The Chase Manhattan Bank v. Sybella Ltd. and Others

HCMP002159/1999

HCMP 2159/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.2159 OF 1999

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Coram : Hon Mr Justice Chung in Chambers

Date of Hearing : 26 October 1999

Date of Judgment : 26 October 1999

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J U D G M E N T

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1. In this action, the Plaintiff commenced its claim against the 3 Defendants by way of Originating Summons. The nature of the Plaintiff's respective claim is :-

(a) against the 1st Defendant, as the mortgagor under a written mortgage document dated 31st July 1995;

(b) against the 2nd Defendant, as the 1st borrower under the said mortgage; and

(c) against the 3rd Defendant, as the guarantor under a written guarantee dated 31st July 1995 and a written guarantee and indemnity dated 21st January 1997.

2. After a hearing before the Master on 17th August 1999, judgment was entered against the 1st and 2nd Defendants. On 24th August 1999, the 1st and 2nd Defendants took out an appeal against the said judgment.

3. As regards the 3rd Defendant, after a hearing before another Master on 24th September 1999, the Master ordered that the proceedings against him be continued as if begun by writ and gave directions relating to the further conduct of the proceedings. On 30th September 1999, the Plaintiff took out an appeal against the said Order.

4. According to the various documents, in particular a "Certificate of Registration" dated 19th September 1996 from the Registrar of Companies of Hong Kong, "Chemical Bank" changed its corporate name to, and was registered under the name of, "The Chase Manhattan Bank". "The Chase Manhattan Bank" is the Plaintiff in this action. The various documents relied upon by the Plaintiff in this action (referred to in the first paragraph above) were entered into between the Defendants and "Chemical Bank".

5. In the hearing before the Master, the 1st and 2nd Defendants argued that they could only be reliable to "Chemical Bank" but not the Plaintiff since they did not enter into any contract with, or borrow any money from, the Plaintiff.

6. The arguments advanced by the 3rd Defendant in the hearing before the Master were :-

(a) the same argument of the 1st and 2nd Defendants set out above;

(b) since the claim against the 3rd Defendant was not based on a mortgage, it was procedurally wrong for the Plaintiff to commence this action against the 3rd Defendant by way of Originating Summons;

(c) the 3rd Defendant is entitled to put the Plaintiff to proof of its claim at trial.

7. In the appeals, Mr Lin for the 3rd Defendant put forward the following points :-

(a) the same point as point (b) in the Court below;

(b) the nature of the Plaintiff's claim against the 3rd Defendant was not clearly stated in the Originating Summons or the supporting affirmation;

(c) the 3rd Defendant disputed the Plaintiff's claim in his affirmation;

(d) the same point as point (c) in the Court below.

8. I consider that Mr Lin is entirely correct in not arguing that a change in the Plaintiff's name should per se affect the Defendants' liability. It is trite law that a company is a separate legal person. A change of name by a corporate person, just as a change of name by a natural person, does not affect the rights or obligations of the contracts entered into by that person (whether corporate or natural) before the change of name.

9. As regards the question of whether the Plaintiff should have commenced this action against the 3rd Defendant by Writ or Originating Summons, I disagree with Mr Lin and agree with Mr Chan for the Plaintiff. Neither Rules of the High Court, Order 5, Order 6 or Order 7 requires a claim based on a guarantee to be begun by Writ.

10. In fact, Order 5, rule 4(1) allows either mode of proceedings to be used. One of the factors to be taken into account in choosing the mode has been set out in Order 5, rule 4(2), namely, that the issue involved is, or is likely to be a question of construction of law or instrument, or some other question of law, or that there is unlikely to be a substantial dispute of fact. From the materials before me, this case falls within such category. There is, thus, nothing wrong for the Originating Summons procedure to be used.

11. Mr Lin's points (b) to (d) can be considered together. When Mr Lin aruged that the 3rd Defendant disputed the Plaintiff's claim, he was referring to paragraph 4 of the 3rd Defendant's affirmation (see paragraph 2.7 of Mr Lin's written submissions). Paragraph 4 of the 3rd Defendant's affirmation stated :-

"The Plaintiff has failed to demonstrate to this Honourable Court that as of the outstanding amount owed by the 2nd Defendant, the same was incurred pursuant to the facilities available by the Plaintiff under the facilities letter (exhibit FKK-4). I therefore am not liable as a guarantor ... ,"

Exhibit FKK-4 is a facilities letter of the Plaintiff (not "Chemical Bank") dated 30th December 1996. Two paragraphs therein are relevant, namely :-

"PURPOSE :

Hong Kong Dollar Overdrafts and/or Short Term Advanced up to 90 days.

INTEREST RATES :

For Overdrafts [the interest rate was set out] For Short Team Advances [the interest rate was also set out]"

12. In the affirmation of Fu Kwok Keung dated 15th May 1999 :-

(a) paragraph 10(a) expressly set out the amount of "Short Term Advance" outstanding as at 13th April 1999 (the date of the Originating Summons);

(b) paragraph 10(c) expressly set out the amount of "Short Term Advance" outstanding as at the date of the affirmation.

13. It is obvious that the outstanding amounts were clearly referable to the facilities letter and there is, therefore, no substance in paragraph 4 of the 3rd Defendant's affirmation.

14. Mr Lin relied on Lloyd's Bank Co. v Ogle [1876] 1 Ex. D 263 for the proposition that where there is no acknowledgement of debts by the defendant or anything else to show that the defence was for the mere purpose of delay, in the case of a guarantor or surety, he should not be prevented from going to trial. The actual judgment has to be looked at; Bramwell B. said :-

"I by no mean say that under no circumstances, in an action on a guarantee, could security be required, because it is quite possible to imagine a case in which the Defendant might only put in a plea for the purpose of delay, knowing his indebtedness and having acknowledged it. If the Plaintiffs had sworn that the debt had been admitted by the company [the debtor], and that the Defendant had been informed of the amount and had not dissented or in any other way denied his liability, it would seem to me that he could only defend the action for the purpose of delay ... ." (at page 264 of the report)

15. I consider that the observations of Branwell J. are applicable to the present case in that :-

(a) the debtor [1st and 2nd Defendants] have not disputed the Plaintiff's claim save to put forward a defence relying on the Plaintiff's change of name, which I found to be totally unmeritorious;

(b) the 3rd Defendant has been informed of the amount not only by way of the Plaintiff's supporting affirmation herein, but also a Letter of Demand dated 1st April 1999 (i.e. before the commencement of these proceedings) (see pages 133-134 of the Bundle of Documents) but he has not challenged the amount stated therein save to assert (erroneously) that the sum has not been proven to be related to the facilities letter;

(d) although there was no express admission of the Plaintiff's claim, from the above circumstances, I infer that the 3rd Defendant had in effect done so.

In these circumstances, even according to the Lloyd's Bank case, the only reasonable conclusion is that the 3rd Defendant is only defending this action for the purpose of delay.

16. Further to the above, the following matters are also relevant :-

(a) the 3rd Defendant had been described as the director of the 1st and 2nd Defendants in the mortgage document;

(b) the 3rd Defendant has been described as the director of the 2nd Defendant in the loan agreement dated 31st July 1995;

(c) the 3rd Defendant was one of the signatories to the mortgage document and the loan agreement;

(d) the same address (but on 21/F) was used by the 1st to 3rd Defendants in the mortgage document, the loan agreement, and by the 3rd Defendant in the guarantee and indemnity (but on 20/F) dated 20th January 1997.

(e) all the exhibited correspondence were sent to the said address (on 20/F).

17. For the above reasons :-

(a) the appeal of the 1st and 2nd Defendants is dismissed;

(b) the appeal of the Plaintiff is allowed and judgment is entered against the 3rd Defendant in the same sum as set out in the judgment dated 17th August 1999 against the 1st and 2nd Defendants.

Representation:

Mr Chan Chi Hung, inst'd by M/s Johnson, Stokes & Master, for the Plaintiff

M/s C.L. Chow & Lam, Solicitors for the 1st and 2nd Defendants, absent

Mr Kenny C.P. Lin, inst'd by M/s C.L. Chow & Lam, for the 3rd Defendant