Keen Lloyd Energy Ltd v Bank Of China (Hong Kong) Ltd

Judgment Date06 November 2008
CourtCourt of Appeal (Hong Kong)
Judgement NumberCACV34/2008
Subject MatterCivil Appeal
CACV000034/2008 KEEN LLOYD ENERGY LTD v. BANK OF CHINA (HONG KONG) LTD

CACV 34/2008, CACV 35/2008, CACV 36/2008 & CACV 37/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NOS. 34 AND 35 OF 2008

(ON APPEAL FROM HCA NO. 1092 OF 2006)

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BETWEEN
KEEN LLOYD ENERGY LIMITED (formerly known as KEEN LLOYD INVESTMENTS LIMITED and further formerly known as KEEN LLOYD LIMITED) Plaintiff
and
BANK OF CHINA (HONG KONG) LIMITED (formerly known as SIN HUA BANK LIMITED, HONG KONG BRANCH) Defendant

----------------------

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NOS. 36 AND 37 OF 2008

(ON APPEAL FROM HCA NO. 1299 OF 2004)

----------------------

BETWEEN
KEEN LLOYD ENERGY LIMITED (formerly known as KEEN LLOYD INVESTMENTS LIMITED and further formerly known as KEEN LLOYD LIMITED) Plaintiff
and

BANK OF CHINA (HONG KONG) LIMITED (formerly known as SIN HUA BANK LIMITED,HONG KONG BRANCH)

Defendant

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Before: Hon Rogers VP and Le Pichon JA in Court

Date of Hearing: 23 September 2008

Date of Judgment: 23 September 2008

Date of Handing Down Reasons for Judgment: 6 November 2008

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1. These were 4 appeals from decisions and judgments of Poon J. The first 2 were in respect of a decision of 4 January 2008 whereby the judge refused the plaintiff’s application to adduce and rely firstly on a letter dated 18 May 1998 from the defendant, which was then known as the Sin Hua Bank Ltd, Hong Kong Branch (“SHHK”) to the Hong Kong Monetary Authority (“HKMA”), and secondly on a letter dated 17 July 1998 from the HKMA to SHHK. The admission of those two letters was sought in respect of the applications by SHHK to strike out the statements of claim in the two actions HCA 1299 of 2004 and HCA 1096 of 2006. The hearing of those applications had already taken place and the decisions were pending. The other 2 appeals were in respect of the decision dated 11 January 2008 whereby the judge struck out the writs and statements of claim in the two actions.

2. At the conclusion of the hearing of these appeals they were dismissed with costs with reasons to be given in writing which we now do.

Background

3. There were a number of companies in what may be termed the Keen Lloyd group of companies (“the group”), whose chairman was one Chin Kam-chiu (“Chin”). The holding company had been Keen Lloyd Resources Ltd, formerly known as Keen Lloyd Investments Ltd (“Resources”) and Keen Lloyd Ltd. The group had general banking facilities with SHHK which comprised: (a) HK$1.656 billion to HK$1.827 billion between July 1997 and February 1998 and (b) HK$1.75 billion between April and September 1998. The facilities were secured by, among other things, pledges over property owned by various companies in the group.

4. At the end of 1998 the group ran into difficulties. By November 1998, the group owed large sums of money to SHHK, mainly in respect of overdue trust receipts and SHHK had exercised its rights to retain the group’s goods. From about the year 2000 defaults occurred and SHHK began to take action to recover the outstanding debts. Eventually two of the companies within the group, including Resources, were wound up.

5. In March 2004, Chin and four officers of SHHK were convicted of conspiracy to defraud SHHK for having dishonestly applied for and negotiated 25 letters of credit between 19 November 1998 and 16 April 1999 when there was no underlying commercial transaction behind them. The conspiracy had caused SHHK to lose its security over the detained goods.

6. On 1 June 2004, after Chin’s conviction, the plaintiff, which was one of the companies of the group, commenced HCA 1299 of 2004 against the defendant. The original indorsement on the writ claimed damages of HK$5 billion in respect of fraudulent misrepresentation. On 12 December 2005, application was made for leave to amend the claim. Leave was granted by the Registrar on 21 December 2005. That was followed by the filing of a statement of claim. The defendant then appealed the grant of leave to amend the writ. The appeal was heard by Deputy High Court Judge L. Chan. By the decision of 12 April 2006, the Deputy Judge set aside the amendment to the writ and the statement of claim and restored the original indorsement.

7. As the Deputy Judge said in the decision, the statement of claim with which he was concerned, that had been filed pursuant to leave that had been granted and was under challenge, alleged two misrepresentations made at different times. The first misrepresentation was alleged to have been made in the period from around July 1997 to December 1997 was that that the general banking facilities granted by SHHK would be increased from HK$1,656 million to HK$2,400 million. The second misrepresentation was alleged to have been made in around early to late 1998 and was that SHHK would further increase the general banking facilities to HK$3,080 million with part of the funds being provided by the Shenzhen branch of the bank.

8. As the judge on these applications said in paragraph 26 of the decision of 11 January 2008, the Deputy Judge had plainly decided the case on the basis that:

(a) The limitation period for the cause of action based on the second...

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