Chao Yuan Chiao v. Regal Hotels International Ltd. and Another

HCB003869/1999

HCB 3869/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY PROCEEDINGS NO. 3869 OF 1999

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Coram: Hon Kwan J in Court

Dates of Hearing: 27 to 29 June 2001, 3 and 20 July 2001

Date of Handing Down of Judgment: 8 August 2001

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J U D G M E N T

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1.This is a petition for bankruptcy brought by the Hongkong and Shanghai Banking Corporation Limited ("the bank") against Mr Wong Kong Ming based on Mr Wong's failure to comply with a statutory demand served on him personally on 2 November 1999. The petition was filed on 29 December 1999. The debt stated in the petition is in the sum of HK$10,269,802.95, being the indebtedness of Chit Lee Marble & Minerals Company Limited ("Marble & Minerals") guaranteed by Mr Wong with interest calculated up to 16 August 1999, less the value of a property of Mr Wong at No. 6 Broadwood Road, Beverly Hill, Block J, 32nd floor, Flat J2, Hong Kong ("the Beverly Hill Property") mortgaged to the bank estimated at HK$10 million.

2.Mr Wong's liability as a guarantor arose from two guarantees provided by him and his wife Madam Lai Yin Shan jointly and severally. The first one was dated 20 March 1997 for a maximum liability of HK$25 million and this was provided as a security for the general facilities provided by the bank to Marble & Minerals. The other guarantee was dated 27 June 1997 with a maximum liability of HK$12.5 million and this was provided as a security for the factoring facilities provided by the bank to Marble & Minerals.

3.At the initial stages of these proceedings, Mr Wong was not legally represented. He filed his evidence in Chinese. He sought and obtained an order that the affidavits filed by the bank be translated into Chinese. Translations were duly prepared by the bank's solicitors and provided to Mr Wong. On the first day of the substantive hearing, Mr Wong appeared by counsel, Mr Simon Lam. It would appear that counsel, who had received instructions only the day before, had limited instructions as his role was merely to seek an adjournment of the hearing. When his application for an adjournment or stay of the proceedings was refused, Mr Lam told me he was instructed to appeal to the Court of Appeal against my order refusing an adjournment and gave an undertaking to the court that he would seek an urgent hearing from the Court of Appeal. I therefore adjourned the hearing to the afternoon to await the outcome of the appeal. As it transpired, Mr Lam was unable to obtain an urgent hearing within that time and the parties returned to my court for directions. I decided to carry on with the hearing and I indicated that if Mr Wong should still wish to appeal against my order refusing an adjournment, he could do so at the end of the hearing after I have given a judgment on the petition.

4.When the hearing resumed in the afternoon, Mr Lam told me that Mr Wong had withdrawn instructions from his instructing solicitors and Mr Wong would act in person again. A Notice to act in person had been prepared and it would be filed in court. Mr Wong then conducted the proceedings acting in person. He immediately applied for the hearing to be conducted in Chinese. As counsel appearing for the bank, Mr Ashley Burns, is not conversant in Chinese, I decided to deal with this in a flexible manner and I allowed Mr Wong and Mr Burns to address the court and question the witnesses in the language they chose and the court interpreter would interpret to the other party in Chinese or in English as required. I have prepared a Chinese translation of this judgment and this is handed down at the same time as this judgment.

The application to adjourn the proceedings

5.I have given verbal reasons for refusing Mr Wong's application to adjourn or stay the bankruptcy proceedings. It may be convenient to set out those reasons in this judgment in case Mr Wong should wish to appeal against my order.

6.The application made by Mr Lam was on two grounds. The first ground was that Mr Wong would need one to two months to fully prepare for his case because the bank's solicitors had filed a late affidavit. This was the 2nd affidavit of Mr Dobby, the handling solicitor of the bank, made on 23 June 2001. Mr Wong claimed that he had only received the affidavit on 26 June 2001. In that affidavit, Mr Dobby exhibited a bundle of 46 pages being documents taken from the bank's file. The main purpose, as I understand it, was to show that Mr Wong had counter-signed various letters of the bank as requested on a number of occasions. Hence, most of these documents had already been exhibited to the existing affidavits on both sides. As Mr Burns had pointed out, there were only four letters from the bank in that late affidavit that had not been exhibited previously. Other than that, there were two new documents and they were documents provided by Mr Wong to the bank, being facility letters from two other banks to Marble & Minerals in 1995 and 1998. There was no justification for an adjournment of one to two months to study such a limited number of documents. I therefore rejected the application for an adjournment on this ground.

7.The second ground for an adjournment was related to High Court Action No. 10657 of 2000 brought by Mr Wong against the bank on 28 December 2000 claiming loss and damage of HK$145 million. Mr Lam's application was to adjourn or stay the bankruptcy proceedings until after the dispute in the High Court Action had been determined. In fact, when Mr Wong was acting in person, he had issued a summons on 24 May 2001 making the same application. I heard the summons on 29 May 2001 and dismissed his application. There was no appeal from that order. Notwithstanding that, Mr Lam saw fit to make a similar application on instructions. I saw no reason to depart from my earlier view. The matters raised by Mr Wong in the High Court Action were also raised by him in the bankruptcy proceedings. I had made an order that the deponents of affidavits filed in these proceedings should attend court for cross-examination, failing which their affidavits might not be relied upon. Thus, in the bankruptcy proceedings, Mr Wong would have ample opportunity to ventilate the issues he raised in the High Court Action. Further, having read the affidavits filed on both sides, my provisional assessment was that the disputes between the parties were suitable for resolution in the bankruptcy proceedings. There was no proper basis for Mr Wong to renew his application for an adjournment or stay of the proceedings. Accordingly, I refused his application.

The background facts

8.Mr Wong has opposed the petition for his bankruptcy on the ground that there are substantial disputes in respect of the debt on which the petition is founded. Further, he alleges that he has a substantial counterclaim against the bank which far exceeds the debt to the bank in the High Court Action referred to earlier and that he has a good claim against a third party, Chi Wen Trading Company Limited ("Chi Wen"), in the sum of HK$171 million and a writ was issued against Chi Wen a week before the trial of the petition. For these reasons, the petition should be dismissed, stayed or adjourned.

9.I will give an outline of the facts not in dispute before I turn to the matters in contention.

10.Mr Wong was and is a director and the majority shareholder of Marble & Minerals and its parent company Chit Lee Holdings Limited ("Holdings"). He controlled the operations of both companies. Marble & Minerals was incorporated in 1989 and its principal activity was the trading of marble and granite products. At the material time, Marble & Minerals was a sizeable business. For the year ended 30 June 1996, it had a turnover of HK$139 million and profit before taxation of HK13 million. For the year ended 30 June 1997, the turnover had grown to HK$240 million and the profit before taxation was HK$24 million.

11.The bank first granted facilities to Marble & Minerals in March 1996 through its Mongkok office. The facilities letter dated 10 January 1996 was issued by Miss Jeanny Ip, a corporate relationship manager of that office and was countersigned by Mr Wong on behalf of Marble & Minerals in acknowledgement and acceptance of the terms. As security for the facilities granted, Mr Wong and Madam Lai executed a joint and several guarantee dated 9 February 1996 in favour of the bank to the extent of HK$17 million. In addition, Mr Wong executed a legal charge dated 19 March 1996 of the Beverly Hill Property in favour of the bank and this contained a joint and several covenant of repayment on the part of Marble & Minerals and Mr Wong of all monies payable by Marble & Minerals to the bank. It is alleged by Mr Wong that when he agreed to provide a personal guarantee in 1996, he did so on the representation of Miss Ip that the guarantee would not be enforced. This is denied by Miss Ip.

12.In June 1996, the bank provided factoring services to Marble & Minerals through its Factoring Services Division in the main office. By this arrangement, Marble & Minerals assigned the debts due on its invoices to certain customers approved by the bank and the bank advanced 80% of the amounts invoiced to Marble & Minerals. The letter offering this facility was dated 5 June 1996 and it was issued by Mr Philip Cheng, a relationship manager of the Factoring Services Division. As security for this facility, Mr Wong and Madam Lai executed another guarantee in favour of the bank to the extent of HK$6 million. It is alleged by Mr Wong that Mr Cheng had made a similar representation to him that the guarantee he was to provide would not be enforced. This is denied by Mr Cheng.

13.The general and factoring facilities provided to Marble & Minerals were increased in 1997. On 20 March 1997, a letter for this purpose was issued by Miss Ip and was countersigned by Mr Wong on behalf of Marble & Minerals. As a result, Mr Wong and Madam Lai executed a fresh guarantee dated 20 March 1997 in favour of the bank to the extent of HK$25 million. This was one of the two guarantees relied on by the bank to enforce payment against Mr Wong. It is alleged by Mr Wong that Miss Ip had again represented to him that the new guarantee would not be enforced. Miss Ip denies the allegation. Another additional security provided to the bank for the increased facility was an all monies legal charge dated 26 May 1997 executed by Holdings of its property at No. 338 Hennessy Road, CNT Tower, 16th floor, Unit B, Hong Kong ("the CNT Tower Property").

14.Likewise, with the increased factoring facility, Mr Wong and Madam Lai were requested to and did provide a new guarantee to the extent of HK$12.5 million. This was dated 27 June 1997 and was the other guarantee relied on by the bank in these proceedings. Mr Wong said that he provided this guarantee on the basis of the alleged representation of Mr Cheng in June 1996.

15.The facilities were reduced from April 1998 and other additional securities were required from time to time. In July 1998, two past due import loans were restructured. On 15 December 1998, Miss Ip wrote to Marble & Minerals stating that in view of the reduction of market value of the properties mortgaged to the bank, and as a condition for continuing the facilities provided, the bank would require additional security in the form of a debenture over all assets of Marble & Minerals. Mr Wong countersigned this letter to signify his acceptance.

16.In January 1999, Mr Wong entered into a provisional agreement to sell the Beverly Hill Property at HK$8.8 million to reduce the interest burden of Marble & Minerals. This was with the consent of Miss Ip and a copy of the provisional agreement dated 15 January 1999 was faxed to the bank. The agreement provided for a completion date of "30 February 1999". Completion did not take place. This formed the subject of a claim brought by Mr Wong against the bank in HCA No. 10657 of 2000 referred to earlier. It is alleged by Mr Wong that the sale fell through because the bank had wrongfully objected to the sale in March 1999, notwithstanding the earlier consent given by Miss Ip. Mr Wong claims damages against the bank being the compensation he had to pay to the purchaser, the loss of interest, and the fall in the price of the property. This counterclaim against the bank is one of his grounds for opposing the petition.

17.By a letter dated 2 March 1999, the bank notified Marble & Minerals that as of that date, the latter's accounts had been transferred from the Mongkok office to the Credit Control Division at the main office. Miss Pamela Yue, a corporate recovery manager of that division, issued that letter. On 5 March 1999, Miss Yue issued two letters to Marble & Minerals whereby the banking and factoring facilities were withdrawn with immediate effect. It is not in dispute that following a meeting with Miss Yue in early March 1999, Mr Wong had changed his mind about giving the bank a debenture over the assets of Marble & Minerals as he had agreed to do in December 1998.

18.There were further meetings and discussions between Mr Wong and Miss Yue in April 1999 to work out a repayment proposal for Marble & Minerals with the view to reinstate the facilities. At the request of Miss Yue, Mr Wong engaged an independent firm of accountants Kennic L H Lui & Co. ("Kennic Lui") to look into the financial position of Marble & Minerals and a report was provided on 12 April 1999. On 17 April 1999, the bank provided Mr Wong with an updated valuation of the Beverly Hill Property and this was in the sum of HK$11.3 million. By a letter dated 30 April 1999, Mr Wong appointed HSBC Property (Asia) Ltd his agent to market the Beverly Hill Property at HK$11.3 million for three months. At about this time, Mr Wong agreed to provide a debenture over the assets of Marble & Minerals and this was executed on 21 May 1999. It is his case that the debenture was provided on the representation of Miss Yue that the two guarantees given in March and June 1997 would be cancelled in return for the debenture given. Miss Yue denies she had made any such representation.

19.On 9 June 1999, Miss Yue issued a letter to Marble & Minerals setting out the outstanding indebtedness of about HK$19.3 million under the various facilities and the repayment proposals. It was envisaged that the Beverly Hill Property was to be sold by 31 July 1999 and in the event that the selling price was less than HK$11.3 million, the shortfall was to be made up by Marble & Minerals. Apart from paying quarterly instalments, Marble & Minerals was to make twelve monthly instalments of HK$150,000.00 each commencing on 9 June 1999 and that all remaining indebtedness was to be paid no later than 31 May 2000. The letter set out the security that the bank was to continue to hold and this included the two guarantees in question and the debenture executed in May 1999. The letter was countersigned by Mr Wong to signify his understanding and acceptance of the terms.

20.Only one instalment of HK$150,000.00 was ever made by Marble & Minerals pursuant to the repayment proposals. On 11 August 1999, a creditor Fung Sang Trading (China) Limited ("Fung Sang") petitioned to wind up Marble & Minerals. On 16 August 1999, Miss Yue issued two letters of demand to Marble & Minerals for immediate repayment of its debt under the banking and factoring facilities. They were followed by letters of demand to Mr Wong and Holdings on 17 August 1999.

21.On 2 November 1999, the bank served its statutory demand on Mr Wong. On 3 November 1999, the bank brought a mortgage action ("the mortgage action") in respect of the Beverly Hill Property and the CNT Tower Property in HCMP No. 6865 of 1999 against Mr Wong, Holdings, and Marble & Minerals. Following the legal action taken by the bank, there were discussions between Mr Wong and Miss Yue in November and December 1999. It is alleged by Mr Wong that he had a verbal agreement with Miss Yue regarding new repayment proposals for Marble & Minerals and pursuant to which he was to sell the Beverly Hill Property and the bank was to withdraw all legal proceedings. This is disputed by Miss Yue.

22.On 26 November 1999, Mr Wong entered into a provisional agreement to sell the Beverly Hill Property at HK$10 million with a completion date on 14 February 2000. He provided Miss Yue with a copy of the agreement on 27 November 1999. In Miss Yue's letter in reply dated 29 November 1999, it was stated that the bank would be willing to consider releasing the mortgage on condition that the proceeds were to be paid to the bank towards reduction of the liabilities of Marble & Minerals. Mr Wong entered into a formal agreement for sale and purchase with the purchaser on 9 December 1999.

23.On 28 December 1999, Mr Cheng issued a letter to Holdings offering to provide factoring services without financing. The proposed arrangement was that the bank was to collect the debts assigned to it by Holdings but there would be no advance or facility on the debts assigned. Holdings did enter into a factoring agreement with the bank on 6 January 2000 but no debt was in fact collected under this arrangement.

24.Also on 28 December 1999, Fung Sang applied for dismissal of its petition against Marble & Minerals and the bank sought and obtained an adjournment of three weeks to be substituted as the petitioner. On 29 December 1999, the bank filed this petition for bankruptcy against Mr Wong.

25.On 3 January 2000, Mr Wong wrote a letter to the bank marked for the attention of Miss Yue's superior, Mr Tony Wise, and requested a meeting to discuss the debt repayment of Marble & Minerals. Mr Wise and Miss Yue had a meeting the following day with Mr Wong and his secretary. It is alleged by Mr Wong that an agreement was reached on 4 January 2000 by which the bank was to withdraw or suspend all legal action against Mr Wong and his companies upon certain conditions being met. This formed the other subject of his claim against the bank in HCA No. 10657 of 2000 in which he claimed substantial damages alleging that the bank had continued with legal action against him and his companies in breach of the verbal agreement on 4 January 2000. Mr Wong relies on this counterclaim against the bank to oppose the bankruptcy petition. The bank's case is that there was an agreement to suspend legal action but upon the terms as set out subsequently in a letter dated 7 January 2000 countersigned by Mr Wong. One of the terms as provided was that the defendants in the mortgage action were to consent to judgment in terms of the originating summons and to consent to the grant of a possession order in respect of the CNT Tower Property.

26.The bank's solicitors prepared a letter dated 17 January 2000 to Marble & Minerals, Holdings and Mr Wong enclosing a consent summons in the mortgage action to be signed by them and requesting Holdings to contact Mr Richard Tollan of the bank's solicitors to execute an unlimited corporate guarantee in favour of the bank. The letter was not sent as Mr Tollan had intended to hand over the documents at a meeting with Mr Wong on 20 January 2000. However, Mr Tollan was unable to keep his appointment with Mr Wong so he only handed the letter with the enclosed consent summons to Mr Wong when they met in court on 21 January 2000 before the hearing of the mortgage action was due to take place before Master Cannon. Mr Tollan requested Mr Wong to sign on a copy of the letter to acknowledge receipt. Mr Wong refused to do so. After the Master had ascertained from Mr Wong that all three defendants would not consent to judgment, she proceeded to hear submissions on the basis that it was a contested application and gave judgment for the bank against all three defendants in respect of their covenants for repayment in the mortgage documents in the sum of about HK$21.2 million and possession of the CNT Tower Property against Holdings. There was an appeal against the order of Master Cannon and this was dismissed by Waung J on 10 May 2000. Mr Wong sought leave to appeal out of time from the judgment of Waung J A single judge of the Court of Appeal, the Court of Appeal, and the Appeal Committee of the Court of Final Appeal turned down his application successively.

27.On 27 January 2000, Kennic Lui provided to the bank a report on the financial position of Holdings and its associated companies pursuant to instructions received from Mr Wong after his meeting with Mr Wise and Miss Yue on 4 January 2000. Kennic Lui stated that they had not been provided with sufficient financial information to be able to undertake a detailed analysis of recent and current receipts and payments. They questioned whether the trading and cash flow forecasts of the management could be justified and concluded that they had seen no evidence to support Mr Wong's claim that the group was viable whereas the evidence available would support the view that the group was not viable and would be unable to meet current liabilities or defend current creditor actions. As for the repayment proposal of the directors to repay all outstanding debts to all creditor banks within four years, Kennic Lui stated that they had not seen any evidence to indicate that the proposed debt rescheduling was achievable.

28.On 28 January 2000, the bank's solicitors wrote to Marble & Minerals, Holdings and Mr Wong stating that the companies had acted in breach of the agreement contained in the letter dated 7 January 2000 in that Mr Wong had refused to consent to judgment in the mortgage action and that the bank was no longer bound by the terms of that agreement. On the same day, the bank presented a petition to wind up Holdings and it applied to be substituted as the petitioner in the petition to wind up Marble & Minerals.

29.On 31 January 2000, Mr Wong telephoned the bank's general manager, Mr Raymond Or, to lodge a complaint and a meeting was arranged the next day with Mr Noel Jones, Miss Yue and the representatives of Kennic Lui. Mr Wong stated his position that the bank was in breach of an agreement to withdraw all legal action and that he had complied with all the conditions. The bank's officers stated that Mr Wong had not co-operated with Kennic Lui and had failed to provide necessary financial information so that the bank was in no position to consider a repayment proposal. Nothing conclusive was reached at that meeting.

30.On 10 February 2000, four days before the scheduled completion date of the Beverly Hill Property, Mr Wong reached an understanding with the purchaser that he was to approach the bank regarding its petition for bankruptcy, which was an impediment to the sale and purchase. Mr Wong wrote a letter to Mr Or that day setting out at length his complaints against the bank and one of them being that the bankruptcy petition would have invalidated the sale of his property and that completion was due to take place in four days' time. In response to that letter, Miss Yue sent an internal memorandum to Mr Or and Mr Wise and recommended inter alia that the bankruptcy petition against Mr Wong should be withdrawn to facilitate the sale of the property as the bank's primary objective at that time was to have the property sold on 14 February 2000 and recover a part payment of the debt of HK$10 million. On 11 February 2000, Mr Wise wrote to Marble & Minerals and Holdings stating that the bank had withdrawn its bankruptcy petition against Mr Wong and that it was still prepared to consider a full repayment proposal provided it was adequately supported by the necessary financial information to justify its viability. On the same day, the bank's solicitors wrote to Mr Wong's solicitors in the property transaction and enclosed for their information a consent summons to dismiss the bankruptcy petition. The letter was copied to the purchaser's solicitors.

31.Correspondence was exchanged between Mr Wong's solicitors and the purchaser's solicitors between 11 and 18 February 2000. In short, the purchaser's position was that he was willing and ready to complete the purchase of the property within seven working days of receipt of the reply to the remaining outstanding requisitions given that the problem concerning the registration of the petition against the property could be resolved. Mr Wong's position, as appeared from the letter of his solicitors dated 14 February 2000, was that the parties had agreed to cancel the sale and purchase on 10 February 2000 and the purchaser was not entitled to revive the contract. Completion did not take place. It is alleged by Mr Wong that the sale fell through because of the action of the bank in presenting a bankruptcy petition against him.

32.When the bank discovered that Mr Wong no longer intended to proceed with the sale of the Beverly Hill Property, its solicitors notified the court on 21 February 2000 that the consent summons to dismiss the bankruptcy petition would be withdrawn. On 1 March 2000, a winding up order was made against Marble & Minerals and on 3 May 2000, Holdings was ordered to be wound up by the court.

The witnesses

33.Pursuant to an order of the court, the deponents of affidavits all attended court for cross-examination. Mr Wong cross-examined Mr Tollan, Miss Ip, Mr Cheng and Miss Yue. He was cross-examined by the bank's counsel on the five affirmations he made in these proceedings.

The debt in the petition

34.Mr Wong has not expressly admitted the amount of the debt in the petition. He has not disputed the amount either. There can be no dispute as to the amount. Miss Yue has provided a certificate that the amount of the guaranteed moneys as defined in the two guarantees in question as at 16 August 1999 (being the date of the letter of demand) was HK$20,269,802.95. Under clause 2.04 in each of the guarantees, it was provided that such a certificate shall be conclusive evidence against the guarantor of the amount of the guaranteed moneys owing at any time.

The assessment of the witnesses

35.The credibility of Mr Wong is important for my decision. I have had a great deal of opportunity of assessing him as a witness. He has placed great emphasis on the fact that he was educated up to primary five and that he does not understand English although he knows simple English words and phrases because he grew up in Hong Kong. This was proffered as an explanation why he had signed quite a lot of documents in English, which are against the case he now seeks to put forward. I do not accept his reasons or his professed lack of understanding of the documents that he signed. Mr Wong ran a sizeable business at the time and he had run his companies successfully for some years. A lot of the business documents he had to deal with were in English. As the director in control, he would be responsible for making important decisions for his companies. Mr Wong struck me as a shrewd and resourceful businessman with considerable mental agility. He would not be able to make an informed and appropriate decision if he did not acquire a proper understanding of important business documents in English and had merely relied on his secretary or accountant to tell him the gist of such documents, as he would have me believe. I am not impressed with him as a witness for the reasons I will give in the analysis of the evidence.

36.Mr Wong has mounted a scathing attack on the witnesses for the bank. I have considered the grounds he gave in his detailed closing address for attacking their credibility and the discrepancies in their evidence pointed out by Mr Wong. I do not accept Mr Wong's criticism that they were evasive merely because they could not recall the details of the various discussions they had with Mr Wong. It must be borne in mind that some of these discussions took place some three or five years ago and as the bank's officers had apparently not made a record of what was discussed at the time, they would only have the contemporaneous letters to assist their memory. The alleged forgetfulness of these witnesses must be viewed against the backdrop that Mr Wong has been making a variety of allegations against them of a changing nature in the mortgage action and in these proceedings, and some of these allegations were made for the first time in Mr Wong's closing address to the court. I also reject the ulterior or sinister motives that Mr Wong seeks to impute to some of these witnesses, as they appear to me to be far-fetched and have no basis in fact.

37.I turn to consider the disputes in respect of the debt raised by Mr Wong and analyse the relevant evidence concerning his allegations.

The alleged representations of Miss Ip and Mr Cheng

38.These are the representations allegedly made by Miss Ip in 1996 and 1997 and by Mr Cheng in 1996 to the effect that the personal guarantees provided by Mr Wong would not be enforced by the bank. In his affirmation, Mr Wong stated that he was told by Miss Ip that the bank would only look to the mortgaged property if it should be necessary to enforce the security and that the personal guarantee was required only as a matter of procedure for approval by the main office. He further stated Mr Cheng had told him that the bank would only pursue the customers of Marble & Minerals whose debts were assigned to the bank under the factoring arrangement and that the personal guarantee was merely sought as a matter of procedure.

39.I have no hesitation in rejecting Mr Wong's evidence that the bank's officers had made the representations to him as alleged.

40.Firstly, Mr Wong's assertion that he believed that the guarantees would not be enforced on account of the alleged representations is belied by the terms of these letters of the bank addressed to him over a period of three years:

(1) the facility letter dated 10 January 1996;

(2) the letter confirming the availability of facilities dated 21 March 1996;

(3) the facility letter dated 27 March 1996;

(4) the facility letter dated 5 June 1996;

(5) the facility letter dated 20 March 1997;

(6) the facility letter dated 14 June 1997;

(7) the facility letter dated 11 December 1997;

(8) the facility letter dated 8 April 1998;

(9) the audit letter dated 27 May 1998;

(10) the facility letter of 7 July 1998;

(11) the letter setting out the repayment proposal and reinstatement of facilities dated 9 June 1999.

41.The first facility letters for the general and factoring facilities in 1996 made it clear that the offer of the facilities was conditional upon the satisfactory completion of the security as specified in the letters. The subsequent facility letters for the renewal of the facilities set out the security already held by the bank and stated that the offer of renewal was made subject to the existing security and the provision of additional security as might be required. The personal guarantee from Mr Wong was mentioned in each instance as among the security required. In each instance, the offer was required to be accepted by Marble & Minerals by signing and returning to the bank a duplicate of the letter to denote confirmation and acceptance of the terms and the security specified therein. Mr Wong had signed the letters on behalf of Marble & Minerals on each occasion. He could not seriously have believed that the guarantee was just a formality and of no importance to the bank when the letters clearly indicated otherwise.

42.Secondly, I find Mr Wong's testimony quite simply unreliable. He has all the characteristics of an untruthful witness. He made a new allegation against Miss Ip when he cross-examined her about the letter dated 15 December 1998 in which Miss Ip sought a debenture over the assets of Marble & Minerals. He alleged that he had expressed unwillingness to give a debenture stating that the bank already had a guarantee from him and to persuade him to do so, Miss Ip told him that the guarantee was merely a formality and not regarded as a security to the bank. Quite apart from the fact that this allegation is new, I find it difficult to envisage why Mr Wong would remind Miss Ip of the guarantee he had provided if he was really led to believe initially that the guarantee to be provided was not a security of substance in that it would not be enforced.

43.Furthermore, Mr Wong's testimony is inconsistent with his affirmation in the mortgage action. Under cross-examination, he admitted that he knew that the legal charge he executed in March 1996 contained a personal covenant that he was to repay all monies borrowed by Marble & Minerals from the bank and when he was asked by Miss Ip to provide a personal guarantee in addition to the legal charge, he felt that it was superfluous as there was already a covenant to repay in the legal charge and that was why he believed Miss Ip when she said the guarantee was just a formality. In his 2nd affirmation in the mortgage action, he stated however that his understanding of the legal effect of the legal charge was that his liability would be up to the value of the property mortgaged, that at most he would lose the property, and that if he had known he would be personally liable without limit under the personal covenant to repay in the legal charge he would never have executed the document.

44.As for the fact that Miss Ip and Mr Cheng had not explained the effect of the guarantees to Mr Wong or advised him to seek legal advice, I do not think this is material. Mr Wong could be in no doubt that he would assume legal obligations in the guarantees he was asked to provide. If he was unclear as to what his obligations were, he should have made inquiries from an appropriate person.

45.For the above reasons, I reject Mr Wong's evidence and find that Miss Ip and Mr Cheng did not make the representations to him as alleged when the guarantees were given in 1996 and 1997.

The alleged agreement with Miss Yue for the cancellation of the guarantees

46.Mr Wong has alleged that when he agreed with Miss Yue to provide a debenture in April or May 1999, he did so in return for Miss Yue's promise that the guarantees would be returned to him for cancellation. The difficulty with this allegation is that he has signed a letter dated 9 June 1999 in which the bank set out the repayment proposal and the security which it held and would continue to hold. The security included the two guarantees in 1997 as well as the debenture executed in May 1999. To get round this difficulty, Mr Wong has alleged he was misled into signing the letter, that the letter was given to him at the office of the bank and he was required by Miss Yue to sign it immediately. Hence, he had insufficient time to read it through and there was no one to explain the letter to him when he signed. Mr Wong pointed to the fact that the letter was signed by him without the rubber stamp of Marble & Minerals to lend credence to his allegation that he did not sign the letter in his own office but in the office of the bank.

47.I do not accept Mr Wong's evidence. His evidence that he had requested Miss Yue to cancel the guarantees in 1999 is incredible. There was no reason why he should have made this request in 1999 if he had been told by Miss Ip and Mr Cheng that the guarantees he was to provide would not be enforced and he had believed and acted on the alleged representations made earlier. I do not attach significance to the fact that the letter did not have the rubber stamp of Marble & Minerals. I note that there were two other letters signed by Mr Wong for the company without the rubber stamp, being the letters dated 15 December 1998 and 7 January 2000, apart from two undated letters of undertaking he gave on behalf of the company in 1997 as required in the facility letter dated 20 March 1997. Further, the allegation that he was misled into signing the letter dated 9 June 1999 was a new allegation not made in any of the affirmations he has filed in these proceedings or in his letter of complaint to Mr Raymond Or on 10 February 2000.

48.It is also pertinent to note that the letter dated 9 June 1999 was not the only document signed by Mr Wong that is against the case he now seeks to put forward. On 17 May 1999, the bank's solicitors sent to Mr Wong the draft minutes of the directors' meeting of Marble & Minerals for the execution of the debenture. Mr Wong and his wife duly signed the minutes and returned them to the bank's solicitors. In the minutes, the directors disclosed their interests in the proposed transaction to execute a debenture including their interests in the facilities granted by the bank in that they had provided a personal guarantee on 20 March 1997 for HK$25 million for securing the facilities granted and the guarantee "is still valid and subsisting and in full force". It was further noted that the execution of the debenture was previously a requirement of the bank to continue the facilities for the company, to which the company had then agreed, and would now be a prerequisite before the bank would consider any repayment plan proposed by the company. In view of those circumstances, it was concluded that there were "significant commercial reasons" for the company to execute the debenture.

49.In my judgment, the minutes signed by Mr Wong and his wife set out the true position. There was no agreement with Miss Yue to cancel the two guarantees as alleged.

The alleged agreement with Miss Yue in late 1999

50.Mr Wong's allegation is that he had made a verbal agreement with Miss Yue in late 1999 by which the bank was to withdraw all legal proceedings in return for the promises of Mr Wong to sell the Beverly Hill Property for the proceeds to be applied to reduce the indebtedness and to repay the outstanding balance in four years time by monthly instalments of HK$250,000.00. It was allegedly agreed that the payment would be made by causing Holdings to enter into a factoring arrangement with the bank and that the instalments were to be paid out of the proceeds on the invoices collected by the bank for Holdings.

51.In support of these allegations, Mr Wong pointed to the fact that he had entered into a provisional agreement to sell the Beverly Hill Property on 26 November 1999 and that the bank had sent him a letter on 28 December 1999 offering factoring facility to Holdings.

52.Miss Yue gave evidence denying that there was any agreement to withdraw legal action as alleged, nor was there any agreement of a new repayment schedule as she had no authority to agree to this without the approval of her superior. Further, if there were any such agreement for a new repayment proposal, she would have issued a letter to Mr Wong setting out the terms for his confirmation and acceptance as she had done in the letter dated 9 June 1999. According to Miss Yue, she had merely agreed with Mr Wong to withhold legal action temporarily on the understanding that Mr Wong was to make an upfront payment of HK$250,000.00 to show good faith by 17 December 1999 (which was extended to 24 December 1999) and that no repayment proposal would be considered by the bank until Mr Wong had met this requirement. Mr Wong had failed to make any payment as promised so legal action was continued by the bank in late December 1999.

53.It should be noted that a similar allegation was made by Mr Wong in his affirmation filed in the mortgage action and that this was rejected by Waung J who found that the agreement was "really at best a temporary 'cease fire' by the parties pending [the defendants in the mortgage action] paying up on a regular basis the additional further money, and the evidence shows the defendants could not keep up the payment promise, therefore the bank resumed the war". Waung J concluded that there was nothing in this point of the bank having given up its right to sue by this agreement. I accept the submission of Mr Burns that there is an issue estoppel and Mr Wong cannot re-litigate in these proceedings the same issue which has been determined against him in the mortgage action.

54.In his cross-examination of Mr Cheng and Miss Yue, Mr Wong had suggested that the alleged agreement was made in December 1999 and not on 22 November 1999 as he had deposed to in his affirmation in the mortgage action. If this was done with the view of circumventing the doctrine of issue estoppel, I do not think this would succeed, as it is clear that the same agreement was raised and relied on by Mr Wong even though he now seeks to say that the agreement was made on a different date. I should also mention that in his cross-examination of the first witness for the bank, Mr Tollan, Mr Wong had still suggested that the date of the alleged agreement was 22 November 1999. Further, his present allegation regarding the date of the alleged agreement was inconsistent with the date put forward by him in his letter of complaint to Mr Or dated 10 February 2000, being the middle of November 1999.

55.Even if the doctrine of issue estoppel were not applicable, I would still have found against Mr Wong on the evidence, as I do not find him to be a truthful witness and I regard his evidence as inherently improbable. I prefer the evidence of Miss Yue. I accept her evidence that the mere fact that Mr Wong had discussions or even an agreement with Mr Cheng regarding a factoring arrangement for Holdings was insufficient in that a repayment proposal had still to be put forward by Miss Yue for the approval of her superiors. I note further in the letter of Mr Wong to Mr Wise dated 3 January 2000 that he expressed confidence the debts could be repaid within a few years because he had "a verbal agreement with [the bank's] Factoring Department for repayment of debts". Mr Wong did not allege in that letter that he had any agreement regarding repayment with Miss Yue or the Credit Control Division. Further, the apologetic tone of that letter was completely at odds with the case he advanced in the mortgage action and in these proceedings that Miss Yue had acted in breach of an agreement to withdraw all legal action.

The agreement of 7 January 2000

56.Here, it is alleged by Mr Wong that there was an agreement with Mr Wise at their meeting on 4 January 2000 that the bank was to withdraw or suspend all legal action upon certain conditions being fulfilled by Mr Wong. The conditions were as set out in an internal memorandum of Miss Yue to Mr Or and Mr Wise dated 10 February 2000 and were as follows: Holdings was to give a guarantee for the debts of Marble & Minerals; Holdings was to set up a factoring arrangement with the Factoring Services Division; Kennic Lui was to be appointed to conduct a review and make a report within two weeks about the viability of the Chit Lee group and if possible to propose a repayment plan for the consideration of the bank; and Mr Wong would commence marketing of the CNT Tower Property or surrender it to the bank voluntarily by 1 March 2000. Mr Wong claimed that he had complied with all the conditions save that he had not delivered up possession of the property in question to the bank as the deadline for doing so had not expired when the bank acted in breach of the agreement and resumed legal proceedings against him and his companies on 28 January 2000.

57.As with the other allegations made by Mr Wong, this allegation was at odds with a document that he had signed. This was the letter dated 7 January 2000 in which it was stipulated that the defendants must consent to judgment in the mortgage action. Mr Wong had failed to comply with this requirement. Further, he had failed to co-operate with Kennic Lui by providing to the accountants the necessary financial information for them to conduct a review on the viability of the group. To get round the difficulty that he was clearly in breach of the terms of the agreement contained in the letter dated 7 January 2000, Mr Wong made a new allegation in his closing submission that he had signed this letter on the representation of Miss Yue that it was an accurate reflection of the agreement made on 4 January 2000 and that Miss Yue had later agreed with him when he protested that this letter had departed from the earlier agreement that this letter was to be replaced by a subsequent agreement to be prepared by the solicitors for the bank.

58.I am of the view that Mr Wong's testimony is wholly devoid of credence. I reject his evidence that he was misled in any way when he signed the letter dated 7 January 2000. His new allegations in his closing submission are inconsistent with his allegations in his letter of complaint to Mr Or dated 10 February 2000. I accept Miss Yue's evidence on this without reserve. I find that Mr Wong was in breach of the agreement contained in the letter dated 7 January 2000 and that the bank was entitled to and had accepted his breach by the letter of the bank's solicitors dated 28 January 2000. The claim of Mr Wong against the bank based on the alleged breach of the agreement on 4 January 2000 in HCA No. 10657 of 2000 is not a genuine or serious cross claim with some prospect of success and it is no answer to this petition, quite apart from the fact that the losses claimed were losses suffered by Marble & Minerals and Holdings, not by Mr Wong.

The sale of the Beverly Hill Property

59.It is alleged by Mr Wong that the provisional agreements he had made with two purchasers in January 1999 and November 1999 were not carried out because of the wrongful behaviour of the bank that I have set out in the earlier part of this judgment. I am quite unable to see how these allegations would have constituted a genuine and serious cross claim against the bank that would have exceeded the debt on which this petition is founded. If the first transaction in January 1999 had fallen through due to the wrongful objection of Miss Yue to the sale as alleged, Mr Wong had suffered no loss in that he was able to conclude a much better deal in the second transaction. The purchase price under the agreement in late 1999 was HK$10 million, whereas the price under the first transaction was just HK$8.8 million. As for the second transaction, I have reviewed the correspondence between Mr Wong's solicitors and the purchaser's solicitors disclosed by Mr Wong. The conclusion I have reached is that the sale was aborted because Mr Wong had declined to proceed with it and had insisted in the letter of his solicitors dated 14 February 2000 that the parties had a binding agreement to cancel the transaction notwithstanding the clear indication of the purchaser's solicitors that the requisition regarding the effect of the bankruptcy petition on the sale could be regarded as capable of being resolved. There is no merit in the allegation that the bank was in any way to be blamed for the failure to proceed with the second transaction. Lastly, even if there were any merit in Mr Wong's claim arising out of the aborted sale of the Beverly Hill Property, the damages he could recover from the bank would come nowhere near the debt in the petition which is above HK$10 million.

The claim of Mr Wong against Chi Wen

60.In this action, which was commenced a week before the hearing of this petition, Mr Wong claims against Chi Wen HK$33.8 million on the basis that Chi Wen was in breach of an agreement made in July 1997 that Chi Wen was to purchase 30% of Mr Wong's shares in Marble & Minerals and that Chi Wen had failed to pay the balance of the purchase price being HK$33.8 million by September 1997. In addition, he claims damages in the sum of HK$137 million being 70% of the estimated value of his shares on the basis that the shares of Marble & Minerals would have been listed in the Hong Kong Stock Exchange and that its profits would have been seven times its profit in 1997. Mr Wong has obtained legal aid to pursue his claim against Chi Wen in May 2001 and the claim he advanced is taken from a pleading drafted by counsel.

61.It is unnecessary for me to express any views on the viability of this proposed claim for colossal damages against Chi Wen. Even if there were a meritorious claim, this is not a valid reason for dismissing, staying or adjourning the petition. Mr Wong has been granted legal aid to pursue this claim. The legal expenses for pursuing this claim would be met by the Director of Legal Aid. It is not apparent to me how the making of a bankruptcy order against Mr Wong would have affected the legal aid granted to him even though the cause of action would be vested in his trustee for bankruptcy upon the making of a bankruptcy order.

Conclusion

62.For the above reasons, I hold that Mr Wong has failed to make out a case that there is a bona fide dispute of the debt in the petition on substantial grounds. I further hold that there is no cross claim of a genuine and serious nature and which exceeds the amount of the debt in the petition. No valid reasons for staying or adjourning this petition have been made out. In the circumstances, I make a bankruptcy order against Mr Wong with costs to the bank.

Representation:

Mr Ashley Burns, instructed by Messrs Johnson Stokes & Master, for the Petitioner.

Mr Simon H W Lam, instructed by Messrs Paul Cheng & Co., for the Debtor on the 1st day of the hearing.

The Debtor, acting in person, on the subsequent days of the hearing.

The Official Receiver, attendance excused.