Yu Wai v. Chong Fong Yeung and Others

HCA 236/2021

[2022] HKCFI 1892

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 236 OF 2021

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Before:  Deputy High Court Judge H. Au-Yeung in Chambers (Open to Public)

Date of hearing:  20 June 2022

Date of Decision:  20 June 2022

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DECISION

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THE APPEAL

1.Upon the plaintiff’s application for summary judgment or alternatively interim payment against the 1^st defendant, Master Kenneth Lee ordered on 1 March 2022, among other things, that:-

(1)  The 1^st defendant shall make interim payment in the sum of $46,805,464.56 to the plaintiff within 90 days;

(2)  Costs of the plaintiff’s application up to the filing of the 1^st defendant’s supplemental submissions on quantum dated 5 January 2022 (including the costs of perusal) be paid by the 1^st defendant to the plaintiff, with certificate for counsel, to be paid forthwith;

(3)  No order as to the costs incurred thereafter (including the hearing before the learned Master).

(“the Decision”)

2.This is the 1^st defendant’s appeal against the Decision.

THE APPLICATION TO ADDUCE NEW EVIDENCE

3.By summons filed on 16 June 2022 (“the Summons”), the 1^st defendant applied for leave to adduce new evidence in the form of her 3^rd Affirmation for the purpose of this appeal. The main purpose of filing this Affirmation is to place before the Court the following evidence:

(1)  By way of the affirmation, elaboration on the relationship between the plaintiff and herself since more than 30 years ago;

(2)  Bought and Sold Notes of certain shares dated 8 June 2018;

(3)  Various WhatsApp communication records between 2015 and 2020.

4.The 1^st defendant explained that she did not provide her previous solicitors with the aforesaid evidence when she prepared her 1^st Affirmation because she did not know what evidence she should present at the time and that she only realised the importance of these pieces of evidence upon her new solicitors’ explanation.

5.Order 58 rule 1(5) of the Rules of the High Court (Cap.4A, Laws of Hong Kong) (“RHC”) provides that:

“No further evidence (other than evidence as to matters which have occurred after the date on which the judgment, order or decision was given or made) may be received on the hearing of an appeal under this rule except on special grounds.”

6.In Bank of China (Hong Kong) Limited v Certain Aim Ltd (HCMP 1272/2007, unreported, 4 October 2010), the issue which Au-Yeung DHCJ (as her Ladyship then was) had to decide was whether or not a more relaxed approach should apply where an application is made to rely on further evidence at an appeal from a summary judgment or a refusal to set aside default judgment; and whether the Court has a residual discretion to admit new evidence, if it appears appropriate to do so, even if there has been a delay in the application. It was held that:

“I agree with Mr Lam SC. Order 58, rule 1(5) was introduced to ‘curb the undesirable practice before the Civil Justice Reform when parties sought to adduce a further round(s) of evidence on appeal after an unfavourable decision from a Master. Rule 1(5) aims at effecting a change of culture so that parties should prepare their application properly at the earliest possible opportunity and lay all cards on the table prior to the hearing before a Master. The spirit of this rule will be defeated if a party is allowed to revert to the pre-CJR practice…”[1]

7.Under Order 58 rule 1(5) of the RHC, new evidence would not be admitted unless “special grounds” can be shown. Given the same words “special grounds” are used in both Order 58 rule 1(5) and Order 59 rule 10(2) of the RHC, it is now well-established that the same test should be applicable to the aforesaid rules. In other words, before new evidence can be admitted in an appeal against Master’s decision, the criteria laid down in Ladd v Marshall [1954] 1 WLR 1489 have to be satisfied. Under those criteria, further evidence is admissible on appeal only when such evidence:

(1)  could not have been obtained with reasonable diligence for use at the hearing below;

(2)  would or might, if believed, have an important influence on the result of the case, though it need not be decisive; and

(3)  is apparently credible though it need not be incontrovertible.

8.In my view, it is obvious that the aforesaid first criteria cannot be satisfied herein:

(1)  As far as the relationship between the plaintiff and the 1^st defendant is concerned, the 1^st defendant in fact had mentioned about it in paragraphs 4 and 5 of her 1^st Affirmation filed on 19 November 2021. There is simply no reason why she could not elaborate on the matter at that time;

(2)  It is clear that the 1^st defendant was in possession of the Bought and Sold Notes in question when she filed her affirmation in opposition on 19 November 2021;

(3)  The 1^st defendant was also in possession of the WhatsApp communication records at all material times. In fact, she had specifically mentioned in her 1^st Affirmation (at paragraph 5 thereof) about communicating with the plaintiff frequently almost on daily basis by way of Whatsapp messaging. It is also apparent that she had made the deliberate decision to copy and paste a number of WhatsApp messages exchanged between her and the plaintiff but not to exhibit the records themselves[2]. Although she did say in her 1^st Affirmation that she reserved the right to produce the entirety of the WhatsApp communication records, I do not think such a “reservation of right” would entitle her to bypass the hurdle imposed by Order 58 rule 1(5) of the RHC in adducing new evidence on appeal.

9.I therefore dismiss the Summons with costs.

THE UNDISPUTED FACTS

10.The following facts are undisputed or indisputable.

11.In the period between 26 February 2016 and 13 September 2016, the plaintiff transferred a total sum of $18 million to the 1^st defendant.

12.On 5 September 2016, the plaintiff and the 1^st defendant signed a 借款合同 (written in Chinese) (“the First Written Agreement”) which provided that the plaintiff agreed to lend and the 1^st defendant agreed to borrow a total sum of $18 million at the interest rate of 32% per annum.

13.On 4 and 5 January 2017, the plaintiff transferred a total of $7 million to the 1^st defendant.

14.On 7 January 2017, the plaintiff and the 1^st defendant signed a document entitled “借款合同之補充合同” in Chinese (“the First Chinese Addendum”), by which the amount lent under the First Written Agreement was revised to $25 million.

15.On 9 May 2017, the plaintiff transferred a sum of $5 million to the 1^st defendant.

16.On 4 July 2017, the plaintiff and the 1^st defendant signed another document with the title “借款合同之補充合同” in Chinese (“the Second Chinese Addendum”), by which the amount lent under the First Written Agreement was further revised to $30 million.

17.On 5 July, 7 July, 13 October and 18 October 2017, the plaintiff made further transfers to the 1^st defendant in the total sum of $30 million.

18.In a Deed of Loan dated 17 October 2017 which was entered into by the plaintiff and the 1^st defendant (“the Second Written Agreement”), it was stated, among other things, that the plaintiff lent the 1^st defendant the sum of $30 million at the interest rate of 32% per annum. The Second Written Agreement was prepared by the plaintiff’s solicitors and it was signed by the plaintiff and the 1^st defendant in the presence of a clerk of that solicitors’ firm.

19.In a document entitled “Loan Agreement” dated 10 December 2019 (“the Third Written Agreement”), it was stated, among other things, that the plaintiff lent the 1^st defendant the sum of $60 million at the interest rate of 40% per annum. The Third Written Agreement was also prepared by the plaintiff’s solicitors. The plaintiff signed this document in the presence of a clerk of that solicitors’ firm, whereas the 1^st defendant signed in the presence of a person known as “Chong Fong Ying”.

20.The plaintiff and the 1^st defendant signed a “Deed of Arrangement” dated 17 July 2020 which was prepared by the plaintiff’s solicitors (“the Deed of Arrangement”), under which it was stipulated, among other things, that in the event the 1^st defendant as a borrower proceeded to sell the property specified in the schedule to the Deed of Arrangement, she shall pay the plaintiff the net sale proceeds of the transaction as part payment of the outstanding sum of the Second Written Agreement.

PARTIES’ RESPECTIVE CASES

21.The plaintiff’s case against the 1^st defendant is that he had, by virtue of various oral agreements which were subsequently reduced into writing, lent the 1^st defendant the total sum of $60 million. The details thereof are as follows:

Date of sum lent	Amount ($)	Evidenced by
26.2.2016	1,500,000	First Written Agreement; First Chinese Addendum; Third Written Agreement
4.7.2016	4,500,000
16.8.2016	6,000,000
5.9.2016	3,000,000
13.9.2016	3,000,000	Second Chinese Addendum; Third Written Agreement
4.1.2017	3,500,000
5.1.2017	3,500,000
9.5.2017	5,000,000
Sub-total	$30,000,000
5.7.2017	5,000,000	Second Written Agreement; Third Written Agreement
7.7.2017	5,000,000
13.10.2017	5,000,000
18.10.2017	15,000,000
Sub-total	$30,000,000
Total	$60,000,000

22.The plaintiff accepted that the 1^st defendant had paid him on various occasions all through the years, and those were interest payments.

23.While the 1^st defendant accepted that the plaintiff had indeed transferred the total sum of $60 million to her on the dates set out in the above table, she alleged that they were not loans but the plaintiff’s contributions to their joint investments. In the skeleton submissions lodged by Mr Lam, the 1^st defendant’s counsel, it was stated that:

“4. D1 submits that unconditional leave should be granted to it for the matter to be trial (sic):

4.1 D1’s primary defence is that the Sums were advanced as part of P and D1’s joint investments into D1’s various ventures. They are not loans. The investments had been complete and payments [in the total sum of $63,365,001] were made representing a total exit from the investments by P;

4.2 The various documents purporting to evince loans made by P to D1 are sham transactions and not intended to be enforced;

4.3 D1 also relies on the operation of the Money Lenders Ordinance (“MLO”) to the facts, that the interest rate is exorbitant;

4.4 Even if the Court is not persuaded that the operation of MLO assists D1, the Could (sic) should nevertheless order payment into Court as condition for leave to defend, as opposed to the interim payment sought by P or as granted by the Order.”

LEGAL PRINCIPLES

Summary Judgment

24.The principles are trite and undisputed.

25.In Li Chuen Kwai v. Po Lam Construction Development Limited (HCA 2376/2013, unreported, 24 September 2014), it was held that:-

“11. As far as the plaintiff’s claim is concerned:

(1) An application for summary judgment must be supported by an affidavit verifying the facts on which the claim is based [Order 14, rule 2(1), Rules of the High Court].

(2) The Statement of Claim must be good and complete in itself; any defect or omission in the Statement of Claim cannot be corrected or supplemented by the plaintiff’s affidavit. If the defect is one of substance, the application for summary judgment will be dismissed [see: Hong Kong Civil Procedure 2014 at Practice Note 14/1/5].

(3) This means that an Order 14 application has to proceed on the case as pleaded, and it is those facts (as pleaded) which have to be verified on affidavit.

(4) Where the assertions in the plaintiff’s affirmation constitute a material deviation from the plaintiff’s pleaded case, the plaintiff will have failed to verify his claim as pleaded, and summary judgment should not be granted [Lin Jan v Long Xiaobo, HCA 1516/2012 (Judgment dated 4/09/2013)].

(5) Equally, summary judgment will not be granted where the plaintiff’s affidavit evidence is materially different from and inherently inconsistent with his/her case in the Statement of Claim [see: Sin Yuk Hung v Sin Tung San, HCA 474/2013 (Judgment dated 18/12/2013)].

12. As far as the defendant’s defence is concerned:

(1) The defendant shoulders the burden to satisfy the court that he has a real or bona fide defence (ie that there are triable issues), or that there ought for some reason to be a trial of the plaintiff’s claim.

(2) However, a complete defence need not be shown. The defence set up need only show that there is a triable issue or question or that for some other reason there ought to be a trial; and leave to defend ought to be given unless there is clearly no defence in law and no possibility of a real defence on the question of fact.

(3) Although the mere assertion in an affidavit does not, ipso facto, provide leave to defend, the court will not embark upon a mini‑trial of the action on paper and leave to defend will be granted unless the defence raised is so incredible or so contradicted by contemporaneous documents or circumstances that it becomes clear that the defence is a sham.

(4) The test is not whether the defendant’s assertions are to be believed, rather it is whether those assertions are believable, ie capable of being believed. If so, the defendant must have leave to defend.

(5) Whether the defendant’s assertions are believable is a question that should be answered not by taking those assertions in isolation bur rather by taking them in the context of so much of the background as either undisputed or beyond reasonable dispute.”

26.In Ju Yan Di Emperory Genesisy v Yau Wai Han [2015] 1 HKLRD 822, 827, Cheung JA held that:-

“14. It is well-established that the burden on the defendant in a summary judgment application is to show that he has a credible defence and he must condescend to give particulars of his defence. However, this does not mean that once the plaintiff invokes the application and irrespective of the strength of his case, the defendant bears all the burden of showing that there are triable issues in the case. This is because the starting point in a summary judgment application is that it should only be invoked when there is no defence to the claim. This means that the plaintiff must in the first place demonstrate that the defendant has indeed no defence. This requirement is further recognised in the procedural rules which mandate the plaintiff to state his belief in the verifying affidavit that there is no defence to the claim. This requirement must be kept in proper perspective when assessment is made of the strength of the application, otherwise there is a danger that the attention will be focused solely on what the defendant has said without consideration at the same time of the basic premise of the plaintiff’s claim or its inherent strength and weakness…” (Emphasis added)

27.Having said that, to raise a triable issue or arguable defence, the defendant cannot be sparing of the particulars of his defence, and then claim, as a result of his own parsimony in details. that there is an obscurity which must await trial for illumination.[3]

Interim payment

28.In Delco Participation B V v Chiho Environmental Group Limited (formerly known as Chiho-Tiande Group Limited) & Another [2020] HKCFI 1643, in which the plaintiff therein also applied for summary judgment and alternatively interim payment, Coleman J had the following to say:-

“31. As to an application for interim payment under Order 29 rule 10, whether to order interim payment is an exercise of the court’s discretion. There is some overlap with the test for granting conditional leave to defend, namely whether the defences and/or counterclaims raised can be said to be shadowy. But, essentially, the burden is on the plaintiff to show on the balance of probabilities that it would, and not merely that it is likely to, succeed at trial. The standard of proof required is high.

32. Where unconditional leave to defend is granted, it is at least unlikely that the plaintiff will be able to satisfy the burden of proof required to make an order for interim payment. But that may depend in each case on the nature of the claim and the defence put forward.”

Appeal against Master’s decision

29.In relation to an appeal brought against Master’s decision, it is well established that such an appeal 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 for the first time. The judge will give the weight it deserves to the previous decision of the Master, but he is in no way bound by it. The judge in chambers is in no way fettered by the previous exercise of the Master’s decision. (Hong Kong Civil Procedure 2022, Volume 1, paragraph 58/1/2).

DISCUSSION

30.Taking into account the way this case was argued by Mr Lam for the 1^st defendant, I am of the view that this Court has to consider the following questions in this appeal:

(1)  Whether the 1^st defendant has raised an arguable defence that the payments of the total sum of $60 million by the plaintiff to the 1^st defendant was his share of investment rather than loans;

(2)  In the event there were any loan agreements reached between the parties, whether the 1^st defendant has raised an arguable defence that the transactions under those loan agreements were extortionate;

(3)  In the event there were any loan agreements reached between the parties, whether the 1^st defendant has raised an arguable defence on the outstanding amount payable under those agreements.

Loan vs investment

31.The loans in the total sum of $60 million are evidenced by a number of written agreements signed by the 1^st defendant, namely, the First Written Agreement, the First Chinese Addendum, the Second Chinese Addendum, the Second Written Agreement, the Third Written Agreement and the Deed of Arrangement.

32.In her Defence and Counterclaim, the 1^st defendant pleaded that:

“4. […] The Defendants specifically deny that any loan or any loan agreement, including the First Written Agreement, the First Chinese Addendum, the Second Chinese Addendum, the Second Written Agreement or the oral agreement(s), was entered between the Plaintiff and the 1^st Defendant as alleged. Despite repeated demands, whether by way of telephone call, instant messages or solicitors’ letter, the Plaintiff has failed and refused to provide a copy of any of the agreement(s) allegedly entered between the Plaintiff and the 1^st Defendant.

5. Further or alternatively, if, which is denied, the Plaintiff and the 1^st Defendant entered into any loan agreement(s) or addendum(s) as alleged, the 1^st Defendant avers that: -

(a) the 1^st Defendant did not know the nature of the transaction(s) she was committing to or was not given any or any reasonable opportunity to understand and/or consider the terms of the agreement(s) before entering them;

(b) the 1^st Defendant was under mistake, duress or undue influence when she entered into those agreement(s);

(c) the Plaintiff had fraudulently misrepresented to the 1^st Defendant the nature of the transaction(s) or agreement(s) to be entered into;

(d) no or no valid consideration was given for any of the agreement(s) allegedly entered by the 1^st Defendant;

(e) in any event, the agreement(s) allegedly entered by the 1^st Defendant was/were invalid, void or unenforceable;

(f) the 1^st Defendant will rely on the matters pleaded in this Defence further below;

(g) the 1^st Defendant reserves the right to plead further pending discovery in due course.

6. […] The Defendants specifically deny that any further agreement, including the Third Written Agreement […] or any oral agreement(s), was entered between the Plaintiff and the Defendants as alleged. Despite repeated demands, whether by way of telephone call, instant messages or solicitors’ letter, the Plaintiff has failed and refused to provide a copy of any of the agreement(s) allegedly entered between the Plaintiff and each of the Defendants.

7. Further or alternatively, if, which is denied, the Plaintiff and the Defendants entered into any further agreement(s) as alleged, the 1^st Defendant avers that: -

(a) the Defendants did not know the nature of the transaction(s) they were committing to or were not given any or any reasonable opportunity to understand and/or consider the terms of the agreement(s) before entering them;

(b) the Defendants were under mistake, duress or undue influence when they entered into those agreement(s);

(c) the Plaintiff had fraudulently misrepresented to the Defendants the nature of the transaction(s) or agreement(s) to be entered into;

(d) no or no valid consideration was given for any of the agreement(s) entered by the Defendants;

(e) in any event, the agreement(s) allegedly entered by the Defendants was/were invalid, void or unenforceable;

(f) the Defendants will rely on the matters pleaded in this Defence further below;

(g) the Defendants reserve the right to plead further pending discovery in due course.”

33.In her 1^st Affirmation, the 1^st defendant gave the following evidence:

“35. The Plaintiff relied primarily on the following documents in the support of his application for a final judgment against me: -

(a) A Chinese Loan Agreement dated 5 September 2016;

(b) A Chinese Loan Agreement dated 7 January 2017;

(c) A Chinese Addendum dated 4 July 2017;

(d) A Deed of Loan dated 17 October 2017;

(e) A Second Mortgage dated 17 October 2017;

(f) A Loan Agreement dated 10 December 2019;

(g) A Deed of Agreement dated 17 July 2020;

(h) A Fourth Mortgage dated 6 July 2020.

36. For the purpose of the Plaintiff’s application, I do not wish to go at length at this stage to explain the circumstances that gave rise to the subsistence of the above documents. The legal arguments will be left to my lawyers at the hearing, but I will say so right away that all of these documents were a result of the Plaintiff playing dishonest tricks to my disadvantage. The Court must consider them as void and unenforceable.

37. First of all, I repeat what I have explained above and reiterate that all of the payments made to me by the Plaintiff were not loans. The alleged loan agreements and mortgages therefore do not record or accord with the agreement between the Plaintiff and I either in form or in substance. To put another way, even if the alleged loan agreements were valid and binding (which is denied) they had never been performed on the part of the Plaintiff. […]

38. […] The challenge I make is that the liability I accept that I have did not arise from the alleged loan agreements and/or mortgages. In the first place, at all material times I was not given an opportunity or a fair opportunity to study any of the alleged loan agreements or mortgages. This was because there was never an agreement to obtain a loan from the Plaintiff and that I never understood that to be the case. The Plaintiff or the solicitors whom he instructed at the time also did not provide to me a copy or a complete copy of the alleged loan agreements or mortgages after they were purportedly executed, until his affirmation filed on 15 October 2021. I was not aware of the exact nature or terms of these documents until now.

[…]

40. The alleged loan agreement dated 5 September 2015 contained unclear, peculiar and even unnecessary terms that were entirely disadvantageous to the borrower. These terms had never been discussed with me, raised with me or agreed by me. The presence of those strange and usually stringent terms by itself is proof that the Plaintiff had been dishonest in seeking an unfair advantage from me during the time when I had been extremely busy with the running of the 101 Education business and also other types of joint investments with the Plaintiff. Whether for an expansion of the education business when times were good or for a sharp turn in business direction to the conducting of online classes during low times when the COVID-19 pandemic broke out, there was practically no time for an adequate discussion about a loan or particulars of a loan (if there were such a loan or discussion which is denied) between the Plaintiff and I, let alone signing or find out the reason for signing any document with the Plaintiff. Those were the times I placed trust on the Plaintiff, a kind of trust that I did not expect to be abused.”

[…]

44. I raise the same arguments for the other alleged loan agreements, mortgages and deed of agreement the Plaintiff claims to have been executed. These so-called agreements and mortgages are all tainted with illegality. Alternatively, I say that the so-called loans or loan agreements had never been drawn out or acted upon by the Plaintiff.” (emphasis added)

34.I have quoted the 1^st defendant’s pleaded case and her evidence at length above so as to demonstrate that the “primary defence” of “sham transaction”, as described by Mr Lam for the 1^st defendant, is not particularised nor supported by the 1^st defendant’s own evidence at all. As Mr Lam accepted, for sham agreements to exist, there must be a common, subjective intention shared by both parties that the documents involved (a) would not create the legal rights or obligations they appear to create; and (b) would mislead a third party into believing the parties had created those rights and obligations[4]. There is absolutely no explanation by the 1^st defendant as to why the parties had to sign those “sham” agreements. Remarkably, she said in her Affirmation that she did “not wish to go at length at [that] stage to explain the circumstances that gave rise to the subsistence of the above documents”[5]. However, without such evidence, the 1^st defendant cannot discharge her burden in an Order 14 application.

35.If the written agreements are not sham agreements, then the 1^st defendant should be bound by them even if she did not study the contents thereof before signing them. In Ming Shiu Chung & Others v Ming Shiu Sum & Others (2006) 9 HKCFAR 334, it was held by the Court of Final Appeal that:

“84. […] Reliance is universally placed on signatures appended to documents by persons of full age and understanding as signifying the signatory’s assent or adherence to what that document states. Where such a person has signed a document which purports to have legal effect, the law has never regarded it as enough to show that he signed without knowing its contents for the document to be disavowed […] But they are held to the documents which they have chosen to sign unless there is shown to be a recognized 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.

[…]

87. The vitiating factors at common law include fraud, mistake, misrepresentation, non est factum, duress, undue influence and lack of mental capacity: see, for instance, Blay v Pollard & Another [1930] 1 KB 628; and Gillman v Gillman (1946) 174 LT 272. To disown a signed legal document, facts constituting the particular vitiating factor relied on must be pleaded and established by the evidence […]”

36.As can be seen from the excerpts of the Defence and Counterclaim quoted above, the 1^st defendant has indeed pleaded a number of vitiating factors including mistake, duress, undue influence and misrepresentation. However, she had failed to particularise these allegations therein, nor did she give any evidence in support thereof in her 1^st Affirmation.

37.The 1^st defendant’s allegation that she did not know the nature of the transaction is also bound to fail. Take the First Written Agreement as an example. This document was written in Chinese and there was a heading of “借款合同”. It was clearly stated that the 1^st defendant was a borrower and the plaintiff was a lender, and that the sum lent under the agreement was $18 million with an interest calculated at 32% per annum. The 1^st defendant is the owner and proprietor of an education group. She had also engaged in different types of investments which, she claimed, “typically involved millions or even tens of millions of dollars”[6]. The 1^st defendant’s case that she did not know the terms of the First Written Agreement is simply unbelievable.

38.I therefore hold that the 1^st defendant’s defence that the written agreements are invalid, void or unenforceable is incredible.

39.It follows that the 1^st defendant’s defence that there were no loan agreements but investment agreements between her and the plaintiff is also incredible.

40.This conclusion is further supported by the following evidence which shows that the 1^st defendant had mentioned or acknowledged about the calculation or payment of interest (which is inconsistent with the 1^st defendant’s case on investment) in her WhatsApp messages. For example:

(1)  On 5 April 2017, the 1^st defendant had deposited a sum of $2 million into the plaintiff’s bank account. At 10:06am, she asked the plaintiff: “The amount correct? I ll sent (sic) soon”. The plaintiff replied: “Correct. 25000000 x 32% ÷ 4”. This coincides with the calculation of interest at the rate of 32% per annum as stipulated under the First Written Agreement for the then loaned principal of $25 million;

(2)  On 8 January 2018, the 1^st defendant stated that:

“200 萬 (new, 2.5 months)
18/10轉給我
我計半個月”

This is consistent with the plaintiff’s case that the plaintiff was charging the 1^st defendant interest, and that such interest was payable quarterly pursuant to the Second Written Agreement (the prevailing written agreement at that time);

(3)  Following up on the above, the plaintiff replied:

“有1000是7月初轉的，所以算法是:
1000 x 32% ÷ 12 x 6 + 2000 x 32% ÷ 12 x 2.5 = 2,933333”

This is consistent with the plaintiff’s case that the agreed rate of interest was 32% per annum;

(4)  On 6 June 2020, the plaintiff’s wife (who had taken over the negotiation with the 1^st defendant), discussed with the 1^st defendant about the equity value of the 1^st defendant’s property in Yuen Long. She stated: “欠款方面，至6月底所欠的利息已近2100萬”. In reply, the 1^st defendant stated “唔該晒”. The 1^st defendant did not question the plaintiff’s wife as to why there was an accrued interest of such a large amount;

(5)  On 29 May 2020, the 1^st defendant sent the following message to the plaintiff: “希望最壞的已過去。多謝這兩個星期沒追我只要我還在，公司還在，利息、本金，必定全數歸回 […]”.

41.I have not lost sight of the discussions between the plaintiff and the 1^st defendant which show that the plaintiff was indeed considering to invest into the 1^st defendant’s education business at one stage. However, this cannot assist the 1^st defendant as there is no evidence that any concluded agreement on investment had ever been reached between them.

42.Another feature of the case is that it is undisputed that the 1^st defendant had made a large number of transfers to the plaintiff over the years. The 1^st defendant alleged that all those transfers represented the plaintiff’s shares of profits which the plaintiff was entitled to in their joint investment rather than payments of interest. However, out of the WhatsApp communication records placed before the Court, I cannot find any explanation given by the 1^st defendant as to the calculation of the amounts of transfers made, nor did the 1^st defendant produce any calculation record kept by her for her own reference. In my view, the lack of evidence in this respect of the case also renders the 1^st defendant’s case incredible.

43.Mr Lam for the 1^st defendant reminded this Court that it could be seen from the Whatsapp communication between the parties that there had been a lot of discussions about 3 different types of investment, namely, investment on musical instruments, on the 1^st defendant’s education business, and on land property. In my view, the more different types of investment which the 1^st defendant said the parties had jointly engaged in, the more likely it should be that she would have explained to the plaintiff about the purpose of each of her payment to him and about how such payments were arrived at, because without such information, the plaintiff could not keep track on how his investments were doing. In other words, the more different types of investment which the 1^st defendant said the parties had engaged in, the more incredible her case on joint investment is.

44.Mr Lam further submitted that the fact that the 1^st defendant was not given copies of the written agreements show that the parties did not intend to enforce those agreements. I am afraid I cannot accept this argument. In this regard, I only need to refer to the fact that the plaintiff’s solicitors did send the draft version of the Third Written Agreement to the 1^st defendant on 4 December 2019 for her comment before it was eventually signed on 10 December 2019. The plaintiff also reminded the 1^st defendant on the same day (i.e. 4 December 2019) by WhatsApp message that his solicitors had sent her an email containing the said draft. The plaintiff apparently had treated the matter seriously. Indeed, it is evident that the 1^st defendant did reply to the plaintiff’s solicitors and told them to proceed with the matter. The 1^st defendant therefore cannot argue seriously that she did not know the content of the said agreement (even though in law it is binding on her anyway). The position remains the same even if she was not given a copy thereof. While there was no similar evidence in relation to the earlier written agreements, it must be noted that the Third Written Agreement confirmed that $60 million had been lent by the plaintiff to the 1^st defendant. This covers the entirety of the plaintiff’s claim herein.

45.The 1^st defendant’s case that the written loan agreements were not intended to be enforced is incredible also because, if it was not so intended, there was no reason why (and the 1^st defendant did not explain why) the parties had to sign the Deed of Arrangement, in which:

(1)  The 1^st defendant acknowledged that she had entered into a “Deed of Loan Agreement” (i.e. the Second Written Agreement) as a borrower;

(2)  The 1^st defendant agreed that if she proceeded to sell the property specified in the schedule to the Deed of Arrangement, she shall pay the plaintiff the net sale proceeds of the transaction as part payment of the outstanding sum of the Second Written Agreement.

46.It must be borne in mind that when the Deed of Arrangement was entered into on 17 July 2020, the 1^st defendant had already engaged her own solicitors, who, by facsimile message dated 8 July 2020, had requested the plaintiff’s solicitors for a copy of the Second Written Agreement and the Third Written Agreement. The 1^st defendant’s allegation that she had entered into the Deed of Arrangement without any intention to have it enforced, even if relevant as a matter of law, is thus simply incredible.

47.If what was said above was not enough, it should further be pointed out that if the parties did not intend to enforce the various loan agreements, there was no reason why the plaintiff would engage the service of solicitors from the time when the Second Written Agreement was entered into.

48.To conclude, I am of the view that the 1^st defendant’s primary defence on sham agreement is totally incredible.

Whether the transactions were extortionate

49.Mr Lam pointed out that the loan agreements relied on by the plaintiff bear very high interest rates. It was therefore contended that “there is clearly a case to be made out that the interest rates are extortionate”[7]. It was further submitted that it is inappropriate for the Court to resolve the issue as to whether the interest rates are extortionate at this stage.

50.Section 25 of the Money Lenders Ordinance (Cap.163, Laws of Hong Kong) (“the Ordinance”) provides that:

“(1) Subject to section 24(2), where—

(a) proceedings are taken in any court by any person (whether a money lender or 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) […]

(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.

[…]”

51.It is undisputed that the interest rates provided in the written agreements had never been over 48% per annum. The presumption under section 25(3) of the Ordinance is therefore not engaged herein. In such a case, the 1^st defendant has the burden to prove that the loan transactions were extortionate. She also has the obligation to put this matter in issue by pleading this as a ground of defence in her pleading. However, she has not done so.

52.While I accept that the fact that the matter was not pleaded is not fatal for the purpose of an Order 14 application[8], the difficulty faced by Mr Lam is that this line of defence was not even mentioned in the 1^st defendant’s Affirmation in opposition, and the 1^st defendant had failed to condescend upon particulars in relation to the basis on which she alleged that the loan agreements were extortionate.

53.Mr Lam, apparently doing the best he could, tried to fit in some of the evidence into the factors set out in section 25(4) to (6) of the Ordinance. However, in my view, he is not entitled to do so when the 1^st defendant had not even raised this as a defence in her Affirmation.

54.In such circumstances, the 1^st defendant’s argument on extortionate transactions is a non-starter.

The outstanding amount under the loan agreements

55.Mr Lam did not dispute that a total of $60 million had been advanced by the plaintiff to the 1^st defendant from 26 February 2016 to 18 October 2017.

56.In her Defence and Counterclaim, the 1^st defendant alleged that she had paid the plaintiff a total of $63,365,001 in the period between 30 December 2015 and 3 February 2021.

57.The plaintiff disagreed. In his Reply and Defence to Counterclaim, the plaintiff pleaded that the 1^st defendant had only paid him $60,904,501 during the said period. He further alleged that as some of the payments made by the 1^st defendant were unrelated to the loans claimed in this action, only $56,924,501 thereof should be treated as repayment pursuant to the various loan agreements which are the subject matters of this action.

58.According to the plaintiff’s calculation, the total outstanding amount of principal plus interest is in the sum of $87,392,167, whereas the 1^st defendant, relying on a calculation table which was handed up to the learned Master beforehand (“the 1^st defendant’s Calculation Table”)[9], submitted that the total outstanding amount is only $46,805,464.56.

59.When arriving at the figure of outstanding amount, the plaintiff has not taken into account certain payments which the 1^st defendant alleged that she had made. Some of those payments were said to be unrelated to the loans which are the subject matters of this action.

60.On the other hand, the plaintiff has deducted certain payments which were not listed in the 1^st defendant’s list of payments.

61.A hearing for Order 14 application is certainly not the appropriate occasion to resolve the differences between the parties in this regard.

62.I am therefore of the view that the 1^st defendant has raised an arguable defence as to the exact total amount of principal and interest which is outstanding pursuant to the loan agreements. However, given the 1^st defendant’s acceptance that she is at least liable to the plaintiff for the sum of $46,805,464.56 in the event her argument on liability is rejected, I see no reason why the Court should not enter partial Judgment against her on such a basis, subject to the adjustment of certain payments by cheques which were shown to have been bounced which I will further discuss below.

63.In the 2^nd Affirmation of the plaintiff, he alleged that various alleged payments by way of cheques dated 10 September 2018, 11 March 2019, 14 June 2019, 30 January 2020, 29 June 2020, 30 June 2020, 23 July 2020, 14 September 2020 and 12 October 2020 had been dishonoured. He had produced a number of Return Cheque Advices issued by various banks in support. Those Advices cover the following cheques:

Date	Bank	Cheque No.	Amount
11/3/2019	HSBC	886506	$1,500,000
11/3/2019	Bank of East Asia	001300	$500,000
14/6/2019	Citibank	000003	$900,000
30/1/2020	HSBC	403352	$1,000,000
29/6/2020	Bank of East Asia	001490	$300,000
30/6/2020	Bank of East Asia	001491	$200,000
23/7/2020	China Construction Bank	000267	$250,000
23/7/2020	Bank of East Asia	002150	$250,000
14/9/2020	Bank of East Asia	000599	$50,000
12/10/2020	DBS	000016	$500,000
Total:			$5,450,000   ========

64.In this regard, it is observed that:

(1)  Although the cheque dated 10 September 2018 (referred to in the plaintiff’s 2^nd Affirmation) was not covered by any Returned Cheque Advice, it can be seen from the Savings Account History Report in relation to the plaintiff’s HSBC account No.118-x-xxxxxx) that a cheque which was deposited on 10 September 2018 was reversed with a remark “Returned Cheque Withdrawal” in the record. As it is the 1^st defendant’s case that she had deposited $1,000,000 into the said HSBC account held by the plaintiff, and it is evident from the aforesaid Savings Account History Report that no other cheque payment had been deposited into that bank account on that day, I am satisfied that it was the 1^st defendant’s alleged payment of $1 million which was bounced;

(2)  The returned cheque dated 30 January 2020 was not relied on as one of the payments made by the 1^st defendant in her Defence and Counterclaim. This was also not counted in the 1^st defendant’s Calculation Table. Therefore, no adjustment is required to be made in relation to this payment.

65.Since there is uncontradicted evidence that the aforesaid cheque payments made by the 1^st defendant to the plaintiff did not go through, I am of the view that the amounts of those unsuccessful payments[10] should be added back to the outstanding amount owed by the 1^st defendant, and the final figure as shown by the 1^st defendant’s Calculation Table has to be adjusted accordingly, for it is not arguable that they had been paid. Those payments include:

Date	Amount
10/9/2018	$1,000,000
11/3/2019	$1,500,000
11/3/2019	$500,000
14/6/2019	$900,000
29/6/2020	$300,000
30/6/2020	$200,000
23/7/2020	$250,000
23/7/2020	$250,000
14/9/2020	$50,000
12/10/2020	$500,000
Total:  $5,450,000

66.Hence, the amount of partial Judgment to be entered against the 1^st defendant should be $52,255,464.56 ($46,805,464.56 + $5,450,000.00).

67.Since this Court considers it appropriate to give partial Judgment, there is no need to consider the plaintiff’s alternative application for interim payment. In any event, I do not consider it appropriate to make any order of interim payment on top of the amount of partial Judgment, since I am not satisfied that the plaintiff has satisfied the burden of proof required to make an order for interim payment in respect of such an amount.

ORDER

68.By reasons of the aforesaid, it is ordered that:

(1)  Paragraph 1 of the Decision be set aside;

(2)  Partial Judgment be entered against the 1^st defendant for the sum of $52,255,464.56;

(3)  Unconditional leave be granted as to the balance of the plaintiff’s claim.

COSTS

69.Although I have set aside the learned Master’s Decision, the 1^st defendant has in fact obtained a worse result upon appeal. She should therefore bear the plaintiff’s costs of the appeal.

70.I therefore order that the 1^st defendant shall pay the plaintiff’s costs of the appeal including the costs of the Summons.

71.Parties agreed that the costs order made by the learned Master should be left intact. I agree.

72.The plaintiff’s costs are summarily assessed in lieu of taxation pursuant to Order 62 rule 9A(1)(a) of the RHC at $168,000. Such costs shall be payable by the 1^st defendant on or before 4 July 2022.

Mr Tommy Cheung, instructed by Eddie Lee & Company, for the plaintiff

Mr Benjamin Lam, instructed by Guantao & Chow, for the 1^st defendant