HANG SENG BANK LTD v. SWEETHEART DESSERT LTD AND OTHERS

bjbj DCCJ 4270 /2006 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 4270 OF 2006 -------------------- BETWEEN HANG SENG BANK LIMITED Plaintiff and SWEETHEART DESSERT LIMITED 1st Defendant LAU SO PIK 2nd Defendant LI YAU HANG 3rd Defendant -------------------- Coram: Deputy District Judge W. C. Li in Chambers Date of Hearing: 30th March 2007 Date of Handing Down Decision: 11th April 2007 D E C I S I O N The Plaintiff is a licensed bank incorporated with limited liability under the laws of Hong Kong. The 1st Defendant was a customer of the Plaintiff and various loans, advances and banking facilities were from time to time granted by the Plaintiff to the 1st Defendant, including (a) an overdraft facility made available to the 1st Defendant s current account no. 237-198007-001 maintained by the 1st Defendant with the Plaintiff; (b) the banking facilities under the Bills Transaction maintained by the 1st Defendant with the Plaintiff; (c) the banking facilities under the commercial Visa Card no. 4423-1410-0040-0559 in the name of the 2nd Defendant maintained by the 1st Defendant; and (d) the banking facilities under the Commercial Visa Card no. 4423-1410-0040-1110 in the name of the 3rd Defendant maintained by the 1st Defendant. The 2nd and 3rd Defendants are the guarantors of the 1st Defendant under a Deed of Guarantee dated 9 March 2006 for the loans, advances and banking facilities granted from time to time by the Plaintiff to the 1st Defendant. As at close of business on 27 August 2006, the 1st Defendant owed (a) HK$343,715.74 (inclusive of interest) in its overdraft facility in its current account no. 237-198007-001; (b) HK$206,895.78 (inclusive of interest) in its Bills Transaction account; (c) HK$14,391.55 in its Commercial Visa Card account no. 4423-1410-0040-0559; and (d) HK$14,640.20 in its Commercial Visa Card account no. 4423-1410-0040-1110. The total indebtedness owed by the 1st Defendant to the Plaintiff amounted to HK$579,643.27. It was not disputed by the Defendants that these monies had been advanced to and were owed by the 1st Defendant to the Plaintiff. The Plaintiff demanded repayment of the said monies together with interest from the 1st Defendant. The Plaintiff also demanded the 2nd and 3rd Defendants as guarantors of the 1st Defendant to honour their obligations under the guarantee to repay the monies owing by the 1st Defendant to the Plaintiff. The Defendants did not make any repayment and the monies remained outstanding to date. The Plaintiff brought this action against the Defendants for recovery of the monies owing by the 1st Defendant together with interest and costs. The 1st Defendant did not deny liability. The 2nd and 3rd Defendants denied liability as guarantors. The Plaintiff took out this Summons for Summary Judgment under Order 14 of the Rules of the District Court. The 2nd and 3rd Defendants denied liability on 3 main grounds. First, they challenged the validity and enforceability of the terms and conditions of the credit cards and the facility letter. They said they had not specifically agreed to be bound by the terms and conditions governing the use of the credit cards, and they had not been notified of the interest rate for cash advances, rate for late charge and the rate of finance charge. The documentary evidence before the court showed otherwise. The application forms for the credit cards were signed by the 2nd and 3rd Defendants on the 1st Defendant s behalf, they were the directors of the 1st Defendant and the authorized card users. In signing the application forms, they agreed to be bound by the terms and conditions in the card member agreement from time to time in force throughout the use of the credit cards. The 2nd and 3rd Defendants therefore could not say they did not have knowledge of the terms and conditions of the credit card agreement. By using the credit cards, the Defendants were deemed to have agreed to be bound by the credit card agreements. Monthly statements containing the applicable rate of interest, finance charge and late charges were sent to the Defendants and no issue had been taken on the same at all relevant time. The Plaintiff did not claim interest on the credit accounts after these accounts were closed. There are no arguable issue here that the Defendants did not have full knowledge of the terms and conditions under the credit card agreement and the facility letter. These terms and conditions were obviously binding and enforceable on the Defendants. Secondly, the 2nd and 3rd Defendants challenged the enforceability of the guarantee. They said they were not advised of their right to seek independent legal advice, that they did not know the contents of the guarantee when it was presented to them for their signatures, they were told it was a formality, and the contents were not interpreted to them. The 2nd and 3rd Defendants were not pleading Non Est Factum. Their counsel confirmed to the court that they knew the document they were signing was a guarantee at the time. Solicitor for the Plaintiff pointed out that this was in fact not the first occasion the 2nd and 3rd Defendants signed a guarantee for the loans, advances and banking facilities granted by the Plaintiff to the 1st Defendant. The 2nd and 3rd Defendants were experienced, business people who were taking out banking facilities and loans, and were giving a personal guarantee for the same. They derived direct benefit by entering into the guarantee agreement. They were in fact also the directors and shareholders of the 1st Defendant. No credible defence had been shown by the Defendants in this argument. The third ground put forward by the Defendants was that the Plaintiff had breached the facility letter by granting facilities in excess of the limit granted, hence the terms governing the credit cards and the facility letter were rendered invalid. The Defendants also argued that they should be given a reasonable time to repay the monies outstanding. This argument was not sustainable as the Facility letter dated 24 February 2006 expressly provided that the guarantee provided by the 2nd and 3rd Defendants was a Joint and Several Unlimited Deed of Guarantee . The guarantee document signed, sealed and delivered by the 2nd and 3rd Defendant on 4 March 2006 was for all sums of monies .now and at any time hereafter or from time to time owing and incurred and also stated to be repayable on demand. The Defendants had also initially contested this application for Summary Judgment on the ground that there was inequality of bargaining power and that it was unconscionable for the Plaintiff to enforce repayment. This ground appeared not to have been pursued in the hearing before me. It was clear that the argument of unfair bargaining power as laid out in Lloyds Bank v Bundy (1975) 1 QB 327 would not afford any defence to the Defendants in this case. The decision of Lord Denning MR in the Bundy s case was subsequently questioned in the House of Lords in National Westminster Bank plc v Morgan (1985) AC 686 , and the learned editors of Chitty on Contracts concluded (at par. 7-124) that It is certainly unlikely that the mere inequality of bargaining power, even when this leads to the exertion of considerable pressure, will be recognised as a ground for setting aside a contract . In Anglo-Italian Bank v Wells (1878) 38 LT 197,201 (cited in Hong Kong Civil Procedure 2007 at 14/4/8), Sir George Jessel MR said: When the Judge is satisfied not only that there is no defence but no fairly arguable point to be argued on behalf of the Defendant it is his duty to give judgment to the Plaintiff . Also in Re Safe Rich Industries (1994) HKLY 115, as per Bokhary JA (as he then was): The test at the summary stage is indeed as simple as whether the defendant s assertions are believable. But it must be recognized because failure to recognize it would create a debt-dodger s charter - that whether the defendant s assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as either undisputed or beyond reasonable dispute . For the above reasons, it is obvious that there are no triable issues and the Defendants have no defence to the Plaintiff s claim, and the Plaintiff should be entitled to have Summary Judgment in its favour. Judgment is therefore entered for the Plaintiff against the Defendants for the sums stated in Par. (a), (b), (c) and (d) of this Inter Partes Summons for Summary Judgment. I also order that the Defendants are to pay the Plaintiff s costs of this action including the costs of this application, to be taxed if not agreed. This be a cost order nisi and be made absolute 14 days after handing down of this judgment. ( W.C.Li ) Deputy District Judge Representation: Miss R. Lee of Messrs. Li, Kwok & Law for the Plaintiff Mr. Stephen S.B. Yeung instructed by Ms Edward Lai & Co. for 1st, 2nd and 3rd Defendants PAGE - PAGE A B C D E F G H I J K L M N O P Q R S 1udk 1udk E F G H I J K L M N O P Q R S T U V (#p# (#p# (#p# (#p# &`#$ & 6" ABC.dot setup Microsoft Word 9.0 Judiciary Title Microsoft Word Document MSWordDoc Word.Document.8