Chiu Ricky Tong v. Eagle Bright Property Development Company Ltd and Others

HCA 520/2019

[2022] HKCFI 872

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 520 OF 2019

____________

____________

_______________

J U D G M E N T

_______________

A. INTRODUCTION

1.By a notice of appeal of 16 August 2021 (“the Notice of Appeal”), the 1^st Defendant (“Eagle Bright”), 2^nd Defendant (“Mr Law Senior”) and 3^rd Defendant (“Mr Law Junior”) seek to appeal (“the Appeal”) against the decision of Master Alan Kwong of 3 August 2021 (“the Decision”) which ordered the Defendants to make an interim payment in the sum of $5,900,000 in favour of the Plaintiff within 35 days, failing which judgment would be entered against the Defendants for payment of the sum to the Plaintiff.

2.The Plaintiff had applied for summary judgment by a summons of 3 December 2020 (“the Summons”) against the Defendants for payment of the sum of $5,900,000, alternatively damages to be assessed, or alternatively an order for interim payment of $5,900,000.

3.As this is an appeal under O.58 r.1, what is before me is a rehearing of the Summons.

4.The originally scheduled hearing of the Appeal was adjourned by reason of the general adjournment of proceedings announced by the Judiciary by reason of public health considerations.  The parties did not object to the determination of the Appeal on the papers instead.

B.  THE BACKGROUND

5.Unless otherwise indicated, the following facts are not in dispute.

6.Prior to its dissolution on 10 September 2021, Eagle Bright was a company carrying on a property development business.  Both Mr Law Senior and Mr Law Junior (together, “the Laws”) were directors and shareholders of Eagle Bright.

7.The Plaintiff and the Defendants were introduced to each other, and in about August 2016, they discussed the making of a loan by the Plaintiff of $8m to Eagle Bright.  There is a dispute as to who initially proposed the making of the loan, but it is not disputed that the terms discussed were that a loan of $8m would be made by the Plaintiff to Eagle Bright, that it would mature on 31 January 2017, and that Eagle Bright would have to repay $10m on that date (that is, the principal of $8m together with interest of $2m).  The effective interest rate of the loan would therefore be 57.32% per annum or thereabouts.  It was further pleaded on the Plaintiff’s behalf that as Eagle Bright was a limited company, the Laws were to guarantee Eagle Bright’s performance of the loan agreement; the Defendants did not expressly admit this part of the negotiations in their Amended Defence.

8.The Plaintiff says that the parties reached a verbal agreement as to the making of the loan shortly before 25 August 2016 (“the Disputed Verbal Agreement”).  The Defendants deny that any verbal agreement was reached.

9.What was not in dispute, however, was that the parties signed a three-page Chinese document dated 25 August 2016 entitled “Sale and Purchase Agreement” (translation) (“the Written Document”), pursuant to which Eagle Bright was to sell, and the Plaintiff was to purchase, a small village house, for $8m.  The completion date of the sale and purchase was to be the earlier of the date on which Eagle Bright paid the premium due for the house or 31 January 2017, and Eagle Bright was to give a written notice of the exact completion date.  The Plaintiff had the right to cancel the sale and purchase after receiving the notice but before the scheduled completion date, and upon such cancellation, Eagle Bright was to repay $10m to the Plaintiff.  Mr Law Senior and Mr Law Junior undertook to bear any losses incurred by the Plaintiff caused by breach of the agreement by Eagle Bright.

10.It will be apparent that the Written Document largely reflects what the parties acknowledge to be the terms of the Disputed Verbal Agreement (save perhaps as to the obligations of the Laws).  The Plaintiff’s case is that the Written Document was put forward by the Defendants, but as it embodied the essential terms of the Disputed Verbal Agreement, he signed it.  Mr Law Junior’s evidence is that the Written Document was not put forward by them, and that it was not a genuine sale and purchase agreement, but instead a sham, used to cover up an extortionate loan transaction, and therefore void and unenforceable.

11.The Plaintiff drew a cheque for $8m on 25 August 2016 in favour of Eagle Bright.  Eagle Bright has received the entirety of the $8m.  Eagle Bright has subsequently repaid $2.1m to the Plaintiff.  Mr Law Junior’s evidence is that this was because Eagle Bright was under the mistaken belief that the Written Document was enforceable; upon discovering its mistake, Eagle Bright has refused to make any further payments.

12.When the present proceedings were instituted in March 2019, the Statement of Claim pleaded a case of breach of a written agreement – namely, the Written Document.  In November 2019, the Statement of Claim was amended to plead a case of breach of the Disputed Verbal Agreement instead, with the Written Document being pleaded as simply a document which was signed as it embodied the terms of the Disputed Verbal Agreement.  The primary claim was for repayment of the outstanding amount of the loan and interest (totalling $7.9m) as against Eagle Bright, and performance of Mr Law Senior’s and Mr Law Junior’s obligations as guarantors.  It was pleaded in the alternative that if the Disputed Verbal Agreement was void or unenforceable, then the Plaintiff was entitled to the return of $5.9m (that is, leaving aside the interest of $2m), “from the 1^st to 3^rd Defendants under the laws of unjust enrichment and/or laws of surety/guarantee/indemnity, as the case may be”.

13.Pursuant to the Decision, the Defendants were ordered to make an interim payment of $5.9m to the Plaintiff, failing which judgment would be entered for this sum.  They failed to do so, and judgment was subsequently entered against them.

C.  THE POSITION OF EAGLE BRIGHT

14.It has since transpired that Eagle Bright was struck off the Companies Register pursuant to s.746 of the Companies Ordinance (Cap.622) (“CO”) on 10 September 2021, which was after the Decision of 3 August 2021 and Notice of Appeal of 16 August 2021.  This was discovered by the Plaintiff’s solicitors in the course of taking steps to serve a statutory demand on Eagle Bright.

15.By a letter of 15 October 2021, the solicitors for the Laws claimed not to have had any knowledge of such striking off, and indicated that they had instructions to rectify the “surprising situation” by applying for the restoration of Eagle Bright for the purpose of continuing the proceedings.

16.In their response of 18 October 2021, the solicitors for the Plaintiff did not accept that the Laws were surprised about the striking off, since public records showed that no annual returns had been filed for more than two years, and there had been a failure to respond to the Companies’ Registry’s queries which must have been sent to Eagle Bright’s registered address.  They further warned that unless and until Eagle Bright was restored to the Companies Register, it would not be able to appear at the hearing for a stay of execution sought by the Defendants.  That application was thereupon withdrawn.

17.It was not until 31 January 2022 that an application by Mr Law Senior was filed with the Companies Registry for the restoration of Eagle Bright.  No explanation by either the Laws (or their solicitors) has been given for the delay in making the application, despite the Plaintiff’s solicitors’ complaint that the delay was deliberate.  As matters presently stand, Eagle Bright has not been restored, and it is not clear what the current status of the application is.

18.No application for adjournment of the hearing of the Appeal has been made.

19.In support of the Appeal, counsel Mr Andrew Lau filed submissions which were said to be made on behalf of all three Defendants.  It was said that his instructing solicitors Messrs Cedric & Co had received instructions to represent Eagle Bright in the appeal prior to lodging the Notice of Appeal on 16 August 2021.

20.However, I note that by virtue of s.746(3) CO, on publication of the notice of striking off, Eagle Bright was dissolved.  Furthermore, by virtue of s.752(1) CO, every property and right vested in Eagle Bright immediately before the dissolution would have been vested in the Government as bona vacantia, which rights would include the right to bring the Appeal.  In such circumstances, it has not been explained how Eagle Bright, which has been dissolved, can continue to prosecute its appeal, nor how solicitors and counsel can continue to act for Eagle Bright.

21.I therefore dismiss Eagle Bright’s appeal.

D.  THE APPLICABLE PRINCIPLES

22.The principles on an application for summary judgment are well established.  The defendant’s affidavit must condescend upon particulars; a mere general denial will not suffice.  The defendant must show that there is a triable issue or that he has a real or bona fide defence.  If he makes an allegation, it must be credible or believable in the light of the evidence placed before the court.  On the other hand, the court must not embark on a mini trial on affidavits.  The test is whether the defendant’s assertions are believable, not whether they are to be believed.  See Hong Kong Civil Procedure 2022, notes 14/4/4, 14/4/9, 14/4/9A.

23.On an application for interim payment, the court will approach the matter in two stages.

(1)  At the first stage, the question is whether the applicant would obtain judgment for a substantial sum of money at trial.  In this regard, the court should read O.29, rr.11 and 12 together and ask the single question of 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.

(2)  If the court is satisfied that the applicant would obtain judgment for a substantial amount at trial, it then decides whether to exercise its discretion to make an order and if so, for what amount.

(3)  At both stages, the court is required to take into account the likelihood of a set-off or other defence or counterclaim succeeding at the trial.

See Ho Kuen Fai v Chun Wo Construction & Engineering Co Ltd, unreported, HCA 1790/2007, 7 August 2008, at [30] to [32], per DHCJ Lisa Wong SC (as she then was), applying Shearson Lehman Brothers Inc v Maclaine, Watson & Co Ltd [1987] 1 WLR 480, Shanning International Ltd v George Wimpey International Ltd [1988] 3 All ER 475 and Maxon Investment Ltd v Million Nice Development Ltd, unreported, HCA2332/2003, 6 July 2004.

24.The onus on the applicant for an order for interim payment is a high one.  The court must be satisfied on the balance of probabilities that the plaintiff “would” obtain judgment, and not merely that he “would be likely to”.  The court must also be satisfied that the defendant has no arguable defence, such as one that would warrant the grant of unconditional leave on an O.14 application.  Where the defence is shadowy, so that only conditional leave to defend would be given on an O.14 application, it is possible for the court to be satisfied that the plaintiff will succeed at trial (although it does not automatically follow that it will be appropriate to make an order for interim payment).  See Hollywood Palace Co Ltd v Trans-Global Hong Kong Investment Ltd [2011] 1 HKLRD 833 at [17] to [19], per Mr Recorder Anderson Chow SC (as he then was).

E.  THE DEFENCES ADVANCED BY THE LAWS

E1.  “Disputed Verbal Agreement not made”

25.The case for the Laws is that they did not agree to taking the proposed loan from the Plaintiff in the terms of the Disputed Verbal Agreement, but they agreed to proceeding with the transaction by way of the Written Document.  Mr Law Junior’s evidence is that the Written Document was presented to them as being a “safer option” for Eagle Bright, with the Plaintiff being treated as a potential purchaser.  Mr Lau submitted that there were factual disputes as to whether the Disputed Verbal Agreement had been made, and it was inappropriate to determine the matter by way of summary judgment.  In particular, he put forward the following points.

(1)  If the Disputed Verbal Agreement existed, it did not make sense that it was not pleaded until after the filing of the Amended Defence and Counterclaim, by way of an Amended Statement of Claim.

(2)  The Disputed Verbal Agreement was not supported by contemporaneous evidence.

(3)  Particulars as to where and how the Disputed Verbal Agreement had been entered into were not given.

(4)  The Disputed Verbal Agreement was a loan agreement, whereas the Written Document was a sale and purchase agreement.  What the Defendants had agreed to was the latter, because it was a “safer option” for Eagle Bright.

(5)  The Defendants did not admit the existence of the Disputed Verbal Agreement in the Amended Defence or Mr Law Junior’s evidence.

26.Counsel for the Plaintiff, Mr David Tang, submitted that it was incredible for the Laws to deny having entered into the Disputed Verbal Agreement.  He submitted that:

(1)  had there been no Disputed Verbal Agreement, the Written Document would not have been signed.  The suggestion that the negotiations leading up to the Disputed Verbal Agreement did not result in an agreement was incredible as otherwise, why would the Defendants have signed the Written Document which embodied effectively the same terms as the rejected proposal? Furthermore, the Amended Defence admits that the Written Document was a sham to “cover up the … loan transaction”  

(2)  had there been no Disputed Verbal Agreement, the Plaintiff would not have made a loan to Eagle Bright of $8m, and Eagle Bright would not have made a repayment of $2.1m to the Plaintiff;and

(3)  Eagle Bright being a limited company, it was common sense that the Plaintiff would only have agreed to lend money to it on the strength of personal guarantees from its directors. Had there been no agreement on the terms of the Disputed Verbal Agreement, it is inexplicable why the Laws would have signed the Written Document.

27.I bear in mind that on an application for summary judgment, the court should not embark on a mini-trial by affidavit.  The question is whether defence put forward is believable, rather than whether it is to be believed.

28.In my view, a key point is that paragraph 7.4 of the Amended Defence expressly pleads that the Written Document was not a genuine sale and purchase agreement, and that it was a sham to cover up the aforementioned loan transaction.  This was reiterated in Mr Law Junior’s evidence, where he said that the objective of the Written Document was to cover up an extortionate loan transaction (1st Affirmation of Law Shing Yan (“Law 1st”), paragraph 13).

29.The meaning of “sham” was explained by Diplock LJ in Snook v London and West Riding Investments Ltd [1967] 2 QB 786 at 802C:

“As regards the contention of the plaintiff that the transactions between himself, Auto Finance and the defendants were a “sham,” it is, I think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the “sham” which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create. But one thing, I think, is clear in legal principle, morality and the authorities (see Yorkshire Railway Wagon Co. v. Maclure and Stoneleigh Finance Ltd. v. Phillips), that for acts or documents to be a “sham,” with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating. No unexpressed intentions of a “shammer” affect the rights of a party whom he deceived.”

30.In other words, it is the Laws’ own case that the actual legal rights and obligations (if any) which the parties intended to create were different from those set out in the Written Document.  It was not, therefore, the intention of the parties to enter into a sale and purchase agreement.[1]

31.The question, then, is what rights and obligations did the parties in fact intend? Based on Mr Law Junior’s evidence and the Amended Defence, it must have been a loan transaction, since that was what the Written Document was to cover up.  The Plaintiff says it was a loan transaction on the terms of the Disputed Verbal Agreement (including the Laws’ obligations as guarantors).  The Laws deny this, but they have not identified what they say to be the terms of the loan transaction, either in the Amended Defence or in their evidence.  Indeed, they have not identified what were the true rights and obligations intended by the parties, if not those in the Disputed Verbal Agreement.  I agree with Mr Tang that in the circumstances, the Laws have put forward nothing more than a bare denial to the Plaintiff’s claim on the Disputed Verbal Agreement, and have failed to condescend to particulars.

32.The five points relied on by Mr Lau (as set out above) do not take the matter further.  It remains the case that whilst on the one hand, the Laws say that the Written Document was a sham which covered up the actual loan transaction between the parties, on the other hand, they have failed to say what the terms of that loan transaction were.  Whatever the transaction was, it would have had to have been one which could explain (1) why the Plaintiff paid $8m to Eagle Bright, (2) why Eagle Bright subsequently repaid $2.1m to the Plaintiff,[2] and (3) why the parties signed the Written Document.  The absence of any explanation from the Laws as to what the true loan transaction might have been leaves the Disputed Verbal Agreement as the only plausible possibility on the evidence.

33.Indeed, some of the evidence from the Laws supports the Disputed Verbal Agreement as being the actual transaction: Mr Law Junior’s evidence that the transaction being covered up was a loan transaction; that the Laws were told that the proposal for a loan – being the one which was said to have been rejected by the Defendants – could be embodied in a sale and purchase agreement for property; that the Laws sought to give the Plaintiff “added security” by investing in a columbarium business in which the Plaintiff was interested.  Furthermore, paragraph 7.4 of the Amended Defence expressly pleaded that the Written Document was to cover up the “aforementioned” loan transaction – namely, that under the Disputed Verbal Agreement.

34.I therefore agree that the Laws’ denial of the Disputed Verbal Agreement, in the absence of a positive case as to what the transaction between the parties was, is not credible.

E2. “The Disputed Verbal Agreement may be re-opened under s.25 Money Lenders Ordinance”

35.Mr Lau next submitted that the loan transaction under the Disputed Verbal Agreement would in any event be presumed to be extortionate within the meaning of s.25(3) of the Money Lenders Ordinance (Cap.163) (“MLO”) as the effective interest rate thereunder exceeded 48% per annum, so that the transaction could be re-opened by the court under s.25(1) MLO.

36.Mr Tang highlighted that the Summons only sought judgment or interim payment for the principal outstanding under the loan, that is, $5.9m.  He submitted that:

(1)  the Laws were not entitled to rely on s.25 MLO as they had not pleaded it;

(2)  s.25 MLO could not constitute a defence to the Plaintiff’s application for interim payment or summary judgment, since the Plaintiff was not seeking any payment of interest in the application, and since s.25 MLO would not prevent recovery of at least the principal amount lent by the Plaintiff.

37.Mr Lau’s response was that there was a wide range of matters that needed to be considered in the exercise of the discretion as to whether to reopen a loan transaction under s.25 MLO, which were not suitable for summary determination, and it was premature for the Master to have held that it was extremely likely that the Plaintiff would recover the outstanding principal of $5.9m.

38.In relation to the pleadings point, paragraph 7 of the Amended Defence in fact pleaded that the court had the power to reopen the loan transaction given that the interest rate meant that the transaction was presumed to be extortionate under s.25 MLO; and paragraph 11 of the Amended Defence had pleaded that the Defendants were not liable to make any repayment to the Plaintiff “[by] reason of the matters aforesaid”.  For the purposes of a summary judgment application – which in any event does not limit a defendant to relying on what has been pleaded (see O.14 r.4(1)) – I would accept that this sufficiently raises a potential defence under s.25 MLO. (I express no view as to whether the pleading sufficiently particularises, for other purposes, any relief sought under s.25 MLO.)

39.As to the re-opening of the loan transaction, the relevant provisions of s.25 MLO are as follows.

(1)  Subject to section 24(2), where -

(a)   proceedings are taken in any court by any person (whether a money lender of not) for the recovery of any money lent or the enforcement of any agreement or security in respect of any loan; and

(b)   subject to subsection (3), there is evidence which satisfies the court that the transaction is extortionate,

the court may reopen the transaction so as to do justice between the parties having regard to all the circumstances, and, for that purpose, make such orders and give such directions in respect of the terms of the transaction or the rights of the parties thereunder as the court may think fit.

(2)  For the purposes of this section, a transaction is extortionate if –

(a)  it requires the debtor … to make payments ... which are grossly exorbitant; or

(b)   it otherwise grossly contravenes ordinary principles of fair-dealing.

(3)  Any agreement for the repayment of a loan or for the payment of interest on a loan in respect of which the effective rate of interest exceeds 48 per cent per annum shall, having regard to that fact alone, be presumed for the purposes of this section to be a transaction which is extortionate; but except where such rate exceeds the rate specified in section 24(1), the court may declare that any such agreement is not extortionate for the purposes of this section if, having regard to all the circumstances relating to the agreement, the court is satisfied that such rate is not unreasonable or unfair.

(4)  In determining whether a transaction is extortionate for the purposes of this section, regard shall be had to such evidence as is adduced concerning—

(a)  interest rate prevailing at the time it was made;

(b)  the factors mentioned in subsections (5) and (6); and

(c)  any other relevant considerations.

(5)   Factors applicable under subsection (4)(b) in relation to the debtor include—

(a)  his age, experience, business capacity and state of health; and

(b)  the degree to which, at the time of entering into the transaction, he was under financial pressure, and the nature of that pressure.

(6)  Factors applicable under subsection (4)(b) in relation to the lender or other person by whom the proceedings are taken include—

(a)  the degree of risk accepted by the lender, having regard to the nature and value of any security provided;

(b)  his relationship to the debtor;

(c)  whether or not a specious cash price was quoted for any goods or services included in the transaction; and

(d)  where one or more other transactions are to be taken into account, the question how far any such other transaction was reasonably required for the protection of the debtor or the lender, or was in the interest of the debtor.

40.Mr Lau cited Yu Tai Hing Company Limited v Teresa Cheung, unreported, HCA 5453/2001, 27 August 2002, at [10], where DHCJ Saunders said that “Where it is arguable that the provisions of ss 24 and 25 MLO apply, it is a matter for the trial judge, not a judge on O.14 procedure, to determine the consequences of those sections to the loans because the relief that may be given, either to a lender or a borrower under the provisions of s 25(1), are a matter of discretion”.

41.As DHCJ Saunders went on to say, it will only be in the rarest of cases that matters which require the exercise of a discretion could ever be determined without a trial, by way of summary judgment.  I respectfully agree. However, it is necessary for a defendant to first show that there are indeed factors which would call for the court to exercise its discretion before he can begin to argue that summary judgment should not be considered on the grounds that an exercise of discretion is involved.

42.Mr Lau has submitted that there are four matters which the court could consider under s.25(4) to s.25(6) and which ought to be left for consideration at trial.  These are: (1) the fact that it was the Plaintiff who approached the Defendants, (2) the fact that it was the Plaintiff who caused the Defendants to enter into the Written Document, (3) the fact that Mr Law Junior invested, via a corporate vehicle, in a columbarium business in which the Plaintiff had an interest, and (4) the effective interest rate of 57.32% under the loan transaction between the Plaintiff and the Defendants.

43.As to the first three of these matters, there has been neither evidence nor submissions as to how they might be relevant for consideration at trial under s.25(4) MLO, including how they might make the loan transaction extortionate.  It is not sufficient to simply say that they are matters which require “further discovery, interrogatories, and examination of witnesses”.  This does not identify what the triable issue might be.  I do not consider that the Laws’ reference to these matters raises any issue under s.25(4) to s.25(6) which ought to be considered at trial.

44.This leaves the matter of the interest rate under the loan transaction.  Since it exceeded 48% per annum, a rebuttable presumption arises under s.25(3) MLO that the loan transaction was an extortionate one.  Accordingly, under s.25(1) MLO, the court may reopen the transaction so as to do justice between the parties.

45.However, by the Summons, the Plaintiff only sought summary judgment, alternatively an interim payment, in respect of the outstanding $5.9m principal loaned under the Disputed Verbal Agreement.  The Laws have not identified, whether by way of evidence or submissions, any circumstances which might be relevant for consideration at trial such that the court would exercise its discretion under s.25 MLO(1) to render even the principal amount lent by the Plaintiff irrecoverable, “so as to do justice between the parties”.  I do note that the Amended Defence and Counterclaim pleads that the Written Document is unenforceable, so that Eagle Bright is effectively entitled to keep the $5.9m and even to claim back the repayment of $2.1m earlier made to the Plaintiff, but these are advanced as arguments based on the (alleged) illegality of the Disputed Verbal Agreement and change of position as a defence to the Plaintiff’s restitutionary claim, and not as factors relevant to the court’s discretion under s.25(1) MLO.  In any event, it appears from the parties’ written submissions[3] that Mr Lau is not seeking to argue that there should be any reopening of the loan transaction pursuant to s.25 MLO such that it results in the Plaintiff losing the right to recover even its principal.

46.For completeness, I note that Mr Tang submitted that he had not found any cases where the court had exercised its power under s.25 MLO to allow the borrower to keep the principal amount lent to him; he referred to various cases in which, he said, the court re-opened the loan transaction on the issue of interest only, without disturbing the obligation to repay the principal.  I do not propose to review these, since they turn on their particular facts, and do not purport to lay down any rule that on a “reopening” of a loan transaction under s.25 MLO, a lender can never be deprived of the right to recover its principal.

47.I therefore do not consider that the Laws can rely on s.25 MLO as raising a triable issue to the Plaintiff’s claim.

E3.    “Plaintiff not entitled to claim restitution”

48.The Plaintiff’s alternative claim as pleaded in paragraph 13 of the Amended Statement of Claim is for restitution of the $5.9m by reason of unjust enrichment.  The claim was pleaded against all of the Defendants.  However, it appears from Mr Tang’s submission that this is pursued against Eagle Bright only, and not the Laws.  No doubt this is because it was Eagle Bright, rather than the Laws, which received the loan from the Plaintiff, so that it could not be said that the Laws were enriched by the receipt of the funds.

49.Given that I have dismissed Eagle Bright’s appeal, it is not necessary for me to consider the arguments as to whether the Plaintiff has a good claim for unjust enrichment or whether Eagle Bright has a defence of change of position to such a claim.

E4.    “Disputed factual allegations”

50.Mr Lau submitted that there were a number of disputed factual allegations which related to the three defences addressed above, which could not be resolved on affidavit and therefore warranted the matter going to trial.  These were: (1) who raised the idea of advancing funds to Eagle Bright, (2) whether the Disputed Verbal Agreement was made, (3) who prepared the Written Document, (4) the Defendants’ case that they were told to invest in the columbarium business in which the Plaintiff had an interest (which in fact is acknowledged not to be a disputed), (5) the extent of involvement of a common friend of the parties in the transaction, and (6) how the sum of $8m was used.

51.I have set out above why I consider that the Laws’ denial of the Disputed Verbal Agreement is not credible, and why it is not necessary to consider any defence of change of position.  As to the remainder of the allegations, I agree with Mr Tang’s submission that they are not material.  They do not raise any bona fide defence or constitute a triable issue. 

F.  THE COUNTERCLAIM

52.As set out above, at both stages of considering an application for interim payment, the court is required to take into account the likelihood of a counterclaim succeeding at the trial.

53.The Amended Defence pleads that Eagle Bright is entitled to repayment of the $2.1m which it paid to the Plaintiff in partial repayment of the principal borrowed.  It is said that this was paid as a result of a mistaken belief that the Written Document was enforceable.

54.Given that Eagle Bright has been dissolved, it would not be able to pursue the counterclaim.

55.I note that Mr Lau has not suggested that the existence of the counterclaim constitutes a good reason for opposing either the making of the order for interim payment or the amount of such a payment.

56.In the circumstances, I do not consider that there is any real likelihood of the counterclaim succeeding at trial, such that it should affect either the grant of an order for interim payment or the amount of such payment.

G.  CONCLUSION

57.I have set out my dismissal of Eagle Bright’s Appeal above.

58.I further conclude that the Laws have not shown any bona fide defence to that part of the Plaintiff’s claim for repayment of the outstanding principal of $5.9m lent by the Plaintiff to Eagle Bright, repayment of which was guaranteed by the Laws.

59.I am also satisfied that the Plaintiff would obtain judgment against the Laws for a substantial sum of money at trial, being at least the aforesaid $5.9m.

60.I therefore dismiss the Laws’ Appeal.

61.I further make a costs order nisi that the Laws pay the costs of and occasioned by the Appeal to the Plaintiff, to be taxed if not agreed.

Mr David WK Tang, instructed by Tsang, Chan & Woo Solicitors & Notaries, for the Plaintiff

Mr Andrew Lau, instructed by Cedric & Co., for the 1^st to 3^rd Defendants