PCL ASSETS LTD v. PACRIM INTERNATIONAL CAPITAL HOLDINGS INC

HCA 2852/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2852 OF 2006

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D E C I S I O N

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Application

1. This is an application for summary judgment by the Plaintiff against the Defendant.

The Plaintiff’s case

2. On 28 December 2006, the Plaintiff commenced the present proceedings.  It is the Plaintiff’s case that, by a loan agreement dated 24 July 2003 (“the Loan Agreement”), the Plaintiff lent a term loan of $15 m to the Defendant at an interest of 8% p.a.  The loan was due on 23 July 2004 or automatically renewed for a further year.

3. The Defendant duly paid $100,000 monthly interest during the term of the Loan, but failed and/or refused to repay it upon its maturity on 23 July 2004, alternatively on 23 July 2005.

4. Nonetheless, the Defendant continued to pay the interest of $100,000 p.m. until 23 June 2006, when the cheque for the subsequent month was dishonoured.  Since then, the Plaintiff has not received any payment of interest.

5. Further or in the alternative, the Defendant committed an Event of Default by pledging its assets to others on 1 November 2003, and as such, the Loan was due and repayable.

6. Finally, in any event, by 2 letters dated 17 July 2006 and 22 July 2006, the Plaintiff demanded for repayment. However, the Defendant failed to do so.

7. Hence, at the time when the Writ was issued, the Defendant owed the Plaintiff the sum of $15 m together with interest of $100,000 p.m. from 24 June 2006 until payment.

The Defendant’s case

8. The Defendant filed its Defence on 24 January 2007.  It admitted the Loan Agreement and the payment of $100,000 p.m.  However, it denied that it was due and payable for the following reasons.

(a)	The Loan was extended by conduct on or about 23 July 2005.
(b)	There was no Event of Default.  Even if there was, the Plaintiff had knowledge of and waived the same.
(c)	The Loan was not due and payable until the Plaintiff had declared the indebtedness.  No declaration had been made before the commencement of the present action.
(d)	Further or alternatively, the Plaintiff had no authority to commence the present action or to instruct solicitors.

Application for Summary Judgment

9.  On 5 February 2007, the Plaintiff took out an application for summary judgment against the Defendant.  I heard the substantive argument on 1 and 6 June 2007.  Mr. Melvin Wong of Counsel acted for the Plaintiff and Mrs. Dora Chan of Counsel represented the Defendant.  At the hearing, both parties attempted to introduce further evidence before me.  I allowed them to be admitted on a de bene esse basis to save time and costs.  After thoughts, I will allow all these evidence to be relied upon because I see no prejudice for so doing.

Ruling and Reasons

10. Upon consideration of the evidence authorities and submissions from the parties, I have decided that unconditional leave should be granted to the Defendant to defend the case in the circumstances.  My reasons appear in below.

11. Mr. Wong referred me to quite some authorities in relation to Order 14 rule 1 RHC.  I do not consider that the parties should have any dispute over the applicable law.  For our purpose, it suffices to summarize that the underlying policy of summary procedure is to prevent the defendant from delaying the plaintiff from obtaining judgment in a case in which the defendant clearly has no defence.  Factually, it what the defendant says believable in light of undisputed or indisputable circumstances?  The Court is entitled to have regard to the commercial reality as well as to the contemporaneous documents.  However, mini-trial on affidavit evidence shall not be embarked.  Bare assertion is insufficient and the defendant must condescend upon particulars.  Legally, if what the defendant says is believable, does it amount to an arguable defence in law?  After all, the burden lies on the defendant to show triable issue or some other reason to be a trial.

12. Applying the above principles to the present case, I cannot come to a conclusion that the Defendant’s case is unbelievable in the circumstances.

(a)	The parties disputed, among others, when the Loan was due.  The Plaintiff put various alternative cases to the Court.
(b)	However, with respect, I doubt very much if the Loan was due and repayable on 23 July 2004 or 24 July 2005 with the evidence before this Court. I would venture to suggest that, by the conduct that the Plaintiff had accepted $100,000 monthly interest, it is more likely than not that the issue should be ruled in favour of the Defendant.
(c)	As to the Event of Default, the crux goes to the knowledge of the Plaintiff.  However, I do not consider that there is any convincing evidence to help this Court at this stage to rule one way or the other.  It is to be decided at the trial upon hearing the evidence from witnesses.
(d)	While it is not disputed that the Defendant has failed to pay interest from 24 July 2006, it remains a mixed question of fact and law as to the exact relationship between the parties.  Was it still a term loan?  Was it a loan terminated by default or notice?  Were the 2 letters issued in July 2006 reasonable notice?
(e)	Further, the parties’ conduct from July 2006 to December 2006 is not without any relevance.  Did Madam Lee Sui Ping agree to allow time for the Defendant to pay later?  Was she able to do the same, if so, in what capacity?  In this respect, I note that Mr. Wong has tried to convince me otherwise by leading me to go through the conduct of the Defendant at the material times.  However, there remains conflicting evidence within the Plaintiff’s evidence.
	(i)	The Plaintiff’s minutes on 5 August 2006 included:
		“	I, Lam Pak Cheung declares that I have lent to PCL Assets Limited (“the Company”) a sum of HK$15,000,000 for the Company to advance a loan to Pacrim International Capital Holdings Inc. (“Pacrim”) under a Loan Agreement made between the Company and Pacrim dated 24th July 2003.”
	(ii)	However, on 27 January 2007, another Declaration was attached to the Plaintiff’s minutes:
		“	We, Lam Pak Cheung and Lee Sui Ping, declare that we have lent to PCL Assets Limited (“the Company”) a sum of HK$15,000,000 for the Company to advance a loan to Pacrim International Capital Holdings Inc. (“Pacrim”) under a Loan Agreement made between the Company and Pacrim dated 24th July 2003.”
	I believe that the Plaintiff does owe an explanation to this Court.

If this Court would accept the case of the Defendant, the Loan was then not due and payable at the time when the present proceedings were issued. In law, it is a valid Defence.

Costs

13. I see no reason why costs should follow event as stipulated under paragraph 14/7/13 of HKCP 2007.  As such, there will be an order nisi that costs of the application, together with all costs reserved and certificate for counsel, be in the cause.

Further Directions

14. I will further direct that the Plaintiff shall file and serve its Reply within 21 days from today. 

Remarks

15. I have granted the Defendant unconditional leave to defend the proceedings.  However, having noted that the Defendant raised the point of “lake of authority to sue” in the Defence, I hope to draw to the parties attention to the comment of the Hon A. Cheung J. in HCA 3524/2003, judgment dated 14 January 2005.  At paragraphs 11 to 13 of the Judgment, the learned judge said:

“	11.	In short, a point on lack of authority must be taken by a defendant at the earliest opportunity.  It should not be raised as a point of defence, for it is not a defence, and for that reason the matter should not be left for determination at trial.  Furthermore, given the nature of the point, the matter should not be left to be determined at trial together with the substantive issues between the parties, the determination of which issues at trial would become a total waste of time and resources if the point on lack of authority should be upheld at the end of the day.
	12.	The procedure to raise the point on lack of authority is an application to strike out the plaintiff’s name under the inherent jurisdiction of the court.  Maybe for the sake of convenience, this type of applications is included in the general discussion on striking out applications (of pleadings) under Order 18 rule 19 in Hong Kong Civil Procedure 2004, Vol. 1, para. 18/19/24.
	13.	However, unlike an ordinary application to strike out a pleading, the present type of striking out applications inevitably requires a definitive determination by the court seised of the application on the point.  In other words, either the action was authorized by the company or it was not.  There is no halfway house.  The point has to be decided according to the burden and standard of proof – the burden lies with those suing in the name of the plaintiff to prove authorization.  Subject to any subsequent ratification (where necessary) of the action by the company, the action will stand or fall depending on the court’s determination of the question of authority.”

16. Parties should therefore put their heads together to decide how the issue on authority to sue should be resolved in due course.