Fubon Bank (Hong Kong) Ltd v. Bright Idea Promotion Ltd and Others

HCMP 1987/2023

[2024] HKCFI 3267

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1987 OF 2023

________________________

________________________

________________

___________________________________

REASONS FOR JUDGMENT

___________________________________

1.In these proceedings commenced by Originating Summons (“the OS”), the Plaintiff bank (“the Bank”) seeks to recover from the Defendants (together “Ds”, individually and respectively “D1” to “D7”) the total outstanding indebtedness in the sums of HK$67,185,119.51 and RMB 16,010,444.47 (“the Outstanding Sums”) advanced under a number of loans to D5 and D6 pursuant to 4 facility letters, with interest thereon. As can be gathered from the rather long title to these proceedings, the Bank is seeking to enforce 6 legal charges in respect of a number of properties and 6 deeds of guarantee executed by different Defendant to secure these loans.

2.The Plaintiff has filed 2 affidavits from Ms Lee Sim Fong (“Lee”), its Vice President of Special Assets Management Department. To contest the Bank’s claims, Ds only filed one affirmation, namely the one filed by D3 dated 12 June 2024 on behalf of Ds (“D3’s Aff”).

3.In D3’s Aff, D3 merely raised a number of matters against the Bank (which will be alluded to), but did not raise any other dispute, particularly none whatsoever over the amount of the Outstanding Sums or the detailed interest calculations provided by Lee, in respect of each of the loan accounts under the 4 facility letters, listing the outstanding amount in each, the specific interest rate applicable to that loan account and the specific period interest was accrued.

4.Per the direction of the Master made on 17 July 2024, this is the hearing for summary disposal of the OS, or if the same is refused, for directions.

5.The Bank asked for judgment to be entered. Ms Chan, counsel for Ds, asked that the OS be converted into a writ action, based on the matters raised in D3’s Aff.

6.At the conclusion of the hearing, I gave judgment for the Bank that Ds be jointly and severally liable to pay the Bank the Outstanding Sums and interest, that vacant possession of the properties be yielded to the Bank in terms of its draft order, with the time for D1 and D2 to yield up vacant possession of their properties be changed to 30 days, and the time for D3 and D4 to yield up vacant possession of their properties be changed to 42 days, and that, the Bank having so agreed, the costs of these proceedings be taxed on indemnity basis instead of solicitor and own client basis.

7.I said written reasons will be provided. These are my reasons.

Applicable principles concerning summary disposal of an OS

8.Under O.28 r.4, at the hearing of an originating summons, it may be disposed of summarily where the court is satisfied that there are no triable issues.

9.The approach and applicable test have been succinctly summarized by Fok J (as he then was) in Billion Wealth Group Ltd V Strategic Media International Ltd HCMP 2586/2009, unrep., 3 May 2010, which are not disputed by Ds:

“3. As Ma J (as he then was) held in Wing Hang Bank Ltd v Liu Kam Ying & Ors [2002] 2 HKC 57 at §10:

“… The burden in summary judgment applications under the originating summons procedure is on the Plaintiff to justify its entitlement to summary judgment. However, once this is prima facie demonstrated on the evidence, it is then up to the defendant to show that he does have a defence or defences to the claim. In this way, there may in practice be little difference between an application for summary judgment in originating summonses and an application for summary judgment under RHC, Order 14.”

4. And it is trite that on a summary judgment application, the court simply has to determine two questions: firstly, whether what the defendant says is believable as opposed to whether its version of events is to be believed; and secondly, if it is, whether what the defendant says amounts to an arguable defence in law.

5. Whether a party’s assertions are believable is a question to be answered not by taking the assertions in isolation but by taking them in the context of so much of the background as is either undisputed or beyond reasonable dispute: per Deputy Judge To (as he then was) in Ip Kam Wah v Fair City Group Ltd [2005] 4 HKLRD 168 at §8.”

The basic facts, the 4 facility letters, the legal charges and the properties, the guarantees, default by D5 and D6 and commencement of these proceedings

10.D4 and D3 are husband and wife. The other remaining Defendants, namely, D1, D2, D5, D6 and D7 are companies incorporated in Hong Kong of which D3 is and was at all material times a director and shareholder. D4 is and was a director of D1, D2 and D5 and a shareholder of D1 and D5.

11.D5 and D6 were the borrowers. According to D3, D5 has been conducting the business of manufacturing and trading of toys accessories, among others, and D6 has been conducting the business of, among others, trading and processing of products.

12.Upon the application by D5 and/or D6, the Bank issued the following 3 facilities letter all dated 3 January 2022 providing banking facilities to them:

a.  Facility letter to D5 and D6: Banking facilities aggregating up to HK$49,000,000, including (i) Residential Mortgage Loan to D5 up to HK$5,000,000 (ii) Non-residential Mortgage Loan to D5 up to HK$15,000,000, (iii) Revolving Loan (Uncommitted) (General Purpose) to D5 up to HK$10,000,000, (iv) Overdraft Facility (General Purpose) to D5 up to HK$5,000,000, and (v) Trade Facility to D5 and D6 up to HK$14,000,000 (“1^st Facility”);

b.  Facility letter to D5: Term Loan (Uncommitted) (General Purpose) up to HK$5,000,000 (“2^nd Facility”); and

c.  Facility letter to D6: Export Factoring (Without Recourse) (Disclosed) up to HK$28,000,000 (“3^rd Facility”).

13.On the same day, ie. 3 January 2022, the following 4 Deeds of Guarantee in the Bank’s standard form were executed by respectively D3, D5 and D6:

a.  A Deed of Guarantee executed by D3 guaranteeing payment of all sums and liabilities owed or will be owed by D5 to the Bank;

b.  A Deed of Guarantee executed by D3 guaranteeing payment of all sums and liabilities owed or will be owed by D6 to the Bank;

c.  A Deed of Guarantee executed by D5 guaranteeing payment of all sums and liabilities owed or will be owed by D6 to the Bank; and

d.  A Deed of Guarantee executed by D6 guaranteeing payment of all sums and liabilities owed or will be owed by D5 to the Bank.

14.The following 6 all monies Legal Charges all dated 31 January 2022 were entered into in favour of the Bank as Lender by the respective owner(s) of the properties as Mortgagor(s) together with D5 and D6 as Borrowers securing all sums and liabilities (including all interest thereon) from time to time advanced by the Bank to D5 and D6 which are outstanding, and the Mortgagor(s) also covenanted therein (by Clause 2.01) jointly and severally with the Borrowers to pay, make good and discharge such outstanding sums and liabilities owed to the Bank:

a.  Legal Charge by D1 as the register owner of Workshops 13, 14 and 15 on 4^th Floor, Block A, Vigor Industrial Building, Nos 14-20 Cheung Tat Road, Tsing Yi registered by Memorial No 22022400980078;

b.  Legal Charge by D1 as the register owner of Workshop 12 on 11^th Floor, Block A, Vigor Industrial Building, Nos 14-20 Cheung Tat Road, Tsing Yi registered by Memorial No 22022400980062;

c.  Legal Charge by D2 as the register owner of Workshop 13 on 11^th Floor, Block A, Vigor Industrial Building, Nos 14-20 Cheung Tat Road, Tsing Yi registered by Memorial No 22022400980096;

d.  Legal Charge by D3 and D4 as the register co-owners of 1^st Floor, No 1030 Canton Road, Kowloon registered by Memorial No 22022400980017;

e.  Legal Charge by D3 and D4 as the register co-owners of 1^st Floor, No 1032 Canton Road, Kowloon registered by Memorial No 22022400980031; and

f.  Legal Charge by D3 and D4 as the register co-owners of 1^st Floor, No 1034 Canton Road, Kowloon registered by Memorial No 22022400980046.

15.Shortly after, upon the application by D6, the Bank further issued a facility letter dated 18 February 2022 providing to D6 further Trade Facility up to HK$10,000,000 (“4^th Facility”).

16.About 6 months later, D7 executed 2 Deeds of Guarantee both dated 8 August 2023 respectively guaranteeing payment of all sums and liabilities owed or will be owed by D5 and by D6 to the Bank.

17.Thus, and not disputed by the relevant Defendant(s):

a.  By virtue of the respective Deeds of Guarantee mentioned above, the respective guarantors became jointly and severally liable to the Bank in respect of any outstanding indebtedness owed by D5 and D6 to the Bank; and

b.  By virtue of the same covenant to pay (Clause 2.01) contained in the respective Legal Charges entered into by D1, D2, D3 and D4, they became jointly and severally liable to the Bank in respect of any outstanding indebtedness owed by D5 and D6 to the Bank.

18.I will refer to the banking facilities under the 4 facilities letters mentioned above collectively as “the Facilities”.

19.There is no dispute that D5 and D6 had drawn down and utilized the Facilities.

20.It is not disputed (save the matters raised in D3’s Aff) that around January 2023, D5 and D6 began failing to make punctual repayments on the respective due dates of various loans advanced under the Facilities.

21.By 3 identical letters all dated 18 April 2023 issued by the Bank to respectively D3, D5 and D6 serving as formal notice, the Bank informed them that they were in default of payment due and threatened termination of the Facilities and commencing action for recovery.

22.By reason of the persistent default and failure to make repayments by D5 and D6, on 7 September 2023, the Bank by its solicitors issued letters before action to respectively D1 to D6. On 20 October 2023, the Bank issued a similar letter before action to D7.

23.On 1 November 2023, the Bank commenced these proceedings by issuing the OS.

24.In Lee’s 1^st Affidavit,

a.  the respective due repayment dates of various loans made under the Facilities which were defaulted by D5 and D6 were set out in the tables under §27 therein; and

b.  the state of account in respect of each loan under the Facilities, including the calculation of the respective outstanding sum under each loan/account and the detail interest calculations were set out and listed in tables in §§30 to 47. As said, there is no dispute thereon.

Ds fail to raise any defence or triable issue

25.As have mentioned, Ds in D3’s Aff raised a number of matters.

26.First, D3 in §§10 to 13 complained about the renewal of the 3^rd Facility on around 31 December 2022. She said barely and vaguely that renewal was subject to a consent for renewal granted by the Bank, which representatives of the Bank “have forgotten to obtain” and another resigned staff of the Bank “took away some documents, part of which were necessary for obtaining the Consent for Renewal”, and she was told “to put the 3^rd Facility’s repayment on pause until they could obtain the Consent for Renewal … until late January 2023 when the Consent for Renewal was eventually obtained”.

27.No further details were provided by D3. There is no documentary evidence proffered. It was not said that she actually had money ready and intended to repay but was unable to do so. In any case, the complaint only concerned the period from 31 December 2022 until late January 2023. Importantly, it was not even said by D3 that such complaint would form any basis for a defence for D6 not to repay the amount borrowed under the 3^rd Facility.

28.That regardless, Lee in her 2^nd Affidavit filed on 3 July 2024 explained the matter. She pointed out that under the terms of the 3^rd facility letter, the Bank has a sole discretion whether to renew the 3^rd Facility or not; and (at §§12 and 13) that on 24 January 2023, the Bank refused to renew the 3^rd Facility to D6 as D6 did not pass the “Know Your Customer” due diligence check and by then the facility limit of the 3^rd Facility had been fully utilized but D6 was in default of making payment towards a factoring loan under the 3^rd Facility for the amount of 3.2 million odd RMB when it fell due on 15 January 2023.

29.The clear term in the 3^rd facility letter that the renewal of the 3^rd Facility was upon the sole discretion of the Bank is rather indisputable and not disputed. Ds also did not seek to file any evidence to dispute that the 3^rd Facility was not renewed on 24 January 2023.

30.This matter of renewal complained by D3 clearly does not afford Ds any defence regarding their liability to repay the outstanding indebtedness under the 3^rd Facility, nor does it raise any triable issue.

31.Second, D3 complained about the so-called “Drawdown Episodes” and “Deposit Episodes” in §§13 to 17 of D3’s Aff.

32.As I understand it, by “Drawdown Episode”, D3 was complaining that,

“Since February 2023, however, despite the fact that I had been making payments to the Facilities, the 5^th and 6^th Defendants were unable to draw down credit from the 2^nd, 3^rd and 4^th Facilities for unknown reason.” (§13).

33.By “Deposit Episode”, D3 was complaining, in the barest allegation without any time frame or details, that

“the 5^th and 6^th Defendants were unable to and/or requested not to make payments to accounts other than the Factoring account for unknown reasons. This is saying that no repayments could be made to the 1^st, 2^nd and 4^th Facilities but the 3^rd Facilities” (§14).

34.Firstly, D3 alleged merely barely “[she] had been making payments to the Facilities” since February 2023. No details whatsoever are provided. The amounts and dates of her such alleged payments are evidently crucial. Documentary evidence such as bank statements and/or pay-in or transfer slips showing payments should have been readily available and ought to have been proffered. However, no such documentary evidence was produced.

35.What was produced by D3 was 6 monthly bank statements of D5’s bank account with the Bank for the months of October 2023 to March 2024[1], and not “since February 2023”. These monthly statements essentially cover a period after these proceedings were commenced. In these 6 months, the bank statements did not show one single instance of deposit or payment in. Similarly, only 6 monthly bank statements of D6’s bank account with the Bank in respect of the same period[2] were produced by D3. There were 8 instances of deposits and payments-in, ranging in amount from HK$13,800 to HK$630,000, the overwhelming majority of them were withdrawn shortly after as partial loan repayments. They hardly substantiate D3’s allegation that since February 2023, she has been making payments to the Facilities.

36.Concerning the “Deposit Episode”, D3 said she had been requested to make payment into “the Factoring account” (under the 3^rd Facility), she then alleged that “no repayments could be made to the 1^st, 2^nd and 4^th Facilities” (my emphasis). It can be noted from the default dates provided by Lee (§27 of Lee 1^st) that the loan that D5 and D6 first defaulted in repayment was Loan No BP23000059 under the 3^rd Facility which occurred on 24 January 2023. Not unsurprisingly, the Bank would request D3 and D6 to repay that loan first.

37.Moreover and likewise, save the barest of allegation, D3 provides no factual details or documentary evidence, for instance, concerning any attempt of payment in that was refused or was made unable to do so by the Bank (save the 3 cheques mentioned below). It simply defies commercial and common sense that the Bank would refuse repayment by Ds and then terminated the Facilities and then incurred time and expenses to issue solicitors’ letters to, and then sues, Ds.

38.D3 relied on but 2 matters to show that she tried but was unable to make repayments. They are: (a) an email she sent to Shirley Chan of the Bank on 18 December 2023[3] (“the Dec 18 Email”), but only that email was produced, and (b) 3 cheques[4] issued by D3 all dated 21 December 2023 (“the 3 Cheques”) to the Bank as payee in the respective amount of HK$87,549.59, HK$21,667.23 and HK$98,381.99, which, as is common ground, were rejected when being banked in.

39.The Dec 18 Email reads:

“Dear Shirley,

How are you getting on?

Thank you for your concern, there are really too many bad things that have happened to me this year but I will do my best to do my duty to Fubon Bank.

I have been trying to pay the loan payment for the last two weeks but have not got through. I called for help a week ago, but John also said that he could notify you before he could fix the account, but you were in the middle of the holiday, so he waited for you to come back to re-open the account and make an appointment to meet. I am in a rather difficult position at the moment and I'm wondering if you have any advice for me. I understand our payment is late but “better late than never”. Please advise the next meeting.

With regards,

Jackie Szeto.”

40.In Lee’s 2^nd Affidavit, she produced the complete string of emails consisting of 16 pages of print-outs[5]. They began with an email sent by John Li of the Bank on 17 November 2023 listing out in a table the outstanding amounts under the Facilities totalling to about HK$77.6 million. That was followed by a long email sent by Johnny Chan for D3 on 22 November 2023 setting out the details of a proposal to repay and requesting the Bank to reinstate the Facilities. The proposal was rejected by an email sent by Saffron Lee of the Bank on 28 November 2023 (quoted in §48(a) below). There were then further discussions concerning repayment arrangements, including through selling the properties charged.

41.In the 3 consecutive emails sent by Cecilia Chu on behalf of D3, 2 on 5 December 2023 and then one on 15 December 2023 immediately before the Dec 18 Email, Cecilia was telling the Bank that “we are not able provide [sic] a second repayment yet as Ms Szeto will only come back to office late today after her family matters (funeral). We will look at our cash flow position and to submit a new repayment plan in due course, hopefully by end of Friday. Meanwhile, we are still waiting for your advice on the market price of the mortgaged properties…” and in her 15 December 2023 email, that “For the loan arrangement, we will arrange to repay the first overdue installment. How can we arrange the payment?”. These 3 emails were then followed by the Dec 18 Email.

42.Then Shirley Chan replied to the Dec 18 Email on the next day, ie 19 December 2023:

“ … As clarified with John, no special arrangement is required at present. You can deposit funds to account to settle the loan that you want. According to the system, the past due interest and penalty will be settled first and then settled the loan principal.

If you have any issues want to discuss with us, we are fine to meet you on 28 Dec 2023 afternoon.

We reiterated that the Bank understood that Beauty Vision and BVML are currently facing difficulty in cash flow, the Bank could consider to further negotiate the settlement plan if the properties are surrendered to the Bank for disposal.”

D3 then by email sent about 3 hours later replied to Shirley Chan:

“Thank you for your reply and understanding. I will arrange to deposit and confirm the coming meeting on 28^th …”

43.Reading the Dec 18 Email together with the other emails before and after it and in context, in my judgment, it was clearly shown that there were no such alleged “Drawdown Episode” or “Deposit Episode”. There was no complaint, not even a mention, that D3, D5 or D6 were made unable by the Bank to make repayment. Rather, those communications were most clear that it was D3, D5 and D6 themselves who were unable to meet the repayments that were due.

44.Moreover, Lee explained in her 2^nd Affidavit that drawdowns were refused as the facility limit has been reached or there was default in repayment, and Ds did not seek to file any evidence to dispute that.

45.Regarding the 3 Cheques, Lee explained in her 2^nd Affidavit that the 3 Cheques were rejected because when D3 attempted to deposit them into D5 or D6’s bank account, the payee’s name must match the name of the account holder, namely, that of D5 or D6. As the Bank was named as the payee in the 3 Cheques, they were rejected when being banked into D5 or D6’s bank account. Not only is such explanation inherently credible, Ds also have not sought to file any evidence to contradict Lee’s such explanation.

46.Furthermore, and not disputed is that Ds were unable to refer to or proffer any evidence showing the existence of any contemporaneous complaint about these “Drawdown Episode” and “Deposit Episode”, which was therefore only first raised in D3’s Aff.

47.It is abundantly clear to me that these complaints of “Drawdown Episode” and “Deposit Episode” are devoid of substance or merits, that they are not capable of belief, and that they also do not amount to a defence in law.

48.Third, D3 alleged that certain promises were made by the Bank, that “during one of those meetings in or around November 2023 in which Ms Chan was present … I was told that the Plaintiff would not continue with its legal action against the Defendants and that the Facilities would resume with on-going discussions on alternative repayment schedule and method if payments could be made to the 3^rd Facility” (§20 of D3’s Aff), and that D3 accordingly made repayment in the total sum of HK$1,260,000 in January 2024, and that “on 5 March 2024 … Ms Chan again assured me that if payments could be made to the 3^rd Facility, the legal proceedings would not be continued after the Originating Summons hearing” (in §24 of D3’s Aff).

49.D3 such allegation of oral “promise” made at a meeting in November 2023 and then repeated in March 2024 is not only not mentioned, not to say recorded, in the said continuous string of emails exchanged between the parties, but indeed the contemporaneous emails directly contradicted such allegation, particularly, in that the Bank has been discussing with D3, D5 and D6 concerning the repayment of all the outstanding indebtedness and not just the repayment of the loans made under the 3^rd Facility, and that the Bank has been rejecting the proposals put forth by D3, D5 and D6:

a.  In an email sent by Saffron Lee of the Bank to John Li, D3 and Cecilia Lau on 28 November 2023[6] and copied to Shirley Chan, among others:

“Dear Johnny,

1. As of 22 November 2023, overdue amount of BEAUTY VISION LIMITED (“Beauty Vision”) is HK$39,971,078.16 and that of BEAUTY VISION MANAGEMENT LIMITED (“BVML”) is HK$16,141,843.84. Beauty Vision has become overdue since 10 Mar 2023 and BVML has become overdue since 24 Jan 2023. Given the significant amount of overdue and the long-overdue record, the proposed instalments from end of Nov 2023 to Jan 2024 to clear the overdue amount in 3 months is not acceptable to the Bank.

2. Given the proposed disposal prices for the properties are very high as compared to the market prices, the chance of disposal and the proposed disposed prices is dim and remote.

Given the above-mentioned reasons, the Bank could not agree with the proposed settlement plan. Still, the Bank understood that Beauty Vision and BVML are currently facing difficulty in cash flow, the Bank could consider to further negotiate the settlement plan if the properties are surrendered to the Bank for disposal.”

b.  Johnny Chan, for D3, then replied by email sent on 29 November 2023, copied to D3 and Shirley Chan, among other[7]:

“Thank you for your response to our e-mail.

We understand our loan outstanding has been overdue for a long period, which we don't want to explain again … We know your bank is not going to accept our proposal, we will look into our cash flow again to and [sic] provide another proposal to you. We believe the next proposal should be better with our improved cash position after the recent start of our new business. We will give another repayment plan by the end of next Monday.

As for the disposal of properties …

We are still very sincere to settle the bank outstanding base on our ability and cash flow from our business. We wish you would kindly allow us some time to provide the next proposal.”

c.  Parties then further exchanged the emails mentioned in paragraphs 39, 41 and 42 above.

d.  Then Saffron Lee in an email sent on 28 December 2023 reiterated[8]

“… We reiterated that the Bank understood that Beauty Vision and Beauty Vision Management Limited are currently facing difficulty in cash flow, the Bank could consider to further negotiate the settlement plan if the properties are surrendered to the bank for disposal.” (original bold and underline)

50.Moreover, in view of the contents of the parties’ discussion by email, the clear stance expressed and emphasized by the representatives of the Bank and the much more substantial amount of outstanding indebtedness as compared to HK$1,260,000, it is most inherent improbable that the Bank would promise to drop these proceedings merely based on Ds’ repayment of the relatively minor sum of HK$1,260,000.

51.On such available evidence, I came to a clear and firm view that Ds’ allegation of there being such a “promise” is not at all believable. I found no triable issue raised in that regard.

52.I therefore concluded at the end of the hearing that there was no arguable defence or triable issue raised by Ds, I therefore granted judgment to the Bank against the Ds as aforesaid.

53.I thank Mr Kok and Ms Chan for their assistance.

Mr. Martin Kok instructed by Messrs. P.C. Keith Lam Lau & Chan for the Plaintiff

Ms. Cherry Chau instructed by Messrs. Wat & Co. for the 1^st to 7^th Defendants