THE BANK OF EAST ASIA, LTD v. DARE LTD AND OTHERS

HCA 1359/2023

[2025] HKCFI 2710

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1359 OF 2023

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REASONS FOR JUDGMENT

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Introduction

1.  The 1^st, 2^nd and 3^rd defendants (“Ds”) appealed from the Judgment of Master K W Wong dated 24 March 2025. The Master entered Judgment for the plaintiff (“P”) against Ds pursuant to Order 14 rule 3 of the RHC in the sum of HK$1,141,066,150.65 plus interest and costs.

2.  The appeal was pursuant to Order 58 rule 1 of the Rules of the High Court (Cap.4A), and operated as a re-hearing de novo.

3.  At the conclusion of the hearing I dismissed Ds’ appeal with costs to P.

4.  I now provide my reasons.

The plaintiff’s claim

5.  P is a bank and the 1^st defendant (“D1”) is its customer.

6.  The parties entered into a Facility Agreement dated 13 August 2018 (the “FA”) with P as lender, D1 as borrower, and the 2^nd defendant (“D2”) and the 3^rd defendant (“D3”) as guarantors. Under the FA, P agreed to make available to D1 a term loan facility in the amount of HK$1,200,000,000.

7.  In 2018, D1 then drew down a loan of HK$1,001,815,200 (the “Loan”) from P pursuant to the FA.

8.  Under the provisions of the FA, D1 was to pay the 4^th to 6^th repayment installments of the Loan on 17 August 2020, 16 February 2021, and 13 August 2021, respectively, totaling HK$934,693,581.60. P pleaded that it agreed with D1 to extend the due date for payment of the 4^th repayment installment to 16 February 2021.

9.  P claimed against Ds on that basis that:

(1)  D1 defaulted in making payment of the 4^th and 5^th repayment installments on the due date of 16 February 2021 or at all.

(2)  By letter dated 26 February 2021 from Messrs. King & Wood Mallesons (“KWM”), P’s former solicitors, to D1 (the “KWM Letter”):

(a)  P informed D1 that as D1 had defaulted on the repayment of the 4^th and 5^th repayment installments, and an Event of Default had occurred pursuant to Clause 21.1 of the FA;

(b)  P declared, in the exercise of its rights under Clause 21.17(b) of the FA, that the Loan together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable; and

(c)  P demanded that D1 pay the total outstanding indebtedness as at 23 February 2021 and notified D1 that default interest would apply and accrue.

(3)  By two letters dated 26 February 2021 from KWM to D2 and D3, P informed D2 and D3 of the matters referred to at sub-paragraphs (2) (a) and (b) above, and demanded the same amounts from D2 and D3 as guarantors under the FA;

(4)  The amounts claimed have not been paid in full despite repeated demands, and P claimed the outstanding balance.

Principles on summary judgment

10.  The principles applicable on an application for summary judgment are well-known.

11.  They were summarised by Cheng J in Heng Wah (Hong Kong) Decoration Company Limited v. Bonjour Holdings Limited [2022] HKCFI 3487 at §15 in the following terms:

(1)  Summary judgment is for clear cases, where there is no serious material factual dispute, or no more than a crisp legal question as well decided summarily as otherwise.

(2)  The defence needs only to show that there is a triable issue or question or that for some other reason there ought to be a trial.

(3)  There should not be a mini-trial on affidavit. The court should simply ask whether what the defendant says is credible. If so, he must have leave to defend. If not, the plaintiff is entitled to summary judgment. The issue is not whether the defendant’s assertions are to be believed, but whether they are believable.

(4)  Summary judgment will only be granted on the claims set out, and facts pleaded, in the statement of claim.

12.  Further, if the application for summary judgment is properly constituted, it is for the defendant to show that there are triable issues ie a bona fide arguable defence warranting trial. [1]

Defence and grounds for opposing summary judgment

13.  There was no dispute that the application for summary judgment was properly constituted, and that it was for Ds to show a credible defence to P’s claims.

14.  Ds’ pleaded Defence raised a number of matters, but only two (related) points were raised by Mr. Chok, appearing for Ds, for the purposes of opposing summary judgment.

15.  I confine myself to considering those two points.

16.  Both points relate to the KWM Letter referenced at §9(2) above, and the question whether by that letter P gave a valid notice of acceleration pursuant to Clause 21.17(b) of the FA: see further below.

17.  It was Ds’ pleaded case that D1 did not receive the KWM Letter (and also that D2 and D3 did not receive the letters said to have been sent to them by KWM on the same date).

18.  This case was supported by an affirmation of D2 stating, inter alia, that D1 never received the KWM Letter whether by post, fax or email; and that D2 and D3 also did not receive letters from KWM.

19.  Accordingly, argued Ds, effective notice of acceleration was never given by Ps under Clause 21.17 of the FA, and there was at least a triable issue on this point.

Relevant provisions in the FA

20.  The relevant provisions of the FA are as follows:

“21.17 Acceleration

Without prejudice to Clause 6.2 (Overriding right of repayment on demand), on and at any time after the occurrence of an Event of Default which is continuing, the Lender may by notice to the Borrower:-

…

(b) declare that all or part of the Loans, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable, whereupon they shall become immediately due and payable.

…

27. NOTICES.

27.1. Communications in writing

Any communication to be made under or in accordance with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by fax, letter or (under Clause 27.4 (Electronic communication)) email.

27.2. Addresses

The address, fax number and email address … of each Party for any communication or document to be made or delivered under or in connection with the Finance Documents are those identified with its name at the end of this Agreement, or any substitute address, fax number, email address … as the relevant Party may notify to the other Parties by not less than 5 Business Days’ notice.

27.3 Delivery

(a) Any communication or document made or delivered by one person to another under or in connection with the Finance Documents will only be effective:

(i) if by way of fax, when received in legible form;

(ii) if by way of letter, when it has been left at the relevant address or 5 Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address; or

(iii) if by way of email, if it complies with the rules under Clause 27.4 (Electronic communication);

…

27.4 Electronic communication

(a) Any communication to be made between the Parties under or in connection with the Finance Documents may be made by electronic mail or other electronic means, if the Parties:-

(i) agree that, unless and until notified to the contract, this is to be an accepted form of communication;

(ii) notify each other in writing of their electronic email address and/or any other information required to enable the sending and receipt of information by that means; and

(iii) notify each other of any change to their address or any other such information supplied by them.

(b) Any electronic communication made by one Party to another Party will be effective when it is sent by the sender Party unless the sender Party receives a message indicating failed delivery…”

Ds’ arguments

21.  As noted above, Mr Chok for Ds ran only two arguments. Both related to the validity of the KWM Letter as a notice of acceleration under the FA, in light of Ds’ evidence that it was not received by D1.

Ds’ first argument: allegedly defective pleadings

22.  Mr Chok’s first argument was that the facts pleaded in the Statement of Claim (“SOC”) were insufficient to support P’s claim.

23.  In short, he argued that the claim in the SOC was premised on P having given a valid notice of acceleration under Clause 21.17 of the FA by sending the KWM Letter; but P had to plead the manner in which the notice was served, which was a material fact required to be pleaded.

24.  In particular, at §§10 and 11 of the SOC, P pleaded that it had by the KWM Letter declared that it exercised its rights under Clause 21.17, but there was no plea as to how P satisfied the requirements for the methods of delivery set out in Clause 27 of the FA.

25.  P’s evidence in support of the application for summary judgment included the Affidavit of Wan Hong Yin Edmund, a partner of KWM, which stated inter alia that on 26 February 2021 Mr Wan served the KWM Letter by:

(a)  sending an email to D1’s two email addresses which were provided by D1 under the execution page of the FA; and

(b)  sending the physical original of the letter by ordinary post in an envelope duly prepaid and properly addressed to the address in the Mainland which was provided by D1 under the execution page of the FA.

26.  Copies of the said email and the envelope which was posted, were exhibited to Mr. Wan’s affirmation.

27.  Mr Chok argued that whilst P’s affidavit evidence set out the means by which notice was purported to be given under Clause 27 of the FA, P’s pleading did not contain such material facts. Further, there is authority that it is impermissible for an applicant for summary judgment to fill a lacuna in its pleading by reference to its evidence: see §11(4) above.

28.  I do not accept this argument.

29.  §10 of the SOC pleaded that by the KWM Letter from KWM to D1, P declared that it exercised its rights under Clause 21.17(b) of the FA. Accordingly, P has pleaded that it gave notice to D1 of acceleration under the wording of Clause 21.17(b).

30.  I do not consider that it was necessary for P to have also pleaded the precise means by which the notice was delivered under Clause 27.1, particularly in circumstances where P would have been unaware at the time of the SOC that Ds would claim not to have received the KWM Letter.

31.  In my view, P pleaded the material facts required to make good its claim, and sufficiently put Ds on notice of the basis of the claim made.

32.  I also note that when I asked Mr. Chok whether there was any prejudice to his clients as a result of the allegedly defective pleading, in terms of their ability to meet P’s substantive case and oppose summary judgment, he was unable to identify any.

Ds’ second argument: dispute of fact as to whether the KWM Letter was received

33.  Mr Chok’s second argument was that there were triable issues as to whether valid notice of acceleration had been given under Clause 27 of the FA, in light of D1’s evidence that the KWM letter was not received.

34.  In my view, this defence can be disposed of shortly since Clause 27.3(a)(ii) of the FA provides that valid notice may be given by letter 5 Business Days after being deposited into the post with postage prepaid in an envelope addressed to D1 at its address as identified in the FA.

35.  Accordingly, if the KWM Letter was deposited into the post in compliance with Clause 27.3(a)(ii) of the FA, then notice was given to D1 in compliance with Clause 27, whether or not D1 actually received the KWM Letter.

36.  As noted at §25(b) above, Mr Wan’s evidence confirmed that this was done. I do not see any reason to doubt that it was.

37.  On the day of the hearing Mr Chok handed up the Decision of Linda Chan J in Bank of India v. Gimajasa Limited and others [2021] HKCFI 354. Mr Chok referred to §47.2 in which Her Ladyship discussed a “deemed service clause” which featured in that case. Mr Chok argued that this was authority that the purpose of provisions such as Clause 27.3 of the FA was to ensure that the receiving party is actually notified of the document sent.

38.  However, I do not think that the authority cited supports Mr. Chok’s position, which is tantamount to arguing that provisions such as Clause 27.3(a)(ii) in the present case are invariably ineffective. The Court’s discussion at §47 was in the context the true construction of the 4^th defendant’s liability under the guarantee in that case. The Court concluded, inter alia, that a “deemed service provision” makes perfect sense where a demand is a condition precedent to a guarantor’s liability to pay, since it prevents the guarantor from contending that his or her obligations under the guarantee did not arise because of difficulties in delivery of the demand. As pointed out by Ms. Mak for P it was in that case not possible for the plaintiff to rely on the deemed service provision because the demand letter in question had not been sent to the 4^th defendant’s address as specified in the deemed service clause: §49.

39.  Mr Chok also raised a query as to how photographs could be taken of the envelope which was deposited into the post box containing the KWM Letter, and said that this cries out for explanation. I do not understand this point, since copies were presumably taken prior to posting.

40.  Mr Chok further argued that it was questionable whether the postage included on the KWM Letter would be sufficient for ordinary post to Mainland China, and again said that this called for investigation. However, Ds did not adduce any evidence suggesting that the amount of postage included was insufficient, and it is not self-evident that this is so.

41.  For the above reasons, I conclude that there is no triable issue on the question whether notice of acceleration was validly given by P to D1 by posting the KWM Letter.

42.  Accordingly, there is no defence. I do not need to consider P’s alternative positions, including that notice was validly given by email pursuant to Clause 27.3(a)(iii) and Clause 27.4, and the parties’ arguments in this regard.

43.  Mr. Chok also said that as a fallback position the Court should grant conditional leave to defend. However, since there is no triable issue or defence, this would not be an appropriate course.

Conclusion

44.  For the reasons given above, I consider that P’s application for summary judgment should succeed. I accordingly dismissed Ds’ appeal with costs to P.