THE BANK OF EAST ASIA, LTD v. DARE LTD AND OTHERS

CACV 471/2025, [2026] HKCA 106

On Appeal From [2025] HKCFI 2710

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 471 OF 2025

(ON APPEAL FROM HCA NO. 1359 OF 2023)

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REASONS FOR JUDGMENT

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Hon Anthony Chan JA (giving the Reasons for Judgment of the Court):

1.  This was the Defendants’ appeal against the order of DHCJ Alexander Stock SC (“Judge”) dated 10 June 2025, whereby their appeal against the summary judgment (“Judgment”) granted by Master K W Wong on 24 March 2025 in favour of the Plaintiff (“Bank”) was dismissed with costs.

2.  By the Judgment, the Defendants were ordered to pay the Bank: (i) the sum of HK$1,141,066,150.65; (ii) interest on the sum of HK$934,693,581.60 at the contractual default interest rate of 5% per annum higher than the contractual rate of 2.8% over HIBOR from 1 August 2023 until judgment; (iii) post-judgment interest on the sums set out in (i) and (ii) above at judgment rate from the date of judgment until full payment; and (iv) costs summarily assessed at HK$380,000 to be paid forthwith.

3.  At the end of the hearing, this appeal was dismissed with costs to the Bank, to be taxed on party and party basis if not agreed.  These are the reasons for the dismissal of the appeal.

Issues

4.  In this appeal, the Defendants sought an order that: (i) the Judgment be set aside; and (ii) unconditional (or alternatively conditional) leave to defend the Bank’s claim be granted on the following grounds :

(1)     The Judge had erred in holding that the compliance with the restrictive means of giving notice under Clause 27 of the Facility Agreement dated 13 August 2018 (“FA”) was not a material fact, and the lack of pleading of the same in the Statement of Claim (“SOC”) did not render the Bank’s claim defective for the purpose of its summary judgment application (“Ground (1)”); and

(2)     The Judge had erred in rejecting the Defendants’ bona fide defence by misinterpreting Clause 27 of the FA, which provided for the pre-requisites for triggering the Bank’s relevant right (“Ground (2)”).

5.  Grounds (1) and (2) represented a helpful summary provided by Mr Chan, who appeared with Mr Chok for the Defendants, of the grounds of appeal contained in the Defendants’ Notice of Appeal.

6.  There was a Respondent’s Notice filed by the Bank on 28 July 2015, which contended that the Judge’s Reasons for Judgment dated 3 July 2025 ([2025] HKCFI 2710) (“R for J”) should be affirmed on additional grounds.

Background

7.  Pursuant to the FA, which was entered into by the Bank as lender, the 1^st Defendant as borrower and the 2^nd and 3^rd Defendants as guarantors, the Bank made available to the 1^st Defendant a term loan facility in the amount of HK$1.2 billion.

8.  On 16 August 2018, a loan in the amount of HK$1,001,815,200 was drawn down by the 1^st Defendant under the FA. 

9.  It was the Bank’s case that on 26 February 2021 its solicitors, Messrs King & Wood Mallesons, sent letters to each of the Defendants by post and email stating, inter alia, that an event of default had occurred pursuant to Clause 21.1 of the FA following the default of the 4^th and 5^th repayment instalments both due on 16 February 2021 (“KWM Letters”).  It was further stated that the Bank would exercise its right to accelerate the repayment of the entire loan, which became immediately due and payable (“Repayment Acceleration”).

10.  On the other hand, it was the Defendants’ case that they never received the KWM Letters.  However, there was no dispute that there were defaults over the repayment of the 4^th and 5^th instalments.

11.  The key dispute before the Judge was whether the Repayment Acceleration was properly triggered under the FA.  Mr Chan submitted that this was a significant issue both in terms of pleadings as well as the parties’ substantive cases.

Relevant provisions of the FA

12.  The relevant provisions of the FA are Clauses 21.17 and 27 :

“21.17 Acceleration

Without prejudice to Clause 6.2 (Overriding right of repayment on demand), on and at any time after the occurrence of an Event of Default which is continuing, the Lender may by notice to the Borrower:-

…

(b) declare that all or part of the Loans, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable, whereupon they shall become immediately due and payable.

…

27. NOTICES

…

27.3 Delivery

(a) Any communication or document made or delivered by one person to another under or in connection with the Finance Documents will only be effective:-

(i) if by way of fax, when received in legible form;

(ii) if by way of letter, when it has been left at the relevant address or 5 Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address; or

(iii) if by way of email, if it complies with the rules under Clause 27.4 (Electronic communication);

and, if a particular department or officer is specified as part of its address details provided under Clause 27.2 (Addresses), if addressed to that department or officer.

…

27.4 Electronic communication

…

(b) Any electronic communication made by one Party to another Party will be effective when it is sent by the sender Party unless the sender Party receives a message indicating failed delivery.

…”

Relevant pleas in the SOC

13.  Paragraph 10 of the SOC pleaded as follows :

“10. By a letter dated 26 February 2021 from Messrs. King & Wood Mallesons (‘KWM’), the Plaintiffs former solicitors, to the 1^st Defendant, inter alia :

(a) the Plaintiff informed the 1^st Defendant that as the 1^st Defendant defaulted in repayment of the 4^th and 5^th repayment instalments, an event of default pursuant to Clause 21.1 of the Facility Agreement has occurred;

(b) the Plaintiff declared, in exercise its rights under Clause 2l.17(b) of the Facility Agreement, that the Loan, together with accrued interests, and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable; and

(c) the Plaintiff demanded the 1^st Defendant to pay the total outstanding indebtedness as at 23 February 2021 due and payable by the 1^st Defendant to the Plaintiff in the total sum of HK$939,096,330.49 and notified the 1^st Defendant that default interests at the rate of 5% above base rate (i.e. HIBOR plus 2.8%) shall apply to and accrue on the outstanding indebtedness as well as any default interest accrued as a result up to the date of actual payment in full.”

14.  The same averments (with necessary modifications) were repeated in para 11 of the SOC against the 2^nd and 3^rd Defendants as guarantors.

Ground (1)

15.  This was a pleading point, namely, whether it was necessary for the Bank to plead that the KWM Letters were effectively delivered pursuant to Clause 27.3(a) of the FA. 

16.  The Judge’s reasons for disagreeing with the Defendants’ contention were contained in paras 29 to 31 of the R for J :

“29. §10 of the SOC pleaded that by the KWM Letter from KWM to D1, P declared that it exercised its rights under Clause 21.17(b) of the FA. Accordingly, P has pleaded that it gavenotice to D1 of acceleration under the wording of Clause 21.17(b).

30. I do not consider that it was necessary for P to have also pleaded the precise means by which the notice was delivered under Clause 27.1, particularly in circumstances where P would have been unaware at the time of the SOC that Ds would claim not to have received the KWM Letter.

31. In my view, P pleaded the material facts required to make good its claim, and sufficiently put Ds on notice of the basis of the claim made.”

17.  Mr Chan’s arguments were encapsulated in paras 9 to 11 of his skeleton submissions :

“9. [The Bank’s] pleaded case is based on the exercise of the right to accelerate the repayment of the Loan under Clause 21.17(b) of the FA, which mandated P to give notice to D1 as a condition for exercising such right.

10. Clause 27 prescribed for the restrictive means of giving effective notices under the FA …. In particular, Clause 27.3(a) stipulated that ‘any communication or documentmade or deliveredby one person to another’ under the FA ‘will only be effective’ if it was conveyed through one of the means stated in Clauses 27.3(a)(i) to (iii).

11. It follows that valid exercise of right of acceleration under Clause 21.17 must be premised upon an effective delivery of notice under Clauses 27. As such, the compliance with Clauses 27 was a crucial element for the P’s pleaded cause of action.”

18.  The analysis here should begin with a reminder of the basic rule that only material facts but not evidence are required to be pleaded.  Whilst it is not necessarily straightforward in all cases to distinguish between the two, it may be a good guide to consider that the essential elements of a cause of action should be pleaded as material facts. To use an elementary example, in a contract claim, the contract, its material terms, the breach of contract and the damage caused by the breach are the material facts.  How much details are required on, eg, the breach of contract may be answered by what is adequate for informing the defendant of the claim against him.  The pleader should always bear in mind that: “it is an elementary rule in pleading that when a statement of facts is relied on it is enough to allege it simply, without setting out the subordinate facts which are the means of producing it or the evidence sustaining the allegation” (Hong Kong Civil Procedure 2026, vol 1, [18/7/5]).

19.  Further, the statement of claim should not anticipate a defence that may never be made, and state what the plaintiff would have to say in answer to it (HKCP 2026, vol 1, [18/15/9]).

20.  Mr Chan relied on Schindler Lifts (HK) Ltd v Nikko Services Ltd, unrep, HCMP 270/2014, 20 May 2014, [11]-[12] for the proposition that all matters that form the basis of the plaintiff’s assertion that it is entitled to enforce its right under an agreement should be pleaded in the statement of claim, not in the reply, and an incomplete plea is liable to be struck out.

21.  We do not believe that, based on the above proposition, the SOC was defective in failing to plead the means by which the KWM Letters were delivered.  The material fact that the Defendants were informed of the event of default and Repayment Acceleration by the KWM Letters was adequately pleaded as a simple proposition.  There was no way for the Bank to know that receipt of the letters would be in issue.  The details of fulfilment of Clause 27.3(a) would only become an issue in the event of dispute over the receipt of the letters.  There was no need for the Bank to anticipate the defence which might be raised.

22.  In our view, the SOC had adequately set out all the matters that formed the basis of the Bank’s assertion that it was entitled to enforce its rights under the FA.  We see no merit in Ground (1).

Ground (2)

23.  The arguments here concerned the proper construction of Clause 27.3(a)(ii) of the FA, ie, whether fulfilment of its terms would render delivery of the KWM Letters effective regardless of whether the letters were in fact received by the Defendants or, as contended by Mr Chan, would at best give rise to only a rebuttable presumption of delivery.

24.  The relevant findings of the Judge were in R for J, [33]-[36] :

“33. Mr Chok’s second argument was that there were triable issues as to whether valid notice of acceleration had been given under Clause 27 of the FA, in light of D1’s evidence that the KWM letter was not received.

34. In my view, this defence can be disposed of shortly since Clause 27.3(a)(ii) of the FA provides that valid notice may be given by letter 5 Business Days after being deposited into the post with postage prepaid in an envelope addressed to D1 at its address as identified in the FA.

35. Accordingly, if the KWM Letter was deposited into the post in compliance with Clause 27.3(a)(ii) of the FA, then notice was given to D1 in compliance with Clause 27, whether or not D1 actually received the KWM Letter.

36.     As noted at §25(b) above, Mr Wan’s evidence confirmed that this was done. I do not see any reason to doubt that it was.”

25.  The principles of construction of contract are trite.  The law favours a commercially sensible construction, which is more likely to reflect the intention of the parties.  The Court will have regard to not only the language used but also the context, purpose and objectives of the provisions. 

26.  We were referred by Ms Mak, who appeared for the Bank, to Ener-G Holdings Plc v Philip Hormell [2011] EWHC 3290 (Comm), [9], where three canons of construction were applied to the construction of notice provisions (including notice in writing, service and deemed service) ([3]) of a share sale contract: (i) if there are two possible constructions of a document, the Court is entitled to prefer the construction which is consistent with business common sense; (ii) it is of utmost importance in commercial transactions that there is a need for certainty, so that parties can know where they stand and act accordingly; and (iii) in commercial transactions, where there are tight deadlines, they should be construed strictly unless there is some indication that time was not intended to have been of the essence.

27.  Mr Chan argued that the postal delivery provision (Clause 27.3(a)(ii)) should at best give rise to a rebuttable presumption of receipt, as opposed to a conclusively deemed receipt.  He sought to draw support from the provisions on other modes of delivery.  For fax transmission, Clause 27.3(a)(i) required receipt in legible form.  Whereas email would be effective when it was sent unless there was a failed delivery message (Clauses 27.3(a)(iii) and 27.4(b)).  Mr Chan submitted that the provisions should be construed consistently such that they each required a high degree of certainty for the receipt of communication.  The Judge should have held that by virtue of textual and contextual interpretation of Clause 27.3 as a whole, notice by way of letter sent by post would be ineffective if it in fact failed to reach the intended recipient.

28.  The construction point is a short one.  We are unable to agree with Mr Chan for the following reasons :

(1)     Matter of notice was for the parties to the FA to agree.  It is important to bear in mind that the FA was a commercial contract drafted by solicitors.  It involved a loan in excess of HK$1 billion.  Certainty must be of primary importance.  It is highly unlikely that the contracting parties would be interested in arguments over whether a notice by letter was actually received despite having been posted. It was a matter of allocation of risk of failed delivery which the parties were free to agree on.    

(2)     The terms of Clause 27.3(a)(ii) are clear.  Letter delivered by post would be “effective” 5 business days after posting (with postage prepaid, etc.).  In the face of unequivocal language, there is no real scope for argument.

(3)     We agree with Ms Mak that the nature of delivery by fax and email is different to that of letter.  The former is almost instantaneous.  For fax transmission, normally the sender will get a record of the transmission.  Hence the transmission is effective subject to legibility.  As regards email, failed transmission will normally result in a failed delivery message.  We are unable to see any sufficient justification that the construction of Clause 27.3(a)(ii) should be affected by the provisions on other means of delivery, especially when the language of the former is abundantly clear.

29.  In the premises, we are unable to find merit in Ground (2). 

30.  In light of the lack of merit in this appeal, it was unnecessary for the Bank to rely on the Respondent’s Notice, nor for the Court to deal with it. 

31.  We are grateful to counsel for their assistance.