Tsui Yam Tong, Terry Cnt (Holdings) Ltd v. The New China Hong Kong Finance Ltd (in Liquidation)

HCA 1276/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1276 OF 2005

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BETWEEN

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Before: Master de Souza in Court

Date of Hearing: 26 October 2011

Date of Judgment: 26 October 2011

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J U D G M E N T

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Background

1.This is an assessment of damages pursuant to the judgment of Saunders J, dated 4 January 2010.

Evidence

2.By a deed dated 18 August 1995, which appears at A114 of the hearing bundle, Tsui Yam Tong, Terry and CNT (Holdings) Limited respectively the 2nd and 4th Plaintiffs charged all the shares in a company called HonLung Industrial Limited (HonLung) in favour of the Defendant, The New China Hong Kong Finance Limited (NCHKF), now in creditors’ voluntary liquidation since 1 March 1999 as security for a term loan of up to HK$60 million to Eternal March Limited (Eternal March) pursuant to an agreement in a facility letter of even date.

3.Under clause 2.2 (d) of the deed the 2nd and 4th Plaintiffs covenanted with NCHKF that they would “not do or cause or permit to be done anything which in any way depreciates, jeopardises or otherwise prejudice the value to the lender (i.e. NCHKF) of any of the Charged Assets or the security created thereby.”

4.At the relevant time the assets held by HonLung comprised three properties.  They were 5th Floor, Block A, Ocean Garden, Pak Yuen, Macau, with Car Park No. 28, that is property 5A; 6th Floor Block A, Ocean Garden, Pak Yuen, Macau, with Car Park No. 29, i.e. property 6A and finally, 12th Floor, Block B, Ocean Garden, Pak Yuen, Macau, with Car Park No. 38, i.e. property 12B.

5.The loan advanced to Eternal March remained extant and was not repaid in consequence of which NCHKF began proceedings against Eternal March for breach of contract under HCA 8351 of 1999.

6.The Plaintiffs also brought suit against the Defendant in HCA 1276 of 2005, the current proceedings.  They sought declarations that the deed and all of the securities provided for thereunder securing to the loan had been discharged and/or were unenforceable by the Defendant, NCHKF.

7.Whilst all these matters were afoot and unknown to the Defendant or its liquidators the three properties referred to were sold contrary to the deed.

8.Property 12B, property 6A and property 5A were sold by HongLung in 1997, 1998 and 2000 respectively for HK$12.3 million, HK$4.65 million and HK$2.05 million respectively.  The sale in frustration of the Defendant’s security is not a matter in issue.

9.Following discovery of the sale of two of the properties the Defendant counterclaimed against the 2nd and 4th Plaintiffs for breach of clause 2.2 (d) in this action.

10.The matter came before Saunders J and he conclusively held for present purposes that the 2nd and the 4th Plaintiffs have indeed breached clause 2.2(d).

11.It is pursuant to that ruling and judgment that the matter is now before this court for assessing the damages that have been suffered by the Defendant.

12.As part of the background it is also important to note that HonLung became deregistered in November 2007 and consequently it no longer exists.  The security created by the deed between the parties also no longer exists and cannot now be realised by the Defendant.

13.Had the properties not been sold the Defendant would have been able to assume control of HonLung and pursuant to the deed could have sold the properties to recover the loan that has been advanced.  In consequence thereof damages have clearly been suffered by the Defendant.

14.In prosecuting the claim for damages before me the Defendant called two witnesses to testify.  The first witness is James Wardell, whose witness statement appears at page 102 of the hearing bundle.

15.The witness confirmed the accuracy of his witness statement and has adopted it as his evidence-in-chief.  Mr Wardell is one of the joint and several liquidators of the Defendant.

16.I find as facts all the matters which Mr Wardell has spoken of in his witness statement which is now his evidence. There is no evidence led from the 2nd or the 4th Plaintiffs to contradict those matters and they are taken as proven.

17.The 2nd witness called is Mr Ip Kwok Kwong, the expert valuer of the three properties. His conclusion is that as at the date of the judgment of Saunders J, the three properties had an aggregate value of $29 million.  That is the amount of damages that the Defendant seeks against the 2nd and the 4th Plaintiffs.

18.In light of the absence of any countervailing evidence, or any participation at all from the 2nd and 4th Plaintiffs, the case on damages is clearly established.

19.I therefore quantify the damages suffered by the Defendant at $29 million and I award that quantum in this exercise.

20.There will be judgment for the Defendant against the 2nd and the 4th Defendants in the sum of $29 million. There shall also be interest thereon from the date of the judgment of Saunders J, namely 4 January 2010 at judgment rate until full payment.

21.There shall also be costs to the Defendant including any costs that may have been reserved in respect of the assessment proceedings with certificate for counsel, taxed if not agreed.

2nd Plaintiff in person, absent

4th Plaintiff in person, absent

Ms Bethany M Y Chan, instructed by Messrs Stephenson Harwood, for the Defendant