Commercial Law — High Court dismisses Indian bank’s summary judgment application for US$3 million debt due to “grave suspicion” that the subject bill of exchange was forged
Given the gravity of the forgery allegation, this is not a typical debt recovery case. The Court’s refusal to enter judgment perfectly illustrates that the integrity of the plaintiff’s case remains of prime importance in a summary judgment application.
Canara Bank v Excel Triumph Ltd and Another
|Reference:||HCA 1736/2019;  HKCFI 3747|
|Court:||Court of First Instance|
|Before:||Hon K Yeung J in Chambers|
|Appearance:||Simon Wong and Samantha Lau, instructed by Oldham, Li & Nie, acted for the 1st Defendant and, instructed by Tonys Lawyers, the 2nd Defendant.|
|Date of Decision:||16 December 2021|
The Plaintiff, an Indian bank, sought final judgment against the 1st Defendant as debtor and the 2nd Defendant as guarantor. Its claim is based on a dishonoured bill of exchange allegedly drawn by the 1st Defendant as consideration for banking facilities in the sum of US$3 million. The defence case is that the bill of exchange and the guarantee agreement were both forged.
Hon K Yeung J found genuine weaknesses in the Plaintiff’s claim. There were suspicious features on the bill of exchange and supporting documents, such as fully identical signatures of the 1st Defendant and an absence of company chop. As such, the Court held that triable issues have been raised and dismissed the Plaintiff’s summons with costs.
The Plaintiff’s Case
The 1st Defendant (“D1”) was a Hong Kong company and a customer of the Plaintiff (“P”). According to P, P allegedly granted D1 banking and bill discounting facilities in the sum of US$3 million (“the Facilities”) pursuant to a “Terms and Conditions for General Customer Services” (“T&C”). The 2nd Defendant (“D2”) then executed an agreement to guarantee D1’s principal indebtedness up to US$3 million.
Later, D1 drew a bill of exchange (the “Subject BoE”) as consideration for the Facilities. However, the Subject BoE was dishonoured when P presented it for acceptance, and the Facilities remained unpaid.
P is suing on D1’s alleged outstanding indebtedness, which is principally the “Face value of the [Subject BoE]” together with interest.
The Defendants’ Case
D1 admits to having signed the T&C but denies having been granted the Facilities and having drawn the Subject BoE. It avers that the Subject BoE is forged.
D2 avers that P only gave her a blank proforma guarantee to sign, and that information related to the debtor, D2 and the limit of the guarantee was only subsequently inserted into the document. The guarantee agreement is forged, void and unenforceable.
The Court’s Analysis
The legal principles which govern Order 14 applications are clear. While the burden is on the defendant to show a triable issue, the Court would examine the plaintiff’s case first before considering the defence. If genuine weaknesses were exposed in the plaintiff’s case, the correct course for the Court is to give the defendant unconditional leave to defend — provided that the defence is credible.
The Subject BoE is fundamentally important in P’s claim. With this in mind, Hon K Yeung J accepted Ds’ counsel’s analysis and found several genuine weaknesses in P’s case, namely:
(1) Material inconsistencies as to whether P ever had the original Subject BoE
• P pleads that D1 tendered the Subject BoE by fax. However, in another part of its Statement of Claim, P pleads that it presented the “original” Subject BoE to the relevant bank for acceptance. How P got hold of the original copy was never explained.
(2) Highly unusual features on the face of the Subject BoE
• Just by mere inspection, all of the signatures said by P to be those of D1’s representative on the Subject BoE and the supporting documents are exactly the same. None of these documents bore D1’s company chop.
(3) The 5th discounted bill being missing
• P alleges that, soon after executing the T&C, P upon D1’s request discounted a bill in the sum of around US$3 million and credited the amount into 2 companies specified by D1. After that, P discounted 4 other bills for D1. The 5th discounted bill was supposed to have been repaid by the Subject BoE.
• However, P could not produce the 5th discounted bill in Court. P’s “Senior Officer” named Iris Ip claims in her letter that the bill was misplaced during P’s office relocation. The Court agreed with counsel for the Defendants that P’s explanation is unsatisfactory and warrants further investigation at the very least.
(4) Unexplained connection between P’s external auditor and some of the entities concerned
• D1 asserts that it has no business relationship with the beneficiaries and drawees of the discounted bills. However, it has emerged that some of those entities have connections to an external auditor engaged by P.
• The learned Judge remarked, “The connection, in the context of the allegation of forgeries by D1, in my view gives rise to grave suspicion, is a serious cause for concern, and warrants at least further canvasing during the trial.”
In all the circumstances, Hon K Yeung J held that triable issues – particularly those related to the Subject BoE’s authenticity – have been raised in respect of the claims against both D1 and D2. Those issues constitute arguable defences and ought to be tried.
The Court dismissed the Plaintiff’s summons for summary judgment and awarded costs to D1 and D2.
Previously, P’s summary judgment applications against the same D2 in Canara Bank v Pradeep Phulchang Agarwal & Anor (HCA 1737/2019, judgment dated 25 October 2021) and Canara Bank v Pradeep Phulchang Agarwal & Others (HCA 1769/2019, judgment dated 18 November 2021) were also dismissed by Masters with costs. Simon Wong acted for the successful D2.
Conclusion and Takeaway
It is to be reminded that the Court will readily dismiss an O.14 Summons if the plaintiff’s case and evidence are weak. The defence, in resisting such an application, may show triable issues by challenging the plaintiff’s evidence and showing matters which ought to be investigated further.
This is not a typical debt recovery case. The Defendants alleged that the very documents that created the loan were forged, which is a serious allegation. That said, the Court’s refusal to enter judgment perfectly illustrates that the integrity of the plaintiff’s case remains of prime importance in a summary judgment application. Suspicious and unexplained features in the plaintiff’s evidence on the core issues which ought to be investigated further would be sufficient for the Court to refuse the application.
“Simon is a great communicator, very meticulous, and provides sound practical advice. His arguments are well-structured and very persuasive. Sensible, commercial and very responsive.”
Simon is qualified to practise law both in Hong Kong and California USA. He specializes in commercial dispute resolution and personal injury litigation. Simon’s commercial litigation experience includes company and shareholders’ disputes, insolvency and contractual disputes. He also has an ever-increasing experience in probate, trust and land matters including Chinese customary law.
In his personal injury practice, he has been instructed in more than 400 personal injury and medical negligence cases and has extensive experience in representing claimants as well as defendants.
Recently, Simon successfully resisted an appeal against the decision to uphold a striking out order in Chu Yue Bun v Lai Shiu Woon (formerly known as Ng Lai Shiu Woon) (CACV 475/2020)  HKCA 1929. He also acted for the successful Respondent in the Court of First Instance.
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Samantha graduated from the University of Hong Kong with double first-class degrees in law and government, before attending Harvard Law School for postgraduate studies, where she graduated with a top prize for her essay on equality law. She later served as a judicial assistant of the Court of Final Appeal of Hong Kong, before being awarded the Hong Kong Bar Scholarship. She is also called to the Bar in New York.
Since joining the Bar, Samantha has been steadily developing a predominantly civil practice with an emphasis on commercial and civil disputes, arbitration and public law. Recently, Samantha worked on a complex arbitration case involving a transnational EPC contract and the United Nations Convention on Contracts for the International Sale of Goods (CISG).
She also appeared with Mr Tim Parker in Re LH and Another  3 HKLRD 707, which deals with the novel issue of whether the Court has jurisdiction to give prior authorization for expenses intended to be paid under a contemplated surrogacy arrangement.
Samantha served as co-speaker at the CPD-accredited webinar “Administrative Appeals: Law and Strategy”.
This article was first published on 16 March 2022.
Disclaimer: This article does not constitute legal advice and seeks to set out the general principles of the law. Detailed advice should therefore be sought from a legal professional relating to the individual merits and facts of a particular case. The photograph which appears in this article is included for decorative purposes only and should not be taken as a depiction of any matter to which the case is related.