Case Detail

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

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BETWEEN
	HOLYROOD LIMITED	Plaintiff

	AND

	BANK OF CHINA (HONG KONG) LIMITED	1st Defendant
	ERNST & YOUNG TRANSACTIONS LIMITED	2nd Defendant
	YEO BOON ANN	3rd Defendant
	STEPHEN LIU	4th Defendant

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Coram: Hon Stone J in Court

Dates of Hearing: 2, 3, 6-9 October 2003

Date of Judgment: 22 October 2003

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J U D G M E N T

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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 :

"
Dear Madam,
Re: Residential Development at 10-12 Peak Road, Hong Kong ('Project')
We refer to our meeting this morning and we set out below the following proposal for your consideration:-
1. A Project Manager designated by us to be appointed to take all the control and supervision of the development forthwith.
2. The mandate of the Project Manager is inter alia to complete the development by August 20, 2003 and to secure the issuance of the Occupation Permit.
3. Your Board of Directors passes a resolution to give effect to the said appointment.
4. Your company gives an irrevocable Power of Attorney to the appointed Project Manager to enable him to do all that is necessary to complete the development.
5. An undertaking by each of the directors of your Company not to do any acts or things that may interfere or jeopardize the mandate of the Project Manager and or the development.
6. Your Company and each director will sign such other documents that are deemed necessary by our legal advisers to give effect to the said appointment.
7. You are liable to prompt payment to the contractors and such other parties so as not to delay the completion of the development on or before August 20, 2003.
8. Your Company undertakes to settle all your indebtedness to us including but not limiting to outstanding charges or expenses within 3 months from the said date of issuance of Occupation Permit or December 31, 2003, whichever is earlier.
9. Your Company and your directors undertake to extend the fullest cooperation to the Project Manager to enable him amongst other things to gain access to such documents and accounts as he thinks fit in relation to the development.
10. Any financial arrangements to be agreed by you with the contractors and such other parties must not entitle the contractors and such other parties to exercise a lien over the development. Your Company undertakes to procure all parties to agree to the same.
11. The condition precedent to the above is your payment of HKD5,082,100.00 payable to the Government of the Hong Kong Special Administrative Region on June 30, 2003 at 11:00am.
12. The proposal herein is without prejudice to our rights under the security, loan, mortgage documents and such other documents.
Please signify your acceptance by signing and returning to us the copy of this letter by fax (fax no.(852) 2840 1849 or (852) 2868 0887) on or before June 30, 2003 at 8:00am latest.
Yours faithfully,
For and on behalf of
Bank of China (HK) Ltd"

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 :

(i) first, that that which had transpired in the Lau/Liang phone call of 8:20 a.m., when viewed objectively, and whatever Mr Lau in fact may have intended, had constituted a new "resuscitated" or "revived" offer from the Bank, which had been accepted by Mr Liang, and that payment of the Government extension premium at 11:02 a.m. on 30 June plainly satisfied the stipulated requirement of payment "on June 30, 2003 at 11:00 a.m." if these words (as he suggested should be the case) properly could be construed as "at or about 11:00 a.m."; and
(ii) second, if the stipulated time for payment had not in fact been complied with in light of the payment as was made, then the use by Mr Lau Pak On of the words "That'll be fine, as long as you pay the money", when construed in the context of Mr Liang's concerns as to whether payment could be made in time and in the context of his assurance that nevertheless such payment would be made, signified that Mr Lau was agreeing on behalf of the Bank that the time stipulation within the Bank's letter of offer should be varied to accommodate Holyrood's payment difficulties. Mr Sussex contended in the further alternative that these words as were allegedly used by Lau Pak On at the very least gave rise to a promissory estoppel, and accordingly that the Bank was estopped from invoking its strict legal rights, having induced Holyrood, through Mr Lau, to pay the Government extension premium.

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.

	(William Stone)
	Judge of the Court of First Instance
	High Court

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

HCCL000035/2003

HCCL 35/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.35 OF 2003

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BETWEEN
	HOLYROOD LIMITED	Plaintiff

	AND

	BANK OF CHINA (HONG KONG) LIMITED	1st Defendant
	ERNST & YOUNG TRANSACTIONS LIMITED	2nd Defendant
	YEO BOON ANN	3rd Defendant
	STEPHEN LIU	4th Defendant

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Coram: Hon Stone J in Chambers

Dates of Hearing: 15 and 17 September 2003

Date of Judgment: 19 September 2003

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J U D G M E N T

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The background

1. The plaintiff, Holyrood Ltd, is the owner of a site on the Peak known as No's 10-12 Peak Road, Hong Kong. It is, or rather was, in the process of redeveloping this site for resale. I am told that it is building thereon two ten storey blocks and a number of town houses.

2. This redevelopment is being financed by monies borrowed from the 1st defendant, Bank of China (Hong Kong) Ltd. By a loan agreement dated 5 September 1997 (as supplemented by three supplemental agreements of 27 February 2001, 12 April 2001 and 31 July 2002) made between Holyrood as borrower and the Bank of China as lender, a term loan facility of up to HK$735 million was made available to the plaintiff.

3. By a debenture dated 11 September 1997 (as supplemented on 15 June 2001) the Peak property was charged to the bank as security for the loan.

4. There has been a default in repayment. There is some incidental controversy over whether the date of such default is 30 April 2003 or 31 May 2003, but for present purposes it matters not. It is accepted that there has been such default.

5. We now come to the nub of the present dispute. On 30 June 2003, pursuant to the terms of the debenture held by the bank over the property, the Bank of China appointed two employees of Messrs Ernst & Young as the joint and several receivers and managers of the plaintiff and of the property. These are the 3rd and 4th defendants, Messrs Yeo Boon Ann and Stephen Liu, whom I am told arrived at the plaintiff's office at 11:10 a.m. on 30 June 2003 stating that they had been appointed as receivers to take over the company.

6. In practical terms this meant that the receivers moved into the Peak site, which, as I have said, remains under development, and the staff of Holyrood moved out. I understand, also, that some construction work remains ongoing, but to say the least there appear to have been significant delays, involving allegations of unpaid contractors, and completion seems still to be some way off, a matter which has involved payment to the Government of premiums upon each three monthly time extension required under the Conditions of Grant.

7. In this situation, the Bank wishes to sell the property, and wishes to do so as a matter of urgency given the bank's concern as to the state of the luxury property market. The details do not greatly matter at this stage, but the broad picture is that the amount of money that is thought likely to be recouped upon an 'as is' sale falls short of the sum presently owed to the bank by the site owner/developer, Holyrood, which itself is a subsidiary of a company known as Paladin Limited, whose unaudited results for the six months ending 31 December 2002 reported not insignificant losses.

The application

8. The foregoing, therefore, is the stage against which the plaintiff, Holyrood, mounts the application with which the court presently is seized.

9. By summons dated 8 August 2003 the plaintiff seeks an interim injunction restraining sale or disposal of the property, and second, seeks to terminate the receivership and management of the plaintiff.

10. In practical terms, therefore, the plaintiff wishes to re-enter the site and to continue with the development pending trial of this action. The relief claimed in the writ, which was issued on 1 August 2003, mirrors at paragraphs 1 and 2 thereof the relief now sought in the present application for an interim injunction. There are several other claims for relief, in terms of a declaration, an account and so forth consequent upon what is asserted to be the wrongful invocation of the current receivership, but in essence the substantial matter for trial is precisely that with which this court now is seized.

11. The sole live issue for debate in this case is the validity of the appointment of the receivers.

Circumstances of the Receivers' appointment

12. The factual matrix requiring attention is in narrow compass. Much is common ground, and, at bottom, the present dispute focuses upon that which occurred at or about 8:20 a.m. on Monday 30 June 2003.

13. Negotiations between the bank and Holyrood had been taking place during May and June 2003 regarding a further extension of the repayment date of the loan consequent upon construction delays. A meeting took place between representatives of the Bank and of Holyrood on the morning of Saturday 28 June 2003. This meeting ended in impasse, however, and no agreement was reached as to any such extension; it is said by the plaintiff that this was the result of the bank's insistence that the premium payment required by Government in the sum of HK$5,082,100, which was not due for payment until 30 June 2003, be made by 10:30 a.m. that Saturday morning.

14. Be that as it may. At 2:30 p.m. on the same day Mr Liang Zhong Hong, who is an adviser and consultant to the plaintiff, and who had attended the meeting that morning, received a telephone call from Mr Lau Pak Hon of the bank asking that he return to the bank to collect a letter. This he did. However, the letter was not ready, and Mr Zhong had to leave for Beijing. Later that afternoon Mr Zhong was telephoned and asked whether the letter, now completed, could be sent to Ms Lilian Oung, the director in charge of the plaintiff, but it appears that this was not possible as Ms Oung was uncontactable.

15. In the event, the letter ultimately was faxed to Mr Liang in Beijing, whom it is agreed received it at 2:30 p.m. on the following day, that is Sunday 29 June 2003. Mr Liang appears to have indicated at that stage that if, as he anticipated, he could not get hold of Ms Oung, the matters outlined in this letter would have to wait until the following day, Monday 30 June 2003, in order that it could be dealt with by the plaintiff.

16. This letter, dated 28 June 2003, is a significant document in terms of the argument advanced in this case. It is addressed to Ms Oung of the plaintiff and sets out twelve matters constituting that which the bank calls a "proposal for your consideration". The letter speaks for itself. The main planks deal with the appointment of a Project Manager for the site, an undertaking that Holyrood settles "all your indebtedness to us" within three months of the issuance of the Occupation Permit or 31 December 2003, "whichever is earlier", and, at paragraph 11, the following :

"The condition precedent to the above is your payment of HKD5,082,100 payable to the Government of Hong Kong Special Administrative Region on June 30,2003 at 11:00 am."

The letter concluded by asking that acceptance of the contents be signified by signing and returning a copy of the letter by fax "on or before June 30, 2003 at 8:00am latest."

17. On the morning of 30 June, shortly after 8:00 a.m., Mr Liang received a phone call from Mr Lau of the bank. There are differing versions of what transpired. The essence of Mr Liang's evidence is that although he had not yet been able to liaise with Ms Oung, he said that the premium could be paid on that day, and that the other conditions were acceptable, although as a matter of formality they could not be enshrined in a formal board resolution by the deadline in the letter. Mr Liang asserts that Mr Lau said : "that'll be fine if you can pay the money".

18. For his part Mr Lau disputes this version. He says that he used his colleague, Fonnie Lau's, telephone at about 8:20 a.m. in order to contact Mr Liang in Beijing because he had been told by Fonnie Lau that she had not received the plaintiff's acceptance of the terms in the bank's letter by the stipulated 8 00 a.m. deadline. He says that he told Mr Liang that this was the case and that Mr Liang "mumbled incoherently". He says that he told Mr Liang that the first action that was required was for the plaintiff to pay the extension premium to the government before 11:00 a.m., although Mr Liang would not say whether payment would be made by that date but that it would be made on that day. As to the other conditions in the letter, Mr Lau says that Mr Liang said "vaguely" that the plaintiff would accept some of the conditions, but would not specify which were acceptable and which were not. Mr Lau disputes that he said to Mr Liang the words ascribed to him, namely "that'll be fine if you can pay the money", or anything to similar effect.

19. It is a matter of record that the relevant government premium was paid by the plaintiff at 11:02 a.m. on Monday 30 June 2003.

20. Mr Lau says that shortly after 11:00 a.m. he received a call from Mr Liang informing him that someone had been sent to pay the extension premium to the government, and that he reported it to Fonnie Lau, who told him that receivers already had been appointed. It appears similarly to be a matter of record that the receivers entered the plaintiff's offices at 11:10 a.m.

21. There appears to have been a meeting on 11 July between Mr Liang and the bank's general manager Mr Mao Xiao Wei, who is said to have indicated that the bank had taken the action that it did because it had no evidence that the premium had been paid, not having received the fax payment receipt until around noon on 30 June 2003.

22. In addition, after the events of 30 June two letters were sent by the plaintiff to the bank. The first is dated 2 July 2003, stating the fact of payment to the government, and that in respect of the other items in the letter of 28 June "we would convene a board meeting immediately and once the resolution is passed, we shall revert". The second is dated 12 July 2003 and contains a commentary on the bank's 12 requirements in its letter of 28 June; the requirement for a project manager on site in items 1-6 of that letter is subject to a request that the project continue to "be managed by our original management team", although items 7-12 appear to be accepted, the point being made that the construction company had now been paid, as had the government.

The argument

23. It is common ground that the principles on which this court should act are those enshrined in American Cyanamid v. Ethicon [1975] AC 396. The difference between the parties lies in that which is regarded as the appropriate application of those established rules.

24. On behalf of the plaintiff, Mr Sussex SC took strong issue with the validity of the appointment of the receivers. He asserted that clearly there was a serious issue to be tried, that this situation involved infringement of the right to enjoy land, and that in the present circumstance damages should not automatically be considered an adequate remedy, notwithstanding that the defendant was the Bank of China, and further that in terms of the balance of convenience the needle inevitably swung toward preservation of the status quo pending trial, which in this instance required restoration of the plaintiff to the affairs of the company. For his part Mr Fung SC took issue with each of these contentions, thus in effect disputing each element within the Cyanamid equation.

25. In terms of a serious issue to be tried, Mr Sussex put his case on four bases: first, that there was a concluded contract entered into at or about 8:20 a.m. on 30 June 2003 in terms of the letter of 28 June, as orally varied, in order to permit payment of the premium within the day, the consequence being that there could not have been an event of default for the purpose of appointing receivers; second, if and in so far as this construction was incorrect, there was indeed such a concluded contract, but that time was not of the essence, and so payment at 11:02 a.m., as opposed to 11:00 a.m., was acceptable; third, that there was such a contract, but that if time nevertheless is to be regarded as of the essence, the undisputed fact of payment at 11:02 a.m. entitles the plaintiff to invoke the equitable principle of relief against forfeiture; and fourth, that in the event that there was no concluded contract, the circumstances and the statement of Mr Lau in terms of the words "That'll be fine if you can pay the money" sufficed to raise against the defendant bank a promissory estoppel or an estoppel by representation.

26. Mr Fung SC forcefully attacked this application root and branch, his initial contention being that demonstrably no serious issue to be tried arose; a "fanciful" issue could perhaps be demonstrated, he said, but the hard fact was that the plaintiff could not even surmount this first essential hurdle.

27. In this connection Mr Fung submitted that on the available evidence Mr Liang had contradicted himself, and was in any event in no position to bind the company, of which he was not even an employee. Nor had Holyrood accepted the bank's terms of offer, even by the 2 July, citing here the letter of that date from the plaintiff. Not only had there been no acceptance, he argued, but in any event time clearly had been made of the essence, both in terms of the payment of the premium and in terms of the time limit for acceptance of the cumulative terms, that is by 8:00 a.m. on 30 June 2003. It was incumbent upon the plaintiff, in circumstances in which clearly it was in default, to establish variation of the terms of payment, and, asserted Mr Fung, the failure to discharge even this initial burden had been conspicuous.

28. I confess that this is an argument that occasioned considerable reflection. Ultimately, however, I do not consider that it gets home in light of the words alleged to have been used by Mr Lau, and the circumstances in which they are alleged to have been said to Mr Liang; at this stage I decline to become drawn into an issue regarding the ambit of his authority to act on behalf of the plaintiff, although in the circumstances he would appear to have had ostensible authority in any event. Moreover, as Mr Sussex also reminded me, the hard fact is that the money in question was paid.

29. At the end of the day, looking at the situation in the round, I do not consider that the plaintiff's case in this regard can be castigated as, in effect, frivolous and vexatious. As Mr Sussex reminded me, the threshold for the establishment of a 'serious issue' is not high, and it seems to me that unless the matter really can be seen, at this stage, to be demurrable on its face, there is no justification for knocking the application out on this basis absent the opportunity of seeing and hearing the witnesses who presently are recounting contradictory stories on affidavit/affirmation.

30. Accordingly I find that in all the circumstances of this case that there is a serious issue to be tried.

31. I move now to the other elements within the Cyanamid formulation, namely considerations of the adequacy of damages and that of the balance of convenience.

32. The issue of the adequacy of damages provided Mr Fung SC with what at first blush appears a decisive argument. With this Mr Chan SC, appearing on this application for the receivers, fully agreed, pointing out to the court the observation of Lord Diplock in Cyanamid, op cit at 408, to the effect that "if damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff's claim appeared to be at that stage".

33. This, said Mr Fung, was the end of this particular matter. His client was the Bank of China, and whatever else may be said in this case its ability to pay whatever damages may be awarded should it subsequently become clear that the receivership was wrongly founded, could not be in issue.

34. There is a good deal in this argument, and once again it was tempting to accede to it, the plaintiff thus being left to proceed to trial in normal course and, if its case be proven, to its damages remedy.

35. Once again, however, I decline to decide this application on this basis. Mr Sussex suggested that injuries, threatened or anticipated, to land constituted a special case, and that as a result the courts should be far more ready to grant injunctive relief in such circumstances. I will not here dwell upon his colourful analogies with a Monet painting or a Faberge egg, but that certainly was the drift of one of his arguments. The answer, it seems to me, is that everything depends upon the particular circumstances, and whilst there are guidelines there is no hard rule one way or the other. The short and irrefutable point here, and one made by both Mr Fung and Mr Chan, is that this is what realistically can be considered to be a pure money case. This site was purchased at the height of the property boom in 1997 with a view to redevelopment and onsale at a profit. This scheme, like so many others, has come crashing to earth with the demise of the Hong Kong property market, but for present purposes this is nothing to the point.

36. To his credit Mr Sussex eschewed reference, in oral submission at least, to this case falling within a special category by reason of the fact that it is said that Ms Oung wishes to live in one of the houses which are being built upon the site, and that for this reason the court should be more ready to grant the injunction sought. Mr Chan SC submitted that any suggestion along these lines was nonsense. For myself I would categorise any such argument, in the particular circumstances of this case, as ambitious and simply unsustainable.

37. The alternative approach, however, struck me as having more substance in the context of a debate as to the adequacy of damages. In my view Mr Sussex was justified in suggesting that, if at trial the plaintiff's case was to be vindicated, and thus it was decided that the receivers' appointment lacked validity, it by no means followed that the ascertainment of the damage accruing to the plaintiff would be an easy matter; indeed, he said, such assessment might be very difficult indeed, and at the least was, or very likely would be, beset with significant imponderables.

38. The essence of the point is thus that damages are not necessarily to be considered an adequate remedy if their ascertainment is, or well may be, so replete with speculation or conjecture in terms of such assessment that such remedy may not constitute a genuine remedy at all, and that as a consequence there is a real danger of justice not being able to be done in terms of the party who duly is found, after trial, to have been wronged.

39. Conceptually, I suppose, it is certainly possible to posit a damages construct whereby a plaintiff's quantum of damage would be, for example, the difference between a current sale of the site on an 'as is' basis (which is precisely that which the bank currently has in mind), and the value of the current site on a completion basis. But I suspect that this area is rather easier in theory than in practice. There may be no completion of that which already exists. What of the situation, for example (and apparently this is a possibility that has already arisen) whereby a putative buyer wishes to purchase the site upon a 'as is' basis, and then to knock down everything that is there and start all over again?

40. It strikes me that assessment of damages, if this is an exercise which ultimately is necessary to be undertaken, by no means would be as straightforward as often is the case in commercial disputes, and may well be fraught with imponderables, and in the present circumstances I see no reason to submit the plaintiff to such imponderables if it is practically possible (as I believe is the case) to avoid the possibility of such difficulties arising.

41. Accordingly, therefore, the assertion that damages are an adequate remedy, and that in itself this is sufficient reason to dismiss this application, is a submission with which the court is not totally comfortable.

42. This brings me to the last head for consideration, which is the issue of the balance of convenience. In this Mr Fung SC may be correct when he suggests that the balance of convenience only swims into focus when there is doubt as to the adequacy of damages, but I am unable to agree with his further submission that the possibility of a 'speedy trial' only comes into play "if the court has difficulty in tackling the balance of convenience". With respect, the question of when the dispute may finally be determined cannot, and indeed should not, be so neatly isolated from consideration of the 'balance of convenience' as it is perceived to exist in the circumstance of any particular case.

43. As all counsel are aware, the initial instinct of the court in this case was to sidestep the pitfalls inherent in interim injunctions, and to proceed to hear the case immediately. This is, after all, the Commercial Court which should strive, if at all possible, to produce a speedy resolution to urgent commercial disputes. To this end all parties were, I think, in favour, although the immediate possibility foundered given the apparent unavailability of the plaintiff's key witness, Mr Liang Zhong Yong, to give evidence; however I have been informed that Mr Liang indeed will be available for a trial commencing on 2 October 2003, that is two weeks from today.

44. Although in the event (and after some delay investigating the possibility of such immediate hearing) the court proceeded to hear the plaintiff's interim injunction application in normal course, it remained a signal part of Mr Sussex's concluding submissions that the trial of what on any basis is a very narrow issue, namely the validity of the appointment of the receivers consequent upon the events of the 28 to 30 June 2003, with the focus therein on the Liang/Lau telephone call at or about 8:20 a.m. on 30 June, should nevertheless be the course that should be adopted, and that in the 14 day interim period the plaintiff should have the injunctive relief it now seeks.

45. The defendants do not, I think, oppose a speedy trial in principle indeed until the revelation of Mr Liang's unavailability Mr Fung and his team had been helpfully pro-active in exploring the possibility of holding an immediate trial - and I have recorded Mr Fung's only objections to a trial commencing on 2 October for three days (or, if necessary, four) to be that there had been, as he put it, "not a peep" that the plaintiff would pay the further extension premium of some HK$5 million to the government, which sum is due on 30 September 2003, and further that in the interim additional construction costs would of course be accruing.

46. The best point here, it seems to me, is the fact of payment of the further premium, and Mr Sussex now has stated unequivocally on behalf of his client, a statement which I accept, that his client is prepared to pay this further premium which falls due on 30 September. This objection is thus removed.

47. Whilst I appreciate, of course, the fact that the Bank, having now embarked upon the course that it has in the appointment of the receivers, is concerned about recovery pursuant to its security as Mr Fung has stressed, if the government ultimately refuses further to extend then the right exists under the Conditions of Grant to enter and forfeit, in which case the bank loses its security in a situation wherein the borrower is not worth powder and shot - I do not consider that a delay of an additional two weeks is likely to cause insurmountable difficulty, nor is there any evidence, or any submission, before me to demonstrate that this will be the case. To the contrary. If there is going to be a trial in any event, it seems to me that it is entirely appropriate, and in the interests of all parties, that this matter finally is resolved in the immediate future.

48. Accordingly, I have decided that this matter is to be tried commencing on Thursday, 2 October, with 3rd, 6th and 7th reserved, which decision obviously precludes the necessity for extensive reflection in terms of the balance of convenience. If this approach be correct, as I believe it is, the only matter which requires further resolution is whether any relief should be granted, in terms of the present application, in the 14 day intervening period between now and 2 October, 2003?

49. Clearly the real thrust of the relief sought by the plaintiff lies in the first part of the summons which seeks restraint in terms, and I quote, of "commencing or continuing marketing, selling, conveying, assigning, letting or in any other way disposing of the property known as 10-12 Peak Road, Hong Kong, or any part thereof, whether by private treaty, public tender or otherwise".

50. In the circumstances, it may well be that the Bank of China will feel it appropriate to undertake to the court that in the two weeks between now and the completion of the trial (I anticipate that judgment will be quickly forthcoming) that it will not "sell, convey, assign, let or in any other way dispose of" the property now in receivership, and if this undertaking is, through its counsel, forthcoming it seems to me that that will be sufficient to protect the interests of the plaintiff.

51. Alternatively an injunction will issue in these limited terms. I see little point in going to the trouble of setting up a speedy trial, and hence an imminent resolution of this problem, if in the interim between now and such early resolution the property is sold. As a matter of completeness I would add that for my part I cannot see any basis presently to prevent the bank from canvassing, or continuing to canvass, potential purchasers on the basis that if it should succeed at trial (and I have no idea which party will succeed) it will be free to alienate the property as it wishes.

52. As to the second head of the injunction sought, I presently see no good reason, in the very short interim period between now and 2 October, to order the receivers to leave. I note that that when the idea of a speedy final resolution was initially mooted Mr Sussex clearly did not anticipate any change to the situation as it currently prevails, although he did indicate immediate concern about the possibility of interim alienation of the property by the bank prior to judgment absent any injunction or undertaking in lieu thereof.

53. The sole procedural matter outstanding is the issue of fortification of the plaintiff's undertaking in damages consequent upon grant of relief in the terms indicated. The issue of fortification arose only towards the end of Mr Sussex's submission it was not canvassed in his skeleton argument and he has indicated from the Bar that his client is willing to provide fortification, in terms of a guarantee from Citibank, on a staggered basis, the offer being so constructed that at the end of 14 days from 17 September the undertaking in damages would be fortified in the sum of HK$50 million.

54. Clearly, in light of the apparent financial situation of the plaintiff, and its parent, fortification is required in the present circumstances. Mr Chan warned darkly of difficulty over the wording of any bank guarantee, and expressed scepticism that no draft guarantee had been put in place for consideration. These are valid observations, albeit in terms of the wording Mr Sussex may well be correct when he says that he sees no reason why the wording of this particular bank guarantee should differ greatly from the standard form of undertaking. Be that as it may. In so far as agreement as to a suitable guarantee cannot be reached between the parties a matter which may become clear within the first three days from today, by which time a guarantee of the first tranche of HK$10 million is to be forthcoming on the basis of the timetable proffered by Mr Sussex the court will rule on the manner of provision of such security. At the end of the day, of course, such money, or part at least, can simply be ordered to be paid into court.

Order

55. On the basis of the foregoing, therefore, the substance of the court's decision upon the plaintiff's application may be summarized thus :

(i) there is to be a speedy trial of this matter before this court, commencing on Thursday, 2 October at 10:00 a.m., with 3rd, 6th, and 7th reserved;
(ii) pending judgment there is to be no sale/alienation of the property by the Bank, and an undertaking is to be given to this effect, alternatively an injunction in terms will issue;
(iii) consequent upon such undertaking/injunction the plaintiff is to fortify its undertaking in damages in the sum outlined by its leading counsel, and in a manner to be agreed, alternatively to be decided by the court;
(iv) the plaintiff is to pay the premium falling due to the government on 30 September 2003;
(v) the costs of this application are reserved to the trial.

56. A number of variables exist within the foregoing, and I should be grateful if counsel would confer and draft an Order appropriate for engrossment by the court.

57. The court naturally will make such further directions as are necessary prior to trial, and I will entertain submissions in this regard either now or at a time to be appointed.

58. I thank counsel for their assistance.

	(William Stone)
	Judge of the Court of First Instance
	High Court

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

HOLYROOD LTD v. BANK OF CHINA (HONG KONG) LTD AND OTHERS

Related cases with same parties

Files (2)

"	Dear Madam,

	Re: Residential Development at 10-12 Peak Road, Hong Kong ('Project')

	We refer to our meeting this morning and we set out below the following proposal for your consideration:-

	1.	A Project Manager designated by us to be appointed to take all the control and supervision of the development forthwith.

	2.	The mandate of the Project Manager is inter alia to complete the development by August 20, 2003 and to secure the issuance of the Occupation Permit.

	3.	Your Board of Directors passes a resolution to give effect to the said appointment.

	4.	Your company gives an irrevocable Power of Attorney to the appointed Project Manager to enable him to do all that is necessary to complete the development.

	5.	An undertaking by each of the directors of your Company not to do any acts or things that may interfere or jeopardize the mandate of the Project Manager and or the development.

	6.	Your Company and each director will sign such other documents that are deemed necessary by our legal advisers to give effect to the said appointment.

	7.	You are liable to prompt payment to the contractors and such other parties so as not to delay the completion of the development on or before August 20, 2003.

	8.	Your Company undertakes to settle all your indebtedness to us including but not limiting to outstanding charges or expenses within 3 months from the said date of issuance of Occupation Permit or December 31, 2003, whichever is earlier.

	9.	Your Company and your directors undertake to extend the fullest cooperation to the Project Manager to enable him amongst other things to gain access to such documents and accounts as he thinks fit in relation to the development.

	10.	Any financial arrangements to be agreed by you with the contractors and such other parties must not entitle the contractors and such other parties to exercise a lien over the development. Your Company undertakes to procure all parties to agree to the same.

	11.	The condition precedent to the above is your payment of HKD5,082,100.00 payable to the Government of the Hong Kong Special Administrative Region on June 30, 2003 at 11:00am.

	12.	The proposal herein is without prejudice to our rights under the security, loan, mortgage documents and such other documents.

	Please signify your acceptance by signing and returning to us the copy of this letter by fax (fax no.(852) 2840 1849 or (852) 2868 0887) on or before June 30, 2003 at 8:00am latest.


	Yours faithfully, For and on behalf of Bank of China (HK) Ltd"

(i)	first, that that which had transpired in the Lau/Liang phone call of 8:20 a.m., when viewed objectively, and whatever Mr Lau in fact may have intended, had constituted a new "resuscitated" or "revived" offer from the Bank, which had been accepted by Mr Liang, and that payment of the Government extension premium at 11:02 a.m. on 30 June plainly satisfied the stipulated requirement of payment "on June 30, 2003 at 11:00 a.m." if these words (as he suggested should be the case) properly could be construed as "at or about 11:00 a.m."; and

(ii)	second, if the stipulated time for payment had not in fact been complied with in light of the payment as was made, then the use by Mr Lau Pak On of the words "That'll be fine, as long as you pay the money", when construed in the context of Mr Liang's concerns as to whether payment could be made in time and in the context of his assurance that nevertheless such payment would be made, signified that Mr Lau was agreeing on behalf of the Bank that the time stipulation within the Bank's letter of offer should be varied to accommodate Holyrood's payment difficulties. Mr Sussex contended in the further alternative that these words as were allegedly used by Lau Pak On at the very least gave rise to a promissory estoppel, and accordingly that the Bank was estopped from invoking its strict legal rights, having induced Holyrood, through Mr Lau, to pay the Government extension premium.