BANK OF CHINA, MACAU BRANCH v. CHAN YEUK WAI AND ANOTHER

HCA745/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.745 OF 2003

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REASONS  FOR  DECISION

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1. There was a summons before me issued on 6 November 2004 seeking leave to file the 2^nd affirmation of Keung in order to produce a legal opinion on Macau law dated 4 November 2004.  The 1^st defendant also sought an abridgement of time, less than two clear days have been given so far as the summons was concerned.  I granted an abridgement of time because although the summons was not issued until 6 November 2004,  the opinion had been supplied on 4 November to the plaintiff’s solicitor.

2. The 1^st defendant was sued as a guarantor and it is common ground that the guarantee is governed by the law of Macau.

3. The application for summary judgment was issued on 2 December 2003.  On 22 December 2003 Master Lung made an order to the following effect :

“	1.	The 1st Defendant do have leave to file and serve an affirmation on legal opinion on Macau Law within 28 days from the date of this Order;
	2.	The Plaintiff do have leave to file and serve an affirmation in reply, if any, within 21 days thereafter;
	3.	No further affirmations shall be filed or served without leave of the Court.”

4. On 18 June 2004, Mr Keung in his 1^st affirmation had this to say about difficulty in obtaining a legal opinion from Macau :

“	3.	In view of the nature of the case, a legal opinion on Macau law was required.  Pursuant to my client’s instructions, I have approached several Macau lawyers for this purpose.  I have made at least 4 telephone enquiries with legal firms in Macau.  The replies I have got from them was that they are in a position of conflict of interest as they have acted for the Plaintiff in Macau.
	4.	I exhibit hereto marked ‘kshj-1’ a copy e-mail message which I have sent to Manuela Antonio and a reply from them which stated the situation.  The other firms which I telephoned simply replied orally that they were in a position of conflict.”

5. On 21 June 2004, the hearing before Master Wong for summary judgment took place.  I was told by Mr Ng who appeared on behalf of the 1^st defendant that there was no application for an adjournment before the learned master. 

6. Judgment was given against the 1^st defendant on 21 June 2004.  An appeal from that judgment was lodged on 2 July 2004.

7. Then on 5 November, came Mr Keung’s 2^nd affirmation exhibiting the legal opinion.

8. I did not believe the 1^st defendant had adequately explained the delay in supplying the legal opinion.  The only explanation was Mr Keung’s 1^st affirmation of 18 June which I have referred to above.  At the hearing, Mr Maurice Ng explained further by saying that it was only in October that his instructing solicitors managed to instruct theMacau lawyer who supplied the legal opinion now sought to be relied on.  But that was a bare assertion and I am not satisfied that the 1^st defendant could not have instructed a Macau lawyer earlier.  

9. It will be noted that leave to serve evidence was given as long ago as December 2003.  Having regard to the lapse of time I did not believe the explanation given for the delay was satisfactory.

10. Moreover, the legal opinion which was sought to be relied on was accompanied by many pages of documents in Portuguese without any translation. 

11. More importantly, Mr Ng in response to a query by me in relation to clause 10 of the guarantee accepted that the legal opinion had omitted to deal with clause 10.  He therefore sought leave from me to adduce a supplemental legal opinion dealing with clause 10 of the guarantee.  

12. Now, on an appeal from a master, the court is much more ready to admit further evidence than on appeal to the Court of Appeal. 

Nevertheless it is a matter of discretion and it depends on the circumstances of the case.  See Wong Hung Yu v. Wu Ming Fat [2002] 1 HKLRD 555 paras. 13, 14.

13. Under clause 10 of the guarantee or certificate, the 1^st defendant had waived the right to require the creditor to start legal action, against the principal debtor before enforcing the guarantee, and the right to require the creditor to enforce and realize all the principal debtor’s assets first :

“

十、

保證人自願預將先訴抗辯權及檢索權拋棄借款人如不依約履行債務保證人願立即履行保證責任將債務如數代為清償。”

14. Because the defendant’s legal opinion did not deal with such waiver or its validity, the 1^st defendant’s legal expert opinion was of little value, since the opinion seemed to say that as a matter of the law of Macau, the plaintiff was not entitled to sue the 1^st defendant until after it had sued the principal debtor and the security realized.  I do not know whether clause 10 was effective in waiving such requirements.

15. It was highly unsatisfactory that, without any explanation and at the hearing of the appeal, I was asked to adjourn it so that the 1^st defendant should have an opportunity to put its house in order.  Mr Ng had argued that the plaintiff would not suffer any prejudice which an order for costs could not compensate.  But even if that was so, I do not believe that an adjournment or leave should be granted automatically.  Hence, I refused leave with reasons to be given later.  These are my reasons.

Mr Liu Man Kin, instructed by Messrs Koo & Partners, for the Plaintiff

Mr Maurice K.F. Ng, instructed by Messrs Johnny K.K. Leung & Co., for the 1^st Defendant

HCA745/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.745 OF 2003

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J U D G M E N T

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1. This is the 1^st defendant’s appeal against summary judgment given against him by Master J. Wong on 21 June 2004.  The plaintiff is a bank and the 1^st defendant is sued as a guarantor under a guarantee or certificate dated 20 December 1996 which was in the Chinese language.

2. It is common ground that the guarantee is governed by the law of Macau.  At the hearing I refused leave to the 1^st defendant to adduce evidence on the law of Macau for the purpose of the appeal.  The reasons for that refusal would be handed down together with the judgment. 

3. So for the purpose of this appeal, there is no evidence from the 1^st defendant that the law of Macau is in any material way different from the law of Hong Kong. 

4. Essentially, Mr Maurice Ng who appeared for the 1^st defendant relied on two points.  He did not rely on the other grounds set out in his skeleton submissions.  First, that there had not been sufficient verification of the plaintiff’s claim.  He has referred to me to paras. 4, 7 and 8 of the affirmation of Leong Weng Chio, the manager of the plaintiff :

“4.   According to the Legal Opinion dated 1^st November 2003 (the ‘Macau Legal Opinion’) issued by Mr Leonel Alberto Alives, a lawyer qualified to practice in Macau Special Administrative Region (the ‘Macau Lawyer’), the Plaintiff is entitled to claim against both the 1^st and 2^nd Defendants being guarantors for the outstanding debt expenses and the losses, including the stamp duty on interest payable to Macau Government at the rate of 1% on the total accrued interest until the date of actual payment in full.  There is now produced and shown to me marked ‘LWC-3’, a copy of the said Macau Legal Opinion.  The Plaintiff claims further stamp duty to be payable at 1% on the accrued interest until full payment.

…

7.    I have read and reviewed a copy of the 1^st Defendant’s Defence.  I am advised by the Plaintiff’s solicitors and Counsel that the argument raised in the Defence has no merits in law.  I understand that legal submissions will be made by the Plaintiff’s Counsel at the hearing of the Plaintiff’s present application in this respect.

8.    In the premises, I verily believe that there is no defence on the part of the 1^st Defendant to the Plaintiff’s claim.  I respectfully submit that summary judgment ought to be granted against the 1^st Defendant.”

5. Mr Ng referred me to Order 41, rule 5(2) :

“…

(2)   An affidavit sworn for the purpose of being used in interlocutory proceedings may contain statements of information or belief with the sources and grounds thereof.”

He then referred me to the legal opinion which is at p.122 of the appeal bundle, in particular to the conclusion at p.124 :

“IN CONCLUSION, the Plaintiff is entitled to claim against the 1^st and 2^nd Defendants for the outstanding debt expenses and the losses, which is including the stamp duty on interest payable to the Macau Government at the rate of 1% on the total accrued interest until the date of actual payment in full.”

6. Mr Ng made the point that the legal opinion of Mr Alves did not say that the defendants had no defence and that in Mr Leong’s affirmation he did not say when he referred to the legal opinion of Mr Alves that he “verily believed” the opinion of Mr Alves to be correct.

7. Even if the form in which the legal opinion was chosen to be produced on behalf of the plaintiff required one to regard it as hearsay evidence, I do not believe that the way that Mr Leong dealt with the legal opinion made it inadmissible or that on the basis of the legal opinion, he could not conclude that he verily believed that the defendant had no defence to the plaintiff’s claim.  Now in an application for summary judgment, the plaintiff must depose to the belief that there was no defence.  That Mr Leong had done.  But whether there was in fact no defence is for the court to decide.  In other words, even if the plaintiff in the supporting affidavit were to depose to the belief that there was no defence on grounds which turned out to be wrong, the court might nevertheless give summary judgment if indeed the defendant had no defence.  Here, there being no evidence that the law in Macau is in any way different from the law of Hong Kong, the master was right in concluding that there was no triaable for issue.

8. The other point relied upon by Mr Ng was this : he referred to clause 1 of the guarantee :

“一、本借據於立約日已按本約所訂如數交付與借款人不另立收據。”

He then referred me to certain breakdown which was provided by the plaintiff in the course of the hearing before the master.  They were supplied because the 1^st defendant in his affirmation filed on 19 December 2003 said :

“9.    I also note that the loan was granted on 20 December 1996 for a term of 3 years expiring on 20 December 1999.  Legal proceedings were only started on 27 February 2003.  There is a lapse of over 3 years.  As a result, substantial interest has accrued on the principal debt which is prejudicial to me.  I have not received any statements of accounts from the Plaintiff and I have no idea whether the interest charged is correct.”

9. So the defendant required the breakdown to show whether the interest charged was correct.  The breakdowns were supplied and they are to be found at pages 136 to 141 of the appeal bundle.  And from the breakdown, it is seen that for the purpose of the calculation of interest, there were three loans, Loan I, Loan II and Loan III.  Mr Ng made the point before the master and repeated it before me that as the breakdown showed three loans instead of one loan, the plaintiff had failed to establish a prima facie case against the 1^st defendant.  For that he referred me to clause 1 of the guarantee which referred to one draw down. 

10. Mr M.K. Liu who appeared on behalf of the plaintiff explained that there was only one draw down but that for the bank’s internal purposes, it was divided into three loans.  There was no evidence to this effect because the point was not taken prior to the supply of the breakdown on 21 June 2004.  Now, on an application for summary judgment, the primary obligation is on the defendant to satisfy the court that there is a triable issue or question or that there ought to be a trial for some other reasons.  This point had not been made by or on behalf of the 1^st defendant at any time at all prior to the hearing before the master.  That is notwithstanding that the defendant had filed its defence on 4 April 2003 and that there were earlier letters from the bank demanding payment sent to the 1^st defendant dated 16 May 2002, 18 June 2002 and 19 December 2002 in relation to which there was no reply.  I do not believe the 1^st defendant has raised a triable issue.  If it is the 1^st defendant’s case that there was more than one draw down and that it was material to his liability, he ought to have made that point clearly and condescend upon particulars.  The making of a forensic point at the end of the hearing before the master was not sufficient. 

11. After the hearing before the master, the 1^st defendant enquired about the sale of the mortgaged properties.  In response the 4^th affirmation of Yiu Ka Tung was filed on behalf of the plaintiff, providing details :

“3.    On 1 November 2004, Messrs Johnny K.K. Leung & Co., the solicitors for the 1^st Defendant, issued a letter to our firm asking, inter alia, for information of the sale proceeds of the mortgaged properties sold in Macau by the Borrower.  By a reply letter to Messrs Johnny K.K. Leung & Co dated 2^nd November 2004, our firm informed them, inter alia, that the updated status of the mortgaged properties / car parks of the Borrower are as follows:

‘(i)     In respect of the mortgaged car parks in Macau, the sale of the same was completed in early July 2004 and the sale price (before deduction of tax be paid to Macau government) is in the sum of HK$9,500,000.00.

(ii)     In respect of the mortgaged properties in Fei Tong Industrial Building (飛通工業大廈) in Macau, the sale was completed on or about 11 October 2004 whereby the net sale proceeds received by our client was in the sum of HK$45,200,000.00.’

There are now produced and shown to me marked ‘YKT-5’, copies of the letter from Messrs Johnny K.K. Leung & Co. dated 1 November 2004 and our firm’s reply letter dated 2 November 2004.”

12. Had the same enquiry been made about the draw down, no doubt the explanation given to me by Mr Liu could have been given.  

13. I have been supplied with calculation showing what was the net amount outstanding as of 21 October 2004.  The breakdown had also been supplied to the 1^st defendant.  The 1^st defendant had not challenged the accuracy of this breakdown.  Now that the net amount outstanding has been ascertained, I think I should make an order in favour of the plaintiff for that amount and I do so.  The plaintiff is to supply a figure brought to the date of this judgment.  I also order interest in favour of the plaintiff thereafter at the judgment rate.  As for the costs of this application, I make an order nisi that the plaintiff is to have the costs of this application, to be taxed if not agreed.

Mr Liu Man Kin, instructed by Messrs Koo & Partners, for the Plaintiff

Mr Maurice K.F. Ng, instructed by Messrs Johnny K.K. Leung & Co., for the 1^st Defendant