Bank Of China (Hong Kong) Ltd v Cosan Ltd And Others

Court:High Court (Hong Kong)
Judgement Number:HCA1600/2004
Judgment Date:18 Aug 2006
HCA001600/2004 BANK OF CHINA (HONG KONG) LTD v. COSAN LTD AND OTHERS

HCA 1600/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1600 OF 2004

BETWEEN

  Bank of China (Hong Kong) Limited Plaintiff
  and  
  Cosan Limited 1st Defendant
  Kwan Hin Chu 2nd Defendant
  Kwan Hin Kee 3rd Defendant

Before : Hon Sakhrani J in Chambers

Date of Hearing : 11 August 2006

Date of Judgment : 11 August 2006

Date of Handing Down Reasons for Judgment : 18 August 2006

_________________________

REASONS FOR JUDGMENT

_________________________

1. On 11 April 2006 Master S. Kwang gave judgment to the plaintiff on its O.14 application against the 2nd defendant in the sum of HK$6,266,300.71 together with interest on the principal sum of HK$5,693,295.99 at the rate of 11% per annum from 19 May 2004 to judgment and thereafter at judgment rate until payment and costs with certificate for counsel.

2. On 11 August 2006 I dismissed the 2nd defendant’s appeal against the order of the Master with costs to the plaintiff. These are my reasons for so doing.

3. The plaintiff claims against the 1st defendant as debtor and against the 2nd and 3rd defendants as guarantors of the 1st defendant’s liabilities to the plaintiff under two deeds of guarantee given by the 2nd and 3rd defendants respectively dated 2 July 1996 and 21 April 1997 in favour of the plaintiff.

4. The 1st defendant was extended loans by the plaintiff under facility letters signed between the plaintiff and the 1st defendant and respectively dated 16 October 1996, 16 April 1997 and 14 May 1999.

5. By a legal charge dated 18 October 1996 executed by the 1st defendant as the borrower and the plaintiff as lender the 1st defendant mortgaged its property at Ground Floor, Wai Yip Building, 110-114 Cheung Sha Wan Road, Kowloon (“the charged property”) to the plaintiff as security.

6. There is no dispute that by 2002 the 1st defendant had defaulted in repayment to the plaintiff. Letters of demand dated 26 July 2002 were sent to the defendants by the plaintiff’s solicitors. There were some intermittent payments thereafter but by March 2003 the 1st defendant was still in default in repayment to the plaintiff with monthly instalments in arrears under the time loan and the mortgage loan.

7. The writ of summons with statement of claim was issued on 8 July 2004.

8. As has been pleaded at paragraph 16 of the statement of claim, by 18 May 2004 the defendants were indebted to the plaintiff in the sum of HK$6,266,300.71. This is made up of the sum of HK$5,693,295.99 being the outstanding principal as at 18 May 2004 and HK$573,004.72 being the accrued interest up to 18 May 2004.

9. By letters dated 19 May 2004 demands were made on the defendants to pay the plaintiff the said sum of HK$6,266,300.71 together with interest from 19 May 2004 until payment at the rate of prime + 6 % per annum.

10. The plaintiff’s claim was for the sum of HK$6,266,300.71 together with interest on the sum on HK$5,693,295.99 at the rate of prime + 6% per annum from 19 May 2004 to judgment and thereafter at judgment rate until payment.

11. Judgment in default of defence was entered for the plaintiff against the 1st, 2nd and 3rd defendants on 2 June 2005 for the sum of HK$6,266,300.71 together with interest and costs.

12. However, the 2nd defendant was away from Hong Kong when notice of intention to enter judgment was sent to him and hence he did not have notice of intention to enter judgment. This led to the making of a consent order on 25 August 2005 whereby the Master set aside the judgment entered against the 2nd defendant and gave leave to him to file his defence within 14 days.

13. There was no setting aside of the default judgment entered against the 1st and 2nd defendants and the same remained intact.

14. On 8 September 2005 the 2nd defendant filed his defence and counterclaim.

15. The plaintiff issued its summons for summary judgment under O.14 on 4 November 2005.

16. On 11 April 2006 the Master gave judgment to the plaintiff.

17. It is well settled that on an O.14 application the threshold onus is on a defendant to show a triable issue. I refer to what I said in Bank of China (Hong Kong) Ltd v Cheng Ka Lun Grand and Others, HCA 513 and HCA 515 of 2000, 13 January 2004 at paragraphs 6 to 8:

“ 6. The threshold onus is on the 2nd defendant to show a triable issue. The court should not, of course, embark on a mini-trial of the action on affidavit evidence. However, the mere fact that a defendant supported a defence by sworn evidence did not mean that the court was obliged to suspend its critical faculties and accept that evidence as if it were probably accurate. The filing of evidence which surpassed belief should not deprive a plaintiff of its entitlement to relief (Microsoft Corporation v. Electro-Wide Limited and another [1997] FSR 580).

7. And Bokhary JA (as he then was) said in Re Safe Rich Industries Ltd. unrep., Civil Appeal No. 81 of 1994 at pg. 5:

‘The test at the summary stage is indeed as simple as whether the defendant’s assertions are believable. But it must be recognized-because failure to recognize it would create a debt-dodger’s charter-that whether the defendant’s assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as is either undisputed or beyond reasonable dispute.’

8. If what a defendant says is not credible, then there is no fair or reasonable probability of the defendant having a defence (per Glidewell LJ in National Westminster Bank plc. v. Daniel [1993] 1 WLR at pg. 1457 E-F.”

18. In his defence filed on 8 September 2005, the 2nd defendant relied on two settlement agreements as raising defences to the plaintiff’s claim.

19. Paragraph 5 pleaded a settlement agreement made around the end of March 2003 (“the 1st Settlement Agreement”) and paragraph 15 pleaded a further settlement agreement made around July or August 2004 (“the 2nd Settlement Agreement”). Mr Ho, for the 2nd defendant, at the hearing before the Master abandoned any reliance on the 2nd Settlement Agreement. At the hearing of the appeal he also did not rely on...

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