Orient First Capital Ltd v. Yau Pak Man As Representative of the Estate of Yau Fook Sum Deceased and Another

HCMP 1337/2019

[2022] HKCFI 1113

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1337 OF 2019

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BETWEEN

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Before:  Hon Wilson Chan J in Court

Date of Hearing:  25 January 2022

Date of Judgment:  19 April 2022

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J U D G M E N T

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A.  INTRODUCTION

1.The plaintiff commenced the present proceedings to recover from Yau Pak Man (“YPM”)  and his late father Yau Fook Sum (“YFS”)  outstanding principal and loan interest arising from:

(1)  a loan agreement dated 27 September 2016 between YPM as borrower and the plaintiff as lender (“Loan Agreement YPM 2016”); and

(2)  a loan agreement dated 14 June 2018 between Tsang Suen Kee Building Construction Company Limited (“TSK”)  as borrower and the plaintiff as lender (“Loan Agreement TSK 2018”).

2.The loans under Loan Agreement YPM 2016 and Loan Agreement TSK 2018 are secured by a Mortgage dated 12 October 2016 and registered at the Land Registry by Memorial No 16110301280048 (the “Mortgage”). Flat A on 11^th Floor and Portion of the Roof above, Tai Ming House, No 9 Greig Road, Hong Kong (the “Property”)  is charged under the Mortgage as security.  The plaintiff also seeks vacant possession of the Property in enforcing the Mortgage.

3.YFS passed away on 7 January 2020. YPM was granted probate of the estate of YFS (the “Estate”)  on 19 August 2020.  By Order dated 14 April 2021, YPM was appointed to represent the Estate, and the action is now carried on between the plaintiff and YPM in his personal capacity (as the 2^nd defendant)  and as the executor of the Estate (as the 1^st defendant).

4.The plaintiff invites this court to dispose of the proceedings summarily as there is no triable issue.

B.  BACKGROUND

B1.  YPM, YFS, and TSK

5.TSK was incorporated on 25 May 2005. YPM was a director of TSK at least up to 2016.  According to the Annual Return of TSK, as at 25 May 2016:

(1)  Tsui Chi Keung Johnson (“Tsui”)  and Tsang Hin Wan (“Tsang”)  were the company secretaries.  Tsang is the wife of Tsui;

(2)  YPM and Tsui were the only directors;

(3)  Tsui, YPM, and a Tsui Kam Wing were the shareholders.

6.YFS and YPM were joint tenants of the Property. After the death of YFS, YPM is the sole owner of the Property by survivorship.

B2.  The Loan Agreements and the Mortgage

7.According to the terms of Loan Agreement YPM 2016, the plaintiff shall grant facilities of a total limit of HK$2,000,000 to be repaid in 144 instalments each of HK$23,902.00.  The Loan Agreement YPM 2016 was signed by YPM as the borrower, and acknowledged by YFS and YPM as mortgagors.

8.By a loan agreement dated 27 September 2016 between TSK as borrower and the plaintiff as lender (“Loan Agreement TSK 2016”), the plaintiff shall grant facilities of a total line of HK$3,000,000 (of which HK$2,000,000 for Facility (A)  loan and HK$1,000,000 for Facility (B)  instalment loan)  to TSK.  The Loan Agreement TSK 2016 relevantly provides the following:

“IV)  COLLATERAL/GUARANTEE

1. Continuing Personal Deed of Guarantee duly executed by Mr Tsui Chi Keung Johnson...dated on 27^th September 2016 and Mr Yau Pak Man ... dated 27^th September 2016 and Mdm Tsang Hin Wan ... dated 27^th September 2016 for amount not less than the credit facilities provided by the Lender.

2. A Debenture incorporating a Floating Charge of all the assets, properties and undertakings both present and future including the uncalled capital (if any)  to be properly signed by WING ON PROPERTY LTD & executed in our favour with registration in the Company Registry as security of the credit line/loan facilities enjoyed by Borrower from time to time and at any time granted by the Lender.

3.…First All Monies Legal Charge on the residential property located at Flat A, 11/F and Portion of the Roof above Tai Ming House, 9 Greig Road, Quarry Bay, Hong Kong executed by Mr Yau Pak Man and Mr Yau Fook Sum in favour of the Lender.

(NB This First All Monies Legal Charge is concurrently charged in favour of the Lender for its HKD2,000,000.00 Installment Loan to Yau Pak Man)”

(Original emphasis)

9.The Loan Agreement TSK 2016 was signed on 27 September 2016 by Tsui and YPM as borrowers, acknowledged and accepted by Tsui, YPM, and Tsang as guarantors, acknowledged and accepted by YPM and YFS as mortgagors.  Li Chow Kai (“Li”), senior relationship manager of the plaintiff, explained the contents of the documents to them before they signed the documents.

10.Also on 27 September 2016, each of Tsui, YPM, and Tsang executed a Deed of Guarantee in favour of the plaintiff (a fact not accepted by YPM).  Clause 1 of each of the Deed of Guarantee provides that each of Tsui, YPM, and Tsang jointly and severally agree to pay and satisfy to the plaintiff on demand all sums of money debts and liabilities owed by TSK to the plaintiff up to a sum of HK$3,000,000.

11.Messrs Y T Chan & Co, Solicitors (“YT Chan”)  acted for the plaintiff in the handling of the Mortgage.  It has been the practice of YT Chan since 2003 that where the borrower is not the mortgagor, a solicitor or a solicitor’s clerk (not being the same person who explains the contents of the mortgage or witnesses the mortgagors’ signatures)  will explain the nature of the transaction and the matters contained in certain warning notices to the mortgagors.

12.On 6 October 2016, Wong Kim Ling, a clerk of YT Chan, sent the relevant warning notice to YFS and YPM by post.  The Warning Notice stated, inter alia, that:

(1)  The borrowers were YPM and TSK.

(2)  They were recommended to instruct their own solicitors to give them independent legal advice.

(3)  Their liability under the Mortgage would be unlimited if they decided to execute the Mortgage.

(4)  They also had the choice not to proceed with the transaction in connection with the credit facilities/mortgage loan to be granted to the borrower.

13.The Chinese version of the Warning Notice has all the contents within one page and was signed by YFS and YPM.  In other words, when signing the Warning Notice, YFS and YPM must be aware that the Mortgage was to secure loans granted to YPM and TSK.

14.Each of YFS and YPM signed both the Chinese and English versions of the Warning Notices on 8 October 2016 confirming that they did not want to take independent legal advice and instructed YT Chan to act for them.

15.On 11 October 2016, YPM and YFS attended the office of YT Chan and returned the duly signed Warning Notices to Wong Kim Ling. Wong Kim Ling then interpreted the contents of the Mortgage to YFS and YPM, including in particular that the Mortgage was an all-money mortgage securing the loan to YPM and TSK, and that there was no limit on the amount of the indebtedness secured by the Mortgage.

16.Further, YFS and YPM were each provided with a set of written confirmation letters (which adopted the form of Appendix D of Law Society Circular 20-186(PA)  with modifications), the contents of which were explained to them by Ms Lau Wing Hei, a solicitor of YT Chan.  YFS and YPM were free to flip through any or all of the pages in the letter of advice and warning notice contained therein, and nobody had suggested that they must sign the letter of advice and warning notice within a certain time.  YPM and YFS then each signed a letter of advice in both Chinese and English versions.  The letters of advice highlighted that:

(1)  The Mortgage was to secure a loan/facility from the plaintiff to YPM and TSK.

(2)  YPM and YFS were provided with the Mortgage at the meeting and were asked to read them carefully.

(3)  Liability under the Mortgage would be unlimited.

(4)  The Mortgage would give the plaintiff security over the Property for any existing loans from the plaintiff to TSK, even if YPM and YFS did not know about such loans.

(5)  YPM and YFS could lose the Property if TSK failed to repay the plaintiff or if the borrowing was increased.

(6)  It was not advisable for YPM and YFS to make themselves liable for an unlimited amount.

(7)  YPM and YFS did not have to agree to these arrangements at all if they considered that the risks were too great or they thought that these arrangements were of no advantage to them.  If they found particular terms unacceptable, it might be possible to negotiate variation of those terms with the plaintiff in order to make them acceptable to YPM and YFS.  These decisions were those of YPM and YFS alone.

(8)  YPM and YFS should consider whether they wanted further legal advice from a completely separate solicitor before they made a final decision in connection with the Mortgage.

(9)  By signing the letter of advice, they have decided, of their own free will to enter into the Mortgage.  They did not require the plaintiff to vary any of the terms, and did not require any further legal advice, and they agreed that the plaintiff might be told that they had received the advice in this letter.

17.Although the Mortgage was dated 12 October 2016, Lau Wing Hei confirmed that the Mortgage was in fact executed on 11 October 2016. In this connection, YPM also agree that he signed the Mortgage on 11 October 2016 shortly before 5 pm.  The Mortgage provides that as agreed between YPM and TSK as borrower, YFS and YPM as mortgagor, and the plaintiff as lender, the Property was charged to the plaintiff as security for the due payment of all moneys payable or which may at any time thereafter or from time to time become payable by the Borrower (ie YPM and TSK)  to the plaintiff, or which may be or become payable by the Mortgagor or the Borrower under any of the Mortgages, covenants and conditions contained in the Mortgage and interest thereon as thereinafter provided.

18.In the execution pages of the Mortgage:

(1)  YFS and YPM executed the Mortgage as mortgagors;

(2)  It is stated that the Mortgage was interpreted to the mortgagors by Wong Kim Ling, a clerk to YT Chan.  Wong Kim Ling confirmed that the contents of the Mortgage were explained to YFS and YPM before they executed the Mortgage;

(3)  YPM and Tsui executed the Mortgage on behalf of TSK as directors of TSK.

19.After the execution of the aforesaid documents, on 12 October 2016, the plaintiff advanced an instalment loan of HK$2,000,000 to YPM pursuant to the Loan Agreement YPM 2016, and a total of HK$3,000,000 to TSK pursuant to the Loan Agreement TSK 2016.

20.On 9 June 2017, a loan agreement was made between TSK as borrower and the plaintiff as lender for renewal of Loan Agreement TSK 2016 (“Loan Agreement TSK 2017”)  for the plaintiff to grant a loan of HK$2,926,842.63 to TSK.  Terms similar to Clause IV of Loan Agreement TSK 2016 are provided in Clause IV of Loan Agreement TSK 2017.

21.Loan Agreement TSK 2017 was:

(1)  Signed by Tsui on behalf of TSK as borrower;

(2)  Signed by Tsui, YPM, and Tsang below the phrase “Acknowledged and accepted by Guarantor(s)”;

(3)  Signed by YPM and YFS below the phrase “Acknowledged and accepted by Mortgagor(s)”.

22.On 14 June 2018, Loan Agreement TSK 2018 was executed between TSK as borrower and the plaintiff as lender for renewal of Loan Agreement TSK 2017.  According to the terms of Loan Agreement TSK 2018, the plaintiff shall grant two facilities of total amount HK$2,779,172.01 (Facility (A)  of HK$2,000,000, and Facility (B)  of HK$779,172.01)  to TSK.  Terms similar to Clause IV of Loan Agreement TSK 2017 are provided in Clause IV of Loan Agreement TSK 2018.

23.Loan Agreement TSK 2018 was:

(1)  Signed by Tsui on behalf of TSK as borrower;

(2)  Signed by Tsui, YPM, and Tsang below the phrase “Acknowledged and accepted by Guarantor(s)”;

(3)  Signed by YPM and YFS below the phrase “Acknowledged and accepted by Mortgagor(s)”.

B3.  Circumstances leading to the present proceedings

24.By 31 March 2019, TSK has failed to pay the overdue interest on the loan in the sum of HK$1,970,000 granted under Loan Agreement TSK 2017, interest of Facility A loan granted under Loan Agreement TSK 2018, and monthly repayment of the Facility B loan granted under Loan Agreement TSK 2018.  An Event of Default under Clause 12.01(i)  of the Mortgage has therefore occurred.

25.By letter from the plaintiff’s solicitors dated 19 June 2019, the plaintiff informed YFS and YPM that an Event of Default had occurred, and that the loan and all interest and other sums payable under the Mortgage and/or the Secured Indebtedness had become immediately due and payable, such that YFS and YPM as mortgagors were liable to pay the same to the plaintiff within 28 days, failing which the plaintiff shall institute legal proceedings against YFS and YPM for possession without further notice.

26.The plaintiff, TSK (represented by Tsui), Tsui, and Tsang executed a Deed of Settlement dated 14 August 2019 (the “Deed of Settlement”).  It was agreed by TSK, Tsui, and Tsang, inter alia, that:

(1)  As at 5 August 2019, TSK was indebted to the plaintiff of principal sums of HK$2,662,992.82, and interest of HK$215,878.51.

(2)  The plaintiff had received HK$201,880.00 in part settlement of the outstanding interest on or before the signing of the Deed of Settlement.  The payment of the said sum of HK$201,880.00 was effected by a cheque issued by YPM.

(3)  TSK, Tsui, YPM, and Tsang shall pay the plaintiff a sum of HK$13,998.51 in settlement of the balance of the outstanding interest on or before 16 August 2019.

(4)  It was expressly agreed that nothing in the Deed of Settlement shall affect the plaintiff’s right under the Mortgage, and the Mortgage shall continue to have full force and effect.

27.As said above, the plaintiff had received a cheque from YPM dated 5 August 2019 of amount HK$201,880.00 pursuant to Clause 1(a)(i)  of the Deed of Settlement.  However, the plaintiff has not received the sum of HK$13,998.51 referred to in Clause 1(a)(ii)  of the Deed of Settlement.  Thus, the plaintiff commenced the present proceedings on 27 August 2019 to enforce its right under the Mortgage against YPM and the Estate.

B4.  YPM’s stance

28.YPM agrees with the following:

(1)  YPM and YFS applied to the plaintiff for a home mortgage loan of HK$2,000,000 ie loan under the Loan Agreement YPM 2016 against the Property;

(2)  YPM and YFS signed a mortgage on 11 October 2016;

(3)  YPM repaid loan under the Loan Agreement YPM 2016 up to August 2019 only;

(4)  YFS and YPM signed the application form for the Loan Agreement YPM 2016 on 27 September 2016;

(5)  YFS previously occupied the Property.

29.YPM denies the following:

(1)  YPM and YFS mortgaged the Property for loans to TSK;

(2)  YPM and YFS applied to the plaintiff for loan to TSK.

30.YPM asserts, contrary to the plaintiff’s position, that:

(1)  On 27 September 2016, Li in Tsui’s presence told YPM to sign to acknowledge that TSK was owing and indebted to the plaintiff.  He was “induced and pushed” by Tsui and Li to sign on the signing sheet prepared by Li and Tsui to acknowledge that TSK was indebted to the plaintiff;

(2)  Li did not show, explain, or let YPM read any document other than the signing sheet(s)  or at all;

(3)  YFS and YPM signed the Mortgage on 11 October 2016:

“but no one ever showed us or explained or interpreted to us the contents of any mortgage at all, and nowhere in time did we intend to nor did we authorize or agree any “mortgage” of or for other money or advances lent by the plaintiff to the alleged Lender TSK or anyone else as aforesaid.”

(4)  YFS and YPM never saw the Mortgage except the signing page.  Wong Kim Ling did not interpret the Mortgage at all to them.

(5)  YFS and YPM signed on the signing page honestly believing that they were signing a mortgage for the loan under the Loan Agreement YPM 2016.

(6)  For all the other documents that he signed, he was only given a sight of the signing page, and was not given a copy.  He said Tsui and Li “cheated” YFS and him to sign the other documents.

(7)  YFS and YPM signed Loan Agreement YSK 2017 and Loan Agreement YSK 2018 “to acknowledge and re-confirm the home mortgage loan with the plaintiff”, and that he was only provided with the signing page only.

(8)  YPM paid HK$201,880.00 to the plaintiff fearing that YFS would be made homeless immediately after the plaintiff threatened to take or sell the Property.

31.YPM, being a director of TSK, does not dispute that TSK owed money to the plaintiff under the Loan Agreement TSK 2018.

C.  DISCUSSION

C1.  No triable issues even if everything said by YPM were true

32.In Billion Wealth Group Ltd v Strategic Media International Ltd, HCMP 2586/2009 (unrep, 3/05/2010), Fok J (as he then was)  held at §§2-5 that the court has power at the hearing of an originating summons under Order 28, rule 4 of the Rules of the High Court to dispose of the proceedings summarily where there are no triable issues.

33.The plaintiff’s case is straightforward: YFS and YPM executed the Mortgage to secure the loans granted by the plaintiff to both YPM and TSK.  As TSK defaulted in repaying the loan under Loan Agreement TSK 2018, an event of default has occurred within the meaning of Clause 12.01(i)  of the Mortgage, and the plaintiff has pursuant to Clause 12.03 of the Mortgage given written notice to YPM and TSK that the loan and interest and other sums payable thereunder and/or the Secured Indebtedness have become immediately due and payable, the plaintiff is entitled to enforce the security in accordance with Clause 13.02 of the Mortgage, including but not limited to taking possession of the Property and selling the Property.  Even if everything said by YPM is true, YFS and YPM still have no defence to the plaintiff’s claim.

34.YPM accepts that YFS and YPM have executed the Mortgage.  As held in Ming Shiu Chung & Others v Ming Shiu Sum & Others (2006)  9 HKCFAR 334, at §§84-87, once a person signs a legal document, he is bound by the act of signature, unless there are vitiating factors.  The law has never regarded it as enough to show that he signed without knowing its contents for the document to be disavowed.

35.YFS and YPM’s position on the Mortgage is set out in paragraph 30 above.  In a nutshell, he said YFS and YPM were not explained or interpreted the contents of the Mortgage, and they did not intend to execute any mortgage for the benefit of TSK.  However, it is no defence for YPM to say that YFS and YPM signed the Mortgage without knowing its contents, or that YFS and YPM did not understand the contents of the Mortgage: see Ming Shiu Chung (ibid)  §§84 & 86.

36.Further, insofar as YPM seeks to rescind the Mortgage due to vitiating factors, the antecedent question is whether YPM can do so.  As held by Colman J in De Molestina v Ponton [2002] 1 Lloyd’s Rep 271 at §§6.1 & 6.2, in the context of an attempt to set aside a contract as a result of misrepresentation:

“6.1 There can be no doubt that, according to the present state of development of English law, this court is bound by the general principle that a misrepresentee is permitted to rescind the whole of a contract but not part of it.

…

In the earlier case of Thorpe v Fasey [1949] 1 Ch 649 Mr Justice Wynn-Parry referred to the judgment of the Divisional Court in Sheffield Nickel & Silver Plating Co Ltd v Charwin (1877)  2 QBD 214 per Mr Justice Lush:

‘A contract voidable for fraud cannot be avoided when the other party cannot be restored to his status quo: Clarke v Dickson. For a contract cannot be rescinded in part and stand good for the residue. If it cannot be rescinded in toto, it cannot be rescinded at all; but the party complaining of the non-performance, or the fraud, must resort to an action for damages.’

Mr Justice Wynn-Parry commented:

‘There again, the language used indicated that the court there intended to pray in aid a well-established general principle that a contract cannot be rescinded in part and stand good for the residue. If it cannot be rescinded in toto it cannot be rescinded at all; and one reason for not directing rescission is that the parties, or one of them, cannot be restored to their status quo.’

6.2 These authorities do, in my judgment, make it very clear that the principle that there cannot be partial rescission is part of the wider requirement that there cannot be rescission unless there can be restitution in integrum. Further, that requirement is the conceptual consequence of the basic nature of the remedy of rescission which is to discharge all the parties from the bargain into which the misrepresentor has induced them to enter. It is not and never has had the function of providing compensation for the misrepresentation or some hybrid solution to reflect what would be fair between the parties having regard to the nature of the representation and the extent to which one party has been misled by another. Consistent with that, the court has no power to create a new bargain for the parties. What has been induced is the original bargain and it is the purpose of the remedy to return the parties to their position before that particular bargain was made. There is therefore no room for any form of equitable engineering directed to reconstructing the fabric of the original contract.” (Emphasis added)

37.In the present case, YPM does not seek to rescind the transaction in toto, and total rescission is in any event unworkable:

(1)  YPM does not say he wants to rescind all the agreements with the plaintiff.  He apparently wants to keep Loan Agreement YPM 2016 and a mortgage that provides security for Loan Agreement YPM 2016 only.  However, the mortgage as contemplated by YPM never existed, and the court cannot tailor-make such mortgage for YPM.  Thus, the option of rescission is not open to YPM.

(2)  The Mortgage is connected with Loan Agreement YPM 2016, Loan Agreement TSK 2016, Loan Agreement TSK 2017, Loan Agreement TSK 2018, and the deed of guarantees executed by Tsui, Tsang, and YPM.  When the court approaches the issue on whether rescission is possible, the court has to consider all these related documents.

(3)  If the Mortgage is rescinded, Loan Agreement YPM 2016, Loan Agreement TSK 2016, Loan Agreement TSK 2017, and Loan Agreement TSK 2018, which clearly referred to the Mortgage because the Mortgage was an integral part of the bargain, will become completely different loan agreements.  The liabilities of Tsui, Tsang, and YPM under their respective deeds of guarantee will also be very different if the Mortgage is rescinded.  Plainly, the rescission of the Mortgage alone cannot return the parties to their position before the Mortgage was executed.

(4)  Insofar as YPM wants to rescind not only the Mortgage, but also Loan Agreement TSK 2016, Loan Agreement TSK 2017, and Loan Agreement TSK 2018, clearly this is impossible:

(a)  Loan Agreement TSK 2016, Loan Agreement TSK 2017, and Loan Agreement TSK 2018 were executed by TSK as the borrower.  YPM has no locus standi to rescind these loan agreements.

(b)  TSK has never suggested that it seeks to rescind Loan Agreement TSK 2016, Loan Agreement TSK 2017, and Loan Agreement TSK 2018.  As TSK does not have funds to repay the outstanding loans and interest under Loan Agreement TSK 2018, TSK clearly cannot repay the funds advanced by the plaintiff to TSK under these loan agreements, and the plaintiff cannot be restored to the position before these transactions.

38.Since rescission is not open to YPM, the Mortgage and Loan Agreement TSK 2018 must remain valid and binding.

39.Moreover, insofar as YPM raises a defence of non est factum, such defence is doomed to fail.

40.In Bank of China (Hong Kong)  Limited v Leigh Hardwick, HCA 1110/2006 (unrep, 28/08/2013), Anthony Chan J at §20 set out the principles relating to the doctrine of non est factum:

“20.  The principles relating to the doctrine of non est factum are well-established and not disputed.  It requires proof of 3 elements: (i) permanent or temporary inability to understand the document; (ii) the document must be “fundamentally”, “radically” or “totally” different; and (iii) the person signing must not have been careless: see Cartwright, Misrepresentation, Mistake and Non-disclosure, 3^rd edn, §§13.55-13.58.” (Emphasis added)

41.There is no suggestion that YFS and/or YPM were permanently or temporarily unable to understand the contents of the Mortgage, whether due to sickness or mental handicap or otherwise.  Any purported defence on non est factum cannot get off the ground.

42.It is an everyday occurrence that people sign documents without reading the small (or even the large)  print and therefore sign without actually knowing the terms (or all the terms)  of the documents signed.  But they are held to the documents which they have chosen to sign unless there is shown to be a recognised legal basis for concluding that their apparent consent has been in some way vitiated or that reliance on that document by some other person falls into some category of unconscionable conduct justifying relief in equity (see: Ming Shiu Chung (supra)  §84).

C2.  In any event, YPM’s assertions are unbelievable

43.More importantly, all of YPM’s assertions at section B4 above must be examined in the context that:

(1)  YPM claims to have various qualifications and degrees including a PhD and an ACIArb.

(2)  He has prepared a Defence on his own when acting in person.

(3)  He claims to be an Authorized Signatory.  His role in TSK necessarily includes reviewing all building contracts and documentations to be submitted to the government.  He was paid “professional signing fees” for signing documents for and on behalf of TSK.

44.YPM’s excuse that he was not explained the contents of the various agreements that he signed is beside the point - with his education background, qualification and experience, he certainly was able to understand at least the gist of the agreements that he signed without assistance from others.

45.YPM’s excuse that YFS and YPM were only provided with the signing page of the documents that they were asked to sign is a lame excuse:

(1)  YFS and YPM have both signed the Chinese version of the Warning Notice which provides (on the same page which YPM and YFS signed)  that TSK was a borrower.  Even if YPM runs this “they only saw the signing page but nothing else” excuse, YPM and YFS must still know from the Chinese version of the Warning Notice that the Mortgage was related to a loan made to TSK.

(2)  If YPM was only provided with the signing page and nothing else (which is not accepted by the plaintiff), given YPM’s education background and experience, YPM would have asked why he was not provided with the full copy of the documents.  YPM’s affirmation is completely silent on this point.

(3)  YFS had nothing to do with TSK.  It makes no sense to say that YFS had to execute any documents to acknowledge any indebtedness of TSK.  Clearly, YFS and YPM knew that they had to execute the documents to enable loans of TSK to be secured by the Mortgage.

(4)  It must have been clear to YPM that he had a choice not to sign documents when he was not sure about their contents.  There is no explanation as to why YPM and YFS executed all the documents even when they claim to have no knowledge of the contents of the documents.

46.In all, if it is necessary to consider the credibility of YPM’s evidence, YPM’s assertions are clearly not believable.

47.In paragraph 35 of the defendants’ Skeleton Argument, the defendants submit that by allowing extra time for repayment by the borrower under the Deed of Settlement, the plaintiff has effectively released YPM in the capacity as a surety, citing the Decision of DHCJ R Ismail SC in Pacific Harbor Advisors Pte Ltd & Anor v Winson Federal Ltd & Ors, HCA 1257/2013 (unrep, 19/11/2015).

48.I do not agree with the defendants’ submission.

49.In Pacific Harbor Advisors Pte Ltd (ibid), at §§25 & 27, DHCJ R Ismail SC held as follows:

“25. If obligations under a contract are guaranteed, any variation to the contract must be agreed by the guarantor, or the creditor must reserve his rights against the surety when making the variation agreement, otherwise the guarantor will be discharged: Holme v Brunskill (1873)  3 QBD 495 at 505.

…

27. The rationale for the exception is as follows:

(1)  If a guarantor agrees to the variation, he has of course agreed to the variation of his own rights.

(2)  If the creditor (in agreeing a variation with the principal debtor)  reserves his right against the surety, then the principal debtor impliedly consents to the surety’s rights against him remaining on foot notwithstanding the variation. The surety’s rights to pay off the debt and sue the principal debtor remain intact. Mahant Singh v U Ba Yi [1939] AC 601 at 609; Greene King plc v Stanley [2001] EWCA Civ 1966 at para 80.” (Emphasis added)

50.In the present case, under the Deed of Settlement, the plaintiff has indeed expressly reserved its rights against YPM as a surety.  Clauses 1(c)  and 5 of the Deed of Settlement provide as follows:

“1(c)  Any time, indulgence or concession granted by [the plaintiff] to [TSK], [Tsui], [YPM] and/or [Tsang] shall not affect any right of [the plaintiff] hereunder or otherwise and [TSK], [Tsui], [YPM] and/or [Tsang] shall not be exonerated or discharged from his/their liability hereunder.

…

5. It is hereby expressly agreed, declared and confirmed by the parties herein that nothing herein shall affect [the plaintiff]’s rights of and in the Debenture, the Guarantees and the Mortgage; and that the Debenture, the Guarantees and the Mortgage shall continue to have full force and effect.” (Emphasis added)

D.  CONCLUSION

51.For the reasons set out above, I hold that the plaintiff is entitled to the relief sought in the Re-Amended Originating Summons.

52.In the premises, I order as follows:

(1)  The plaintiff do recover against the 1^st and 2^nd defendants the following sums secured by the Mortgage dated 12 October 2016:

(a)  HK$1,000,000.00 and unpaid interest from 6 August 2019 to 31 January 2021 at HK$88,027.42, and interest on HK$1,000,000.00 at the rate of HK$287.67 per day from 1 February 2021 to the date hereof and thereafter at the judgment rate until payment;

(b)  HK$970,000.00 and unpaid interest from 6 August 2019 to 31 January 2021 at HK$85,386.54, and interest on HK$970,000.00 at the rate of HK$279.04 per day from 1 February 2021 to the date hereof and thereafter at the judgment rate until payment;

(c)  HK$692,992.82 and unpaid interest from 6 August 2019 to 31 January 2021 at HK$64,287.82, and interest on HK$692,992.82 at the rate of HK$194.60 per day from 1 February 2021 to the date hereof and thereafter at the judgment rate until payment; and

(d)  HK$1,716,962.51 and unpaid interest from 6 August 2019 to 31 January 2021 at HK$253,075.55, and interest on HK$1,716,962.51 at the rate of HK$470.40 per day from 1 February 2021 to the date hereof and thereafter at the judgment rate until payment.

(2)  The 1^st and 2^nd defendants do, within 28 days after service upon them of this Order, deliver to the plaintiff vacant possession of the property comprised in the Mortgage and known as “ALL THAT 1 equal undivided 228^th part or share of and in ALL THAT piece or parcel of ground registered in the Land Registry as THE REMAINING PORTION OF SECTION C OF QUARRY BAY INLAND LOT NO 3 And of and in the messuages thereon (Flat A on 11^th Floor and Portion of the Roof above, Tai Ming House, No 9 Greig Road, Hong Kong)  (the “Mortgaged Property”).

(3)  Upon the 1^st and 2^nd defendants paying to the plaintiff money hereby ordered to be paid, the plaintiff (subject and without prejudice to the due exercise of any power of sale for the time being vested in him)  do redeliver to the 1^st and 2^nd defendants possession of the Mortgaged Property and release to the 1^st and 2^nd defendants the security constituted by the Mortgaged Property as the 1^st and 2^nd defendants may agree or this Honourable Court may direct.

(4)  There be liberty to apply.

53.The defendants do not dispute that costs should follow the event.

54.Accordingly, I order that the costs of these proceedings be paid by the 1^st and 2^nd defendants to the plaintiff on the indemnity basis, such costs are to be taxed if not agreed.

55.Lastly, I express my gratitude to counsel on both sides for their helpful assistance in this matter.

Mr Leon Ho, instructed by Messrs Ko & Chow, for the plaintiff

Mr Roland Lau, instructed by Messrs Collin Ng & Co, for the 1^st and 2^nd defendants