BANK OF CHINA (HONG KONG) LTD v. OPEN TRADE INVESTMENT LTD

HCMP 3551/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3551 OF 2002

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J U D G M E N T

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1. This is an application brought by the plaintiff against the defendant by originating summons under Order 88 Rules of High Court for delivery of vacant possession of premises and for moneys due. The proceedings arise because, on the plaintiff's case, its predecessor in title made advances to the defendant of amounts totalling $5.65 million on the security of premises recorded in the contemporary documents and, in particular, a legal charge entered into which I shall call for short "The Goldwin Heights" property.

2. On the bank's account (as I shall call the plaintiff's predecessor) from the time the amounts were drawn down there have been various payments made of principal and interest and, on various occasions, a restructuring of the indebtedness, but payments due and owing by the defendant failed to be forthcoming from some time last year and, as a result, the plaintiff has issued these proceedings for payment in full of the indebtedness of principal and interest accruing and vacant possession of the Goldwin Heights property.

3. In support of the plaintiff's cause there have been filed affidavits by bank officers exhibiting contemporaneous documentation, loan facility letters, the legal charge and minutes of the defendant authorising the entering into and execution of the documentation in consideration for the advances made. On the face of those documents, it is apparent that the loan was made and, on the certificates from time to time issued by the bank officer, that there are moneys due and owing with interest accruing.

4. The defence case is set out in an affidavit of one of the directors of the defendant, one Chan Yeuk-pun, and he raises a number of defences therein. The one that he would have the court rely on is that, notwithstanding the documentation, notwithstanding the legal charge entered into and surrounding documents, there was an oral agreement (as he refers to it) as between the defendant and senior bank officers, to the effect that the bank would not rely upon the documents in question and would, on the issue of default, not sue to recover that default. Related to that ground is the further ground that the defendant does not owe any money to the plaintiff or the bank, that any moneys in fact paid were gratuitously paid to assist a related debtor and that such payments made by the defendant should not be seen as an indication that the defendant owes the money, part of which it had already paid.

5. I should say at this point that although the affidavit in defence was professionally prepared by solicitors then representing the defendant, not long before today's hearing the defendant's solicitors sought leave to withdraw and were granted leave to withdraw. From that time there has been no indication by the defendant either to the court or to the plaintiff's representatives that it would be appointing new solicitors, or alternatively seeking leave to represent itself; in fact there has been nobody before me on behalf of the defendant at these proceedings.

6. Suffice to say I have to consider the defence that the defendant has raised; in doing so I find it incredible and to be rejected therefore, that there was any such thing as an oral agreement that the plaintiff would not pursue its rights in the event of default. The oral agreement defence so-called was raised at a very late stage of the proceedings; there has been no previous reference to it in correspondence or otherwise. Needless to say it is quite categorically rejected by those bank officers who purportedly participated in the so-called oral agreement, and there would be no commercial or other justification for the bank agreeing to withhold its entitlement to recover.

7. It seems quite apparent from the documentation that the two directors and shareholders of the defendant are also directors and shareholders of other companies, forming a group of companies, which have been assisted by the bank, and that the original loan which brought about the indebtedness that I am now concerned with was, in fact, part and parcel of a restructuring of accommodation made to one or other of the companies forming part of this group and, in particular, a company called Paradragon Limited. As such I find there is no irregularity about the manner in which this advance came into being and no defence - at least, no credible defence - as to the plaintiff's entitlement now to recover the balance of moneys due under that original accommodation with interest accruing as has been certified.

8. Accordingly there will be judgment for the plaintiff in terms of its originating summons. The amount to be recorded as due and owing will be as per a certificate that was exhibited to an affidavit made by one of the bank officers, Mr Lau Tat-ming, and I go to the bundle at page 320 for the precise figure. The interest thereon will be as per that certificate up to today at the rate therein recorded and from today at the judgment rate.

9. Costs are sought on an indemnity basis; that is as per the contract, and I see no reason why costs should not be fixed in favour of the plaintiff at that rate and so order, taxed if not agreed.