Luk Wai Ho v. Fang Yu
Read the full judgment text of DCCJ 4744/2019 on BabelCite. This District Court judgment was delivered on 29 October 2021.
1. This is the hearing of an appeal by the plaintiff against the order of Master Jocelyn Leung dated 21 July 2021 (i) dismissing the plaintiff’s summary judgment application dated 12 March 2021 issued pursuant to O14 r1 of the Rules of the District Court, Cap 336H for HK$1,000,000 in final judgment together with interest and costs against the defendant (ii) giving unconditional leave to defend to the defendant and (iii) awarding costs to the defendant summarily assessed at HK$60,000.
Cites 4 cases
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DCCJ 4744/2019 [2021] HKDC 1345 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO 4744 OF 2019 --------------------------------
-------------------------------- Coram: Deputy District Judge Norman Nip SC in Chambers Date of Hearing: 6 October 2021 Date of the Plaintiff’s submission: 8 October 2021 Date of the Defendant’s submission: 8 October 2021 Date of Decision: 29 October 2021 ----------------------------- DECISION ----------------------------- INTRODUCTION 1.This is the hearing of an appeal by the plaintiff against the order of Master Jocelyn Leung dated 21 July 2021 (i) dismissing the plaintiff’s summary judgment application dated 12 March 2021 issued pursuant to O14 r1 of the Rules of the District Court, Cap 336H for HK$1,000,000 in final judgment together with interest and costs against the defendant (ii) giving unconditional leave to defend to the defendant and (iii) awarding costs to the defendant summarily assessed at HK$60,000. BACKGROUND 2.The following background facts are undisputed or incontrovertible. 3.The plaintiff was a conveyancing clerk working in a firm of solicitors when he first met the defendant in around late January or early February 2019. 4.The defendant needed to borrow funds. The plaintiff referred the defendant to a lender, Great Wall Mortgage Company Limited (“Great Wall”), and had prepared all the necessary documentation. The defendant successfully obtained a loan from Great Wall. 5.Between February and March 2019, the defendant had on multiple occasions requested the plaintiff to lend her money. 6.The plaintiff and the defendant signed on a debt acknowledgment memorandum (“IOU”) dated 7 March 2019 which states that the defendant now borrowed HK$690,000 from the plaintiff and promised to repay the said sum on 8 March 2019. 7.The defendant issued a cheque dated 14 March 2019 for HK$1,000,000 drawn on her Standard Chartered Bank account in favour of the plaintiff (“Cheque”). 8.On 26 August 2019, the plaintiff presented the Cheque for payment. 9.On 27 August 2019, the Cheque was returned by Standard Chartered Bank to the plaintiff with the remark “Refer to Drawer”. 10.The plaintiff therefore instituted these proceedings against the defendant to sue on the dishonoured Cheque for HK$1,000,000. 11.The defendant’s case as pleaded in the Amended Defence is essentially as follows:-
RELEVANT LEGAL PRINCIPLES Summary Judgment and Appeal Against a Master’s Decision 12.The principles governing an application for summary judgment are well-settled and need not be fully rehearsed below. I would only mention the following:-
13.An appeal from a master’s decision to a judge in chambers is dealt with by way of an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him/her for the first time: see Hong Kong Civil Procedure 2022, Vol 1 §58/1/2. Statutory Defence under s21(2)(b) of the BOEO 14.Section 21 of BOEO provides, inter alia, as follows:-
15.In Xie Shili v Cheung Wai Keung [2018] HKCFI 2431, DHCJ Dawes SC (as he then was) dismissed a summary judgment application on a dishonoured cheque and granted unconditional leave to defend. In that case, one of the defences relied on was that the cheque in question was delivered to the plaintiff in escrow intended as a gesture of goodwill, which was a “special purpose” under s21(2) of the BOEO and was therefore never intended to transfer property to the plaintiff. The learned Deputy Judge discussed the principles governing the defence under s21(2)(b) of the BOEO at §§11-12 as follows:-
16.Further, allegations that a cheque is merely intended to show the sincerity of the drawer is not uncommon and the idea that the provision of a cheque is only a symbolic gesture is not inherently inconceivable. It all depends on the underlying circumstances. See Xie Shili at §§17 and 19 per DHCJ Dawes SC. Partial Failure of Consideration and Illegal Consideration Due to Excessive Interest Rate 17.Although consideration is presumed under s30(1) of the BOEO, once the issue of consideration has been expressly put in dispute by the defendant, the plaintiff must demonstrate that he/she has lent such sum to the defendant (Ju Yan Di Emperory Genesisy at §15 per Cheung JA). 18.Partial failure of consideration is a pro tanto defence available only when the amount involved is ascertained and liquidated: Suen Ho Sun v Kamenar International Ltd [1989] 1 HKC 135 at 139G-140E per Hunter JA. 19.No agreement for the repayment of any loan or for the payment of interest on any loan and no security given in respect of any such agreement or loan will be enforceable in any case in which the effective rate of interest exceeds 60% pa: s24 of the MLO. DISCUSSION Purpose of the Cheque 20.The defendant’s case on the purpose of the Cheque as supported by her affirmation is essentially as follows:-
21.I agree with Ms Abigail Liu, counsel for the defendant, that the defendant’s case is believable and not frivolous or practically moonshine for the following reasons. 22.First, it is undisputed that since the date of issuance of the Cheque in March 2019, the plaintiff did not present the Cheque for payment until 26 August 2019 (despite contending as part of his case that the Cheque was issued as repayment of the HK$690,000 owing by the defendant to him with the balance of HK$310,000 constituting a token of gratitude from her). This lends support to the defendant’s case that the plaintiff had assured the defendant that he would not bank in the Cheque which was delivered only for the Special Purpose and not for payment. Indeed, on the plaintiff’s own evidence, his relationship with the defendant deteriorated rapidly after July 2019 when he declined to lend further monies to the defendant. It is quite possible that the plaintiff therefore went back on his earlier assurance and disregarded the Special Purpose and presented the Cheque for payment in August 2019. 23.Second, it is not inherently improbable for the defendant to give the Cheque to the plaintiff for the Special Purpose.
24.Third, Mr Ray Kwan, counsel for the plaintiff, relied on the following voice message which the defendant sent to the plaintiff on 11 March 2019 (“Voice Message”) in challenging the defendant’s assertion that the Cheque was never meant to be presented for payment:-
25.Mr Kwan submits that the Voice Message was clearly meant to assure the plaintiff that the defendant would soon have sufficient funds to honour the Cheque. This in turn shows that the defendant intended the Cheque to be presented for payment. 26.I do not accept Mr Kwan’s submission.
27.Fourth, the fact that the amount of the Cheque does not tally with the principal loan amounted stated on the IOU is supportive of the defendant’s contention that the Cheque was issued for the Special Purpose rather than for payment. If the Cheque was meant for repayment of the HK$690,000 owing to the plaintiff, it is not clear to me why the defendant would not simply write a cheque for that amount to the plaintiff. 28.Fifth, Mr Kwan submits that if there had been any understanding amongst the parties that the Cheque was not intended to be presented for payment, it would be against common sense that the defendant did not even confront the plaintiff after he presented the Cheque for payment. However, whether the defendant confronted the plaintiff is a matter which neither side has raised or deposed to in their affirmations filed for the purpose of the summary judgment application. I therefore do not think that it is open to Mr Kwan to level such a criticism against the defendant’s case in this regard. 29.Finally, Mr Kwan criticises the defendant for the lack of contemporaneous documentation to support her case. Whilst the existence or not of contemporaneous documentation is a relevant consideration that I take into account, the lack of such documentation does not per se render a defendant’s defence frivolous or moonshine. I need to consider all the surrounding factual circumstances in the present case, including the affirmations filed by both parties and the documents so far produced by the plaintiff. Having done so, and for the reasons mentioned above, I am satisfied that the defendant’s version of events is at least believable. 30.Further, in arriving at my decision on this appeal brought by the plaintiff, I have also taken into account certain suspicious features surrounding the plaintiff’s case. 31.First, the plaintiff’s case is that the defendant drew the Cheque to repay the debt owed to him as stipulated in the IOU. Given that the IOU stipulated a deadline of repayment of 8 March 2019, that the plaintiff on his own evidence knew that the defendant was heavily indebted to several financial institutions since February 2019 and that the defendant by the Voice Message in March 2019 had purportedly indicated to the plaintiff that she would soon have sufficient funds to honour the Cheque, there is no good reason why the plaintiff would wait until 26 August 2019 before presenting the Cheque for payment. The plaintiff has glaringly not explained the reason for this delay in his affirmation evidence. 32.Second, according to the plaintiff, the Cheque was issued to repay the loan stipulated in the IOU and the Cheque was post-dated to 14 March 2019 because the defendant promised in the meeting on 7 March 2019 (being the date on which the IOU was allegedly signed) to repay the loan in 7 days. However, the date of loan repayment was stated to be 8 March 2019 in the IOU, instead of 14 March 2019, being 7 days from 7 March 2019. If the Cheque was, as the plaintiff contends, drawn together with the execution of the IOU in order to repay the debt of HK$690,000 and that the defendant had promised to repay the debt within 7 days, it is difficult to understand why the date of repayment was expressed to be 8 March 2019 instead of 14 March 2019. 33.Third, if the Cheque was issued at the same time with the execution of the IOU and was used to discharge the defendant’s payment obligation under the IOU, it is surprising that the IOU made no reference to the Cheque at all. 34.Fourth, if the loan amount was HK$690,000 as stipulated in the IOU, there is no good reason why the defendant did not simply write a cheque for that sum but instead issued the Cheque for HK$1,000,000. As to the plaintiff’s explanation that the remaining HK$310,000 constituted a token of gratitude from the defendant, such an explanation is unsatisfactory in a number of respects:-
35.Fifth, the reliability/accuracy of the IOU (upon which the plaintiff heavily relies in this summary judgment application) is doubtful in a number of respects and it will have to be further examined at trial. For example:-
36.In light of the above, I am of the view that the purpose of the defendant providing the Cheque to the plaintiff is clearly a matter which can only be resolved at trial. Partial Failure of Consideration 37.As an alternative to the special purpose defence under s21(2)(b) of the BOEO discussed above, the defendant contends that the Cheque is not fully supported by consideration since she had only borrowed HK$420,000. 38.As mentioned in §18 above, partial failure of consideration is a pro tanto defence and is only available when the amount involved is ascertained and liquidated. 39.As matters presently stand, the defendant is only able to confirm that the total amount she borrowed between February and July 2019 amounted to HK$420,000. She is unable to provide to this court an ascertained amount of the loans owing to the plaintiff as at the time of issuance of the Cheque in March 2019. 40.In the circumstances, the partial failure of consideration defence is not available to the defendant at present. Illegal Consideration Due to Excessive Interest Rate 41.According to the defendant, the plaintiff told her that the interest rate chargeable on the loans to her would be 100% of the principal amount of those loans. The defendant contends, as a fallback argument, that the effective interest rate on the loan might exceed the statutory restriction of 60% pa in contravention of the MLO and that therefore the consideration for the Cheque is illegal and irrecoverable. 42.However, as Ms Liu accepted during this appeal hearing, whether the interest rate for the loans exceeds 60% pa would depend on the borrowing period. Yet, on the defendant’s own evidence, the plaintiff did not “lay down any deadline of repayment”. Given the uncertainty over the exact borrowing period, it is not clear whether the applicable interest rate would exceed 60% pa. For present purposes, I am not prepared to accede to the defendant’s fallback contention in this regard. THE PLAINTIFF’S ALTERNATIVE CLAIM 43.Mr Kwan contends that in the event that I am not minded to enter judgment for the full sum of HK$1,000,000 in favour of his client, I should nevertheless enter judgment against the defendant for HK$690,000 as the Cheque was clearly intended to repay the loan owing to the plaintiff for the amount of HK$690,000. 44.I have no hesitation in rejecting such an alternative claim by the plaintiff for the following reasons:-
DISPOSITION 45.For the reasons mentioned above, I am of the view that the defendant has demonstrated an arguable and believable defence under s21(2)(b) BOEO and that the purpose of the Cheque is a matter which should be resolved at trial. 46.In the circumstances, I dismiss the plaintiff’s appeal against Master Leung’s order dated 21 July 2021. 47.I also make an order nisi that the costs of this appeal (including the hearing on 6 October 2021) be paid by the plaintiff to the defendant, such costs to be taxed if not agreed. The costs order nisi shall become absolute 14 days after the date of handing down of this decision. 48.I thank Mr Kwan and Ms Liu for their assistance.
Mr Ray Kwan, instructed by Wat & Co, for the plaintiff Ms Abigail Liu, instructed by K H Mak & Co, for the defendant | ||||||||||||||
Cases cited in this judgment