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HCMP 281/2017

[2018] HKCFI 978


IN THE MATTER of Order 88 of the Rules

of the High Court, Cap 4A
IN THE MATTER of a Mortgage dated 17
‍February 2015 and registered in the Land
Registry by Memorial No 15030401340207
(“Mortgage”) in respect of Apartment F on
5th Floor of Block A-1 and Car Parking
Space No 4 on 2nd Floor of the Garage,
Scenic Villas, Nos 2 – 28 Scenic Villa Drive,
Hong Kong (“Mortgaged Properties”)
IN THE MATTER of a Guarantee and
Indemnity dated 13 September 2012 given
by Chan Chesta (formerly known as Chan
Sau Chu) for the account of FIE Company
Limited (“1st Guarantee”)
IN THE MATTER of a Guarantee and
Indemnity dated 6 October 2014 given by
Chan Chesta (formerly known as Chan Sau
Chu) for the account of FIE Company
Limited (“2nd Guarantee”)
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(星展銀行 (香港) 有限公司)


CHAN CHESTA 1st Defendant

(formerly known as CHAN SAU CHU)


Before: Deputy High Court Judge Le Pichon in Court

Date of Hearing:25 April 2018
Date of Judgment: 9 May 2018


1. This is a mortgage action commenced by DBS Bank (Hong Kong)

Limited (“the Bank”) against the 1st defendant Chan Chesta (“Madam
Chan”), the 2nd defendant FIE Company Limited (“the Company”)
(collectively “the defendants”) for vacant possession of the mortgaged
properties (hereinafter defined), payment of all monies due to the Bank
(together with interest thereon) as well as monies payable under two
guarantees provided by Madam Chan together with interest and costs.
The total outstanding indebtedness as at 28 February 2017 stood at
HK$33,959,259.86, EUR 1072.11 and US$1,344,852.49. At the
conclusion of the hearing judgment was reserved which I now give.
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2. At the commencement of the hearing, Madam Chan gave notice to act in

person. The Company’s solicitors Messrs Tanner De Witt (“TDW”) were
present at the hearing but had seen fit to dispense with the services of
counsel whom they had earlier instructed and who (on the Company’s
behalf albeit in disregard of the timeline laid down in the practice
direction) had submitted short written submissions to the court the
previous afternoon. Surprisingly, TDW requested that Madam Chan be
permitted to represent the Company as well when TDW was still on
record as representing the Company.

3. Absent a notice filed pursuant to Order 67, rule 6 (solicitor ceasing to act)
and an order obtained from the Practice Master for the Company to be
represented by its director, the court refused the application.

4. TDW then sought the court’s indulgence for a short adjournment. Upon
resumption of the hearing, the court declined to further adjourn the
hearing pending the attendance of counsel for the Company who,
apparently, was instructed during the adjournment.

Background facts

5. At all material times, Madam Chan acted for and on behalf of the
Company of which she was director and shareholder. The banking
facilities granted by the Bank and enjoyed by the Company are not
disputed. In view of the defence relied on at the hearing, no more than a
brief summary of the underlying documentation will be necessary.

6. It suffices to state that between 2012 and 2016, the Bank and Madam
Chan acting for and on behalf of the Company entered into what has been
referred to at the hearing and in the written submissions as “the 1 st facility
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letter” being a facility letter from the Bank to the Company dated 4
September 2012. That was varied by four subsequent facility letters
respectively referred to as the 2nd, 3rd, 6th and 8th ‍facility letters.

7. The Bank offered the Company further banking facilities by facility

letters (referred to by the parties as the 4th, 5th and 10th facility letters)
which Madam Chan confirmed and accepted for and on behalf of the
Company subject to the terms and conditions therein. The terms and
conditions of the 5th facility letter continued subject to variations
subsequently made by facility letters referred to as the 7 th and 9th facility

8. On 13 September 2012, the Bank and Madam Chan on behalf of the

Company entered into a General Commercial Agreement. On the same
day Madam Chan provided the Bank with a guarantee and indemnity (“the
1st guarantee”) in consideration of the Bank granting the Company
banking facilities at the request of Madam Chan who agreed to pay the
Bank all monies owing to the Bank by the Company.

9. On 6 October 2014, Madam Chan gave a further guarantee (“the 2nd

guarantee”) similar in terms to the 1st guarantee. Madam Chan’s liabilities
under the guarantees were unlimited.

10. By a Mortgage dated 17 February 2015 Madam Chan charged Apartment

F, 5th Floor, Block A-1 and car parking space no ‍4 of Scenic Villas,
Pokfulam (“the mortgaged properties”) which she owned to secure all
monies (including all interest, costs, charges and expenses) owed by the
Company as borrower to the Bank.
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11. By letters dated 9 January 2017 to each of the defendants, the Bank
demanded repayment of the outstanding indebtedness within 7 ‍days
together with interest due failing which legal proceedings would be
instituted for recovery for payment of the outstanding amounts and for
vacant possession of the mortgaged properties.

12. The originating summons was issued on 7 February 2017.

The defence

13. Only one affirmation dated 26 May 2017 has been filed in opposition to
the originating summons on behalf of the defendants. It contains various
unparticularised and unsubstantiated assertions which appear to pertain to
allegations of misrepresentation, undue influence and non est factum.
The defendants’ application for the originating summons to be converted
into a writ action was dismissed by Master Liu on 15 ‍November 2017.
No further evidence has been filed.

14. At the hearing, Madam Chan applied for leave to file further evidence,
ostensibly relying on the fact that she had sustained two accidents which
affected her physically and mentally. The application was refused. Quite
apart from the fact that Madam Chan’s affirmation in opposition made
almost two years after the alleged accidents made no mention of her not
being in a fit state when the relevant documents were signed, it transpired
that those accidents actually did not take place until after the guarantees
and the mortgage had all been signed. Moreover, there is no evidence that
the alleged accidents affected Madam Chan’s ability to recall events in
order to respond to the Bank’s claims. In those circumstances, the alleged
accidents could not have had any impact on her capacity whether at the
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time she assumed the obligations and liabilities or her ability to defend
the proceedings.

15. At the hearing, Madam Chan acknowledged that she had been negligent
in not reading the documents she signed with care. In those
circumstances, leaving aside the absence of particulars and the generality
of the allegations, there is no question of any of the above-mentioned
defences of misrepresentation, undue influence and non est factum,
(based as they are on a lack of proper consent) succeeding.

16. It was then submitted that to render her liable would be totally unfair. It
was said that despite various requests, the Bank had refused to provide
particulars of how the interest on the indebtedness was calculated. Those
complaints also formed the basis of the submissions of Mr Chung counsel
for the Company to which I now turn.

17. The only defences Mr Chung relied on were those outlined in §§3 and 4
of his written skeleton which he elaborated at the hearing. Essentially
two points were taken: the first - the “prevailing rates” point - related to
additional interest at “prevailing rates” applicable in case of late payment
or default; the second - the conclusive evidence point - related to whether
the conclusive evidence provision in the facility letters, the guarantees
and the mortgage is applicable.
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(1) The “prevailing rates” point

18. §11.4 of the “Terms and Conditions Governing Banking Facilities and
Services” (“the Terms and Conditions”) attached to the 1 st ‍facility letter
form an integral part of not only the 1 st facility letter but also the
subsequent ones and provides as follows:

“ If any amount under the Banking Facility Letter is unpaid on

due date or exceeds the permitted facility limit, such overdue or
excess sum will be subject to the Bank’s then prevailing
overdue or over limit interest rate, and may be compounded
monthly or at such other intervals as the Bank may determine.
The Bank may, without prejudice to its other rights, increase
the interest rate on the entire amount outstanding under the
Banking Facilities Letters if any amount becomes overdue.”

19. The initial complaint in the defendants’ affirmation in opposition related

to the size of the font in §11.4 which was said to be too small. At the
hearing, it became a complaint that the Bank could have but chose not to
state upfront in the loan documentation (ie the facility letters) that
overdue payments attract default interest of an additional 7% over and
above the contract rate. It was common ground that the prevailing rate at
all material times in the present case was 7% over the contract rate. The
tenor of the defendants’ submission was that, instead, the default rate was
‘buried’ or ‘hidden’ in the Bank Charges Schedule (“the Schedule”). It
was submitted that it gave rise to an issue whether the default rate had
been properly brought to Madam Chan’s notice.

20. Mr Kok, counsel for the Bank, pointed out that the reason why the 7%
was not written into each and every single one of the facility letters was
because the rate in the Schedule was capable of being changed at any
time. That is clear from the opening paragraph of the Schedule which
states that the “charges are subject to change and the Bank reserves the
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right to introduce service charges not included in this booklet” (emphasis

added). So while the prevailing rate of 7% happened not to change in the
present case, it was capable of being changed unilaterally by the Bank at
any time after the date of any of the facility letters.

21. Under item 8 of section VII (relating to loan services) of the Schedule,
interest for late payment is expressed as “Contract Rate + 7% p.a. (except
otherwise agreed with the Bank)” (emphasis added). It was further
ubmitted that quite apart from the Bank’s option to change the prevailing
rate, situations could arise where, by agreement with the customer, a
different rate of default interest could have been charged.

22. In my view, the Bank’s option to change the prevailing rate was a valid
explanation as to why the facility letters did not state that the prevailing
rate. The Schedule is published by the Bank in booklet form and is also
readily accessible on the Bank’s website. I do not accept the suggestion
that the Bank acted unconscionably or contrived to conceal the default
interest rate in the circumstances.

23. A related aspect of the prevailing rates complaint was the Bank’s alleged
failure to provide the defendants with interest calculations (of both the
default rate as well as the normal interest rate) for the period prior to the
date of the originating summons. It was said that the defendants have not
been put in a position of being able to verify whether the calculations of
the indebtedness are correct.

24. That aspect also turned out to be a red herring. Mr Kok referred to the
exhibit marked “MHK 1” to the affirmation dated 7 July 2017 of Ma Ho
Kin (“Mr Ma”), (an officer of the Bank) which is a statement of account
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as at 7 February 2017. The first 3 pages of the exhibit (at B373 – 375)
demonstrate the falsity of the defendants’ allegation. Those pages inter
alia contain a detailed breakdown of calculations and supporting
statements in relation to each item of the indebtedness.

25. The interest calculations appear on the right hand column of B374 and
375 bearing the following heading: “For reference: Excel calculation
formula”. The information provided under the calculation formula includes
(i) the relevant interest rate, (ii) the period of interest in question, (iii) the
number of days involved, (iv) the total amount of interest and (v) the
daily interest amount.

26. I am more than satisfied that full particulars and breakdowns have been
given. It may well be that the defendants did not bother to analyse the
exhibits and it would appear that they never raised any questions with the
Bank had they had difficulty comprehending any of the entries. In short,
the objection is wholly without merit.

(2) The conclusive evidence clause

27. Mr Chung submitted that because the Bank ‘admitted’ that there was an
error in the accounts, the conclusive evidence clause should not apply.
He referred to the 2nd table in §27 of the affirmation of Chan Mee Ying
Brenda, a vice president of Special Assets Management Department of
the Bank dated 28 February 2017 which shows a total amount of
indebtedness inter alia of HK$12,915,115.28 as at 7 February 2017 and
contrasted that with the total amount of HK $12,915,837.49 arrived at by
Mr Ma set out in the 2 nd table in §3 of his affirmation made 4 ‍months
later. That, it was said, amounted to an ‘admission’ by the Bank of a clear
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calculation error. It was submitted that for that reason the conclusive
evidence clause should not apply.

28. Had the affirmations been properly read, the arithmetical error that came to
light as a result of Mr Ma’s review of the earlier calculations and which
was corrected was not the difference of HK$700 odd between the 2
amounts on which Mr Chung placed reliance. Rather, the true difference
is approximately HK$3750 in the defendants’ favour.

29. If Mr Chung’s submissions are valid, any arithmetical error however

insignificant would negate the effect of a conclusive evidence clause.
What the Bank sought to do was have Mr Ma review the earlier
calculations to verify their accuracy. The amounts stated in Mr Ma’s
affirmation supersede those given by Brenda Chan earlier. It is not the case
of the defendants being able to demonstrate that there is something
seriously wrong with Mr Ma’s calculations. The notion that any
correction made by the Bank would have the effect of negating a
conclusive evidence clause is contrary to common sense. I am not
prepared to accept that proposition in the absence of clear authority and
none was cited.


30. I reject the last-ditch defences the defendants have put forward . They are
devoid of merit. Accordingly, there is to be an order in terms of the
originating summons.

(Doreen Le Pichon)
Deputy High Court Judge
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Mr Martin Kok, instructed by Siao, Wen and Leung, for the plaintiff
The 1st defendant appeared in person
Mr Peter K M Chung, instructed by Tanner De Witt, for the 2nd defendant