Industrial And Commercial Bank Of China (Asia) Ltd v Messrs B C Chow & Co

CourtHigh Court (Hong Kong)
Judgment Date30 January 2004
Judgement NumberHCA1792/2001
Subject MatterCivil Action


HCA 1792/2001




ACTION NO. 1792 OF 2001


MESSRS B C CHOW & COMPANY (sued as a firm) Defendant


Coram: Hon Reyes J in Court

Dates of Hearing: 12, 13 and 14 January 2004

Date of Judgment: 30 January 2004




I. Background

A. Facts

1. In March 1996 Mr David Wong Chor Chiu ("Wong"), then trading as Hoi Choi Timber Company ("Hoi Choi"), applied to the Plaintiff ("the Bank") for general banking facilities. As security for the facilities Wong To Shiu Mui ("Mrs Wong"), Wong's wife, agreed to charge the property known as Flat E, 1st Floor, Block 2, Neptune Terrace, 11 Tai Man Street ("the Property"), which was registered in her name. Pursuant to the Bank's practice of requiring the provider of security to be personally liable as a borrower under the relevant loan contract, Mrs Wong also agreed to become a party to the proposed facilities agreement.

2. Accordingly, by a letter ("the 1st Facilities Letter") dated 21 March 1996 to Hoi Choi, the Bank agreed to provide banking facilities to Wong, "subject to availability of funds and periodic review and withdrawal at [the Bank's] sole discretion". More particularly, the letter offered to facilities on the following terms:-

" Facility I
Overdraft Facility To the extent of HKD300,000.00 (Hong Kong Dollars Three Hundred Thousand Only)
Interest Rate At 1.75% p.a. over Hong Kong Dollar Prime Rate, subject to fluctuation and amendment at our discretion.
Handling Charge At 0.5% p.a. on HKD300,000.00 payable upon acceptance of this letter on or before 3rd April, 1996.
Repayment On demand.
Cancellation Fee 1% on amount cancelled, payable upon cancellation of part or whole of the facility.
Facility II
Letters of Credit and Trust Receipts for 90 days To the extent of HKD1,200,000.00 (Hong Kong Dollars One Million Two Hundred Thousand Only) within which 90-day Trust Receipts be limited to the extent of HKD800,000.00 (Hong Kong Dollars Eight Hundred Thousand Only).
Interest Rate
for 90-day
Trust Receipts At 1.5% over Prime Rate, subject to fluctuation and amendment at our discretion.
Opening Commission for Letters of Credit Union Bank Standard Rates.
Repayment On demand.
Handling Charge At 0.25% p.a. on HKD1,200,000 payable upon acceptance of this letter on or before 3rd April, 1996.
Facility III
All existing facilities and/or modifications thereto and/or other facilities of whatsoever nature as we may hereafter grant to you from time to time at our discretion.
As collateral for all of the above banking facilities, we require the following:


An all monies first legal charge on Flat E, 1/F, Block 2, Neptune Terrace, 11 Tai Man Street, Chai Wan, Hong Kong to be executed in our favour and registered.


All other existing securities as may be in force for the time being.
The above facilities are subject to a written valuation report addressed to us and prepared by our appointed valuer confirming that the open market value of the above property os not less than HKD1,880,000.00 and the valuation fee is to be borne by you.
Notwithstanding the foregoing, the banking facilities are subject to no adverse change in market conditions and the completion of documentations and formalities as and when required by us, and we reserve our right to require repayment and/or cash collateralization on demand of all amounts actually or contingently due to us.
Please sign and return the duplicate of this letter to signify your understanding and acceptance of the terms and conditions under which the banking facilities are granted. This offer will be available for acceptance until 3rd April, 1996 after which date it will be lapsed unless extended in writing by us."

Both Wong and Mrs Wong signed a copy of the 1st Facilities Letter to signify their understanding and acceptance of the terms and conditions therein.

3. By a standard form letter ("the 1st Instructions") also dated 21 March 1996 the Bank instructed the Defendant ("the Firm") to prepare, in the Bank's favour, a legal charge and other relevant security documents in respect of the Property. More specifically, the 1st Instructions stated as follows:-

" Upon production of the relative title deeds and satisfactory title investigation, please prepare a
x First Legal Charge
and such other documents as you think fit in favour of our Bank to render additional security to our Bank based on terms outline below:
1. PROPERTY: Flat E, 1/F, Block 2, Neptune Terrace, 11 Tai Man Street, Chai Wan, Hong Kong.
2. CHARGOR: Ms Wong To Siu Mui
3. PRINCIPAL PARTY (BORROWER): M//s Hoi Choi Timber Co.
x Names of proprietor/owner Mr Wong Chor Chiu, David
x B/R No. 18800565-000-01-95-6
4. AMOUNT SECURED: To secure ALL existing and future General Banking Facilities to the extent of
x an unlimited amount ...
5. REPAYMENT: On demand.
6. INTEREST RATE: Current rate of interest, subject to fluctuations and changes at our discretion.
7. ...
8. During the continuance of this security, the Chargor shall not execute or agree to execute any legal charge or further charge or to grant any lease or tenancy without written consent of the Bank.
9. If there shall be default in repayment of the loan and other outstandings (whether actual or contingent) it shall be lawful for the Bank at any time thereafter to dispose of the charged property either by public auction or private contract without further consent on the part of the Chargor.
10. The banking facilities are subject to written valuation report with Current Market Value of NOT less than HK$1,880,000.00 and no adverse change in market conditions.
13. After execution of the Charge documents, you are kindly requested to confirm the Memorial No. of the Charge and keep us informed of the relevant title deeds and documents as soon as possible. All the deeds and documents sent for registration should be returned to us after registration.
d. In respect of title deeds, please note the following:
x please refer to M/S Hua Chiao Commercial Bank who act for/ are the Chargor/ existing Chargee/ Vendor.

4. Acting upon the 1st Instructions, on 22 March 1996 the Firm wrote to Hua Chiao Commercial Bank ("Hua Chiao") requesting copies of the title deeds of the Property in order to arrange for the discharge of the outstanding mortgage in the latter's favour. Hua Chiao had also registered a charging order absolute over the Property in March 1989.

5. By letter dated 28 March 1996 Messrs Chan and Cheng ("C & C"), Hua Chiao's solicitors, sent the requested deeds to the Firm. Among the title deeds sent was a certified copy of Conditions of Sale No. 11633 ("the Conditions") to which the Property was subject. The other documents sent by C & C to the Firm were as follows:-

(1) Certified copy of Modification Letter (Memorial No. 267897);

(2) Certified copy of Modification Letter (Memorial No. 2694334);

(3) Certified copy of Deed of Reassignment and Release (Memorial No. 2889518);

(4) Certified copy of Occupation Permit dated 31 December 1985 (Memorial No. 2976875);

(5) Agreement for Sale and Purchase dated 21 November 1985 ("the Agreement") (Memorial No. 2945782);

(6) Certified copy of Deed of Mutual Covenant and Management Agreement (Memorial No. 3007263); and,

(7) Assignment dated 17 March 1986 ("the Assignment") (Memorial No. 3029261).

6. By letter dated 1 April 1996 to Mr John Wan Yee Kim ("Mr Wan") of the Bank's Credit Administration Department, First Pacific Davies ("FPD") confirmed the current open market value of the Property as $1,880,000.00. FPD further stated:-

20 Marketability:
The property has a reasonable marketability.
21. General Comments:
The property is one of the ten domestic units on the 1st floor of the building with a due east aspect facing buildings nearby.
The interior of the property is finished with PVC tiled floor, painted walls and ceiling in the main living areas whilst the bathroom and kitchen are tiled.
In or valuation, we assumed that the premium for removal of the non-assignment clause had been fully paid.
The property is currently owner-occupied and we have valued the property on an open market value basis assuming sale with vacant possession. ..."

7. The reference to the "premiums for removal of the non-assignment clause" in FPD's letter related to the fact that the Property was a residential unit forming part of a Housing Authority development. Under the Housing Ordinance (Cap. 283) ("HO"), the sale or alienation (including by creation of a mortgage or charge) of such a unit requires the prior written consent of the Director of Housing and payment of a premium.

8. By a Consent Order dated 19 April 1996 the Firm obtained the release of the Property...

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