Kwong Man Hei v. Fok Sin Yee

HCA 981/2021

[2022] HKCFI 303

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 981 OF 2021

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Before:  Mr Recorder Jason Pow SC in Chambers

Date of Hearing:  21 January 2022

Date of Judgment:  27 January 2022

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JUDGMENT

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1.This is an appeal against the Order of Master Hui dated 17 November 2021. The Defendant is acting in person.

2.The Plaintiff issued a Writ endorsed with a Statement of Claim on 25 June 2021.  The claim is based on a written loan agreement with the Plaintiff as “Lender” and the Defendant as “Borrower” (the “IOU”).  The claim is a liquidated claim for repayment of principal and interest as per a demand letter dated 15 June 2021.

3.The Writ was definitely served onto the Defendant because on 17 August 2021, the Defendant applied for Legal Aid. Legal Aid refused her application on 15 September 2021.

4.The Defendant did not give notice of intention to defend and final judgment was entered on 1 November 2021 (“the Judgment”). It is indisputably a regular judgment.

5.On 10 November 2021, the Defendant (acting in person) issued a Summons.  The Summons contained 2 proforma paragraphs. Paragraph 1 refers to “set aside the Judgment”.  Paragraph 2 refers to “stay of execution”.  They are obviously two options which a litigant in person can chose.  He/she can also rely on both in the alternative.  He/she can try to persuade the court to set aside the default judgment and, failing which, to apply for stay of execution.  In the subject Summons, the Defendant did not cross out any of the two paragraphs.  In the brief affirmation filed by the Defendant dated 10 November 2021, she stated that the Plaintiff, though appearing as the “Lender” in the IOU, was not the true Lender but a nominee.  She provided the copy of a cashier order as exhibit. The cashier order was in the sum of HK$9 million (being the principal sum under the IOU) issued by Hang Seng Bank in favour of a solicitors firm. The cashier order does not support the Defendant’s assertion of the Plaintiff not being the “Lender”.

6.Yet, the Order of Master Hui merely mentioned that “the Summons for stay of execution be dismissed”. Upon enquiring from Mr Kwong who appeared for the Plaintiff today as well as before Master Hui, it appears that at the hearing, Master Hui actually stated that the Defendant’s Summons dated 10 November 2021 be dismissed. In fact, in the draft Order sent to Court for approval, he also adopted such wordings. However, when the draft Order was returned to his firm, the Court amended his draft stating “the Summons for stay of execution be dismissed”.  This administrative err is unfortunate. Both parties agreed that I should treat the Defendant’s application as an application to set aside a default judgment.

7.In support of the present appeal which is a hearing de novo, the Defendant filed another affirmation date 8 December 2021. The contents of this 2^nd affirmation repeat the main contention that it was Mr Chow Ka Ming (“Chow”) who provided the HK$9 million loan and that the Plaintiff is just a staff member of Chow.  The 2^nd affirmation also provides in greater details the transactions between her and Chow in relation to the acquisition of Beyond Supreme (a BVI company). In the 1^st paragraph of her 2^nd affirmation, the Defendant referred to a WhatsApp message which she did not exhibit. Since the Defendant acted in person, I allowed her to show me that message contained in her mobile phone. This message was her instruction to one Madam Joyce asking her to prepare an IOU with the Plaintiff’s name mentioned as the Lender and the Defendant’s name as Borrower of HK$9 million.  The Defendant also mentioned other WhatsApp messages in her 2^nd affirmation but, as explained by her at the hearing, these messages merely serve to confirm that she was conversing with Chow in respect of the underlying company acquisition arrangement. Furthermore, whilst the 2^nd affirmation alleged that it was Chow’s decision to deregister Beyond Supreme to save costs, it did not mention “Union Ward” (which is a subsidiary of Beyond Supreme) at all. The Defendant further agreed at the hearing that none of the WhatsApp messages she referred to in her 2^nd affirmation mentioned “Union Ward” or what should be done to the shares of Union Ward.  At the hearing, the Defendant orally asserted that Chow was aware of the issuance of shares of Union Ward to her.

8.It is trite law that in order to set aside a regularly obtained default judgment, a defendant has to demonstrate a meritorious defence i.e. a defence that has a real prospect of success.  I agree with Mr Kwong that the Defendant has failed to demonstrate so for the following reasons:-

(1)  It is not in dispute that the Defendant did execute the IOU[1] and receive the sum of HK$9 million. The Plaintiff’s name appeared prominently and was clearly stipulated as the “Lender”. Under Clause 1, the Defendant’s obligation to repay was expressly owed to the Plaintiff.

(2)  Clause 2 referred to the Defendant issuing a post-dated cheque in favour of the Plaintiff in the sum of HK$9 million as security. Again, the Plaintiff’s name clearly appeared on the cheque as “Payee”[2].

(3)  Even if the Plaintiff is just a nominee or agent of Chow, it does not mean that the Plaintiff has no right to enforce the terms of the IOU and sue the Defendant accordingly. Article 98 of Bowstead and Reynolds on Agency, 22nd ed., reads:

“An agent who makes a contract on the principal’s behalf is liable to or entitled to sue the third party in accordance with the terms of any contractual agreement, whether upon the same contract or upon some independent contract, into which the agent has entered.”

(4)  I agree with Mr Kwong that the allegation that the Plaintiff was just a staff member and hence an agent or nominee of Chow provides no valid defence if the Defendant is, according to the terms of the IOU, liable to repay the principal sum of HK$9 million with interest accrued to the Plaintiff.

(5)  Under Clause 2 of the IOU, it was clearly stipulated that:-

“… and I further agree that if I have decided to ask Beyond Supreme to transfer my 45% shares in Cristalodge and/or in Union Ward in my own name (“the said transfer”), I will forthwith inform the Lender of the same and will deposit the Share Certificate(s) of Cristalodge and/or Union Ward respectively issued in my favour to the Lender immediately after completion of the said transfer.”

And under Clause 4 of the IOU:

“In the event that if I have failed to deposit the Share Certificate(s) of Beyond Supreme and/or Cristalodge and/or Union Ward to the Lender immediately after the said Completion and/or the said tranfser…, the Lender shall have the right to demand immediate repayment of the Loan by me to him and shall also be entitled to charge interest accrued on the Loan at the rate of 15% per annum calculated from the date hereto up to the actual date of full repayment of the Loan and interest thereon by me to the Lender. ”

(6)  In the Statement of Claim, it was pleaded that on or about 6 July 2020, the Defendant caused all the then issued capital of Union Ward, namely 2 ordinary shares of HK$1.00 each, to be transferred to her.  Then on 22 October 2020, the Defendant caused Union Ward to allot 58 ordinary shares of HK$1.00 each to her and 40 ordinary shares of HK$1.00 each to Mr Tang Lung Fai making them shareholders of Union Ward holding 60% and 40% respectively. Paragraph 8 of the Statement of Claim pleaded that the Defendant failed to deposit the Share Certificate(s) of Union Ward issued in the Defendant’s name to the Plaintiff immediately after the said transfer. All these facts have not been denied in the 1^st and 2^nd affirmations of the Defendant. Based on these facts, the Plaintiff was clearly entitled under Clause 4 of the IOU to demand immediate repay of the Loan with interest. 

(7)  In fact, such a demand was made by a solicitors’ letter dated 15 June 2021.  The Defendant admitted receiving that demand letter.  It is further not in dispute that the Defendant has not complied with the said demand.

(8)  In the circumstances, I am of view that the 1^st and 2^nd affirmations filed by the Defendant (including her submissions today) failed to establish a meritorious defence towards the Plaintiff’s claim.  On this ground alone, I will not exercise my discretion to set aside the Judgment which has been regularly obtained. 

(9)  Furthermore, I will add that the Defendant has failed to explain why no action was taken on her part towards defending this action since the rejection of legal aid on 15 September 2021. The Defendant’s oral assertion in court that she was in contact and negotiation with Chow provides no reasonable explanation for her lack of action.

9.I accordingly dismiss the appeal and order that the Defendant do pay costs of the appeal to the Plaintiff to be taxed, if not agreed, on party-and-party basis.

Mr Kwong Chiu Yin, of B.C. Chow & Co., for the plaintiff

The Defendant appeared in person