Holyrood Ltd v. Bank of China (Hong Kong) Ltd and Others
Read the full judgment text of HCCL 35/2003 on BabelCite. This HCCL judgment was delivered on 22 October 2003.
1. On Monday 30 June 2003, shortly after 11:00 a.m., the 3rd and 4th defendants herein, Mr Yeo and Mr Liu, acting on the instructions of the 1st defendant, the Bank of China, moved into the offices of the plaintiff, Holyrood Limited, in their capacity as receivers and managers of the plaintiff's business.
Cited by 5 cases
|
HCCL000035A/2003 HCCL 35/2003 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMMERCIAL ACTION NO.35 OF 2003 -------------------------
---------------------- Coram: Hon Stone J in Court Dates of Hearing: 2, 3, 6-9 October 2003 Date of Judgment: 22 October 2003 ------------------------- J U D G M E N T ------------------------- Introduction 1.On Monday 30 June 2003, shortly after 11:00 a.m., the 3rd and 4th defendants herein, Mr Yeo and Mr Liu, acting on the instructions of the 1st defendant, the Bank of China, moved into the offices of the plaintiff, Holyrood Limited, in their capacity as receivers and managers of the plaintiff's business. 2.Such receivership, invoked by the Bank pursuant to Clause 11 of a debenture dated 11 September 1997 executed between Holyrood and the Bank, and consequent upon a contractual 'Event of Default', involved taking charge of and responsibility for a redevelopment site on the Peak, known as No's 10-12 Peak Road. Holyrood Ltd had purchased this site in 1997 with finance provided by the Bank of China, and since that time has been in the process of constructing thereon two ten storey residential blocks and a town house. 3.This case is solely concerned with the issue of the validity of the appointment of these receivers, who are employees of the 2nd defendant in this case, Ernst & Young Transactions Limited. These proceedings 4.The writ in this action was issued on 1 August 2003. The plaintiff sought injunctive relief, in terms both of the removal of the receivers and a restraint in terms of the marketing and sale of the site by the receivers acting on behalf of the Bank. 5.One week later, on 8 August 2003, Holyrood issued a summons seeking interlocutory relief, the terms of which mirrored the final injunctive relief prayed for in paragraphs 1 and 2 of the Endorsement of Claim. This application was fixed for hearing before this court on 15 September 2003, an application by the defendants for an earlier hearing date having been rejected. 6.The hearing of the plaintiff's application for the interlocutory injunction took two days, and concluded on 17 September 2003. 7.Judgment thereon was delivered on 19 September 2003. This judgment speaks for itself. 8.The result of the application was that whilst the receivers were permitted to remain in place, this court accepted the Bank's undertaking, in lieu of an injunction, that pending judgment there was to be no sale/alienation of the Peak property by the Bank, and that there was to be a speedy trial of that which was recognized by all parties to be a narrow issue, namely the validity of the appointment of the receivers. 9.This in turn depended upon an equally narrow sub-issue, involving an investigation into that which was found to have occurred during one particular phone call on Monday 30 June 2003 at or about 8:20 a.m. between a Bank officer, one Mr Lau Pak On, and a Mr Liang Zhong Yong, an adviser and consultant to the debtor company, Holyrood. Circumstances of the receivers' appointment 10.At this juncture it may be convenient to make reference to the immediate background, and to the events of 28 to 30 June 2003 leading up to this crucial phone call. 11.Much is common ground. It is undisputed that at the time of these events the plaintiff company was in default in terms of its repayment obligations to the bank, and was in the process of attempting to negotiate an extension of time for repayment of the loan. 12.There is some disagreement, which for present purposes is of no consequence, as to whether the date of existing default should be regarded as 30 April or 31 May 2003, but at any rate Holyrood's letter of 6 June 2003 to the Bank requested a restructuring whereby the period for repayment of the loan would be extended to June 2004 or until "after the construction work on the project is completed". 13.In this connection it seems fair to observe that it would have been improbable had the Bank seriously considered this latter option, given that to-date almost six years had elapsed over that which originally had been conceived as a two year construction project. 14.Be that as it may. These negotiations between the Bank and Holyrood led to a meeting which took place between representatives of the Bank and of Holyrood, at the offices of the Bank, at about 10:30 a.m. on the morning of Saturday 28 June 2003. 15.This meeting ended in impasse, the major sticking point apparently being a difference of view as to when payment should be made of a Government extension premium of some HK$5 million odd, a Government levy that by this stage was recurring upon a three monthly basis, on this occasion falling due on 30 June 2003. 16.Apparently the Bank wanted this sum to be paid that very morning, leaving other relevant negotiations to be considered and decided within the coming week; this payment appears to have been a sensitive matter for the Bank, given that omission to pay such extension premium gave rise to the risk of Government forfeiture of the site, and hence loss of the Bank's interest therein. 17.Mr Liang Zhong Yong, on the other hand, who had been representing Holyrood throughout the negotiations with the Bank to restructure the loan, and who represented the company at this meeting, insisted that although this sum of money was then ready, it could equally well be paid on Monday 30 June 2003. So the meeting had broken up without agreement. 18.Later that afternoon, Mr Liang was asked to go to the Bank of China building by Mr Lau Pak On, the Deputy Manager of the Bank's Special Asset Management Department, Local Corporate Non-Performing Loans Division. The purpose of this meeting was to give Mr Liang an important letter from the Bank, which had been drafted by a Mr Wong Wai Hung, the General Manager of the Bank's Legal Department consequent upon a meeting of the Bank's Credit Committee, attended by senior officials, which had taken place immediately after the failure of the earlier meeting with Mr Liang. 19.In fact when Mr Liang turned up, this letter was not ready for collection, and he told Mr Lau that he could not wait, having to catch a plane for Beijing that afternoon. So arrangements were made to fax it to him at his office in Beijing. Apparently this did not go smoothly, and Mr Lau and his superior, Ms Fonnie Lau, went into the Bank on the next day, the Sunday afternoon, in order to re-fax the letter and to liaise with Mr Liang to ensure that the fax indeed arrived. Which it duly did. 20.Apart from the fact of its receipt, it seems that the content of the letter was not then discussed in any detail. Mr Liang, who maintains that he cannot speak or read English, said that he had asked a colleague in his Beijing office to translate it for him at around 9:00 p.m. that Sunday evening. Having observed him in the witness box, I think that Mr Liang is being overly modest about his ability to comprehend English, but at the end of the day perhaps this does not greatly matter. 21.In the context of this case this letter is an important document. It is sent under Bank of China letterhead to Holyrood Ltd at its office in Convention Plaza, for the attention of one of the two of its directors, Ms Lilian Oung. It is dated 28 June 2003 and is signed by Ms Fonnie Lau as authorised signatory of the Bank. It reads :
22.By the time of the deadline thus imposed for acceptance, namely, 8:00 a.m. on Monday 30 June 2003, no signed copy of this letter had been faxed through by Mr Liang to the Bank in Hong Kong. Accordingly, Mr Lau Pak On was asked by his immediate superior, Ms Fonnie Lau, to telephone Mr Liang in Beijing "to check" what was happening. It is the content and significance of this phone call that has occupied the attention of the parties in this trial. 23.A further Liang/Lau telephone call took place later that morning at about 11:00 a.m., wherein Mr Liang apparently informed Mr Lau than someone from Holyrood had been sent to pay the extension premium, and it is a matter of record that the Government extension premium, that is, the sum of HK$5,082,100.00, was paid by the plaintiff at 11:02 a.m. on the morning of 30 June 2003. Confirmation of this payment was sent by Holyrood to the Bank by letter of that date, the Bank's receipt chop indicating that this letter was received at 12:56 p.m. on 30 June 2003. 24.It is further a matter of record that the receivers were appointed by the Bank shortly after 11:00 a.m. The plaintiff's case 25.Before turning to this all-important phone call, it may assist briefly to outline the manner in which the plaintiff puts its case. 26.Mr Sussex SC, who conducted a difficult brief with skill, accepted that the Lau/Liang call at or about 8:20 a.m. on that Monday morning took place against the background of an offer from the Bank, as reflected in the letter of 28 June, which clearly already had lapsed. There had, of course, been no acceptance by faxing a signed copy of the letter "on or before June 30, 2003 at 8:00 a.m. latest", as had been required by the concluding paragraph of that letter. 27.Notwithstanding this, however, Mr Sussex argued thus :
28.To these arguments Mr Sussex subsequently added another limb, which was a point, he said, that but lately had occurred to him, and which, he maintained, constituted merely a 'legal overlay' within the present factual matrix. This was that if the court was unable to conclude that a contract had come into existence between Holyrood and the Bank in the telephone conversation at 8:20 a.m. on 30 June 2003, which was his primary argument, nevertheless a contract had come into existence when Holyrood had paid the Government extension premium and had communicated to the Bank of China that they were in the process of so performing. 29.Mr Fung SC and Mr Chan SC, for the Bank and for the receivers respectively, objected strongly to this additional argument, which was permitted to be advanced upon a de bene esse basis. The substance of this objection was that the plaintiff's case only ever had been put upon the basis of a contract having come into existence during the telephone conversation of 8:20 a.m. on 30 June, that a speedy trial had been ordered on this basis alone, and that the plaintiff should not now be permitted belatedly to move the goalposts in final submission when the plaintiff's evidence had not been canvassed or cross-examined with this argument in mind. 30.I have reflected on these objections, and I agree with them. I understand the way in which points occur to counsel during the course of a case, and I make no criticism, but in this instance I do not think it fair to put this argument forward after conclusion of the evidence, and without having afforded defence counsel the opportunity to test that evidence in light of this later argument. The short point is that throughout the application for the interim injunction, and indeed up until the end of this trial, the plaintiff's case had proceeded on the basis solely of the contractual significance of the 8:20 a.m. telephone call on 30 June, and in my judgment it was and is too late to change this fundamental premise. 31.Accordingly, I do not consider this argument further. In fact it is difficult to see how such an argument could have succeeded in any event, given the established principle that there can be no acceptance by conduct until such acceptance is communicated to the offeror, and given that the fact of payment (as opposed to the intention to effect it) was not actually communicated to the Bank until 12:56 p.m., by which time, of course, the receivers already were in place. 32.I turn now to examine the evidence solely in light of the plaintiff's arguments as they focus upon the Liang/Lau phone call of 8:20 a.m. on 30 June 2003. The evidence 33.Four witnesses were called on behalf of the plaintiff: Mr Liang Zhong Yong, Mr Wong Lai Shun, Ms Doris Cheng Yuen Ting, and Ms Lilian Oung. 34.Mr Wong, a manager of Holyrood, was the author of a letter, also dated 30 June, which had been sent to the Bank explaining that the payment had not been made until 11:02 a.m., which delay had been caused by a queue in the Post Office, and enclosing a copy of the imprint receipt obtained at the time of such payment. He was not cross-examined. 35.Ms Cheng also is a manager of Holyrood. She said that she had been involved in the Peak project since its inception. She gave evidence primarily as to letters, dated 2, 9 and 12 July 2003, which she had written to the Bank and which had been written and sent on Ms Oung's instructions. These letter speak for themselves, and Ms Cheng was but briefly cross-examined. 36.Little, if anything, arises from the evidence of Mr Wong and Ms Cheng. 37.Ms Lilian Oung, a director of Holyrood, and very much the guiding light behind the Peak redevelopment project, was the final witness to give evidence on behalf of the plaintiff. She had earlier figured large in Holyrood's application for the interim injunction. 38.I did not find Ms Oung to be an impressive witness, and her evidence was not of any real assistance in considering the issue before the court. 39.On occasion somewhat emotional, perhaps understandably in the circumstances, and frequently non-responsive to the questions asked in cross-examination, she did not strike me as being on top of this case. In fairness I should record that she told the court that recently she had been very unwell, and even now continued to have problems with her eyes, which caused difficulty in terms of reading documents. In any event it was clear that she had delegated the Bank negotiations to Mr Liang, and had but a second-hand knowledge of what had transpired in those negotiations. 40.It was evident, also, that Ms Oung currently did not enjoy a good relationship with the Bank, and particularly with Ms Fonnie Lau, the manager in charge of the non-performing loans division. The two ladies did not get on, which perhaps understates the position, and certainly provides some explanation for the fact that a third party, Mr Liang, had been asked to represent the plaintiff's interests in the loan restructuring negotiations with the lending Bank. 41.Mr Liang Zhong Yong was called first for the plaintiff, and undoubtedly he was its main witness. He appeared to have no connection whatever with the plaintiff save in a capacity as a de facto unpaid consultant, and I am bound to say that his presence as such a key figure in this case struck me as a curious circumstance, although he explained that he had first met Lilian Oung, who is Taiwanese, in or about 1989 when she had begun to invest in the mainland. 42.However, there is no doubt that he had been enlisted by Ms Oung to assist with Holyrood's relations/negotiations with the Bank of China, and clearly he was, and is, a mainland official who holds, or has held, positions with a number of government bodies; currently he said that he was working as a supervisor in the Ministry of Supervision, which I gather is essentially an anti-corruption body. Whilst perhaps not of particular significance, it seems likely that notwithstanding his various offices Mr Liang's involvement stems from his liaison work with the Taiwan Commercial Association wherein he said that he works in "research". 43.Be that as it may. He described the events leading up to the phone call with Mr Lau at 8:20 a.m. on 30 June, including his abortive visit to the Bank of China on the afternoon of Saturday 28 June, and his receipt of the faxed letter in Beijing on the following day. It was evident that he was somewhat put out at the Bank having produced this letter, and the deadlines therein, for his attention over a weekend, particularly when he had made it clear to Fonnie Lau and Lau Pak On that he would be in difficulty in contacting Ms Oung over that weekend period. Evidently he felt that this sort of behaviour was unfair. 44.As to the all-important phone call with Lau Pak On, he said that he had told Lau that the terms set out in the Bank's letter of 28 June 2003 "could be accepted", although the term as to payment would have to be handled by Oung "because she would have to sign". He said that he had explained his concerns not only about the fact that there may be problems in making payment by 11:00 a.m. on 30 June, which was the Monday morning, but also that a Board Meeting of Holyrood could not be convened in time to pass the necessary resolution. 45.In any event, the upshot was that Mr Liang asserted that Lau had said that "so far as you can make the payment, that would be alright". 46.Accordingly, after completing this call with Mr Lau, Mr Liang had tried to telephone Ms Oung, but had been unable to locate her, and that she had eventually phoned him, between 9:00 a.m. and 10:00 a.m. on that morning, wherein he had told her that he had given the answer to the Bank of China "accepting the terms in the letter", at the same time asking her to arrange payment as soon as possible. In this connection he told her that "things would be alright if you can make the payment", but that he did not tell her anything about the time limit; in answer to a question from the Bench, he said that his view was that during that conversation with Lau, that "the time limit of 11:00 a.m. has been broken, waived, gone". 47.During the course of his evidence Mr Liang referred on several occasions to discussions about the Holyrood restructuring that he had had with more senior officials of the Bank, in particular Mr Or (also referred to as Mr Ke) and Mr Miao; in fact he said that he had reached an oral agreement with Mr Or on 27 or 28 June, and also that there was another agreement on 30 June with an unidentified senior official of the Bank to the effect that the receivers (who by then were in place) would be withdrawn. 48.Mr Sussex placed no reliance on these other agreements, and I did not attach a great deal of importance to this element of the evidence, notwithstanding the absence of any reference to these matters (which had provided a fertile area for cross-examination) in Mr Liang's earlier affirmation evidence which had been used in the application for the interim injunction. I accept that Mr Liang, as perhaps befitted a person of his official status, had had access to and discussions with senior officials within the Bank of China, and indeed I note that the meeting on the morning of Saturday 30 June, which had ended inconclusively, had had to be delayed from its designated 9:30 a.m. start because Mr Liang was elsewhere in the Bank. However, as I have indicated, I do not think that, at bottom, much turns on this. 49.Mr Liang was in the witness box for the best part of one day, and was extensively examined. I did not find his evidence compelling, and at times it was difficult to avoid the impression that his recollection of events had been affected by his knowledge of the plaintiff's legal argument. He was followed by the evidence of Mr Wong and Ms Cheng, both of whom were extremely short. On the following morning, that is, the third day of the trial, Mr Sussex made an application to recall Mr Liang to the witness box, notwithstanding that Mr Liang had completed his evidence. It had been discovered, said Mr Sussex, that Mr Liang had had an handwritten journal which had "only just come to light", and which comprised a daily working note which would, for example, detail and verify his meetings with various Bank officials which he had been describing. It was thus intended to produce this journal, or extracts therefrom, in particular response to those parts of the cross-examination of Mr Liang which had prepared the ground for allegations of recent fabrication. 50.Mr Fung SC and Mr Au, for the defendants, strongly objected to this application. Mr Fung made the point that this was a very odd development, coming as it did after the star witness for the plaintiff had given evidence on the stand-alone issue of whether there had been an oral agreement, for which of course a speedy trial had been ordered, and he suggested the possibility that this document had, as he put it, been "artificially suppressed". In addition, once Mr Fung had had the opportunity to inspect the document in question, which the court suggested should occur before the application was ruled upon, he added that this was a lengthy document in excess of 100 pages in small Chinese manuscript, an examination of which revealed that there were additions in different ink and that there were "recent corrections", in particular on one issue (he did not identify which) which appeared to attempt to gloss the original text in a manner which sought to support Mr Liang's story; additionally, he said, the passages which earlier had been 'blocked out' in photocopy, but which now he had been able to see in the original, contained material which contradicted Mr Liang's testimony as earlier given. 51.I dismissed Mr Sussex's application to recall Mr Liang. In the circumstances which had arisen, and in particular given the hotly-disputed background of this case, which had been actively in train since early August of this year, I was entirely unsatisfied with the explanation, tendered from the Bar upon instructions, as to why this document had not appeared until the eleventh hour and after the witness had left the witness box and had been released. It was this aspect, coupled with Mr Fung's warning as to apparent additions and recent corrections to the manuscript itself, which was sufficient for me to determine that this application should be rejected. It struck me then, as now, that if ever there was a case wherein a second bite of the evidential cherry should be refused, after the completion of evidence, then this was such. Moreover, if and in so far as Mr Sussex was concerned about allegations of recent fabrication, and the potential effect on credibility, as earlier observed I did not accord particular significance to the allegations of other agreements allegedly made with other more senior officers of the Bank, and upon which no reliance was placed - and in any event, Mr Liang's evidence in this regard remained unchallenged, by contrary evidence at least, since neither Mr Or nor Mr Miao gave evidence on behalf of the Bank. 52.In fact, as may have been anticipated given the precise nature of the issue before the court, in the event the only witness to give evidence for the Bank was Mr Lau Pak On, the Deputy Manager of the Bank's Non-Performing Loans Division, who at 8:20 a.m. (or, more precisely, 8:22 a.m.) on Monday 30 June 2003 had initiated the telephone call to Mr Liang upon which the entirety of this case rests. No-one else from the Bank was called, although other officials had made affirmations at the interim injunction stage of these proceedings. Nor, for that matter, did Mr Chan SC, appearing on behalf of the receivers, call any evidence. 53.Mr Lau described the events leading up to the telephone conversation of that Monday morning, none of which are in any real dispute between the parties. What is strongly disputed, however, is Holyrood's allegation that any agreement was reached in that telephone call. 54.Mr Lau said that when he had come into work on that Monday morning shortly after 8:00 a.m. he was told by his immediate boss, Fonnie Lau, that Holyrood had not faxed back to the Bank a signed copy of the letter of 28 June indicating acceptance of the terms and conditions therein, and so Ms Lau had asked Mr Lau to telephone Mr Liang "to check". 55.Accordingly, said Mr Lau, he had phoned Mr Liang in Beijing on Mr Liang's mobile phone, the purpose of his call being to ascertain what was happening. Mr Lau explained that as he understood the position the offer by the Bank had lapsed, and that he "had to collect information to brief my superiors so that there could be further instructions given". 56.In this conversation Mr Lau accepted that indeed he had referred to the issue of payment of the government extension premium, and he had asked Mr Liang whether payment would be made before 11:00 a.m., the reason being that if this sum was not to be paid by the client by the due date, consequently the Bank would have to do so, and would have to have time to make the necessary arrangements. He denied that Mr Liang had said that he could not guarantee payment by 11:00 a.m., although he recalled that Mr Liang had said that it would be paid on that day. 57.In terms of the other requirements within the letter, Mr Liang had continued to complain (as he had done on the previous Saturday afternoon, when Mr Lau had met Mr Liang in the main hall of the Bank of China building and had told him that the letter that was being prepared was not yet ready) that the Bank was not giving them enough time over the weekend to handle the various matters, to which Mr Lau said that he had responded that Holyrood was not required to do all these things over the weekend, but only to give a reply by 8:00 a.m. 58.Mr Lau said that in addition to the issue of the payment to the government he had mentioned the other terms in the letter of 28 June, but that Mr Liang "only said that some of the terms would be accepted", and that "I had no idea whether my superior would accept or not, that's why at the time I was still gathering information". 59.He accepted that Mr Liang had been concerned about not only the payment, and that he had said something to the effect that it was impossible to convene a board meeting to formalize or accept the appointment of a project manager, but he specifically denied that he had said the words "that will be fine if you can pay the money". 60.Mr Lau maintained in cross-examination that at the end of this conversation with Mr Liang there was no agreement between the Bank and Holyrood, and he firmly denied that he had said anything that would have induced Mr Liang to believe that there was such an agreement. 61.After this call, said Mr Lau, he did not make any further call to Mr Liang, albeit at around 11:00 a.m. Mr Liang had made a further call to the Bank, and he had told Mr Lau that somebody had been sent to pay the government premium, a matter which Mr Lau observed was the responsibility of the client in any event. 62.Mr Lau had himself prepared the letter of appointment of the receivers, who were appointed, he thought, at or about 11:02 a.m. on that day. Decision 63.An air of unreality pervades this case. At first blush it is neither easy to believe, nor to make commercial sense, of a situation in which a six year financial relationship hitherto as thoroughly documented as was Holyrood's with the Bank of China should be thought to depend for its continuation upon a telephone conversation of slightly in excess of four minutes between a relatively lowly officer of the lending bank and an independent third party who had assumed the mantle of negotiating with the Bank on behalf of its defaulting client. Strange things no doubt do occur, but not often. 64.If the plaintiff is right in its contentions in this case, the result is that by virtue of the oral agreement alleged, the appointment of the receivers as now put in place by the Bank is rendered invalid on the basis that, by reason of the agreed restructuring of the outstanding debt, there was extant no default contractually permitting the Bank to take the action that it did. 65.In my view the plaintiff has signally failed to establish an oral agreement upon the alternative bases outlined by its leading counsel. That which has happened, in my view, is that a relatively innocuous conversation between the plaintiff's representative and a junior officer of the Bank, who was seeking to ensure that a return fax had not been mislaid and to obtain information as to the ongoing situation, in particular as to whether the all-important government premium was to be paid, has been parlayed by the plaintiff into that which is now asserted to constitute an independent contractual obligation. In my judgment this case is long on legal finesse and demonstrably short on substance. 66.The irony, of course, is that absent the making of this phone call at 8:22 a.m. on that Monday morning there would have been no case for the plaintiff to put forward at all. The Bank's letter of 28 June 2003 had not been returned, signed, "or before June 30, 2003 at 8:00 a.m. latest", as required by that letter of offer, and indeed it never was signed by Holyrood, either then or thereafter. So that by 8:20 a.m. or so on that date, when Mr Lau had picked up the phone, the Bank's offer indisputably had lapsed. 67.Mr Sussex does not shrink from this, and frankly accepted that, from his client's viewpoint, the Lau/Liang telephone conversation constituted a "legal windfall", albeit it was none the worse for that. He also accepted that by the time of receipt of the Bank's letter of 28 June 2003 Holyrood had little room to manoeuvre, and was in no position to bargain. This then was the situation when, as he somewhat uncharitably put it, Mr Lau "blundered in". 68.I do not think that Mr Lau's conduct can be thus characterized. The plaintiff's contractual argument is founded upon the contention, which I reject, that in his conversation with Mr Liang that Mr Lau had 'resuscitated' or 'revived' the Bank's offer; in fact, the second contractual formulation put forward by Mr Sussex (which originally was his first option) was that Mr Lau's alleged use of the words "that'll be fine as long as you pay the money" was sufficient not only to revive the lapsed offer but to vary it also, in that Mr Lau was said to be thus agreeing on behalf of the Bank to extend the payment deadline of 11:00 a.m., albeit this formulation does not condescend to a time by which such payment was to be made, and presumably depends upon the further contention that such payment should be effected so soon after 11:00 a.m. as was reasonable in the circumstances. 69.This line of argument is ambitious, to say the least, and I reject it as firmly as I may. The sensitivity of the Bank toward ensuring that payment indeed was safely made on 30 June 2003 would have been clear to all involved, not least after the abortive meeting on the morning of Saturday 28 June when the Bank had wanted the extension premium to be paid on that morning rather than to wait (as Mr Liang would have had it) to the following Monday; the idea that Mr Lau, a junior official within a state Bank, would have said anything that reasonably could be construed as varying the stipulated deadline in a letter containing conditions which had been laid down by senior Bank officials within the Credit Committee strikes me as a non-starter. 70.It follows that I accept Mr Lau's denial that he said to Mr Liang "that'll be fine if you can pay the money", words that have figured large in this case, and which underpinned the application for the interim injunction. Whilst no doubt Mr Lau was concerned to ascertain the situation as to payment of the government extension premium in order to clarify the situation for his superiors, whatever the form of words as were used when inquiring about the payment, in my view it is highly improbable that Mr Lau used any such words in the manner and context in which it is claimed, far less to seek unilaterally and without instructions to extend the 11:00 a.m. payment deadline. 71.As Mr Sussex I think accepted, this particular form of words, as varied in Mr Liang's viva voce evidence and recorded as "so far as you can make the payment, that would be alright", possessed resonance not only in terms of the way in which the plaintiff put its alternative contractual case, wherein payment of the government premium does not depend upon meeting the stipulated 11:00 a.m. deadline, but also in terms of the asserted promissory estoppel, whereby Holyrood's reliance upon these alleged words of Mr Lau mean that the Bank is estopped from invoking its strict legal rights, having thus induced payment of the government extension premium. In my view, however, both these lines of argument must fail in light of the view that I have taken of the evidence. 72.Turning now to the plaintiff's primary contractual case (or, at least, that which ultimately became its primary case), the evidence which is of more significance is the assertion that Mr Liang indeed had accepted the terms of the letter during his telephone conversation with Mr Lau. 73.In this connection Mr Liang stated, both in chief and in cross-examination, that he told Mr Lau that the terms of the letter "could be accepted", but that Ms Oung would have to process the payment and that a Board Meeting would have to be convened also. As to this, Mr Lau said that Mr Liang had said that only "some" of the conditions could be agreed, but that his attempts to clarify whether this meant that some could not be accepted had met with no response. 74.I do not consider, on the state of the evidence before me, that it is at all possible to conclude that there was an unequivocal acceptance of the terms of this letter sufficient to make the argument that an oral contract came into existence during this telephone conversation, and I do not do so. The probability, in my judgment, is that Mr Lau is correct in his recollection of the conversation, and that there was some general discussion regarding the conditions in the letter, interfaced with Mr Liang's complaints about being put into a difficult practical position of having to deal with this matter over the weekend, absent being in the position to contact Ms Oung. In my view, however, the conclusion now pressed by the plaintiff as to a clear acceptance of the terms in the letter, subject to the payment of the government extension premium by 11:00 a.m., simply cannot be, and I find is not, established. 75.Fundamental to the success of this primary contractual argument is the assertion that the term within paragraph 11 of the letter, namely, that the extension premium be paid "at 11:00 a.m.", can be construed as meaning "at or about 11:00 a.m.". Absent this construction, even if clear acceptance of the terms of the letter had been given by Mr Liang (which I have found not to be the case), the fact that payment was not made until after 11:00 a.m. suffices, without more, to defeat the plaintiff's argument, since although a contract would come into existence upon acceptance, the Bank would be discharged from all contractual obligations if Holyrood in fact failed to comply with the condition precedent in paragraph 11. 76.In this context Mr Sussex submitted that this was a letter which had been drafted by the head of the Bank's legal department, and that within paragraph 11 he had used the phrase "at 11:00 a.m.", which was to be compared and contrasted with the final words of the letter, namely "on or before June 30, 2003 at 8:00 a.m. latest", in itself a clear stipulation leaving no doubt as to the deadline for acceptance. 77.Mr Sussex argued that it was to be presumed that a legal draftsman does not use words or phrases synonymously, citing Jarvis v. Rockdale Housing Association Ltd, (1986) 36 BLR 48, per Bingham LJ at 60-61, and that as here used the phrase "at 11:00 a.m." is plainly ambiguous. If this phrase meant, as he suggested it must, that payment was permitted before 11:00 a.m., in the context of a legally drafted document it must also be construed to permit payment after 11:00 a.m., although how much latitude was to be allowed wherein payment was made after 11:00 a.m. really depended upon the commercial purpose underlying the transaction. He accepted, of course, that if Holyrood was not to pay, the Bank should be afforded ample time within that day in which to ensure that the payment was made, and thus protect its commercial interests, although in any event payment at 11:02 a.m., as had occurred, clearly fell within any reasonable latitude to be imported into the phrase "at 11:00 a.m.". 78.This is an ingenious argument, but for my part I am unpersuaded that "at 11:00 a.m." should be construed as "at or around 11:00 a.m.", with consequent residual uncertainty as to how long after 11:00 a.m. such payment reasonably could be permitted. I do not consider in the circumstances of this case that the observations of Bingham LJ (as he then was) in Jarvis, op cit., are of particular assistance. In that case the appellate court was construing the JCT Standard Form of building contract, 1980 edition, wherein it was reasonable to assume that each contractual term had been carefully considered and weighed by the legal draftsman involved, so that construction of the JCT contract - in that case of the term 'the contractor' - might safely be aided by use of the presumption that different words import different concepts. 79.In this instance, however, I am satisfied that the mere omission of the word "latest" within paragraph 11 does not serve to raise a vista of possibilities which might permit payment after 11:00 a.m., with the additional uncertainty of debate about whether a payment made, say, at 11:20 a.m. or at 12:15 p.m. would, or would not, be considered as reasonable. 80.The Bank has here drawn a clear line in the sand, and it seems to me, in the circumstances prevailing, that "at 11:00 a.m." imports payment at or before that time. It may well be the case that had the Bank's offer been accepted, and the letter faxed back to the Bank duly signed, but payment not having taken place until 11:02 a.m., that the Bank would not have raised any objection regarding a delay of two minutes in complying with the condition precedent as set out in paragraph 11. But that is nothing to the point. The point is whether, as a matter of construction, Mr Sussex is correct in his assertion that the payment, as in fact made, complied with the condition precedent within paragraph 11. In my view it did not. 81.Accordingly, whilst a conclusion on this argument is not strictly necessary in light of my earlier findings as to the Lau/Liang telephone conversation, I would be against the plaintiff on this point also. 82.In addition to that which I have regarded as the inherent probabilities, and to the view I have taken as to the crucial Lau/Liang telephone conversation at 8:20 a.m. on the morning of 30 June 2003, I have also taken note of the fact that the plaintiff's arguments regarding a contractually binding obligation are not supported by the contemporaneous correspondence. 83.In this regard, both Mr Fung SC and Mr Chan SC have referred at some length to the subsequent letters passing between the plaintiff and the Bank, and to certain of the solicitors' correspondence, wherein there has been no assertion of the agreement as now alleged on behalf of Holyrood. As Mr Chan pointed out, the alleged agreement, which involved an extension of the repayment date of the outstanding indebtedness, would have been a complete answer to the appointment of the receivers; had there been such an agreement, the natural reaction of the plaintiff would have been to invoke it, and to express its indignation over the fact that the receivers had been appointed. 84.In the event, nowhere is this found, and even when lawyers were instructed, Holyrood still made no mention of the alleged agreement, nor of the assertion that the appointment of the receivers was invalid. Indeed, the first solicitor's letter, from Messrs P.C. Woo & Co. dated 16 July 2003, referred to the receivers' appointment pursuant to the debenture, and prior to that date there had been no protest whatever as to the appointment. I note, further, that when Holyrood was asked for delivery to the receivers of all books and records of the company, it replied on 8 July 2003 that the time limit thereby imposed, of before 1:00 p.m. on 9 July 2003, was unreasonable because "most of the directors are out of town", and that a further week should be permitted to allow the directors the time to complete preparation of the requisite statement of affairs. 85.In fact, it appears that when Holyrood finally did respond to the Bank's letter of 28 June, by letter of 12 July 2003, which was put in terms of the plaintiff "now" responding to the terms within that letter, there still was no unequivocal acceptance of the Bank's conditions, in that Holyrood was requesting that the Bank agree that the project shall be managed "by our original management team". The first occasion when the plaintiff went into print regarding an alleged agreement with the Bank to the effect that action against Holyrood would be withheld, and that a time extension for repayment of the loan would be granted until the end of the year, was in a letter from Messrs Holman, Fenwick & Willan (the successors to Messrs P.C. Woo & Co. as the plaintiff's solicitors) dated 18 July 2003. 86.Mr Fung suggests, perhaps with good reason, that the current objection to the receivers' appointment began to manifest only when it became clear that there may be a sale of the site at what was perceived by Ms Oung to be at an undervalue, and at a price that served to extinguish any residual equity the plaintiff may have retained after payment of the outstanding indebtedness to the Bank, and that it was not until this "nuclear bomb", to use his phrase, threatened to explode that Holyrood was stimulated into action to dispute the receivers' appointment. 87.This is interesting, and it may or may not be correct, but whatever the motivation it does not make a great deal of difference. The history of events, and Holyrood's actions, speak for themselves, and they most certainly do not serve to buttress the case the plaintiff now has put forward. In this connection Mr Sussex, recognizing the fact that his client was vulnerable to "debating points" in terms of its subsequent conduct, nevertheless maintained that an appreciation of the availability of a legal challenge to the appointment of the receivers, which in turn involved an understanding that the appropriate power under the Bank's debenture arose only when there was an 'Event of Default', and further that any such contractual arrangement with the Bank removed the impact of such an event of default, all combined to require "a level of sophistication" greater than reasonably could be expected to be immediately forthcoming, and he asked the court to adopt that which he termed "a minimalist perspective" and to concentrate on the events of the morning of 30 June 2003. 88.I am unsympathetic to this submission. I do not accept that in this case the Bank was (or is) dealing with commercial naifs. To the contrary. I have no doubt whatever that the plaintiff, and those seized with directing its affairs, possess a shrewd, and no doubt calculating understanding of the commercial realities, not least in terms of what is going on in this case and in terms of Holyrood's relationship with its financing Bank. 89.I refer, finally, to the issue of authority. I do not base my decision in this case on this issue, but since it has been canvassed before me I should perhaps briefly allude to the point. 90.The question of authority to act arises in two ways. First, it is said by the defendants in this case that Mr Liang, having no formal connection with the plaintiff company, in any event had no authority to accept on behalf of Holyrood the terms within the Bank's letter of offer of 28 June 2003, nor indeed any allegedly 'revived' offer. Whilst I can see the temptation to run this argument, I do not consider that this is sustainable. In the factual matrix as exists in this case, it is clear that Holyrood, and more particularly Ms Oung, had delegated authority to Mr Liang to negotiate and if possible to come to agreement with the Bank, and there appears to be no suggestion that the Bank had ever questioned his locus or his role in the affairs of Holyrood. Clearly he was clothed with authority so to act, and I am unsympathetic to the suggestion that, in effect, he was on an unauthorized frolic of his own. Had Mr Liang indeed signed the letter of offer and faxed it by return to the Bank, and had the Bank's Credit Committee thereafter had a change of heart, it strikes me that the Bank would have been hard pushed to disavow the concluded contract, on the terms of the signed letter, on the basis of an absence of authority on the part of Mr Liang. 91.The second way in which the issue of authority arises is the argument, raised by the plaintiff, that Mr Lau Pak On had the authority of the Bank to 'resuscitate' or 'revive' the Bank's offer (and, on one formulation, even to vary it), and to receive Mr Liang's acceptance thereof. The basis for such allegation of apparent authority stems, on this argument, from the presence of Mr Lau's name on the fax header sheet, under which the Bank's letter of offer of 28 June was faxed to Mr Liang in Beijing on the following day. 92.The evidence, which I accept, is that the signature appearing on this letter is that of Mr Lau's immediate superior, Ms Fonnie Lau, and that Mr Lau himself, as was made clear at the outset of his evidence, had no actual authority to orally extend the loan repayment date, nor any authority to agree that the Bank would not enforce its security against this client. In light of my other conclusions in this case it perhaps does not much matter, but I am bound to say that I would have found it difficult to ascribe to Mr Lau the apparent authority to do what he is said to have done solely on account of having made the telephone call in question, and by virtue of the fact that it was his name that appeared next to a contact telephone number on the fax cover sheet accompanying the sending of the Bank's letter of offer of 28 June 2003 - a cover sheet, moreover, which also bore the signature of the sender, the local NPL Corporate Division (Section 4), Special Assets Management Department, which was the same signature as appeared on the letter itself, that is, the signature of Ms Fonnie Lau. Accordingly, had it been necessary so to do, I should have been against the plaintiff on the issue of Mr Lau's authority also. Order 93.For the reasons set out hereinbefore, the plaintiff's action against the defendants must be dismissed. I so order. 94.Costs must follow the event, but I do not make an order nisi since on the question of costs counsel have flagged that they wish to be heard. Doubtless arrangements can be made for a brief hearing as to costs (which encompass also the reserved costs of the injunction application), and as to any consequential matter as may arise, at a date and time convenient to the court and to counsel.
Representation: Mr Charles Sussex SC and Mr Douglas Lam, instructed by Messrs Holman, Fenwick & Willan, for the Plaintiff Mr Daniel Fung SC and Mr Johnny Mok, instructed by Messrs Deacons for the 1st Defendant Mr Warren Chan SC and Mr Thomas Au, instructed by Messrs Chui & Lau, for the 2nd, 3rd and 4th Defendants | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other judgments that cite this case
Further hearings and rulings under HCCL 35/2003