Hong Kong Topkey Ltd v. Wintac (Hong Kong) Ltd and Another

HCA 667/2022

[2023] HKCFI 1711

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 667 OF 2022

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D E C I S I O N

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1.This is the hearing of the defendants’ (“D1” and “D2” respectively, and “Ds” collectively) appeal against the summary judgment granted by Master Alexander Tang against Ds on 4 January 2023.

2.By a summons dated 23 June 2023, Ds have made an application for leave to refer to D2’s Affirmation filed on 6 April 2023 in HCB 1051/2023 (“the HCB Affirmation”) at this hearing as evidence in support of Ds’ appeal.  I would also deal with this application made by Ds for admitting new evidence in the appeal (“the New Evidence Application”).

3.In the hearing, P is represented by Mr Jenkin Suen SC (leading Mr Joseph Wong), and Ds are represented by Mr Kenneth Lee (together with Mr Edward KH Ng).

The parties’ respective cases

4.P’s case, in a nutshell, is that Ds are liable to repay the outstanding principal of US$4.3 million and interest owed to P under two loan agreements (“the Loan Agreements”).  Ds have filed a Defence on 22 August 2022, in which Ds have put forward various defences to P’s claim.

5.The following facts are not in dispute[1]:

(1)  Under the 《借款合同》dated 13 August 2019 (“Loan Agreement 1” / “Loan 1”), P (as lender) agreed to lend US$4 million to D1, D2 and Hei Tai Industrial Limited (“Hei Tai”) (as borrowers) (collectively the “Borrowers”) from 15 August 2019 to 15 December 2019 with a monthly interest rate of 2% over the principal sum.

(2)  On 15 August 2019, P advanced a loan of US$ 4 million to D1 in accordance with Loan Agreement 1.

(3)  From September 2019 to April 2020, D1 made a total of 8 instalments of monthly interest payments of HK$80,000 for 8 instalments pursuant to Loan Agreement 1.

(4)  The Borrowers were unable to repay the principal of Loan 1 (or any part thereof) on the repayment deadline of 15 December 2019.

(5)  Under the 《借款合同》dated 6 January 2020 (“Loan Agreement 2” / “Loan 2”), P (as lender) agreed to lend a further US$3 million to the Borrowers from 7 January 2020 to 28 February 2020 with a monthly interest rate of 2% over the principal sum.

(6)  On 7 and 9 January 2020, P advanced the sums of US$1.4 million and US$1.6 million to the Borrowers respectively in performance of Loan Agreement 2.

(7)  From February to April 2020, D1 made a total of 3 instalments of monthly interest payments of HK$60,000 for 8 instalments pursuant to Loan Agreement 2.

(8)  The Borrowers were unable to repay the principal of Loan 2 (or any part thereof) on the repayment deadline of 28 February 2020.

(9)  D1 made transfers of US$1.2 million and 1.5 million to P on 11 and 15 May 2020 respectively.  P’s case is that these sums are partial repayments of the outstanding principal sums under Loan 1 and Loan 2.  This matter is not disputed by Ds.

(10)  The principal sum of US$4.3 million and interest remain outstanding and are yet to be repaid as of the present.

6.Ds say that they are not liable to repay the outstanding principal and interest to P by reason of some representations (“the Representations”).  In Ds’ written submissions dated 14 June 2023 (“DS”), Mr Lee has put forward the following as Ds’ case (footnotes omitted):

“6. …… Ds’ case is that it was subsequently agreed between one Wu Xiaobing (on behalf of himself and, inter alios, P) and D2 (on behalf of himself and some of his companies (including D1)) that in consideration for the transfer of shares in D2’s companies (which held Mainland properties) to Wu Xiaobing’s nominees, the liabilities of, inter alios, Ds under the Loan Agreements would be released.

7. It is not in dispute that on around 17.6.2020, an equity transfer agreement (“ETA”) was entered into between both sides. Unfortunately for Ds, however, although D2 was a party, P was not a party, to the ETA. ……

8. Ds’ case is that despite the apparent lack of privity in writing, P was nonetheless bound by the relevant representations made orally on P’s behalf by Wu Xiaobing (or his agents, in particular one Zhao Xianlong (“Zhao”)), viz to release, inter alia, Ds’ liabilities under the Loan Agreements in return for D2’s transfer of shares in his companies (“Representations”).

9. In performance of the ETA, the shares of D2’s relevant companies (including a BVI company called Window of Trade International Ltd (“Shares”)) were duly transferred to Wu Xiaobing’s nominees.

10. However, after the said transfer, Wu Xiaobing’s nominees breached their contractual obligations under the ETA. D2 and his companies therefore commenced arbitration against Wu Xiaobing’s nominees in the Mainland (“Arbitration”).

11. By an arbitral award dated 11.4.2022 (“Award”), Wu Xiaobing’s nominees were liable to, inter alia, return the relevant shares to D2. However, the Award remains unsatisfied, and the Shares were not returned to D2.” (Emphasis added)

7.Based upon the Representations, Mr Lee submits that Ds are not liable to repay the outstanding principal and interest to P by reason of the following:

(1)  Collateral contract

(2)  Variation of the Loan Agreements

(3)  Promissory estoppel

(4)  Estoppel by representation

(5)  Estoppel by convention

8.In the DS, Mr Lee submits:

“18. The issues in this case are:-

18.1. Whether it is arguable that the Representations had been made (“Issue 1”); and

18.2. If the answer in §18.1 is yes, whether it is arguable that the Representations could support the defences of collateral contract, variation of contract, or estoppels (promissory, by representation or by convention) (“Issue 2”). These are alternative defences, and Ds only need to show one of these defences is reasonably arguable.”

9.In the hearing before me, Mr Lee submits that his position as stated in [18] of the DS is subject to a further point (“Ds’ Further Point”), ie in Wu Jixiu’s affirmations filed in support of P’s application for summary judgment, in the light of the evidence produced by Wu Jixiu in a litigation in Mainland China, Wu Jixiu has said something untrue in those affirmations.  For this reason, P’s application for summary judgment cannot be allowed.

The principles

10.It is trite that an appeal from a master’s decision to a judge in chambers is a de novo hearing.  Subject to the restriction in Order 58 rule 1(5), the hearing before me is an actual rehearing as if the application came before me for the first time.^[2]

11.Order 58, rule 1(5) provides:

“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.”

12.The phrase “special grounds” in Order 58 rule 1(5) is the same expression as in Order 59 rule 10(2).  Accordingly, in order to satisfy the “special grounds” requirement, the conditions in Ladd v Marshall[3] have to be fulfilled.  Under the Ladd v Marshall requirement, further evidence is admissible on an appeal only where such evidence: -

(1)  could not have been obtained at the trial or at the hearing with reasonable diligence;

(2)  would or might, if believed, have a very important effect on the mind of the court; and

(3)  is of a sort which inherently is not improbable.

13.The principles concerning summary judgment applications have been succinctly summarized by Au-Yeung J in Venetian Coati v Bright & Bright^[4], in which the learned judge said:

“16. The principles governing summary judgment application are trite:

(a) The burden is on the defendant to show a bona fide defence or some other reason for a trial. This is normally done by affidavit and it is incumbent upon the defendant to “condescend upon particulars” in such affidavit;

(b) The mere assertion in an affidavit of a given situation by the defendant does not, ipso facto, ground leave to defend;

(c) Order 14 is only for clear cases, and ought not to be applied in cases where there are serious material factual disputes, or a difficult point of law not fit for summary determination, unless it is obvious that the defence put forward is “frivolous and practically moonshine”;and

(d) The Court should not embark on a mini trial on affidavits. Where there are factual disputes, the issue is not whether the defendant’s assertions are to be believed; it is whether those assertions are believable.

See On Loong Investment Company Ltd v IO of Wah Luen Industrial Centre, HCA 341/2014, unrep, 8 January 2016, at §20, per Au-Yeung J.

17. The proper approach to the relevant test of whether the defendant has raised credible triable issues is also well-settled.  Any alleged defence will not be taken at face value but, rather, have its inherent probability considered and tested against the evidence, including contemporaneous documents, and whether there has been inconsistency in defence, or whether the defence is raised only recently despite earlier opportunity to do so: Time Rich 08 Limited v DBE (HK) Limited & ors[2018] HKCA 404, at §5.2, per Cheung JA.”

14.In resisting an application for summary judgment, the defendant is not allowed to raise and rely upon a defence which has not been pleaded in his Defence.  In Kaefer AG v Winfield Marine Services Co Ltd[5], in dealing with an application for leave to appeal against the summary judgment granted against the defendant in that case, Chu JA (as she then was) said (footnote omitted):

“30. We agree with the Judge that the bona fide purchaser defence is a separate and distinct defence from the defence of change of position. It was clearly not intended to be part of the defendant’s case when it took out the summons for security for costs. In fact, the defendant does not dispute that the bona fide purchaser defence is a new defence and that its counsel had confirmed to the Master that it only relied on the change of position defence. The defendant’s argument is that despite the defence was not pleaded, it is entitled to raise it based on the uncontradicted evidence and the pleaded facts. We do not agree.

31. Fundamentally, the two defences are not interchangeable. The nature and the tests required to establish the two defences are different. One cannot be passed off as another based on the similarity in the elements of the defence. The point was made clear by Lord Goff in Lipkin Gorman, supra, at 580H to 581A:

‘The defence of change of position is akin to the defence of bona fide purchase; but we cannot simply say that bona fide purchase is a species of change of position. This is because change of position will only avail a defendant to the extent that his position has been changed; whereas, where bona fide purchase is invoked, no inquiry is made (in most cases) into the adequacy of the consideration.’

The Judge was accordingly correct to hold that the defendant could not rely on the facts that were specifically pleaded as particulars for the change of position defence to support a distinct and separate bona fide purchaser defence.

32. The case of Lo Yuk Sui v Fubon Bank [2020] HKCFA 6 does not assist the defendant. Read in its proper context, the Court of Final Appeal is not suggesting that a party is at liberty to run any defence based on the pleaded facts; otherwise, the other side and the court would be taken by surprise, which would go against the purpose of the rules of pleadings as stated by the Court of Final Appeal.” (Emphasis added)

15.Mr Lee submits that in Kaefer, what the Court of Appeal has said in [30] of the judgment is limited to the particular situation in that case only, and the dictum in that paragraph cannot be regarded as laying down any new principle having general application.  Mr Lee submits that in Kaefer, the Court of Appeal affirmed the decision of the court below not allowing the defendant to run an unpleaded defence merely on the ground that no party can take the other side by surprise.  According to Mr Lee, there is nothing new in Kaefer. Mr Lee further submits that the long-established rule is that a defendant may rely upon an unpleaded defence in resisting an application for summary judgment.  Mr Lee has referred me to the following cases:

(1)  In Tso Yuk Yin v Wan Wai Hung[6], DHCJ Marlene Ng (as she then was) said:

“54.  Mr Cheng accepted the limitation defence might not have been fully/sufficiently pleaded in response to P’s claim for return of the sum of $120,000.00, but he submitted it was arguable and triable and could be fully arrayed by future amendment of the Defence.  I refer to my judgment in Ko Hong and Ko Chi Ching both trading as Wing Yick Chau Chong v Chow Hung Wai and Chow Hung Choi both trading as Man Hung Store, cited in my later judgment in AVC Property Development Company Limited v Joyful Grace Trading Limited & anor, and note that Order 14 rule 4(1) of the RHC provides that a defendant may show cause “by affidavit or otherwise to the satisfaction of the court” and that a defendant is not necessarily bound by his pleaded defence in resisting a summary judgment application.  If the affidavit in opposition raises triable issues or arguable defences, it may be open to the defendant to apply for amendment of the defence in due course especially if it is at an early stage of the proceedings.  Here, D’s limitation argument was a contention in law premised P’s case, so I see no reason why I should not take such argument into consideration.” (Mr Lee’s emphasis)

(2)  In Parklane Mortgage Services Ltd v Li Ho Jacob[7] [2021] HKCFI 537 , Recorder Charles Manzoni SC said:

“23. …… although they are not pleaded with the sort of particularity that one would expect, it seems to me that on an Order 14 application the court should have regard to what the case really is rather than what the pleadings actually say.

24. Certainly, insofar as a plaintiff is concerned, it has always been my understanding of the law that when a plaintiff comes to court seeking Order 14, its pleadings and its evidence must all be in proper order because it is only on the basis of those documents that the court can possibly grant an Order 14, judgment. However, insofar as the defence is concerned, a defendant normally, at least in my experience, has a slightly greater leeway to go outside the true ambit of its pleading.” (Mr Lee’s emphasis)

(3) In Mehboob Bhamani & Ors v Abdul Sattar & Ors[8], Nugee LJ said:

“60. I would accept that the assessment by a judge whether a defendant has any real prospect of successfully defending a claim is not a pure exercise of discretion: it is an evaluative exercise. But the rule itself does not prescribe what material the judge can and cannot look at for this purpose. In practice, as the Judge said, applications for summary judgment are often made before a defence has been pleaded, something that is expressly recognised by the rules: see CPR r 24.4(1)(a) under which a claimant may apply for summary judgment once the relevant defendant has filed an acknowledgment of service, and CPR r 24.4(2) which provides that if a claimant applies for summary judgment before the relevant defendant has filed a defence, that defendant need not file a defence before the hearing.

……

62. In other words, the assessment that the judge undertakes under Part 24 is one of assessing the evidence, not the pleadings. The question is not whether the pleaded defence has a prospect of succeeding, but whether the defendant has no real prospect of successfully defending the claim. What then is a judge to do if the defendant’s evidence appears sufficient to raise a triable issue, but the defendant has served a defence in which the relevant defence has not yet been pleaded? Unless the judge can rule out any possibility of amendment (which would be unusual) I see nothing wrong in the judge concluding that the defendant had some real prospect of success even though this would require the defendant to amend. That is the conclusion that the Judge came to here, and I do not myself think we can say that he was wrong to do so.

……

66. In my judgment the Judge was entitled to conclude that the fact that the Defendants had neither pleaded their proposed defence, nor yet applied to amend, did not prevent him from assessing that they had a real prospect of success in such a defence. I would dismiss Ground 1 of the appeal.” (Mr Lee’s emphasis)

16.In my view, in Kaefer, the Court of Appeal has laid down a general principle that while the defendant has already filed a defence to the plaintiff’s claim, the defendant cannot rely upon an unpleaded defence to resist an application for summary judgment.  The authorities cited by Mr Lee are cases decided before Kaefer, and are decisions by the Court of First Instance or by the English Court of Appeal.  With respect, these cases must be read subject to Kaefer, which is a recent decision by the Court of Appeal[9] and an authority binding upon this Court.  I am of the view that following Kaefer, if the defendant intends to raise a matter which has not been pleaded in his defence to resist the plaintiff’s application for summary judgment, the defendant should seek leave from the Court to amend his own pleading.  After considering all the circumstances, including the importance of the proposed amendment to the defendant and whether the proposed amendment would cause any prejudice to the plaintiff, the Court would determine whether leave would be given to the defendant to amend his pleading.  If leave is granted, the defendant may rely upon the new matter to resist the plaintiff’s application for summary judgment.  If leave is refused, the new matter would remain as an unpleaded matter, and the defendant cannot rely upon the same to resist the plaintiff’s application.

17.Mr Suen has drawn my attention to the fact that P has twice written to Ds on 9 and 10 June 2023 seeking their confirmation as to whether they would amend their pleadings in light of their counsel’s oral reservation of rights to do so during the hearing for stay of execution before Master Keith Lam on 30 May 2023.  Ds have never responded to those letters.  In view of the principle as laid down by the Court of Appeal in Kaefer (which is binding upon this Court), and the fact that Ds have chosen not to amend the Defence notwithstanding the enquiries made by P before this hearing, I would not allow Ds to run any unpleaded defence to resist P’s application for summary judgment.  P should not be taken by surprise, and P should not be required to meet any unpleaded defence in this hearing.

Discussion

18.Having considered the pleadings, the evidence, and the parties’ respective submissions, I am of the view that Ds have failed to raise any triable issue.  I would affirm the Master’s decision and dismiss Ds’ appeal.  I would also dismiss the New Evidence Application.

19.In the paragraphs below, I will explain why I am in respectfully disagreement with Mr Lee on the points advanced by him.

20.Ds have produced the Award as evidence in P’s application for summary judgment.  For the purpose of this appeal, there is no dispute that either party may refer to the contents of the Award.

The Representations

21.One would need to go back to the Defence to see the Representations as pleaded by Ds.  In the Defence, it is pleaded (footnotes omitted):

“2.2 …… [P] was wholly owned by Wu Wei (transliteration of武衛 (“Wu Wei”), Wu Jixiu’s husband. However, [P] is and was controlled by Wu Xiaobing (transliteration of 武小兵 (“Wu Xiaobing”), the younger brother of Wu Wei.

……

12. In around end of April 2020, Wu Xiaobing discovered from [D2] that (i) the construction work for certain buildings erected on properties owned by Kong Shum in BaoAn District, Shenzhen are soon to be completed, and will soon be ready for sale in the property market; and (ii) Yihua has obtained government permit for development of 2 buildings in Futian, Shenzhen. As the sale in the property would allow the owner(s) of the property to gain a substantial sum of money, Wu Xiaobing and his PRC lawyer Zhao Xianlong (transliteration of 趙顯龍 ) (“Zhao Xianlong”), who was and still is a lawyer with the Shenzhen office of Messrs King and Wood Mallesons (both of which were then also acting on behalf of [P]) orally offered to [D2] that:-

12.1. Wu Xiaobing’s group of companies (all of which are legally owned by Wu Wei or Wu Jixiu but are controlled by Wu Xiaobing) could buy out the shares of held land properties in Mainland China and are owned by [D2]; and

12.2. In return, the proceeds of the sale of the said shares would, in[10] be used to, inter alia, pay off the Loan Agreements;

12.3. Release [D2] of all personal liabilities owed by Yihua and Kong Shum, which includes [D2]’s liability under the Loan Agreements (and all other creditors);

12.4. Pay an additional sum amounting to a total of RMB l7,810,000.

13. [D2], on behalf of himself and agreed to the above.

14. On around 17 June 2020, at Wu Xiaobing’s direction, Wu Wei, Fanghua and Kaiming (together, the "Purchasers") entered into [the ETA] with [D2], Xitaida Corporation Management Consultant (Shenzhen) Limited …… (another company wholly owned and controlled by [D2]) and Yihua (together, the “Sellers”). ……

15. For the reasons pleaded above, the Loan Agreements have been varied (“Varied Loan Agreements”).

…………

29. …… [P] is estopped from claiming under the Loan Agreements on the ground that Wu Xiaobing and/or Zhao Xianlong (on behalf of, inter alia, [P]), made the representations which was relied upon and were detrimental to [Ds].

PARTICULARS OF ESTOPPEL BY REPRESENTATION

(i) There existed an unequivocal representation by Wu Xiaobing and/or Zhao Xianlong (on behalf of, inter alia, an agent of [P]) to release, procure or seek the consent of the creditors to release the personal guarantee of [D2] after the Sellers performed its obligations. Such representation is evidenced by the finding of the arbitral tribunal in the Arbitral Award as follows:-

‘仲裁庭认为 … 结合上文已认定的合同 [ie, the Equity Transfer Agreement] 目的以及双方当事人陈述 [ie, representations], 仲裁庭认可被申请人 [ie, the Purchasers] 的主要合同义务包括解除第三申请人 [ie, the 2^nd Defendant] 的担保责任，避免第三申请人因标公司 [ie, Yihua and Window of Trade] 暴雷而被迫承担连带担保责任，对其个人造成损失或不利影响。’

(ii) [D2] (on behalf of himself and [D1]), in reliance on the said representation, entered into [the ETA].

(iii) After entering into [the ETA], the Sellers suffered significant losses/detriment as a result of various breaches by the Purchasers.

30. In the circumstances, it is inequitable for the Wu Xiaobing or [P] to go back on the said representation and [P] is not entitled to the relief claimed by it, or any relief.” (Emphasis added)

22.Looking at the Defence, the Representations pleaded by Ds are those pleaded in [12] of the Defence (“Para 12 Representations), and the one pleaded in [29] in the same pleading (“Para 29 Representation”).

23.Regarding Para 12 Representations, even assuming that Ds’ pleaded case is believable, the said Representations cannot be defence to P’s claim.

(1)  According to [12.2] of the Defence, one of the features of the deal proposed by Wu Xiaobing and Zhao Xianlong (“Zhao”) to D2 is that the proceeds obtained by D2’s side would be used to pay off the loans owed under the Loan Agreements. Clearly, even according to the case pleaded by Ds, the loans owed by Ds under Loan Agreements would not be automatically extinguished once D2 has agreed to the deal proposed by Wu Xiaobing and Zhao.  D2 and his companies would need to use the sale proceeds obtained in the deal to pay off the indebtedness owed under, inter alia, the Loan Agreements.

(2)  [12.3] of the Defence must be read in the context of the whole Defence, including [12.2]. Reading [12.3] of the Defence in context, the release as said in that paragraph must be the release procured by the full repayment of the loans owed under the Loan Agreements by using the proceeds of the sale of the shares.  [12.3] of the Defence cannot mean any automatic release without repaying the loans owed under the Loan Agreements.

(3)  In my view, Ds cannot rely upon the Para 12 Representations to show an arguable defence to P’s claim.

24.Regarding Para 29 Representation, even if the representation as pleaded is believable, Ds would not be able to derive any assistance from that representation.  For the reason stated in [23] above, reading [29] of the Defence in context, the release in [29] can only mean the release procured by the full repayment of the loans owed under the Loan Agreements by using the proceeds of the sale of the shares.  This interpretation is further reinforced by the words “after the Sellers performed its obligations” – after D2 and his companies performing the obligations of selling the shares, D2’s side would obtain the proceeds from the sale, which then can be used to pay off the indebtedness owed under the Loan Agreements.

25.I would also say that the problem in Ds’ pleaded case regarding the Representations is [12.2] of the Defence, which is an admission against Ds’ interest.  In that paragraph, Ds have admitted that P’s representatives did not tell D2 that the loans owed under the Loan Agreements would be automatically extinguished by reason of D2 agreeing to enter into the ETA.  On the contrary, Ps’ representatives in effect told D2 that those loans would be preserved and would need to be paid off by D2 by using the proceeds obtained from the sale as contemplated in the ETA.  Ds are bound by this admission and cannot withdraw the same, unless with leave from the Court.  Ds have made no application to withdraw this admission. Further, there is no evidence showing any ground upon which leave may be given to Ds to withdraw this admission.

26.For the reasons above, the answer to Issue 1 identified by Mr Lee in the DS is that even the Representations as pleaded by Ds in the Defence have been made, there is no arguable defence to P’s claim.  That is the end of Ds’ case.  Without prejudice to this conclusion, for the sake of completeness, I would briefly discuss Issue 2 and Ds’ Further Point in the paragraphs below.

Collateral contract

27.The defence based upon collateral contract as stated in the DS is as follows:

“34. In the present case, it is at least arguable that the agreement reached as a result of the Representations was a contract collateral to the ETA, because the parties must have intended that the Representations should form part of the basis of the legal relationship between them.

35. Alternatively, it is arguable that there was a single composite contract, of which the ETA was one component and the agreement reached as a result of the Representations another.”

28.This is an unpleaded defence.  Accordingly, Ds are not entitled to rely upon this to resist P’s application for summary judgment.

29.Further or alternatively, as said in the above, even if the Representations are believable, Ds in fact cannot derive any assistance from the Representations in resisting P’s application for summary judgment.  As the basis of the alleged collateral contract is the Representations, while this basis is untenable, the defence based upon collateral contract is unarguable.

Variation of the Loan Agreements

30.According to Mr Lee, it is arguable that the Loan Agreements have been varied by the Representations.  The consideration of the variation was the execution of the ETA by D2 and his companies.

31.For the reason stated in [21] – [26] above, even if the Loan Agreements have been varied by the Representations, Ds’ obligation to repay the outstanding principal and interest under the Loan Agreements has not been extinguished in the variation. On the contrary, Ds’ obligation to repay has been preserved in the variation. In my view, the alleged variation cannot be a defence to P’s claim.

Promissory estoppel

32.This is also an unpleaded defence.  Ds cannot rely upon this to resist P’s application for summary judgment.

33.Further or alternatively, the basis of the alleged promissory estoppel is the Representations.  For the reasons given in [21] – [26], the alleged promissory estoppel is not arguable in any event.

Estoppel by representation

34.The basis of this alleged estoppel is also the Representations.  For the reasons given in [21] – [26], this defence is also unarguable.

Estoppel by convention

35.Mr Lee submits that arguably, there was a common understanding between P and Ds that Ds’ liabilities under the Loan Agreements would be released.  For the reasons given in [21] – [26] above, with respect, this submission is inconsistent with Ds’ pleaded case.  I do not see how Ds can put forward an arguable case based upon estoppel by convention.

Ds’ Further Point

36.Ds’ Further Point is that in Wu Jixin’s affirmations filed in support of P’s application for summary judgment, Wu Jixin has said that Ds’ indebtedness under the Loan Agreements is not affected by the ETA.  Mr Lee submits that in view of the evidence produced by Wu Jixin in (2022) 粤0306民初819号 , the aforesaid allegation made by Wu Jixin in her affirmations filed in these proceedings is untrue.  For this reason, P’s application for summary judgment must be refused.

37.With respect, Ds cannot derive any assistance from this further point.

(1)  Mr Lee has fairly accepted that as a result of the undisputed facts as set out in [5] above, P has shown a prima facie case.

(2)  By reason of the analysis as set out in [21] to [35] above, I have concluded that Ds have failed to show any arguable defence to P’s claim.  In my analysis, I have assumed that the matters pleaded in the Defence are believable or even true.  Another side of the same assumption is that anything alleged by P which is not consistent with the matters pleaded by Ds in the Defence is not regarded to be true.  Even with that assumption in mind, for the reasons stated in the above, I am of the view that no arguable defence to P’s claim has been shown.

(3)  For the sake of discussion, assuming that some matters said by Wu Jixin in her affirmations are arguably untrue, this would not deprive P from having judgment.  While P has shown a prima facie case and Ds have not shown any arguable defence to P’s claim, I see no reason why summary judgment should not be given to P.

No arguable defence

38.With respect, none of the points put forward by Mr Lee can be regarded as arguable defence. The Master is correct in granting summary judgment to P.

The New Evidence Application

39.According to Ds, the purpose of introducing the HCB Affirmation in the appeal hearing is to show that as at 3 April 2023, the value of the properties held by one of the companies controlled by D2, ie港深玩具(深圳)有限公司 (“Kong Shum (SZ)”), was around RMB703,800,000 (after tax).  After considering the liability of Kong Sum (SZ) as stated in the ETA, the value of the shares of Kong Shum (SZ) should be around RMB338,100,000.

40.For the reasons set out in the above, I am of the view that Ds have not shown any arguable defence to P’s claim.  The value of the assets or shares of Kong Sum (SZ) would not affect my analysis in any way.  In my judgment, Ds have failed to satisfy condition (2) in Ladd v Marshall.  As a result, the New Evidence Application must be dismissed.

Disposition

41.I dismiss Ds’ appeal.  I also dismiss the New Evidence Application.

42.Counsel have agreed that costs should follow the event, with certificate for two counsel.  I order that costs of Ds’ appeal (including costs of the New Evidence Application) be paid by Ds to P forthwith, with a certificate for 2 counsel.  Those costs be summarily assessed.  There be leave to P to file and serve a bill of costs for summary assessment within 7 days, and leave to Ds to file and serve a written reply to the said bill within 7 days thereafter.

43.I thank all counsel for the helpful assistance provided to the court.

Mr Jenkin Suen SC and Mr Joseph Wong, instructed by Cedric & Co., for the Plaintiff

Mr Kenneth Lee and Mr Edward K H Ng, instructed by Katherine Chan, Law Office, for the 1^st and 2^nd Defendants