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Citibank N.a. v Days Properties Ltd

Judgment Cited authorities 5 Cited in 1 Precedent Map Related
Vincent
Judgment Date26 August 2013
Year2013
Citation[2013] 4 HKLRD 264
Judgement NumberHCMP477/2012
Subject MatterMiscellaneous Proceedings
CourtHigh Court (Hong Kong)
HCMP477/2012 CITIBANK N.A. v. DAYS PROPERTIES LTD

HCMP 477/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 477 OF 2012

_____________

IN THE MATTER OF
(1)All that Flat 2 on the Sixth Floor in Block A and Car Parking Space No. 72 of Villa Monte Rosa, No. 41A Stubbs Road, Hong Kong (the “1st Property”)
(2)All that Flat 2 on the Seventh Floor in Block A and Car Parking Space No. 289 of Villa Monte Rosa, No. 41A Stubbs Road, Hong Kong (the “2nd Property”)
(3)All that Flat 1 on the Seventh Floor in Block A and Car Parking Space No. 58 of Villa Monte Rose, No. 41A Stubbs Road, Hong Kong (the “3rd Property”)
and
IN THE MATTER OF
(1) A legal charge dated 19th March 2001 registered in the Land Registry by Memorial No. 8353806
(2) A legal charge dated 30th June 2006 registered in the Land Registry by Memorial No. 06072701390125
and
IN THE MATTER OF Order 88 of the Rules of the High Court (Cap. 4A)

________________________

BETWEEN
CITIBANK N.A. Plaintiff

and
DAYS PROPERTIES LIMITED Defendant

________________________

Before: Deputy High Court Judge Lok in Court
Date of Hearing: 18 June 2013
Date of Decision of the defendant’s summons dated 10 May 2013: 18 June 2013
Date of Judgment and Reasons for Decision: 26 August 2013

______________________________________

JUDGMENT AND REASONS FOR DECISION

______________________________________

1. The plaintiff is a bank and its claim is a simple one. It is for the repayment of monies advanced to the defendant under various credit facilities. The plaintiff also seeks to enforce the underlying securities to secure payment.

2. The plaintiff’s claim is made pursuant to the following instruments entered into between the plaintiff and the defendant, all of which contain express terms giving the plaintiff the right to repayment of the loan on demand:

(i) a banking facility dated 23 June 2011 (“the 2011 Facility”);

(ii) a legal charge dated 19 March 2011 (Memorial No. 8353806) over the 1st and the 2nd Properties as defined in the title of this action (“the 2001 Legal Charge”); and

(iii) a legal charge dated 30 June 2006 (Memorial No. 0607271390125) over the 3rd Property as defined in the title of this action (“the 2006 Legal Charge”).

3. The substantive hearing of the originating summons was fixed to be heard on 18 June 2013. On 10 May 2013, the defendant took out a summons (“the Discovery Summons”) applying for discovery of various documents including, inter alia:

(i) all the telephone logs between the plaintiff’s and the defendant’s representatives from January 2001 relating to the credit facilities granted by the plaintiff to the defendant and the complete transcripts of all the relevant telephone recordings and the telephone notes relating to these telephone conversations;

(ii) notes of the meetings on 19 September and 14 October 2011;

(iii) all relevant documents, including transcripts of the relevant telephone conversations, relating to the demand for the repayment under the credit facilities; and

(iv) all internal emails and documents kept by the plaintiff relating to the credit facilities.

4. The plaintiff opposed the Discovery Summons. As the court did not have time to hear the Discovery Summons before the substantive hearing, I, in the hearing on 31 May 2013, adjourned the Discovery Summons to be heard together with the substantive hearing of the originating summons.

5. In the substantive hearing on 18 June 2013, I first dismissed the Discovery Summons. In this Judgment and Reasons for Decision, I will give my reasons for dismissing the Discovery Summons and the judgment of this case.

BACKGROUND

6. I would set out the following facts by way of background. The defendant is controlled by the Dayaram family. The Dayaram family is the controller of Days Equities Ltd, Days Dynasty Ltd, Days Impex Limited which was incorporated in Hong Kong (“Days Impex HK Ltd”), another Days Impex Limited which was incorporated in Liberia (“Days Impex Liberia Ltd”) and Days International Ltd, which together with the defendant form the Dayaram family’s company group (“the Days Group”). Besides the defendant, the plaintiff also has banking relationships with all but one of the companies of the Days Group.

7. According to the plaintiff, the main representatives of the Days Group were Mr Nanik Dayaram and his son Mr Mahesh Dayaram.

8. Prior to the 2011 Facility, the plaintiff and the defendant had entered into 4 facilities letters (or extensions of the same) dated 13 March 2001, 15 August 2003, 30 June 2005 and 23 June 2006 (“the Prior Banking Facilities”). All the Prior Banking Facilities were stated to be subject to repayment on demand.

9. In April 2011, the plaintiff and the defendant negotiated for an increase in the amount of the credit facilities. As a result of the negotiation, the plaintiff and the defendant entered into a “Short-term Demand Loan Banking Facility”, ie. the 2011 Facility. The purpose was stated to be for “investment” and, like the Prior Banking Facilities, the 2011 Facility was “subject to recall and repayment on demand”.

10. The 2001 and 2006 Legal Charges over the 1st to the 3rd Properties (“the Properties”), forming the security of the 2011 Facility, also contain express terms providing the right to repayment on demand in relation to the banking facilities, stating that the borrower will pay to the lender on demand all sums of money now or thereafter owing to the lender in whatever currency on account of banking facilities contained in the relevant schedule (see: clause 2.1 of the 2001 and 2006 Legal Charges).

11. According to the plaintiff, it became aware of the changes in the financial position of the defendant, including but not limited to information on changes in the circumstances of the Days Group and the Dayaram family, through various events starting from the filing of the winding up petitions by HSBC against 2 companies of the Days Group, Days Impex HK Ltd and Days International Ltd, on 14 September 2011. In mid September 2011, the plaintiff’s Risk and Credit Department asked for a review of the overall relationships with the Dayaram family and the Days Group due to the winding up petitions.

12. On 30 September 2011, the defendant failed to make interest payment to the plaintiff in the sum of $187,500 that had fallen due. The defendant had only about $4,800 in its account. Given such circumstances, the plaintiff reassessed the defendant’s position and told the defendant that the credit facilities would be rolled-over for 1 month rather than the customary 3 months, but offered for interest to be paid on a quarterly basis.

13. On 14 October 2011, the plaintiff and the defendant met and the plaintiff demanded for the repayment of the loan with interest. The plaintiff also called for the repayment of the loans from Days Dynasty Ltd and Days Equities Ltd.

14. On 12 December 2011, Days Impex HK Ltd and Days International Ltd were wound up by the court for failure to repay sums due to HSBC under other banking facilities.

15. Bankruptcy petition was also presented by HSBC in December 2011 against Mr Nanik Dayaram who was the guarantor under the 2011 Facility.

16. On 16 December 2011, the plaintiff commenced proceedings against Days Impex Liberia Ltd and Mr Nanik Dayaram as guarantors for Days Impex HK Ltd to recover amounts due and owing under credit facilities and a loan granted to the latter.

17. The plaintiff commenced the present proceedings against the defendant on 15 March 2012 to claim for the repayment of the loan under the 2011 Facility.

18. The defendant does not dispute the loan due under the 2011 Facility. However, according to the 1st affirmation filed by Mr Mahesh Dayaram on behalf of the defendant, the purpose of the various banking facilities granted by the plaintiff was to enable the defendant to purchase the Properties for the various family members of the Dayaram family. The plaintiff knew full well that the defendant was unable to purchase the Properties without financing in the form of long-term mortgage facilities, and so the defendant believed that a demand for immediate repayment would only be made if there was a good reason to justify repayment, and the banking facilities would be “rolled-over” at the end of each term unless there was a good reason for not doing so.

19. Further, it is the defendant’s case that the plaintiff was making the demand for repayment in bad faith. According to Mr Mahesh Dayaram, the normal practice was for the banking facilities to be rolled-over for a period of 3 months. In September 2011, Mr Mahesh Dayaram attended a meeting with the representatives of the plaintiff’s private bank to discuss a situation that had arisen in relation to certain accounts of Days Impex HK Ltd, which according to Mr Mahesh Dayaram, was a company controlled by his father.

20. During a telephone conversation on 30 September 2011, the plaintiff’s representative, Ms Stefanie Hon (“Ms Hon”), informed Mr Mahesh Dayaram that the credit facilities would only be rolled-over for 1 month instead of the usual 3 months’ period, the reason being that the plaintiff’s Credit Department wanted to monitor whether the defendant’s private bank accounts were related to the commercial bank accounts of Days Impex HK Ltd.

21. In the subsequent meeting on 14 October 2011, the plaintiff’s representatives informed Mr Mahesh Dayaram that the plaintiff made an immediate demand for the repayment of the loan under the credit facilities. No reason was given to Mr Mahesh Dayaram as to why the plaintiff recalled the loan. Subsequently, he was informed by a senior executive of the plaintiff that the...

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1 cases
  • Chun Wo Building Construction Ltd v Metta Resources Ltd
    • Hong Kong
    • High Court (Hong Kong)
    • 22 Marzo 2016
    ...The absurdity of this application fortifies the view that this is another disruptive effort. See also Citibank NA v Days Properties Ltd [2013] 4 HKLRD 264, §§23-34, per DHCJ Lok (as he then was). 30. There is no proper evidence before the court on the issues identified in para 5 above. Ther......

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