CHINA CITIC BANK INTERNATIONAL LTD v. DURRANT SIMON PATRICK MICHAEL

CACV 127/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 127 OF 2014

(ON APPEAL FROM HCMP NO. 3196 OF 2013)

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J U D G M E N T

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Hon Kwan JA (giving the judgment of the court):

Introduction

1. This appeal arose out of a mortgage action brought by the mortgagee bank, China Citic Bank International Ltd, against the mortgagor and borrower, Simon Durrant.  On 11 February 2014, judgment on the originating summons was given by Master Leong in favour of the plaintiff.  The defendant was ordered to pay the sums due and owing in respect of the two mortgage loans and to deliver possession of the mortgaged property to the plaintiff within 56 days thereof.  He lodged an appeal against the master’s judgment.  This was dismissed by Deputy High Court Judge S T Poon on 23 June 2014.  The present appeal is against that judgment.

2. The defendant has been acting in person throughout.

3. He filed an acknowledgment of service indicating his intention to contest the mortgage proceedings.  But at the adjourned hearing of the originating summons before Master Leong, no evidence in opposition was filed. Since 25 February 2014 (when he filed his notice of appeal to a judge in chambers) and prior to the judgment on 23 June 2014, the defendant has filed a total of seven affirmations.  The majority of the evidence was filed in opposition to the mortgage action; some affirmations were filed in support of his applications for an order that the plaintiff was to provide further documents regarding the amount claimed and for the judge to recuse himself on the ground of alleged bias.  These affirmations have been taken into account by the judge, and will be taken into account by this court, in evaluating the merits of the defence.

4. Since 24 June 2014, the defendant has filed a further ten affirmations in the proceedings below and in the appeal proceedings in support of his applications for stay of execution pending appeal to the Court of Appeal and the Court of Final Appeal, for Master M Wong to recuse himself in giving directions on the conduct of the appeal, and to appeal the master’s directions on the preparation of the appeal bundle.  Save for the defendant’s affirmation filed on 25 March 2015 for the purpose of identifying some documents exhibited to his earlier affirmations filed before the judge had given judgment, we decline to consider the remaining nine affirmations in evaluating the merits of the defence, as these affirmations do not form part of the evidence adduced before the judge and there is no application to adduce further evidence on appeal, such that we would be required to consider its admissibility upon fulfilment of all three requirements laid down in Ladd v Marshall [1954] 1 WLR 1489.  For completeness, we would mention that in the course of giving directions on the preparation of the appeal bundle, which took quite some time, the defendant had been apprised by the court of the necessity to issue an application to adduce new evidence, if he should wish to adduce evidence on appeal that had not been placed before the judge.

5. The defendant handed up a written submission of 31 pages only at the hearing of the appeal.  We had to stand down the hearing for us and for the plaintiff’s counsel, Ms Verna Lui, to properly digest the lengthy written submission.  Due to the lateness of providing the submission, Ms Lui was unable to give meaningful assistance to the court in responding to it.  Under the guise of a general opposition challenging the accuracy of the amounts claimed, the defendant raised yet further challenges to the figures in his submission.  We would not allow litigation to be conducted by ambush.  We would only deal with the new challenges to a limited extent as explained in the latter part of this judgment.

The main lines of defence

6. These were the main lines of defence raised by the defendant in the evidence placed before the judge.

7. Firstly, he alleged that the plaintiff turned down his multiple applications for refinancing and overdraft on the security of his mortgaged property without giving any reason other than that he is a foreigner.  An officer of the plaintiff, Aaron Lai, had promised him in early 2012 that refinancing would be granted if he could make three monthly payments in a row.  But after he had made two payments for April and May 2012, Lai reneged on his promise and refused to consider his refinancing application.

8. Secondly, he alleged that the plaintiff blocked his multiple applications for refinancing to other banks and finance companies in 2012 and 2013.  The plaintiff did so by deliberately providing false and inaccurate information to the credit reference agency, TransUnion Limited, falsely alleging that the payments in early 2012 were in default when he had paid the two instalments for April and May 2012 as confirmed by Lai.  The provision of inaccurate information to TransUnion was defamatory of him and in breach of the Personal Data (Privacy) Ordinance, Cap 486.

9. Thirdly, in view of the above, the plaintiff did not come to court with clean hands in bringing the mortgage action and relief should be refused.

10. Fourthly, he challenged the accuracy of the amounts claimed as deposed to by the plaintiff’s officer Tse Kai Yin in the latter’s 1^st affidavit filed in support of the originating summons in December 2013.  He pointed out that the outstanding principal, the interest rate, and the amount of the instalments deposed to by Tse in December 2013 were different from what was stated in the plaintiff’s letter to him dated 18 June 2013.  He complained that the information provided by the plaintiff was insufficient to enable him to ascertain if the overdue arrears were accurately calculated.  He alleged that the letter of demand issued by the plaintiff’s solicitors on 4 November 2013 had overstated the outstanding loan amount by almost $100,000 for each of the two mortgage loans.

The judgment below

11. The judge rejected all the defences raised.

12. Regarding the first three defences, the judge held that these defences at most could only be regarded as a separate claim against the plaintiff for damages.  They do not constitute a defence to the plaintiff’s claims based on the defendant’s breaches of the loan agreements in default of payment of the mortgage instalments.

13. As to the challenge of the accuracy of the amounts claimed, the judge was satisfied, on the evidence before him, that the defendant started defaulting payment of the instalments of the two mortgage loans on 18 and 20 March 2011 respectively, that a few sums paid by the defendant between 1 April 2011 and 1 June 2012 (around $50,000 and $60,000 respectively for the two loans) have been taken into account in the plaintiff’s claim, and that the plaintiff’s evidence in Tse’s 1^st affidavit, supplemented by Tse’s 3^rd affidavit of 23 May 2014, reflected accurately the states of the two mortgage loan accounts deposed to by Tse in paragraphs 14 and 15 of his 1^st affidavit.

The grounds of appeal

14. The defendant raised these grounds of appeal in his notice of appeal:

(1)   the judge erred in fact and law;

(2)   the judge allowed his personal bias against the defendant to influence his decision and actions during the hearing;

(3)   the judge wrongly exercised his discretion in allowing Tse’s 3^rd affidavit to be admitted;

(4)   there is no evidence to support the judge’s determination of the accuracy of the amount claimed by the plaintiff, which is factually inaccurate.

Our decision

15. We would first deal with the allegation of bias.

16. We have considered the defendant’s affirmation filed on 7 May 2014 in support of his application for the judge’s recusal at the hearing on 8 May.  The defendant alleged that the judge ruled against him in his application for the plaintiff to provide documents in support of the amounts claimed because the judge had a pre-existing bias against him.  He complained that the judge (in his capacity as Chief District Judge) had failed to properly address his written complaints of bias and lies concerning the actions of judges and lawyers when he complained about them to the judge in the District Court.  For these reasons, he did not believe the judge would give him a fair and unbiased hearing in the appeal from the judgment of Master Leong, whom he alleged to be a friend of the judge from the District Court.

17. In his submission before us, the defendant renewed his attack on the judge’s impartiality.  He also made allegations against Master Leong, alleging that the hearing before the master was “a farce as he rushed to rubber stamp the plaintiff’s claim as quickly as possible”, that the master “railroaded the case to summary judgment”, and that the master has a personal bias against him after he lodged a formal complaint against the master with the judge who refused to investigate his complaint.  He submitted that the judge and the master have “massive [sic] abused judicial discretion on multiple occasions”, and went on to accuse this court of not being likely to uphold his appeal and vacate Master Leong’s decision and the judge’s decision for an implausible reason that is unnecessary to repeat.

18. The judge dismissed the application for recusal on 8 May and rightly so.  There is no evidence whatsoever to substantiate the bare allegations of actual bias, whether as against the judge or the master.  As for apparent bias, approaching this from the perspective of a fair-minded and informed observer, we are satisfied that such an observer would have taken the view that there is no real possibility of bias from the matters relied on by the defendant.  The notional fair-minded observer would not be unduly sensitive or suspicious, and would be taken to have a fair understanding of all relevant circumstances.  He is taken to appreciate that a judge or judicial officer has professional training and experience to differentiate between the litigant and the issues that call for determination in a particular situation.  The assumptions of the complainant would not be attributed to the fair-minded observer unless they can be justified objectively, and that is simply not the position here.

19. Turning to the complaint that the judge should not have admitted Tse’s 3^rd affidavit, this is a case management decision in the exercise of the judge’s discretion.  The judge had explained why he admitted the affidavit in paragraph 16 of his decision.  The 3^rd affidavit exhibited two tables setting out the monthly arrears of instalments and interest rates in respect of the two mortgage loans in the period from 18 and 20 March 2011 to 18 and 20 October 2013 respectively.  The judge decided to grant leave to adduce this evidence as the defendant has also put in another affirmation in the last minute, albeit under the disguise of it being the supporting affirmation of a new but superfluous summons.  The judge also took the view that the information provided in the 3^rd affidavit is actually what the defendant had demanded under his summons to order the plaintiff to supply, i.e. supporting documents with regard to the amounts and interest claimed by the plaintiff in Tse’s 1^st affidavit.

20. The appeal court would not interfere with the case management decision unless it is shown that the judge had gone clearly wrong and made an order which involved an injustice or prevented a fair trial of the issues or had erred in principle or that his order was irrational.  We are not persuaded that the judge was clearly wrong or irrational.  That the two tables exhibited to Tse’s 3^rd affidavit are not the primary source documents the defendant sought in his summons but are compilations from the source documents is not material to the proper exercise of discretion in admitting this evidence.  The defendant has plainly not surmounted the high hurdle for this court to interfere.

21. We turn to the ground that the judge had erred in fact and law.

22. The defendant’s arguments went as follows.  He cited Order 88 rule 5 which provides inter alia that:

“(3) Where the plaintiff claims delivery of possession the affidavit must show the circumstances under which the right to possession arises and except where the Court in any case or class or case otherwise directs, the state of the account between the mortgagor and mortgagee with particulars of –

(a) the amount of the advance,

(b) the amount of the periodic payments required to be made,

(c) the amount of any interest or instalments in arrears at the date of the originating summons and at the date of the affidavit, and

(d) the amount remaining due under the mortgage.

…

(6) Where the plaintiff claims payment of moneys secured by the mortgage, the affidavit must prove that the money is due and payable and give the particulars mentioned in paragraph (3).”

23. The defendant submitted that in Tse’s 1^st affidavit, no bank or account statements had been exhibited to support the state of accounts of the two mortgage loans deposed to by Tse in paragraphs 14 and 15 or the total amount asserted in paragraph 16 as remaining due under the mortgage as at the date of the affidavit, being a sum of $3,413,056.42.  He claimed it is impossible to verify the accuracy of the plaintiff’s claim when no bank or account statements had been exhibited.  The plaintiff had failed to prove that the money claimed is due and payable, as required by Order 88 rules 5(3) and (6) and Master Leong should have thrown out the originating summons.

24. We reject the defendant’s submission. Rule 5(6) requires the supporting affidavit to prove that the money is due and payable and give the particulars mentioned in rule 5(3).  Tse had given the particulars mentioned in rule 5(3) in paragraphs 14 and 15 of his 1^st affidavit, having deposed that he made the affidavit from the facts within his own knowledge as an officer of the plaintiff and from information obtained by investigation of the books, accounts and documents of the plaintiff.  Rule 5(6) does not specify that proof is to be furnished only by exhibiting a bank or account statement.  And there is no prohibition that the evidence provided in the first affidavit may not be supplemented by subsequent affidavits.

25. Whether the court would regard the affidavit or affidavits before it as amounting to satisfactory proof required by rule 5(6) must depend on the circumstances of each case.  This must be approached with common sense.  Prior to the issue of the originating summons in a mortgage action where a defendant is in default of instalment payments, it is usual to find that the financial institution would have issued periodic statements to the borrower followed by a letter of demand, so it is not likely that the borrower would be kept in the dark of the amount claimed to be due and payable.  And if there is a genuine dispute of the amount due and payable, one would have expected the borrower to raise it with the financial institution when he received the periodic statements, the letter of demand, or, at the latest, the first supporting affidavit in the mortgage action.  We do not regard this as putting the onus on the defendant to prove that the sum claimed is inaccurate.

26. In this case, there is no or no credible evidence that prior to the judgment entered by Master Leong, the defendant had disputed or challenged the accuracy of the amounts claimed.  As noted by the judge in paragraph 19 of his decision, no query has been raised at any time by the defendant against the correctness of the annual statements he received.  His contention that he is unable to verify the accuracy of the amounts claimed is disingenuous, to say the least.  At the hearing before Master Leong, there is nothing to suggest that the state of accounts of the two mortgage loans deposed to by Tse would be challenged.  As recorded in paragraph 2 of the judge’s decision, the defence that the defendant sought to advance before Master Leong orally was that the plaintiff had provided inaccurate credit information of the defendant to financial institutions and thereby obstructed him from applying for further credit facilities.  It was only when he appealed the master’s judgment that he filed affirmations disputing the accuracy of the amounts claimed, and in answer to which the plaintiff filed two further affidavits by Tse.  The judge did not err in law in taking into account all the affidavits filed by the plaintiff in holding that the evidence before him reflected accurately the states of the two mortgage loan accounts.

27. We reject also the argument that the judge was in error in refusing the defendant’s application for the plaintiff to produce supporting documents including bank statement, repayment history and source of interest.  It is in the discretion of the court to refuse to order discovery where it is not satisfied that it is necessary for disposing fairly of the cause or matter or for saving costs.  There is no basis for us to interfere with the judge’s exercise of his discretion.

28. In his written submission, the defendant contended that the judge had made grave factual errors.  He pointed to the amount of default interest for the 1^st instalment loan in Tse’s 1^st affidavit ($37,273.34), which was described by Tse as default interest at 5.25% per annum accrued on the arrears of instalments ($312,820.80).  He made the point that by “basic maths”, 5.25% of $312,820.80 is $16,423.09, not $37,273.34 as claimed.  He repeated the contention for default interest of the 2^nd instalment loan stated by Tse as $29,139.61, and submitted that the default rate of 2.88571% per annum accrued on the arrears of instalment ($393,078.08) should give $11,343.09, not $29,139.61 as claimed.

29. These are new matters not canvassed in any of the seven affirmations placed before the judge.  They are not even mentioned in the notice of appeal but raised for the first time in the defendant’s written submission placed before us on the day of the hearing.  Needless to say, the plaintiff has no opportunity to answer these allegations of “grave errors” and “perjury”.  We would have declined to entertain these arguments but for the fact that it could be demonstrated easily that they are misconceived.  The facility letter of the plaintiff to the defendant in respect of the 1^st instalment loan contained this provision in respect of interest in clause 2:

“Interest on any overdue sums will be charged at 2% per annum over the Contract Rate or such other rate as from time to time determined by our Bank in addition to the fixed late payment charge of HK$400.00. All due but unpaid interest may be capitalized as principal advance which itself bears interest at the rate as aforesaid at the absolute discretion of our Bank.”

30. The facility letter of the 2^nd instalment loan contained a similar provision in clause 2(g).  It is apparent that the amount of the default interest was not arrived at by simply applying the default rate to the total arrears of instalment.

31. The defendant repeated his arguments below that the plaintiff did not come to court with clean hands, based on his allegation that the plaintiff had reneged on the promise of refinancing held out by Aaron Lai.

32. The defendant’s evidence on the alleged promise is dubious.  It was contradicted by a contemporaneous email of 25 April 2012 sent by Aaron Lai to the defendant in which it was stated:

“As discussed in our meeting in March, full recovery of the total overdue balance was definitely one of the prerequisites for re-financing application of your accounts. Please arrange the monthly instalments on time for coming few months then we discuss further on the settlement date of remaining overdue balance.”

33. This was not a promise to grant re-financing on the payment of just three consecutive monthly instalments, as alleged by the defendant.

34. The judge is clearly right to hold that the allegations of refusing to grant refinancing to the plaintiff and blocking his attempts to seek refinancing elsewhere, even if they could be made out on the facts, could not constitute a viable defence to the plaintiff’s claim but could only be regarded at most as a separate claim against the plaintiff for damages.  There can be no dispute that since 20 March 2011 (for the 1^st instalment loan of $1 million) and 18 March 2011 (for the 2^nd instalment loan of $3,080,000), the defendant had failed to keep up with the monthly instalments and was in arrears.  Failure to pay a sum on the due date is an event of default (clause 7.01(a) of the mortgage) and on the occurrence of an event of default, the plaintiff has the right to declare all loans and other monies to be immediately due and payable without further demand or notice (clause 7.02) and the security would become enforceable with the plaintiff having power to enter into and take possession of the mortgaged property (clauses 8.01 and 8.05(b)).

35. The mere fact that the defendant had made some isolated payments in April and May 2012 does not detract from the fact that he had been and remained largely in default of the monthly instalments.  We fail to see how it could be said that the plaintiff had provided inaccurate information to TransUnion, assuming for one moment that is at all relevant.  We firmly reject the arguments that the plaintiff should be denied relief on the allegations it did not come to court with clean hands.

36. Regarding the challenge of the accuracy of the sums claimed by the plaintiff, the judge rightly pointed out that the complaints were based solely on the different figures shown on several isolated documents of the plaintiff sent to the defendant at different times.  And differences are inevitable, as extra interests would be incurred with time and the 3-month HIBOR (adopted for the 2^nd instalment loan contract rate) had been fluctuating from time to time.  The judge was satisfied there is really no substance in the defendant’s complaints, and so are we.

37. There is no merit in any of the grounds of appeal advanced by the defendant.  We therefore dismiss his appeal.

38. We have heard arguments on costs.  There is no reason why costs should not follow the event.  Ms Lui seeks costs for the plaintiff on an indemnity basis, relying on clause 10.01(b) of the mortgage which provided that the mortgagor shall pay or reimburse the plaintiff all costs, charges and expenses including legal and other fees on a full indemnity basis incurred by the plaintiff in exercising any of its rights under the mortgage.  Ms Lui referred us to the judgment of Ribeiro PJ in Bank of China (Hong Kong) Ltd v Twin Profit Ltd (2012) 15 HKCFAR 560 at §§18 to 21.  We agree that the same approach should be adopted here.  The parties’ agreement as to how costs should be dealt with provides the starting point for the discretionary exercise, and no change from the starting point is warranted in this case.  We award the costs of this appeal to the plaintiff, to be taxed on an indemnity basis.