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DCCJ 4909/2019
[2021] HKDC 296
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL ACTION NO 4909 OF 2019
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LEE SAU YEE SHIRLEY |
plaintiff |
and |
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RYBINSKI MARIUSZ |
defendant |
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Before: Deputy District Judge Tony Ko in Chambers
Date of Hearing: 5 March 2021
Date of Decision: 5 March 2021
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DECISION
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INTRODUCTION
1.There were two applications before me:-
(1) The plaintiff’s application by summons filed on 14 September 2020 (the “plaintiff’s Summons”) for summary judgment or, alternatively, interim payment.
(2) The defendant’s application by summons filed on 26 February 2021 (the “defendant’s Summons”) seeking leave to file the defendant’s 3rd Affidavit.
2.At the conclusion of the hearing, I dismissed the defendant’s Summons, granted unconditional leave to defend to the defendant, and dismissed the application for interim payment.
3.The reasons for my decisions are set out below.
BACKGROUND
4.It is common ground that the plaintiff and the defendant are close friends. According to the plaintiff, the plaintiff came to know the defendant’s wife and her parents when they were members of the Savior of the World Chinese Catholic Church in early 1996, and the plaintiff then developed a close relationship with the defendant and his wife.
5.The plaintiff’s initial case is simple:-
(1) On or about 13 November 2014, two telephone conversations took place between the plaintiff and the defendant, whereby it was agreed between the parties (the “Loan Agreement”) that:-
(i) The plaintiff was to lend and the defendant was to borrow a sum of USD350,000 (the “Sum”).
(ii) The Sum advanced by the plaintiff was to be repaid by the defendant within two weeks from the date of the Loan Agreement.
(2) Pursuant to the Loan Agreement, the plaintiff caused the Sum to be advanced to the defendant by way of two remittances into the bank account of a company incorporated under the laws of Belize named International Product Alliance Ltd (“IPAL”), of which the defendant was at all material times a director.
(3) The two remittances were in the sums of USD200,000 made on 14 November 2014, and USD150,000 made on 17 November 2014 (the “Remittances”).
(4) In breach of the terms of the Loan Agreement, the defendant did not repay the plaintiff within two weeks. During the period from 11 December 2015 to 2 February 2017, the defendant made a total of 14 partial payments in the total sum of USD208,787.49, thereby leaving USD141,212.51 due and unpaid.
6.The defendant, however, gave a different account:-
(1) By way of a written Venture Agreement (“ITO Venture Agreement”) entered into between IPAL and a company based in Texas, USA, named International Trans Oil Co (“ITO”) dated 17 October 2014, IPAL and ITO entered into an investment project whereby:-
(i) IPAL would organise the purchase and resale of certain crude oil product required by airline operators called Aviation Kerosene Jet Fuel Colonial Grade 54 (“JP54”).
(ii) ITO would arrange for the funding for the purchase of JP54, by way of obtaining letters of credit from ITO’s bank (JPMorgan Chase), which serves as a means of secured payment to the supplier of JP54.
(iii) The funding envisaged was in the sum of USD500 million, which involves a bank charge of USD350,000. IPAL should be responsible for paying this bank charge.
(iv) IPAL and ITO would split the profits generated from the resale.
(2) Although the defendant owned several landed properties in Canada, the defendant did not have the liquidity to pay for the bank charge. The defendant therefor turned to the plaintiff and sought her assistance to refer interested investors to the defendant. In an email sent on 28 October 2014, a draft venture agreement (“Draft Venture Agreement”) was sent by the defendant to the plaintiff (I note the plaintiff’s counsel confirmed in the hearing that there is no evidence from the plaintiff disputing that).
(3) Eventually, through the plaintiff’s introduction, the plaintiff’s nephew Tevin Li (“Tevin Li”) funded the entire USD350,000 as he had readily available funds. The plaintiff, acting on behalf of Tevin Li, confirmed that Tevin Li would accept the offer as contained in the Draft Venture Agreement.
(4) The defendant’s evidence did not pin point the exact date on which the alleged acceptance occurred. However, the defendant accepts that the Remittances were received by IPAL on around 14 November 2014 and 17 November 2014, after the alleged acceptance.
(5) On 1 December 2014, the defendant met Tevin Li for the first time at the plaintiff’s home in Hong Kong to formally have the Draft Venture Agreement signed. Those present included Tevin Li, his sister Wingka Li, the plaintiff, Astor Ho and the defendant. The defendant went through the details of the Draft Venture Agreement (including the agreements between IPAL and ITO) thoroughly with Tevin Li to confirm again that he indeed understood everything properly.
(6) The defendant also brought to Tevin Li’s attention that Tevin Li and IPAL would be equal investors in the venture, sharing both the profits and any risks in the venture, to which Tevin Li acknowledged he understood and agreed.
(7) According to the defendant, should the venture be unsuccessful, which at the time both Tevin Li and the defendant thought unlikely, the defendant would liquidate his landed properties in Canada to cover half of the USD350,000 invested.
(8) Finally, Tevin Li and the defendant (on behalf of IPAL) signed the venture agreement on 1 December 2014 (“Written Tevin Li Venture Agreement”).
(9) It turned out that the ITO Venture Agreement was a suspected scam, and despite IPAL having paid the USD350,000 to ITO, ITO has not performed its part of the contract.
ISSUES
7.The issues to be decided by the court are as follows:-
(1) Whether the defendant should be allowed to adduce the defendant’s 3rd Affidavit as evidence in this hearing?
(2) Whether summary judgment should be granted?
(3) If not:-
(i) Whether the plaintiff’s Summons should be dismissed, or leave to defend (either conditional or unconditional) should be granted to the defendant?
(ii) Whether the court should make an order for interim payment?
8.These shall be dealt with in turn below.
MY DECISIONS
The defendant’s 3rd Affidavit
9.Under O 32, r11A(4):-
“Where the determination of an interlocutory application is adjourned for the hearing of the summons, no further evidence may be adduced unless it appears to the Court that there are exceptional circumstances making it desirable that further evidence should be adduced.”
10.Further, pursuant to the Order dated 12 October 2020, no further affidavit may be filed without leave.
11.The effect of these was explained by DHCJ Le Pichon in Jose Miranda Da Costa Junior v Lorenzo Yih HCA 156/2010, 28 April 2014 at paras 9-13, as affirmed by the Court of Appeal in HCMP 1127/2014, 21 July 2014 at para 6 – when there is a previous order to the effect that there shall be no further affidavit evidence to be filed without leave, further evidence should not be admitted in the absence of exceptional circumstances, which would normally be those laid down in Ladd v Marshall [1954] 1 WLR 1489. Exceptional circumstances are not made out if a proper review of the potential issues that might arise in proceedings ought to have resulted in the information contained in the affidavit being filed within the time limits imposed.
12.The defendant’s Summons was taken out just 9 days before this hearing. The purported reason for adducing the defendant’s 3rd Affidavit was to cure an alleged “clerical error”, whereby certain emails intended to be exhibited to the defendant’s 2nd Affidavit were not exhibited.
13.While it is true that the body of the defendant’s 2nd Affidavit did refer to certain emails which were not exhibited, I do not consider there to be exceptional circumstances justifying the exercise of the court’s discretion in favour of allowing the defendant’s 3rd Affidavit to be adduced.
(1) According to the defendant’s counsel, there was nothing new in the defendant’s 3rd Affidavit, as the contents of the emails not exhibited were already referred to in the body of the defendant’s 2nd Affidavit. If so, one could just refer to the body of defendant’s 2nd Affidavit concerning the contents of the emails, which are not alleged by the plaintiff to be inaccurate.
(2) Further, had the defendant exercised reasonable diligence, the emails could have been exhibited to the defendant’s 2nd Affidavit in the first place.
14.In any event, I have, with the agreement of counsel for the Parties, considered the defendant’s 3rd Affidavit and drafts of the plaintiff’s 3rd Affidavit and Tevin Li’s 2nd Affirmation in reply thereto, on a de bene esse basis. I do not consider their contents would make any difference to my decision to grant to the defendant unconditional leave to defend, and to dismiss the application for interim payment. Suffice to say that these new materials raise further triable issues, rather than to go to show a lack of bona fide defence. I shall say no more on this at this stage.
Whether summary judgment should be granted
15.As can be seen, the main difference between the Parties is whether the USD350,000 was transferred as a loan or, as the defendant says, as an investment under the Draft Venture Agreement orally agreed between the defendant and plaintiff (on behalf of Trevin Li), which was subsequently reduced into the Written Tevin Li Venture Agreement.
16.In addition to the Loan Agreement, the plaintiff has pleaded an alternative cause of action in the Amended Statement of Claim, viz the restitutionary claim of money had and received. At this stage, it seems to me that this claim of money had and received adds little to the action, given the Parties’ respective factual case that the Remittances were made either pursuant to the Loan Agreement, or some form of investment agreement between Tevin Li and IPAL. If there was a Loan Agreement, then the restitutonary claim is superfluous. On the other hand, if there was an investment agreement, then the relationship should be governed by the terms of the investment agreement. The plaintiff’s counsel has confirmed in the hearing that, for the purpose of deciding the plaintiff’s Summons, we shall not be concerned with the restitutionary claim.
17.The principles applicable to an application for summary judgment are well established. The following points are highlighted:-
(1) It is trite that the defendant must show that there are triable issues, and satisfy the court that he has a “real or bona fide defence” or “a fair probability or reasonable grounds that a bona fide defence exists”. See Hong Kong Civil Procedure 2021 Note 14/4/9.
(2) It must be noted that “the Court will of course, not take the alleged defence on its face value but test it against the evidence disclosed in the affidavit including matters such as contemporaneous documents … the Court will also consider the inherent probability of the defence”, although the Court will not conduct a mini-trial. See Paul Y Management Ltd v Eternal Unity Development Ltd (CACV 16/2008, 12 August 2008), para 19.
(3) Leave to defend conditional on the full amount claimed being paid into court may be ordered where the defence is “shadowy” or there is little or no substance in it or the case is almost one in chich summary judgment should be ordered. See Hong Kong Civil Procedure 2021 Note 14/4/16.
18.The question is therefore whether the defendant’s defence is believable. As DHCJ Lisa Wong SC (as she then was) puts it in Ontone Finance Co Ltd v Leung Siu Kee HCA 408/2011, 28 February 2012 at para 23:-
“in assessing the credibility of the defendant’s factual case, while the court will not embark on a min-trial on affidavit evidence, the court is not obliged to suspend its critical faculties and assume that the defendant’s evidence is accurate. If having regard to inherent plausibility, inconsistency with contemporaneous documents and other compelling evidence, the defence is not credible, the court must say so.”
19.The documentary evidence reveal the following, which are not disputed by the plaintiff:-
(1) As noted above, on 28 October 2014, the defendant sent an email to the plaintiff enquiring if she could leverage her connections and refer interested investors to the defendant. The Draft Venture Agreement was attached to the email.
(2) Despite the plaintiff’s offer in her email reply on the same day that she could provide the funding of USD350,000 hopefully within the week, the defendant wished to look for other investors.
(3) The defendant was subsequently informed that the hedge fund that the defendant desired to co-operate with had decided against co-operating with IPAL. On 13 November 2014, the defendant sent an email to the plaintiff, saying “I feel embarrassed to mention this now, but the hedgefund did not transfer the funds required for my deal … I am still responsible to pay my $350,000 required to participate in the crude transaction … I may need your help and I will try to reach you tonight …”.
(4) The plaintiff replied by email on the same day, saying “Don’t feel embarrassed as we are family. Both Astor and I are always standing by for you and your family …”. A telephone conversation then followed, following which an email was sent by the plaintiff to the defendant, saying “As discussed on the phone, I will prepare the CAD350,000 to be deposited into your bank account in Canada. Hopefully the money can be ready into your bank account no later than Tuesday next week.”
(5) It was said in the email that USD170,000 would be taken from the plaintiff’s life insurance plan, USD50,000 would be taken out from the plaintiffs bank account, and USD130,000 would be taken out from Tevin Li’s bank account.
(6) According to two HSBC application forms for telegraphic transfer, the Remittances were made by Ho Choi Wan (also known as Astor Ho) (“Astor Ho”), who was a close friend of the plaintiff’s family.
(7) Email correspondence amongst the plaintiff, Astor Ho and Tevin Li shows that there were discussions regarding the arrangement whereby both Tevin Li and the plaintiff would make transfers to Astor Ho in the sum of HKD1,560,000 (approximately USD200,000), and Astor Ho would remit the relevant sum in USD to the defendant. It is not entirely clear as to the origin of the total sum of USD350,000 remitted by Astor Ho to IPAL on 14 November and 17 November 2014.
(8) On 20 November 2014, as shown on the bank transfer receipt adduced by the defendant, a sum of USD350,000 was transferred from IPAL’s account to ITO’s bank account at JPMorgan Chase, marked for the purpose of “Petroleum Contract financial instrument cost”.
(9) The Written Trevin Li Venture Agreement entered into between IPAL and Tevin Li was also produced. It was signed by both the defendant and Tevin Li, and was dated 1st December 2014. The Written Tevin Li Venture Agreement provides inter alia:-
(i) In Schedule A, that Tevin Li, as the “Investor”, should fund “the cost of the financial instruments in the amounts required within the time frame specified for the purchase of the Product for resale”.
(ii) In Schedule B, Tevin Li, as the “Investor”, would be paid USD$0.10 per barrel of JP54 sold, subject to deduction of certain costs.
(iii) In Schedule B, that:-
“[The defendant,] Director of Operations of [IPAL], personally offer the investor additional assurance … Should the investor contribution of $350,000 to be used for the cost of issuing the financial instrument not be covered under the contractual 2% performance bond; I will offer the following personal investment properties as collateral:
47 Normandy Place Oakville Ontario L6K 1R9 Est: $445,000.00
694 Hunter St, Kincardine Ontario N2Z 1 L7 Est: $145,000.00
124 Ottawa St North Hamilton Ontario L8H 3Y9 Est: $175,000.00”
20.As can be seen, the defendant’s case is consistent with contemporaneous documents which cannot be shown to be unauthentic at this stage.
(1) As fairly accepted by the plaintiff’s counsel, the Written Tevin Li Venture Agreement is inconsistent with the plaintiff’s case that the USD350,000 was paid under the oral Loan Agreement. Notably, the Written Tevin Li Venture Agreement and the ITO Venture Agreement created an obligation on IPAL and, correspondingly, on Tevin Li (as “Investor”) to provide USD350,000 as finance costs, which is the exact figure of the Remittances that the plaintiff claims to be a loan.
(2) The following contemporaneous documentary evidence reveal a chronology that is consistent with the defendant’s case:-
(i) The Draft Venture Agreement was sent to the plaintiff by email on 28 October 2014.
(ii) On 13 November 2014, the defendant sent an email to the plaintiff informing her of the defendant’s failure to securing the necessary funding for the desired hedge fund, and seeking the plaintiff’s assistance to fund the USD350,000 finance costs.
(iii) On 14 November 2014, the first of the Remittances in the sum of USD200,000 was remitted by Astor Ho to IPAL.
(iv) On 17 November 2014, the second of the Remittances in the sum of USD150,000 was remitted by Astor Ho to IPAL.
(v) The Written Tevin Li Venture Agreement, dated 1 December 2014, was signed by Tevin Li and the defendant.
21.In dealing with this difficulty in the plaintiff’s case, she claimed in her 2nd Affidavit that the Written Tevin Li Venture Agreement came about in the following manner:-
“15. The dinner on December 2014 was simply a dinner gathering between my family and Max’s [the defendant’s] family…
17. [The defendant] approached Tevin and Wingka for a short 10 minutes conversation about his proposal. Astor and [the defendant’s wife] were playing with the baby Tristan at that time and I was busy preparing dinner. Tevin, Wingka and I told [the defendant] that we were not interested in his business. None of us signed any document on 1 December 2014. Tevin subsequently signed the document due to the pressure put on him by Max. He signed the document hoping to] get rid of the nuisance of [the defendant] and out of politeness. Furthermore, it was a gesture of giving face to me because [the defendant] was my close friend at that time and he also knew that I had gone out of my way to help [the defendant]…
19. Tevin did not sign any document on 1 December 2014. After dinner on 1 December 2014, [the defendant] repeatedly asked him to do so, and said that the document was to evidence the Loan and the security…
20. Eventually, Tevin signed the blank form as per [the defendant’s] instruction and returned it to him by email, giving [the defendant’s] reassurance that the document was to evidence the Loan. I do not know the exact reason(s) why [the defendant] approached Tevin to sign the document. I was busy in traveling…the possible reasons why [the defendant] approached Tevin was because it was hard to get hold of me in Hong Kong during that time and [the defendant] knew the money was lent to him by me with the help of Tevin.
21. We later found out [the defendant] adding information without Tevin’s consent on the signed blank documents afterwards. We asked him about it, but he just told us that information was necessary for him. Based on our trust in [the defendant] at that time, we had not followed up on that.”
22.Tevin Li filed an affirmation in support of the plaintiff’s Summons. In the affirmation, he simply made a sweeping confirmation as follows:-
“2. I refer to the Amended Statement of Claim filed in this action on 10 August 2020, the 1st Affidavit of Lee Sau Yee Shirley filed on 14 September 2020 (“Shirley’s 1st Affidavit”) and the 2nd Affidavit of Lee Sau Yee Shirley dated 18 February 2021 (“Shirley’s 2nd Affidavit”), copies of which are now produced and shown to me marked “LTFT-1”. I declare, confirm, acknowledge and agree that the facts deposed to in Shirley’s 1st Affidavit and Shirley’s 2nd Affidavit are within my own knowledge and are true and accurate.
3. Based on the aforesaid, I verily believe that there is no defence to this action and I verily believe that the defendant is indebted to the plaintiff as set out in the prayer of the Amended Statement of Claim filed.”
23.It is doubtful if Tevin Li could truthfully make such a blanket confirmation, as he does not seem to be privy to a number of matters as deposed to in the plaintiff’s affidavits, including the alleged Loan Agreement reached over phone. The plaintiff’s evidence did not suggest that Tevin Li was involved in the conversations leading to the alleged Loan Agreement.
24.Further, despite it was alleged that a “blank form” was signed by Tevin Li and emailed back to the defendant, the email and the signed “blank form” were not exhibited to the plaintiff’s 2nd Affidavit and Tevin Li’s Affirmation. Having considered the plaintiff’s draft 3rd Affidavit and Tevin Li’s draft 2nd Affirmation on a de bene esse basis, I also noted that no such “blank form” was exhibited. What was exhibited in the draft affidavit was in fact email exchanges between Tevin Li and the defendant on 2 December 2014 and 5 December 2014, whereby an executed agreement titled “Venture Agreement”, in broadly the same terms as the Written Tevin Li Venture Agreement (but with material terms more favourable to Tevin Li) was sent by Tevin Li to the defendant. This can hardly advance the plaintiff’s case that the USD350,000 was advanced as a loan.
25.The strongest point for the plaintiff is perhaps that in numerous post-event emails ranging from December 2015 to 2019, both the plaintiff and the defendant had referred to the USD350,000 as a “loan”. However:-
(1) The defendant’s explanation is that whenever the defendant tried to correct them that it was an investment, not a loan, the plaintiff, Astor Ho and Tevin Li would turn hostile and the whole discussion would turn into emotional bickering. For that reason, out of respect to the plaintiff, the defendant stopped trying to correct their characterisation.
(2) This is not an implausible account, given the close relationship between the Parties. For instance, the plaintiff herself said to the defendant that “we are family” in her email to the defendant sent on 13 November 2014 (exhibited as part of “LSYS-3”). Further, the plaintiff herself said in para 17 of her 2nd Affidavit that Tevin Li signed what was presumably the “blank form” as a “gesture of giving face” to the plaintiff as the defendant was the plaintiff’s close friend.
(3) I note that the defendant has himself used the words “loan” and “repayment” in the emails. However, the emails (the earliest one identified by the plaintiff was sent in December 2015, a year after the Remittances), although relevant to the Court’s consideration, were not contemporaneous documents recording the agreement regarding the nature of the USD350,000. The weight to be given to them can only be decided in a trial.
(4) On the other hand, the defendant’s case is consistent with the Written Tervin Li Venture Agreement, as explained above.
26.The plaintiff also relied on the fact that the defendant had made repayments in the sum of USD208,787.49 since 11 December 2015, exceeding the defendant’s case that he was only obligated to Tevin Li in half the investment sum of USD350,000. Again, given the close relationship between the Parties, it is not inherently improbable for the defendant to try to repay Tevin Li as much as he could, as he might have felt responsible for having dragged Tevin Li into such a bad investment, even though the defendant’s family was facing financial difficulties themselves.
27.Overall, having considered all the evidence and counsel’s submissions, I came to the conclusion that the defendant has demonstrated a bona fide defence which ought to be tried.
Dismissal of the plaintiff’s Summons, conditional leave to defend or unconditional leave to defend?
28.In Greater China Capital Inc v Gbtimes Ltd [2018] 1 HKLRD 210, Lam VP said:-
“8. ... The mere fact that a line of defence was known to a plaintiff does not mean that he should have known that it was not appropriate to proceed by way of application for summary judgment. Much depends on the available evidence and the assessment on the probity of proceeding by way of Order 14 is very often a matter of judgment. A wrong judgment in this respect does not necessarily call for sanction in the same manner as an abuse of the procedure …
11. … an order to dismiss should be made where the case is not within the order or where the plaintiff knew, before the issue of the summons, that the defendant was relying on an arguable defence …
12. … an order that there be unconditional leave to defend should be made where the defendant shows he has a good defence on the merits, or a triable dispute on the facts … When such an order is made, the normal costs order is for costs to be in the cause.”
29.For the reasons set out in paragraphs 15-27 above, I do not consider the defendant’s defence to be shadowy. On the other hand, I do not consider that the plaintiff has abused the summary judgment procedure, no less because of the post-event emails in which the defendant had himself described the USD350,000 as a loan.
30.In my judgment, unconditional leave should be granted to the defendant to defend the plaintiff’s claim.
Interim payment
31.The principles governing an application for interim payment are helpfully summarised by DHCJ Lisa Wong SC (as she then was) in Ho Kuen Fai v Chun Wo Construction & Engineering Co Ltd HCA 1790/2007, 7 August 2008 at paras 29-31:-
“29. Turning to the application for interim payment, the court approaches such an application in two stages.
30. Firstly, it has to be satisfied that if the action proceeds to trial, the applicant would obtain judgment for a substantial sum of money at trial. In this regard, the court should read Order 29, rules 11 and 12 together and ask the single question whether the applicant fulfils the requirements of those rules as a whole rather than considering separately and exclusively the applicant’s entitlement under each rule: Shearson Lehman Brothers Inc v. Maclaine, Watson & Co. Ltd [1987] 1 WLR 480 (CA), per Lloyd LJ at 485H-487D. In determining whether it is so satisfied, the test is whether the applicant will succeed in the claim at the trial and now whether he is likely to succeed. Although the burden is high, it is the civil burden on the balance of probabilities. The court is not required to be sure in the sense of being satisfied beyond reasonable doubt and being able to exclude every possibility of failure because the burden for interim payment may be reversed at trial: Shearson Lehman Brothers Inc v. Maclaine, Watson & Co. Ltd [1987] 1 WLR 480 (CA), per Lloyd LJ at 489A-C.
31. If the Court is satisfied that the applicant would obtain judgment for a substantial amount at trial, the court then decides whether in its discretion it should make an order and, if so, for what amount.”
32.For the reasons set out in paragraphs 15-27 above, I am also not satisfied on the evidence before me that the plaintiff would obtain judgment for a substantial sum of money at trial.
Costs
33.As noted by the Court of Appeal in Greater China Capital Inc (supra), where unconditional leave to defend is given, the normal costs order is for costs to be in the cause. I shall make that order in relation to the plaintiff’s summary judgment application.
34.The defendant’s Summons and the interim payment application by the plaintiff did not add much costs to the summary judgment application. As the plaintiff’s counsel acknowledged in the hearing, the draft affirmations generated in response to the defendant’s Summons could be reused in this action when it proceeds further.
35.It is therefore appropriate to order that both the costs of the plaintiff’s Summons and the defendant’s Summons be costs in the cause.
CONCLUSION
36.For the aforesaid reasons, I made the following orders:-
(1) The defendant’s Summons be dismissed.
(2) Unconditional leave to defend be granted to the defendant.
(3) The application for interim payment is dismissed.
(4) The costs of the defendant’s Summons and the plaintiff’s Summons be in the cause, to be taxed if not agreed.
(5) The defendant’s own costs be taxed in accordance with the Legal Aid Regulations.
37.I thank counsel for their assistance rendered to the court.
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( Tony Ko )
Deputy District Judge |
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