RESONA BANK LTD v. LAM SIE AND OTHERS

cacv 383/2004

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 383 of 2004

(on appeal from HCA NO. 11870 of 1999)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.  This is an appeal from a judgment of Tang J (as he then was) given on 26 November 2004.  The matter before the judge was an application for summary judgment against the 1^st and 2^nd defendants (“the defendants”), who are husband and wife.  The claim by the plaintiff was under guarantees given in respect of two companies, L.E. Garment Limited and Apace Knitting Fty Limited.  The judge gave judgment in favour of the plaintiff in the total sum of $34,536,368.66.  At the conclusion of the hearing of this appeal, this appeal was dismissed with reasons to be given in writing.

Background

2.  The 1^st defendant owned or controlled not only the two companies referred to above but also Koonhon Garments Ltd.  These companies will be referred to collectively as “the three companies”.  The defendants had signed letters of guarantee dated 28 February 1990 in favour of the plaintiff in respect of the indebtedness of the three companies.  There is no dispute that, according to the plaintiff’s books, L.E. Garment Limited and Apace Knitting Fty Limited were indebted to it in respect of banking transactions.  What is disputed is that the amounts owing to the plaintiff by those companies were properly owing.  It is said that the plaintiff had wrongly dissipated/debited amounts in relation to L.E. Garment Limited to the tune of $58,122,854 in relation to Koonhon Garments Limited $17,711,441 and in relation to Apace Knitting Fty Limited $27,685,478 the total amount said to have been dissipated was thus $103,519,773.

3.  In looking to see whether the defendants had established a credible defence the judge considered whether there was evidence that the money had been stolen.  After examining the evidence the judge came to the conclusion that there was no credible evidence that the money had been stolen and that the defendants’ assertion that it had so been stolen was not credible. 

4.  Apart from the fact that the audited accounts of the companies had not been produced, there was no accountant’s report to show that any of the companies had lost anything as a result of what would be termed the “unauthorised transfers”.  One telling matter which the judge referred to was a memo recording a meeting between the 1^st defendant and senior personnel of the plaintiff on 1 August 1997.  That memo was set out in full in the judgment below and for that reason need not be repeated here.  Suffice it to say that that memo recorded the 1^st defendant requesting that the plaintiff extend further financing.  There is not a word of any suggestion that there had been any wrongful withdrawals by the plaintiff from the three companies’ accounts.  The defendants have never challenged the veracity of that memo.

5.  In short the judge considered that since all the transactions which the defendants complained had been wrongful had been shown in the bank’s monthly bank statements which had been issued in the relevant period, that is from 1994 to 1996, and that there had been no complaint, it was simply incredible that such large sums of money had been debited wrongfully from the various accounts and no complaint had been made over that very extended period.  Indeed, it was the 1^st defendant’s evidence that he had been aware of the debits from approximately June 1994.

6.  I can only say that in my view the judge’s approach was clearly correct.  As the judge said, these matters did not happen overnight.  If they had happened, any businessman whose companies had been defrauded of over $100 million would have long since complained to the bank and to its head office, would have drawn up the accounts with clear statements as to the missing amounts and would very quickly have taken action against the plaintiff.  None of this happened.

7.  On this appeal Miss Lee who appeared on behalf of the defendants, first of all sought leave to adduce further evidence.  That evidence was a report from accountants who had been instructed on behalf of the companies and the defendants after the judgment in the court below.  Leave to adduce that evidence was refused primarily because it did not assist the resolution of this case at all.  It was simply a repetition of information which had been provided by the defendants themselves.  It did not constitute any independent examination or audit of the various companies’ accounts to show that there had been discrepancies for which the plaintiff was responsible.  Indeed the report contains the following paragraph:

“Because the above procedures do not constitute either an audit or a review made in accordance with the Statements of Auditing Standards issued by the HKICPA, we do not express any assurance on the suspicious accounts movement summary for the period from June, 1994 to October, 1996.”

8.  The refusal of the admission of further evidence was thus primarily on the basis that the evidence sought to be adduced was not such as would alter the outcome of the case.  This was quite apart from the question as to whether that evidence could have been adduced in the court below.

9.  Having considered the various matters put in argument by Miss Lee it remains only to be said that they did not in any way undermine the essential conclusion to which the judge came, nor did they undermine any of the reasoning relied upon by the judge.

Hon Suffiad J:

10.  I agree with all that has been said by the Vice-President and have nothing more to add.