LEE YUEK LING v. THE CHINA STATE BANK LTD

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. In this action the plaintiff claims damages for the wrongful exercise of the power of sale by the defendant under a mortgage dated the 2nd January 1982 entered into by the plaintiff as mortgagor, Shun Hing Knitting Factory (Shun Hing) as principal and the defendant as mortgagee.

2. By the mortgage it was agreed that in consideration of the defendant granting general banking facilities to Shun Hing, the plaintiff would, in order to secure repayment in favour of the defendant, grant a mortage of a factory building known as Kingsway Industrial Building Phase I in Kwai Chung. The extent of the facility under the mortgage amounted to $700,000 plus interest.

3. By the amended statement of claim, it is alleged that it was a condition precedent to any liability that a notice in writing would be given by the defendant to the plaintiff for repayment of all sums of money together with interest to the extent secured under the agreement and owed by Shun Hing, and that it was an implied term that the defendant's power of sale under the mortgage should not be exercised unless and until a valid notice had been given by the defendant to the plaintiff. The mortgage provides that one month's notice in writing should be given in the event of default in payment by the mortgagor or the principal.

4. The plaintiff contended that the defendant's solicitors letter of the 29th November 1982 which demanded payment of $1,165,429.85 plus interest as the total indebtedness of Shun Hing to the defendant, was invalid because the demand exceeded the amount of the plaintiff's liability under the mortgage. Accordingly, the plaintiff contends that the sale by the defendant of the mortgaged property on the 3rd February 1983 was in breach of the implied term. The plaintiff therefore claims the value of the property together with the income from the property since the 3rd February 1983 and interest.

5. Although the plaintiff and a representative of the defendant gave evidence, this case can be decided upon the documents. However, the plaintiff, during his evidence, said he was unable at the time of the demand made in 1982, to make full payment.

6. On the 18th October 1982, the defendant's solicitors wrote to the plaintiff demanding an overdue payment of $56,995.95 plus interest of $1,795.37 to be paid within 14 days. The plaintiff failed to make any payment although he said that he did not understand how the sum was made up. Another letter was written by the defendant's solicitors on the 27th November 1982 which gave notice that if full payment under the mortgage was not made within one month, the defendant would exercise its power of sale under the mortgage. The next letter was that of the 29th November 1982 to which I have referred stating that up to the 24th November 1982, the total sum owed by Shun Hing was $l,165,429.85 with a claim for interest of $463.84 per day after that date. Payment of this sum was demanded by the 30th December 1982 failing which the defendant stated it would exercise its rights under the mortgage.

7. By a further letter dated the 31st December 1982, the defendant's solicitors informed the plaintiff that the defendant intended to sell the mortgaged property for $750,000 unless payment of all monies due was made within one week.

8. No payment was made by the plaintiff.

9. Following correspondence between the plaintiff and the defendant in 1985, the plaintiff was informed in the defendant's letter of the 13th July 1985 that the total sum due to the defendant under the mortgage up to the time of the sale of the property on the 3rd February 1983 was $751,569.15. It was also explained that the total debt of Shun Hing was $l,165,429.85 which included a sum due in respect of other facilities extended to Shun Hing amounting to $400,000 which was guaranteed by another person named Mr Wong Ming with whom the plaintiff is not concerned. However, as was submitted by Mr Swaine for the defendant, it was not necessary for the defendant, in making the demand to the plaintiff under the mortgage, to specify the precise amount of the debt, see Bank of Baroda v. Panessar and others [1987] 1 Ch 335.

10. Whilst Mr Lin, who appeared for the plaintiff, does not dispute this authority, he submitted that the facts of the present case can be distinguished for he argued that each letter written by the defendant's solicitors superseded those written earlier, and that the addition of the two amounts due from Shun Hing under the facilities granted rendered the defendant's notice invalid.

11. The submission that the earlier correspondence was superseded by the later letters was entirely without any legal or factual basis so that it is rejected. The notice was clearly valid.

12. The first letter of the 18th October 1982 is a demand for the arrears and interest and gave the plaintiff 14 days in which to pay. The second of the 27th November 1982 is the one month notice in compliance with the terms of the mortgage. The third of the 29th November 1982, copies of which were sent to Shun Hing and the guarantors in respect of the other facility is misleading so far as the plaintiff is concerned, but it refers to the true position as to total indebtedness of Shun Hing.

13. It is quite clear that the defendant did not intend to claim against the plaintiff any sum that was over and above the sum of $700,000 and interest secured by the mortgage. The plaintiff's action was devoid of any merit with the result that it will be dismissed.