Su Chun Yan v. Trendzon Holdings Group Ltd
Read the full judgment text of HCA 92/2024 on BabelCite. This High Court CFI judgment was delivered on 17 December 2024.
1. In this action, the Plaintiff (“ P ’) sues the Defendant (“ D ”) on a bond subscription agreement dated 20 October 2021 (“ the Agreement ”) for the repayment of the outstanding balance of the principal plus interest in the total amount of HK$4,050,000, or alternatively, on a dishonoured cheque dated 20 April 2023 in the sum of HK$5,155,000 said to be drawn by D (“ the Cheque ”) for the repayment of its liability under the Agreement.
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HCA 92/2024 [2024] HKCFI 3611 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 92 OF 2024 ______________
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____________________ DECISION ____________________ The application 1.In this action, the Plaintiff (“P’) sues the Defendant (“D”) on a bond subscription agreement dated 20 October 2021 (“the Agreement”) for the repayment of the outstanding balance of the principal plus interest in the total amount of HK$4,050,000, or alternatively, on a dishonoured cheque dated 20 April 2023 in the sum of HK$5,155,000 said to be drawn by D (“the Cheque”) for the repayment of its liability under the Agreement. 2.Upon P’s application for summary judgment by summons dated 10 April 2024 (“the O14 Summons”) and on 12 July 2024, Master Hew granted leave to D to defend conditional upon D paying HK$5,155,000 into court (“the Order”). On 10 September 2024, the said sum was paid into court by D. 3.For determination at this hearing are
4.P did not cross-appeal against the Order to contend that summary judgment ought to have been given. 5.At the hearing, Mr Anson Wong SC (leading Mr Pang and Mr Lam), counsel for D, indicated that leave would be sought to only adduce the Affirmation of Yao and not the 2 others. Having heard submissions, I gave leave to adduce it and ordered that the costs of D’s summons be to P save that the costs of its hearing be in the cause of the appeal. I indicated written reasons for so ordering would be given together with those for allowing the appeal. 6.In the course of the hearing, Mr Frederick Fong, counsel for P, rightly and fairly accepted that :
7.At the conclusion of the hearing, I announced my decision that the appeal be allowed and the Order be set aside, that D is entitled to have leave to defend this action unconditionally, and that the money paid into court by D be released to it on or after 10 December 2024, but, upon hearing parties partly on the question of costs, I reserved the question of whether the O.14 Summons should be dismissed, with the usual costs consequence of P paying the costs of the O.14 Summons, or merely that unconditional leave to defend be given, in which case the usual costs order would be costs in the cause. 8.These are my reasons and decision. 9.It is D’s case that the Agreement was fraudulently entered into by its former general manager Mr Law Sai Chung (“Law”) without D’s knowledge or authority, and that there was a conspiracy to defraud by Law and others. That being the case, there is little common ground between the parties. I will therefore set out their respective case and evidence. Summary of P’s pleaded case and evidence 10.P was and is a business woman. 11.In early October 2021, upon the introduction and/or arrangement of her business acquaintances Yam Tak Wan (“Yam”) and Fong Wai Yan (“Fong”) and their business associate Roy Mok Wan Fung (“Mok”), P entered into the Agreement agreeing to subscribe bond in the principal amount of HK$5,000,000 with interest at 6% per annum which would mature on 20 October 2022 (“the Bond”). 12.The Agreement, which has not yet been executed by D, was mailed by Yam to P for her execution on around 16 October 2021. 13.On 20 October 2021, P paid the principal amount by depositing her cheque for HK$5,000,000 into the bank account of the Subsidiary held with the Bank of Communications (“the Subsidiary Bank A/C”). Mr Fong at the hearing confirmed that there is no provision in the Agreement stipulating that the principal was to be paid to the Subsidiary. P in her affirmations did not mention why she made the payment to the Subsidiary instead of to D. 14.In early November 2021, P received from Yam by mail
15.As P relied heavily on the events that occurred after maturity of the Bond, I will narrate them as follows. 16.On about 24 October 2022 (4 days after the maturity of the Bond), P received through Yam 2 letters from D both dated 24 October 2022. In one of the 2 letters, D promised that the principal and interest in the sum of HK$300,000 would be repaid to P on 20 April 2023. In the other, it was proposed that the interest of HK$300,000 would be repaid on 30 November 2022 and the principal and interest totalling HK$5,155,000 would be repaid on 20 April 2023 and the Cheque was attached. P agreed and it is P’s case that a supplemental agreement was thereby formed (“the Supplemental Agreement”). 17.The Cheque was dishonoured upon P’s presentation on 25 April 2023. 18.P pleaded that part repayment totalling HK$1,400,000 (rounded up) had been made by D (with the particulars as to dates and amounts pleaded). The following further matters were not pleaded but were given in the 1st Affirmation of P:
19.On 23 November 2023, P’s solicitors issued a letter before action to D. On 17 January 2024, P commenced this action. Summary of D’s pleaded case and evidence 20.D was and is a company incorporated in Cayman Islands and was and is listed on the Main Board of Hong Kong Stock exchange. 21.In response to the COVID-19 pandemic and the border closures, D’s directors and senior management stayed in Mainland and Singapore, where D’s main operations were located. D’s Hong Kong office as a result operated with minimal staff tasked primarily with maintaining the listing status of D. Law was left with the company seal, chops and pre-signed cheques of the Subsidiary Bank A/C to pay essential office expenditure, such as salaries and rent. 22.The main averments of D’s pleaded case are:
23.D now counterclaims against P for the return of HK$1,400,000 based on unjust enrichment. 24.To contest the O.14 Summons, D filed 2 affirmations by its Chairman Feng, respectively filed on 21 May 2024 and 4 July 2024. She deposed to the following facts and produced the related documentary evidence mentioned below :
Reasons for granting leave to D to adduce the affirmation of Yao 25.P’s contention against allowing leave to adduce the Affirmation of Yao was that D failed to fulfil the 1st condition of Ladd v Marshall, namely, that the evidence could not have been obtained with reasonable diligence for use at the hearing below. 26.Mr Wong submitted that the Affirmation of Yao was filed in response to the evidence raised for the first time in the 2nd Affirmation of P (“P 2nd”) and the Affirmation of Mok (“Mok 1st”), both of which were filed on 28 June 2024 in reply to the 1st Affirmation of Feng filed on 21 May 2024. In P 2nd, P expressly stated that she relied on Mok 1st. In Mok 1st, Mok disputed that the Agreement was issued without authority of D by relying on, among others, the fact that he knew Yao since 2019 and 2 sets of WeChat messages between him and Yao (together “the Mok WeChats Messages”). One set in late 2020 in which Mok sought from Yao information concerning D. The other were messages exchanged between them from 24 November 2022 to 29 December 2022 and messages exchanged between the two from 11 to 15 May 2023. 27.Mr Wong pointed out that P 2nd and Mok 1st were filed just 2 weeks before the contested hearing before Master Hew and Yao was resident in Mainland, that therefore D did not really have sufficient time and a fair opportunity to prepare and then file the Affirmation of Yao before the contested hearing. 28.This Court drew the attention of the parties to the Court of Appeal case of Johnson Electric International Limited v BEL Global Resources Limited (CACV 36/2013, 8 May 2014). There, Lam VP (as he then was) giving judgment of the CA held (at §§13 and 14):
29.Though the CA was so holding in respect of an appeal to the CA from a CFI judgment granted under O.14, in my view and as a matter of principle, such modification is as much pertinent to an appeal to the judge from a judgment granted by a Master under O.14, if not with more flexibility as such an appeal would be conducted by way of a hearing de novo. 30.One of the factors mentioned by Lord Bridge in Langdale v Danby justifying not expecting as high the standard of diligence required of a defendant preparing his case in opposition to a summons for summary judgment was the pressure of time, which therefore may warrant some modification in applying Ladd v Marshall. 31.The circumstances leading to the need to file the Affirmation of Yao as set out above, in my view, was such a situation whereby D was put under such a pressure of time, not due to its own fault, in preparing his case in opposition of the O.14 Summons. Thus, the modification is applicable and appropriate. I therefore in the exercise of my discretion gave leave to D to adduce the Affirmation of Yao. Reasons for allowing the appeal 32.It is reasonably clear from the amount the Master ordered to pay in as a condition that he had the alternative cause of action based on the dishonour of the Cheque very much in mind when he so ordered. As explained, that cause of action is no longer pertinent. 33.In supporting the imposition of the condition, P relied heavily on the acts of the part repayment of HK$1,400,000, the issuance of the Cheque and of the 5 Post-dated Cheques, the representation of authority made by Lee, and negotiation with Lee or purportedly with Yao. Those matters notwithstanding, on proper analysis and Mr Fong at the hearing confirmed, in my view rightly, that the sole issue was whether the Agreement and the Supplemental Agreement were entered into by D, and these repayments made, and cheques issued, with the actual authority of D, there being no averments pleaded by P in the Statement of Claim or Reply that she relied on other forms of authority like ostensible or apparent authority. 34.P’s contention, relying heavily on these matters, was that these matters thereby showed that D’s case of fraud and lack of actual authority were sham, or moonshine, or not bona fide, or was so weak as to justify the imposition of the condition. 35.However and as mentioned, it is indeed common ground now that the person purporting to execute the Agreement as “director” of D was never such a director, not to mention whether he/she had actual authority of D, and whether he/she was an actual person as opposed to a fictitious or made-up name. That by itself seems to me already establish that there is a triable issue regarding whether the Agreement was entered into by “董事卓曉楠” with the actual authority of D. 36.As mentioned, P’s case was that she all along acted through agents in subscribing to the Bond, that the Bond Certificate, the Confirmation, the WYHC Letter, the 2 letters said to be from D both dated 24 October 2022 she received not from D direct but from Yam, that the 5 Post-dated Cheques she received apparently from Fong and that she finally met Lee on 18 August 2023 in P’s office in Shenzhen. P’s case that Lee had authority was that Lee orally said so to Fong, Yam and Mok on 27 April 2023. It is clear that Lee’s own saying that he had authority, per se and without more, is far from strong evidence that he indeed had authority. 37.As have mentioned, Feng had produced documents showing that Lee was not even an employee of D. Feng, as the Chairman of D, has repeatedly stated on oath that there was no board resolution passed authorizing the issuance of the Bond or that D had authorized any of the repayments or the issuance of the Cheque or the 5 Post-dated Cheques. D has by documentary evidence showed that it had made timely reports of the various fraud, contemporaneously when they were discovered, to the HK Police. Formal announcements were made and filed with the Hong Kong Stock Exchange. D had investigated the WYHC Letter formally with Hau through D’s solicitors and had promptly made a formal and detail complaint to the Law Society. D had also filed a formal report to the Immigration Department. D had resisted a number of formal actions taken by various purported bold holders of purported bonds issued allegedly by Lam, and D’s resistance in some instances had been successful while others are pending. Lam together with at least one other was arrested and now being investigated by the HK Police. These together in my view lend credibility to D’s defence of lack of authority and fraud perpetrated by Lam together with others. I also take the view that D has condescended into sufficient particulars to show that it has a bona fide and triable defence. 38.The repayments, the issuance of the Cheque and the 5 Post-dated Cheques and negotiations by Lee or Yao would show that D’s such defence is shadowy or not bona fide if it is shown that they were authorized by D. Presently,that they were so authorized was hotly disputed as set out above. P has not proffered any strong or compelling evidence that they had such actual authority. 39.P also relied on the Mok WeChat Messages to say that Yao represented D and took part in negotiations for repayment. In his affirmation, Yao deposed in gist that since early 2022 Law had indicated that he could arrange Yao to work in D and helped him apply through the Admission Scheme for Mainland Talents and Professionals to Hong Kong. Using that as a lure, Law asked Yao to help him handle matters relating to the Bond, and Yao therefore communicated with Mok. Yao also said that in Mok’s WeChat Messages, the discussion relating to the Bond was about the payment of substantial commission (佣金) totalling HK$300,000 to Mok, Yam, one Tsang and another entity. As can be gauged from the messages themselves, the question of “佣金” was indeed discussed in the Mok WeChat Messages, which is a matter not mentioned in the Affirmation of Mok or in P’s case or affirmations. I find there are disputes of fact between Mok’s version and Yao’s version that should be resolved at trial. I do not accept that the Mok’s WeChat Messages on their face would establish that the entering of the Agreement and that the other acts and representation of Lee were done or made with the actual authority of D. 40.Mr Fong criticized that there was a lack of contemporaneous documents in support of D’s case and the documents proffered by D are documents coming into existence after the fact. In light of the fact that D’s case is that it had been defrauded and in the circumstances of the case, particularly in light of D’s various prompt and formal actions, I do not think there is sufficient force in the criticism. 41.Mr Fong also argued strenuously that (a) if Lam was suspended on 31 March 2022 as D said, there was no explanation from D as to why he still retained certain pre-signed cheques such as would enable the Cheque to be issued in April 2023 and the 5 Post-dated Cheques to be issued in June 2023, and (b) it is inherently improbable that Lam and other fraudsters would unusually repay P out of the money already defrauded HK$1,400,000. Mr Fong submitted that these matters thereby made D’s case shadowy. 42.Mr Wong responded that there might be factual matters unexplored as to why Law still retained the pre-signed cheques, such as whether attempts have been made by D to retrieve them but somehow not all of the cheques were accounted for and such. He submitted that in resisting an O.14 application, a defendant is not obligated to answer every query or must have a perfect case. He further submitted that in any case these matters were not sufficient, in looking at the matter in the round, to render D’s case shadowy or as weak to merit the imposition of the condition. I agree with that assessment and accept Mr Wong’s said submission. 43.In the round, I do not find D’s defence shadowy or not bona fide or is such as would merit the imposition of the condition. I therefore allowed the appeal and set aside the Order and released the money paid into court by D, but per P’s request and not resisted by D, only on or after 10 December 2024. Dismissal of the O.14 Summons ? Costs of the O.14 Summons and the appeal 44.Mr Wong’s contention seeking a dismissal of the O.14 Summons was that D’s present case of fraud and lack of authority was clearly pleaded in its Defence and P should not have taken out the O.14 Summons at all. 45.I have considered the Defence again. A lot of the matters presently relied on were pleaded. However, the very key and direct point that the purported director of D executing the Agreement, namely “董事卓曉楠”, was never a director of D was not pleaded. Moreover, so far as P was aware at the time the Defence was filed, there were a number of negotiations resulting in the part repayments from May to August 2023, all made through the Subsidiary Bank A/C, and totalling to a not insignificant sum of HK$1,400,000. Such being the case at the time, I am not prepared to fault P for viewing the lack of authority and fraud defence as a mere assertion on the part of D. I thus come to the view, by a thin margin, that I would not hold that D ought not have issued the O.14 Summons. 46.However, after Feng has filed her 1st affirmation on 21 May 2024 confirming on oath that she had made various enquiries showing no broad resolution approving the issuance of the Bond, proffering the documents showing there had never been a “董事卓曉楠” and so on as mentioned above, in my view, D has thereby already shown that there was a bona fide triable defence. In my view, after having considered Feng 1st, P should have withdrawn the O.14 Summons. 47.Therefore, I would exercise my discretion on costs by ordering that the costs of the O.14 Summons incurred before 31 May 2024 be costs in the cause, and P do pay D its costs incurred thereafter to be summarily assessed. 48.At the hearing, Mr Wong has asked me to award to D such part of the costs of the O.14 Summons relating to the Cheque (20% Mr Wong said) to be paid by P, as P ought to have known that the cause of action on the Cheque was defective in the first place. However, looking at the affirmation evidence, the costs attributable solely to pursuing the Cheque claim up to the 31 May 2024 would be relatively minimal. Thus, I would decline to fillet the costs as Mr Wong asked. 49.In the premises, I would make an order on the costs of the O.14 Summons as indicated in paragraph 47 above, and an order that P do pay D its costs of the appeal, and as having ruled with reasons given at the hearing, with certificate for a senior counsel. These 2 costs orders are on nisi basis to be made absolute in 14 days unless any party applies to vary by summons. Unless there is an application to vary in time, D do lodge and serve 7 days thereafter its Statement of Costs for such costs awarded to it, P to lodge and serve her List of Objections 7 days after, and D its Reply within the next 4 days. 50.Lastly, I thank Mr Wong, Mr Fong, Mr Pang and Mr Lam for their assistance.
Mr Frederick Fong, instructed by Messrs Cheng & Ng, for the Plaintiff Mr Anson Wong SC leading Ms Jamie Pang and Mr Osmond Lam, instructed by Messrs Francis Kong & Co, for the Defendant |