Jiang, Jianxin v. Yiu, Ming Fung
Read the full judgment text of CACV 156/2019 on BabelCite. This Court of Appeal judgment was delivered on 6 November 2020.
2. 1 The plaintiff’s case is a simple one. The parties had entered into a written loan agreement dated 30 November 2011 by which the plaintiff lent a sum of RMB 70,000,000 (‘the Loan’) to the defendant in order to fund the defendant’s investment in Triplex International Biosciences Co. Ltd. (‘Triplex’), a Hong Kong company of which the defendant is currently the chairman and president. The terms and conditions of the loan agreement contained the following :
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CACV 156/2019 [2020] HKCA 916 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 156 OF 2019 (ON APPEAL FROM HCA NO. 2063 OF 2017) ________________________
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__________________________________________ REASONS FOR JUDGMENT __________________________________________ Hon Cheung JA (giving the Reasons for Judgment of the Court) : I. The appeal and cross-appeal 1.1.The plaintiff sought summary judgment against the defendant for non-repayment of a loan of RMB 70,000,000 together with interest. The Master granted the application. On appeal to Deputy High Court Judge Anita Yip SC, the plaintiff’s application was allowed to the extent that judgment entered against the defendant for the principal sum of RMB 70,000,000 was not disturbed while the claim for interest has to be tried. 1.2.The defendant appealed to this Court against the decision. The plaintiff also sought leave to cross‑appeal out of time against the decision relating to the issue of interest. We dismissed the defendant’s appeal and we granted leave to the plaintiff and allowed his appeal. We now give reasons for the judgment. II. The parties’ pleaded case 1) The plaintiff’s case 2.1 The plaintiff’s case is a simple one. The parties had entered into a written loan agreement dated 30 November 2011 by which the plaintiff lent a sum of RMB 70,000,000 (‘the Loan’) to the defendant in order to fund the defendant’s investment in Triplex International Biosciences Co. Ltd. (‘Triplex’), a Hong Kong company of which the defendant is currently the chairman and president. The terms and conditions of the loan agreement contained the following : (1) The plaintiff lent a sum of RMB 70,000,000 to the defendant in November 2011; (2) The defendant shall repay RMB 35,000,000, being half of the amount of the Loan to the plaintiff by the end of February 2013; (3) The defendant shall repay RMB 35,000,000 being half of the amount of Loan to the plaintiff by the end of May 2013; and (4) The defendant shall pay interest being 3% of the total amount of the Loan per month for the period of 1 November 2011 to 31 May 2013 by the end of May 2013. 2.2.The defendant failed to repay any of the loan or interest. By a letter dated 15 May 2017 the plaintiff demanded the defendant to repay the loan with interest. The defendant had failed to do so. 2) The defendant’s defence 2.3.The defendant’s case is that he had repaid RMB 70,000,000 to the plaintiff. 2.4.The defendant filed a defence in which he pleaded at the end of 2010 or the beginning of 2011, due to tight cash flow, he negotiated with the plaintiff for a loan of RMB 70,000,000 and part of the loan could also be applied for acquisition of the defendant’s shareholding in Triplex. There was, however, no agreement on interest. 2.5.The defendant was the major shareholder of Triplex. In 2012, the defendant was trying to cause Triplex to be listed on the Stock Exchange of Hong Kong (‘the Stock Exchange’). 2.6.The defendant did not admit that the plaintiff had lent RMB 70,000,000 to him. Instead, he only received from the plaintiff RMB 65,467,766. 2.7.The plaintiff’s reference to the written loan agreement was, in fact, a Confirmation Note dated 30 November 2011. The content of the Confirmation Note was inaccurate and incomplete in that it was not signed on 30 November 2011 but was signed on 13 September 2012. The place where the interest rate of 3% was written was actually left blank at the time of signing but was only later inserted by the plaintiff in hand-writing without the defendant’s knowledge or consent. 2.8.The defendant further pleaded that at the time of the signing of the Loan Confirmation Note there was an oral agreement between the plaintiff and the defendant that out of the RMB 70,000,000 received by the defendant, RMB 35,000,000 would be a loan and the balance was part payment for the purchase price of the 15% of the defendant’s shareholdings in Triplex under a Share Purchase Agreement also signed on 13 September 2012. It was further orally agreed between the same parties that the defendant would pay the plaintiff RMB 35,000,000 as interest on the loan of RMB 35,000,000 if Triplex was successfully listed (paragraphs 6(d) and (e) of the defence). 2.9.The listing failed in about June 2013. As a result, the plaintiff was not entitled to the interest of RMB 35,000,000 under the oral agreement. 2.10.In September 2013, the plaintiff informed the defendant that he did not want to proceed with the Share Purchase Agreement and asked the defendant to repay RMB 70,000,000 — made up of RMB 35,000,000 for the loan and RMB 35,000,000 for the purchase price of the shares. The defendant duly repaid RMB 70,000,000 to the plaintiff between September 2013 and August 2014. III. Further evidence 3.1.After the defence was filed, the plaintiff applied for summary judgment. Further evidence was filed by the parties. 1) The plaintiff’s evidence 3.2.There is no dispute that the written terms of the loan agreement or Confirmation Note (the Judge referred to it as the Loan Confirmation Note) are as follows :
3.3.The plaintiff accepted that the defendant had repaid him RMB 70,000,000 but it was in respect of another transaction in which the plaintiff had lent RMB 66,000,000 and HK$3,000,000 to the defendant. These two sums were to be used as the plaintiff’s investment in Triplex. The terms were contained in an Investment Confirmation Note dated 28 December 2012 which stated that :
3.4.The Investment Confirmation Note was preceded by a Share Purchase Agreement between the parties in which the plaintiff agreed to invest in Triplex. The agreement was concluded in December 2012 but was backdated to 31 March 2012 at the request of the defendant in order to comply with the listing rules. The defendant submitted the listing application of Triplex in December 2012 and according to the rules there should not be any share transfer thereafter. The Share Purchase Agreement provided, inter alia, that : (1) the defendant (named as Party A) agreed to transfer 15% of his shareholdings to the plaintiff (named as Party B); and (2) as at 31 March 2012, the assets of Triplex were worth RMB 919.856 million and the defendant agreed to transfer the 15% shareholdings to the plaintiff for RMB 137.9784 million. 3.5.After the parties entered into the Share Purchase Agreement, the defendant told the plaintiff that there would be 100% return on his investment of RMB 66,000,000 and HK$3,000,000, thus making a total of RMB 132,000,000 and HK$6,000,000. The parties agreed that since the plaintiff had already paid the defendant RMB 66,000,000 and HK$3,000,000, they would treat the money as the plaintiff’s purchase price for the shares and the defendant did not have to pay the return on investment (i.e. RMB 132,000,000 and HK$6,000,000) to the defendant, the reason being that the aggregate of RMB 132,000,000 and HK$6,000,000 was very similar to the purchase price stated in the Share Purchase Agreement of RMB 137.9784 million. 3.6.According to the plaintiff, the defendant never transferred the 15% shareholdings in Triplex to him. In 2013, when the Triplex listing failed, the plaintiff demanded the repayment of the personal loan of RMB 70,000,000 and also the repayment of the principal and interest on the consideration for the share transfer under Article VIII of the Share Purchase Agreement. However, the defendant said he could only repay the plaintiff RMB 66,000,000 and HK$3,000,000 representing the original investment sums he obtained from the plaintiff. The plaintiff agreed. 3.7.The plaintiff’s case, therefore, is that the payment of RMB 70,000,000 by the defendant to him (as stated in the Schedule attached to his defence) represents the repayment for his initial investment in Triplex, i.e., RMB 66,000,000 and HK$3,000,000, which sums were very close to RMB 70,000,000. It was not repayment of his personal loan under the Loan Confirmation Note. 3.8.In respect of interest, the plaintiff stated that there was initial disagreement between the parties on the terms proposed by the plaintiff that the defendant would pay him liquidated damages of a certain percentage on the unpaid amount from the date of default. After negotiation, the defendant agreed to pay the plaintiff the 3% interest now claimed by the plaintiff and the figure 3 was then handwritten on the Loan Confirmation Note which was later signed by the defendant. 2) The defendant’s further evidence 3.9.The defendant maintained that there was only one loan from the plaintiff which he had repaid with RMB 70,000,000. He denied that he had ever received RMB 66,000,000 and HK$3,000,000. He denied that there was an agreement on the 3% interest and maintained that the figure was left blank on the Loan Confirmation Note and later inserted by the plaintiff after he had signed on 13 September 2012. He maintained all three documents, namely the Loan Confirmation Note, the Share Purchase Agreement and the Investment Confirmation Note were signed on 13 September 2012. 3.10.The defendant stated that the Investment Confirmation Note was signed because the plaintiff ‘was worried about the risk of investment and therefore requested me to sign another Loan Confirmation Note. … If the listing or investment fails, he [the plaintiff] would not recognise the Investment Confirmation Note but would only recognise the Loan Confirmation Note’. 3.11.The listing failed in June 2013. The defendant informed the plaintiff in July 2013 of the failure and sent RMB 70,000,000 to an account designated by the plaintiff. 3.12.In respect of the date of the oral agreement pleaded in paragraph 6(d) and paragraph 6(e) of the defence, the defendant said that the oral agreement actually took place before he signed the Loan Confirmation Note on 13 September 2012. 3.13.He further stated that since the parties had ‘signed the Loan Confirmation Note and the Investment Confirmation Note, the oral agreement between both parties was superseded by the two documents.’ This oral agreement was the same one pleaded in paragraph 6(d) and paragraph 6(e) of the defence. IV.The Judge’s decision 4.The Judge held that the defendant’s case that he had repaid the loan of RMB 70,000,000 is totally incredible and defiant of belief. In respect of the claim for interest at 3% the Judge observed that the plaintiff said it was inserted after negotiation while the defendant said it was left blank and was inserted by the plaintiff after he had signed the document. The Judge held that this is a classic case of oral disputes which cannot be resolved on affidavit. She held that it cannot be said that the defendant’s version that the figure 3 was written after signing is wholly incapable of belief. V.The defendant’s appeal 5.1.The defendant’s grounds of appeal focused on the Judge’s decision on the defendant’s alleged payment of the loan of RMB 70,000,000. They are built on the premises of what the defendant perceived to be the Judge’s view in paragraph 57 of her decision. Mr Dawes SC (together with Mr Chan) for the defendant submitted that the Judge had held that it was plausible on the facts that although the defendant had, by signing the Investment Confirmation Note, acknowledged receipt of RMB 66,000,000 and HK$3,000,000 identified in that document, he did not, in fact, receive the sums. It was then argued that it was thus plausible on the facts that the defendant’s repayment of RMB 70,000,000 to the plaintiff, which the latter did not dispute was repaid, was not in respect of the sums identified in the Investment Confirmation Note but was to repay a different sum of RMB 65,467,766 that the defendant had received from the plaintiff. The defendant’s case was also supported by the bank documents that the plaintiff had only paid RMB 65,467,766 to the defendant and the defendant had subsequently repaid RMB 70,000,000 to the plaintiff. Accordingly, it was wrong in law for the Judge in a summary judgment application to discount what she accepted was a plausible factual scenario (i.e. the defendant’s case) based on what she thought was a more compelling scenario, viz: the plaintiff's case that he had advanced two tranches of funds to the defendant, i.e. first, RMB 66,000,000 and HK$3,000,000 under the Investment Confirmation Note and second, RMB 70,000,000 under a Loan Confirmation Note and the RMB 70,000,000 from the defendant to the plaintiff was to repay the first tranche but not the second tranche. Furthermore, there was no justifiable basis, in a summary judgment application, for the Judge to take the view that the defendant’s scenario was not the more compelling of the two scenarios bearing in mind that RMB 66,000,000 and HK$3,000,000 were substantial sums and had the plaintiff paid the sums to the defendant, there ought to have been documentary records but there were none; and the only bank documents available support the defendant’s case. 5.2.Further, in view of the Judge’s decision on the interest which she gave the defendant unconditional leave to defend, the defendant argued that the Judge ought to have appreciated, notwithstanding what had been written on the Loan Confirmation Note, it was perfectly consistent and plausible that the defendant had only received RMB 65,467,766 from the plaintiff for which he had repaid the sum of RMB 70,000,000. VI. Our view 6.1.In our view, the defendant built his appeal on a false premise because the Judge had not accepted that it was plausible that the defendant had not received the sums of RMB 66,000,000 and HK$3,000,000 despite his acknowledgement in the Investment Confirmation Note of the receipt of these sums. 6.2.The whole of paragraph 57 of the decision must be read. One can see immediately that the Judge, far from accepting Mr Dawes’ submission, in fact, had expressed her incredulity that it should be so when the defendant had offered no explanation at all.
6.3.The Judge continued :
6.4.In an application for summary judgment the test is whether the defendant has raised triable issues on the plaintiff’s claim. But the mere fact that the defendant has put forward a defence does not necessarily mean that there are triable issues because the Court does not need to accept such defence on its face value. On the contrary the Court is required to decide whether the defence is credible or simply moonshine. The Court is, of course, not to conduct a mini trial on the evidence but at the same time in order to assess the credibility of the defence, the Court is clearly entitled to test it against contemporaneous documents, whether the defence is inconsistent with the defendant’s case previously put forward or whether it is only recently raised despite opportunity being given to the defendant to respond earlier. The Court will also consider the inherent probability of the defence. 6.5.In this case it is important to focus on what the defendant had pleaded in his defence. He was clearly aware of and was responding to the plaintiff’s case on the loan agreement of RMB 70,000,000 which undisputedly was contained in the Loan Confirmation Note. The defendant admitted that he had asked for a loan of RMB 70,000,000 from the plaintiff. He claimed that it was the only loan he had received and he had already repaid it. Although he said he only received from the plaintiff RMB 65,467,766, he never explained why he should subsequently repay RMB 70,000,000. That was the state of his defence. Again he had not explained why he should confirm in the Loan Confirmation Note that he had borrowed RMB 70,000,000 from the plaintiff in November 2011. 6.6.Faced with the defendant’s contention that he had repaid the loan of RMB 70,000,000, the plaintiff is clearly entitled to refute this by showing that the repayment is in respect of another transaction, namely the agreement as contained in the Investment Confirmation Note. The plaintiff’s claim remained consistent, namely failure of the defendant to repay the loan of RMB 70,000,000. He had not sought summary judgment on any unpleaded alternative case. 6.7.The defendant was plainly caught off guard by the plaintiff’s disclosure of the Investment Confirmation Note which was undisputedly signed by him and in which he expressly acknowledged that he had received two other sums, namely RMB 66,000,000 and HK$3,000,000. These two sums were approximately RMB 70,000,000. Although he denied he had received them, as the Judge observed, he had offered no explanation as to why he should acknowledge their receipt if he had not received them. He then tried to shift the burden by saying the plaintiff had not produced evidence of the payment of the two sums. But why should the plaintiff when there was this clear acknowledgement by the defendant of the payment and there was no explanation why he should acknowledge it if he had not received them. 6.8.Thus there are two documents signed by the defendant showing that he had received two sets of loans. Whilst he was able to show that he had repaid RMB 70,000,000 he had not been able to show that it was for the repayment of the Loan Confirmation Agreement and not the Investment Confirmation Agreement. In an attempt to get out of the quagmire, the defendant then stated that the Loan Confirmation Note only came into existence afterwards in order to ease the plaintiff’s worry about his investment risk in Triplex. As the Judge observed this is inconsistent with his pleaded case. He had never disclosed this subsequent event in his pleaded defence notwithstanding he had gone into length on the Share Purchase Agreement and the proposed listing of Triplex and its subsequent failure. 6.9.Further, despite the parties having conducted their business dealings by way of written agreements, somehow, there was this oral agreement that the plaintiff agreed that if the listing or investment failed, he would not recognise the Investment Confirmation Note but only the Loan Confirmation Note. This oral agreement was not reduced into writing or recorded in the two confirmation notes. 6.10.The Judge was clearly not impressed by the rather contrived nature of the defendant’s case and found the defence incredible. Notwithstanding the dates of the Loan Confirmation Note (30 November 2011), the Investment Confirmation Note (28 December 2012) and the Share Purchase Agreement (31 March 2012), the defendant claimed that these documents were all signed on 13 September 2012. There was no explanation by him why he should sign on documents that bear dates that are different from the dates when the documents were signed and he had not explained why, for example, if the Loan Confirmation Note was indeed only signed on 13 September 2012 why it should be backdated to 30 November 2011. In this note the defendant confirmed that he had received RMB 70,000,000 in November 2011. Further, as the Judge observed, the content of the Investment Confirmation Note showed that it could not have been signed on 13 September 2012 which predated a specific event referred to in that document. 6.11.The Judge was also not impressed with the defendant’s reliance on another oral agreement concerning how RMB 35,000,000 was to be treated as interest on the RMB 35,000,000 if the listing was successful. This was not recorded in any of the written agreements signed by the parties. The defendant did not help his own case when he later retracted from this pleaded oral agreement by saying that since the parties had ‘signed the Loan Confirmation Note and the Investment Confirmation Note, the oral agreement between both parties was superseded by the two documents.’ 6.12.In the light of this and other evidence the Judge was clearly entitled to reject the defendant’s case on the repayment of RMB 70,000,000 under the Loan Confirmation Note. She was clearly right when she held the defendant’s defence of repayment of RMB 70,000,000 is totally incredible and defiant of belief. On that basis she clearly was entitled to come to the view that the repayment by the defendant was only in respect of the Investment Confirmation Note. 6.13.We do not regard the Judge’s decision on interest would assist the defendant at all. The Judge had given cogent reasons why she rejected the defence of the repayment of principal sum of RMB 70,000,000. What she said on the claim for interest does not affect the soundness of her decision on the principal. 6.14.Accordingly the defendant’s appeal was dismissed. VII. Leave to cross-appeal 7.1.The plaintiff explained that his lawyers mistakenly believed it was not necessary to seek leave to cross‑appeal when they filed the respondent’s notice seeking judgment on the interest. They only became aware of the requirement when the defendant objected to the cross‑appeal. 7.2.In our view the defendant was plainly aware, well before the plaintiff issuing the application for leave, of his desire to cross‑appeal and seek judgment on interest. There was no prejudice to the defendant for the issue of interest to be canvassed in this appeal. 7.3.We granted leave and allowed the appeal because the defendant’s case on interest is again incredible. Under paragraph 2 of the Loan Confirmation Note the defendant expressly agreed that he would repay the principal and interest to the plaintiff. The Judge had not addressed the point that the defendant had never explained why he should sign the document if the interest rate at paragraph 2(3) was left blank. Accordingly we ordered judgment to the plaintiff on the interest as claimed. VIII. Costs 8.We ordered costs of the appeal to the plaintiff with certificate for two counsel.
Mr Victor Dawes SC and Mr Anthony Chan, instructed by Fred Kan & Co., for the Defendant Mr Anson Wong SC and Mr Ryan Law, instructed by Nixon Peabody CWL, for the Plaintiff |
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