Yancrown Ltd v. Chan Wai Piu
Read the full judgment text of HCA 527/2021 on BabelCite. This High Court CFI judgment was delivered on 16 August 2021.
1. There are 3 summonses before me: -
Cites 5 cases
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HCA 527/2021 [2021] HKCFI 2406 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 527 OF 2021 ________________________
________________________ Before: Master Alan Kwong in Chambers (Open to public) Date of Plaintiff’s Written Submissions: 11 and 13 August 2021 Date of Defendant’s Written Submissions: 11 August 2021 Date of Decision: 16 August 2021 Date of Reason for Decision: 24 August 2021 _________________________________ DECISION _________________________________ Introduction 1.There are 3 summonses before me: -
Background 2.The material background is set out as follows. 3.In the present Action, the Plaintiff’s claim against the Defendant is based on 7 dishonoured cheques (the “Cheques”) that are dated from 6 to 25 October 2016. The total amount involved is HK$3,837,200. 4.The Plaintiff is a company related to Hepta Artous Icthudia (hereinafter “Hepta”). Both the Plaintiff and Hepta are owned and controlled by members of the same family, and their shareholders/directors overlap[1]. 5.Hepta is the plaintiff in the Existing Proceedings. There, Hepta sues the Defendant[2] based on 7 sets of loan agreements that were said to be entered between the Defendant and itself. 6.The details of the 7 loan agreements are set out in paragraph 3 of DHCJ MK Liu’s Decision dated 31 December 2019 in the Existing Proceedings: -
7.The “scheduled repayment dates” under the 7 loan agreements are exactly the same as the dates of the 7 Cheques. 8.According to the Consolidated Statement of Claim in the Existing Proceedings[3], the Defendant drew and delivered the Cheques post-dated at the time when the parties entered into the alleged loan agreements. It appears that the Cheques are securities in respect of the indebtedness under the loan agreements. 9.However, according to Mr. Alvis Chan’s 1st affirmation filed in the Existing Proceedings[4], in October 2016 Hepta indicated to the Defendant that he should repay all the loans. Hence, the Defendant drew the 7 Cheques in favour the Plaintiff as instructed. If this was the case, the 7 Cheques would be repayment of the underlying loans in question. 10.On 7 July 2019, Master Anthon H K Chan granted summary judgment in favour of Hepta under the Existing Proceedings. He held that the Defendant was indebted to Hepbta under the 7 loan agreements. 11.However, by the Decision dated 31 December 2019, DHCJ MK Liu allowed the Defendant’s appeal. The learned Deputy Judge took the view that there were inexplicable features in Hepta’s case as well as the Defendant’s case, and some material facts behind the 7 loan agreements had not been revealed[5]. 12.DHCK MK Liu held it was arguable that Hepta fell within meanings of “money lender” in the Money Lenders’ Ordinance, Cap 163 (the “MLO”), and Hepta carried on a business of making loans. If it was the case, the requirements under, inter alia, section 23 of the MLO would not be complied with, and the loans might not be enforceable[6]. The learned Deputy Judge held that without knowing all the circumstances, he was not in a position to exercise the discretion under section 23, and the whole picture would have to be explored at trial[7]. 13.In the premises, the learned Deputy Judge set aside the summary judgment entered by the Master, and he granted unconditional leave for the Defendant to defend the Existing Proceedings[8]. 14.Subsequently, the Defendant amended his Consolidated Defence in the Existing Proceedings. It has been pleaded that the 7 loan agreements are unenforceable by virtue of section 23 of the MLO as Hepta carried on a business of money lending without license[9]. 15.In the circumstances, the question whether the 7 loan agreements are enforceable is a live dispute to be resolved at the trial of the Existing Proceedings. It is plain that such live dispute cannot be resolved summarily. 16.Against this background, on 9 April 2021 the Plaintiff commenced the present Action against the Defendant, suing on the 7 Cheques. 17.On 20 May 2021, the Defendant took out a summons seeking to strike out or stay the present Action on the ground of abuse of process. 18.In response, the Plaintiff took out the summons dated 28 May 2021 seeking to enter summary judgment against the Defendant for the sum of HK$3,837,200. 19.Pursuant to the directions made by Registrar Kwang on 18 June 2021[10], the Plaintiff’s application for summary judgment should be dealt with before the Defendant’s application to strike out or stay the present Action. The Plaintiff’s Application for Summary Judgment Legal Principles on Summary Judgment 20.Once the plaintiff can show a prima facie case, the defendant is vested with the burden of establishing an arguable defence or triable issue. There shall be no mini-trial on affidavits as genuine factual disputes ought to be resolved at trial. See Hong Kong Civil Procedure (2021), para 14/4/9. Analysis 21.For the following reasons, I do not accede to the Plaintiff’s application for summary judgment, and I take the view that the application should not have been taken out. 22.Under section 23 of the MLO, an unlicensed money lender shall not be entitled to recover any money lent by him or any interest. He is also not allowed to enforce any security. However, the Court has a discretion to allow an unlicensed money lender to make recovery, and the Court can modify the terms of the loan and the security as it sees equitable. 23.There is no question that the 7 Cheques (i.e. the subject matters of the present Action) are inextricably linked to the 7 loan agreements (i.e. the subject matters of the Existing Proceedings). 24.In his Decision under the Existing Proceedings, DHCJ MK Liu made it clear that there are triable issues regarding the 7 loan agreements. The triable issues include:
25.In light of the ruling made by DHCJ MK Liu, there must be triable issues in respect of the 7 Cheques as well. The parties’ disputes cannot be resolved summarily. Those who are in control of Hepta and the Plaintiff cannot use the present Action to circumvent the triable issues identified by the learned Deputy Judge in the Existing Proceedings. 26.As mentioned, according to the pleadings and affirmation evidence filed by Hepta in the Existing Proceedings, the 7 Cheques are either (1) securities in respect of the underlying loans (the “First Scenario”); or (2) the Defendant’s repayments of the underlying loans (the “Second Scenario”). 27.I will address the 2 Scenarios in turn. 28.The First Scenario: If Hepta was a money lender that carried on money-lending business without license, as appointed out by DHCJ MK Liu, section 23 of the MLO would take effect. It follows that the security in respect of the underlying loans (i.e. the 7 Cheques) may not be enforceable, unless Hepta can convince the Court that it would be inequitable to disallow enforcement. It would be most surprising if an unlicensed money lender can circumvent section 23 by nominating a sister company (or an agent) to take up the security in question. If this technique were workable, section 23 would be useless, and the purpose and objective of the MLO could be defeated without the slightest difficulty. In my view, this cannot be right. 29.The Second Scenario: If the underlying loan agreements are unenforceable by virtue of section 23, it cannot be said that the 7 Cheques (being the Defendant’s repayment of the underlying loans) are supported by good consideration. This is because the 7 Cheques were not issued to discharge any enforceable obligations, and hence there was failure of consideration. As pointed out by Lord Diplock in Sharif v Azad [1967] 1 QB 605, 619B: -
30.In the premises, following the findings and/or ruling made by DHCJ MK Liu in the Existing Proceedings, there are also triable issues in the present Action in relation to section 23 of the MLO. The Defendant does have arguable defences in both Scenarios. 31.Mr. Simon So (representing the Plaintiff) invites me to exercise the discretion under section 23 of the MLO. For the following reasons, I am not persuaded that this is the appropriate course to take:
32.Further, Mr. Martin Wong[11] representing the Defendant, drew my attention to the decision of Kwan J (as Kwan VP then was) in Re Goodwill Creation Ltd (HCCW 1035/2002, unreported, 23 August 2007), para 15(5). In that case, the company issued 2 cheques in favour of the petitioner in purported repayment of the indebtedness owed by 2 related entities. However, the petitioner had not agreed to release and had not released the debts owed by the 2 entities. As such, Kwan J held that there was no consideration at all. Relying on this authority, Mr. Wong argues that the Defendant has never been released from the liabilities under the loan agreements, and this is evidenced by the fact that Hepta has kept prosecuting the Existing Proceedings against the Defendant). Hence, the 7 Cheques are not supported by good consideration. 33.I see the force of Mr Wong’s argument. The Plaintiff does not have a valid answer. At the hearing, Mr. So informed me that there was some alleged arrangement between Hepta and the Plaintiff. However, as Mr. So fairly accepted, there is no evidence showing that such alleged arrangement was known and/or agreeable to the Defendant. Hence, the alleged arrangement is neither here nor there, and could not constitute valid consideration in respect of the 7 Cheques. 34.Mr. Wong, relying on Thong Ko Sine v Wilkinson [1988] HKC 56, 57G-58H (per Rhind J), also raises another technical argument. He points out that no notice of dishonor has been pleaded in the Statement of Claim, and that the Statement of Claim does not contain any plea suggesting that notice of dishonor was dispensed with. Hence, the Statement of Claim is defective. 35.In response to Mr. Wong’s argument, the Plaintiff belatedly took out the summons dated 12 August 2012. The Plaintiff seeks to amend the Statement of Claim by pleading that: -
36.For the following reasons, the proposed amendments would not avail the Plaintiff: -
37.For all the above reasons, there are clearly issues to be tried, and I am not satisfied that the Defendant has no arguable defence. 38.In light of the procedural history of the Existing Proceedings, the Plaintiff (which is a sister company of Hepta and which is controlled by members of the same family) should have known that there are triable issues relating to section 23 of the MLO. Furthermore, the Plaintiff’s claim in this Action has not been properly pleaded and/or formulated. 39.In the premises, I am of the view that the Plaintiff should not have taken out the application for summary judgment, and the appropriate course to take is to dismiss the Plaintiff’s summons dated 28 May 2021 with costs. The Defendant’s Application to Strike-out or Stay the Present Action 40.I now deal with the summons dated 20 May 2021 taken out by the Defendant seeking to strike out or stay the present Action. 41.As elaborated above, the issues in the Existing Proceedings clearly overlap with the issues in the present Action. 42.Hence, the finding in the Existing Proceedings may dispose of the issues in the present Action. For instance, if the Court in the Existing Proceedings rules that the 7 loans are wholly unenforceable by reason of the provisions of the MLO and not a single penny should be recovered by Hepta, it is hard to see how the Plaintiff can get around the provisions of the MLO, and successfully sue the Defendant on the 7 Cheques in the present Action. This would be unthinkable. 43.In the premises, from a case management point of view, it makes sense to stay the present Action, while the Existing Proceedings is pending resolution. 44.Further, as pointed out by Mr. Wong, there is a need to avoid the risk of inconsistent factual findings. I agree. 45.I also take into account that it is pointless for the Plaintiff to prosecute the present Action, while the Plaintiff’s sister company, Hepta, is prosecuting the Existing Proceedings simultaneously. 46.Indeed, this seems abusive to me. It would be surprising if both Hepta and the Plaintiff can enter judgment against the Defendant under the Existing Proceedings and the present Action. If this happens, the Defendant will be liable for the same sum of HK$3,837,200 twice. This would be absurd and unjust. I am the view it cannot not be right to allow the 2 sets of proceedings to progress concurrently. 47.The aforesaid analysis is supported by Re Goodwill Creation Ltd (supra) para 15(5) as discussed above. Since the stance of Hepta is such that it would hold the Defendant liable under the 7 loan agreements, the Defendant has never been released from the underlying indebtedness. Accordingly, it cannot be said the 7 Cheques are supported by good consideration. 48.In the premises, it would be abusive for the Plaintiff to continue prosecuting the present Action. This is particularly so when Hepta is prosecuting the Existing Proceedings simultaneously. 49.For all the above reasons, I order that the present Action be stayed, pending the final determination of Existing Proceedings. 50.There is no reason why costs shall not follow the event. I also order the Plaintiff to pay the costs of the summons dated 20 May 2021. The Summons to amend Statement of Claim 51.As regards the Plaintiff’s summons dated 12 August 2021 seeking to amend the Statement of Claim, having said that the present Action should be stayed, it is unnecessary for me to dispose of the application. I will simply make an order that the Plaintiff’s summons dated 12 August 2021 be adjourned sine die with liberty to restore. Conclusion 52.In the premises, I order that: -
53.Lastly, I express my gratitude to Mr. Wong, Mr. Lam and Mr. So for their able and helpful submissions.
Mr Simon So, instructed by Chan & Associates, for the Plaintiff Mr Martin Wong and Mr Dexter Leung, instructed by C W Heung & Partners, for the Defendant [1] The details are set out in the 1st affirmation made by Mr. Alvis Chan in the Existing Proceedings. Madame Lau Choi Koc (who is the mother of the family) and Ms. Chan Lai Shan (who is a daughter of the family) are the 99% shareholders of Hepta. Madame Lau, Ms. Chan Lai San and Mr. Alvis Chan (who is a son of the family) are the directors of Hepta. As regards the Plaintiff, Madame Lau is a 99% shareholder, whereas Ms. Alvis Chan and Ms. Chan Lai Shan are the directors. [2] The Plaintiff also alleges Chan Kat Cheung and Chan Lai Fung are the guarantors in respect of some of these loan agreements, and they are also sued as the 2nd and 3rd defendants in the Existing Proceedings. [3] See paragraphs 5, 9, 13, 17, 21, 28 and 32 [4] See paragraph 31 [5] See paragraph 20 [6] See paragraphs 15 to 17 [7] See paragraph 20 [8] See paragraph 23 [9] See paragraph 21A [10] See paragraph 1 of the Order [11] Appearing together with Mr. Dexter Lam |
Cases cited in this judgment
Further hearings and rulings under HCA 527/2021