As a result of all the above there are now four matters before this court :

(i)      An application for leave to appeal Master Levy’s Order 14 judgment out of time.  It is over two and a half years out of time.

(ii)     If granted, an appeal against the summary judgment order.

(iii)    An application to adduce further affirmation evidence in connection with the appeal.

(iv)    An appeal against Master Ho’s refusal to set aside the Order 14 judgment.

(1)     New evidence

7. In fairness to the defendant I will decide, first of all, whether to grant leave to adduce further affirmation evidence.  The evidence in question is contained in two affirmations, the first from the defendant dated 6 February 2007 and the second from his solicitor, Mr John Ku Ling Yu, dated 7 February 2007.

8. The defendant’s affirmation claims that, in 1999, there was a settlement agreement between the bank and Kwong Hing.  This is a new defence which was not pleaded in the November 2000 defence; neither was it mentioned to Master Levy in January 2004.  Moreover the delay between that hearing (2004) and the affirmation itself (2007) is substantial.

9. The reasons advanced for the non-pleading and the delay are unacceptable.  The defendant says he was heavily engaged in other matters involving, amongst other things, the re-location of his family to Shenzhen.  He also claims that he was under the impression that the matter was either resolved or being resolved.  In reality he made no adequate attempts to keep in touch either with his solicitor or with the litigation.  Mr Ku’s affirmation purports to explain that the reason the settlement agreement was not pleaded in November 2000 was because, at that time, the settlement had not been finalized and, in any event, did not involve the defendant in his personal capacity and therefore could not help him.  I find this to be too little, too vague and too late.

10. I accept that settlement talks did take place.  They involved the proposed sale of a commercial property and about 100 sets of gold coins to reduce the debt.  At later dates these items were sold, sales to which I shall refer later, however, they are now only relevant to the quantum of the surviving debt by Kwong Hing to the bank.

11. In short, I have considered the contents of the new affirmations de bene esse.  Out of an abundance of fairness to the defendant I admit them but, for the reasons outlined above, they will attract very little weight.

(2)   Leave to appeal out of time

12. The reasons for attaching little or no weight to the new evidence have equal application to this issue.

13. The facts are, as already stated, that leave is being sought nearly three years after the Master’s decision.  The delay is substantial and the reasons for the delay, unconvincing.  In such circumstances a court would have to be satisfied that a defendant’s case had strong merits and that it would be unjust to close the court door.

14. The merits of the case are strongly in the plaintiff’s favour.  In support of the pleaded case of non est factum the defendant, a businessman with experience in managing a number of companies, would have to establish that he was positively misled by a professional witness as to the meaning and effect of a document which he knew was a bank document.  The professional witness in question was a solicitor who witnessed the Deed of Guarantee.  There would be no benefit to her to mislead or misinform the defendant about the document which was one of several documents placed before him at the material time.  He makes no complaint about his knowledge or understanding of any of the other documents, only the one that binds him.

15. In short, the merits are firmly on the plaintiff’s side, the delay since 2004 is not satisfactorily explained, leave to appeal out of time is refused.

The present position

16. As far as quantum is concerned it is necessary to bring the matter up to date.  Although Master Levy was plainly right in granting the Order 14 application, the sum in which judgment was entered requires amendment for two reasons.  Firstly, the gold coins referred to above had, at the time, already been sold in partial reduction of the debt.  This was not brought to the Master’s notice.  Secondly, since the hearing before the Master the commercial property has also been sold and bankruptcy proceedings have been instituted and heard.

17. The defendant correctly submits that because the gold coins were sold before the hearing before the Master the judgment sum was excessive and therefore the judgment was irregular.  It is however open to this court, not to set it aside, but simply to correct it.  Where there is no merit in the defence the proper course is to correct.  It would be a waste of time and money to do otherwise.

18. The sale of the gold coins (which realized $574,455.24) and the subsequent sale of the property have fully been accounted for in the subsequent bankruptcy proceedings.  The plaintiff now applies for judgment in an amended sum.

19. I accept that the amended sum is as set out in the plaintiff’s written supplemental submissions.  Therefore, in addition to dismissing the defendant’s application for leave to appeal Master Levy’s decision out of time and also dismissing the defendant’s appeal against Master Ho’s refusal to set aside the Order 14 judgment, I amend the judgment sum which shall now be in the sum of $3,930,836.09 (being the sum due and owing in the bankruptcy petition HCB7804/2005 as at 19 May 2004) together with interest on the sum of $3,881,752.65 at judgment rate from 20 May 2004.

20. I make no order as to costs in relation to the defendant’s application to adduce further evidence by way of two affirmations dated 6 and 7 February 2007.  In all other matters I make a costs order nisi in the plaintiff’s favour.