Dbs Bank (Hong Kong) Ltd v. Extra Ideas Ltd and Others

HCMP 966/2024

[2025] HKCFI 1324

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 966 OF 2024

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BETWEEN

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J U D G M E N T

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Introduction

1.In this case, the Plaintiff DBS Bank (Hong Kong)  Limited (“P”)  filed an Originating Summons (“OS”)  on 6 June 2024 pursuant to Order 88 of the Rules of the High Court, Cap. 4A, seeking repayment of all monies due to it under a number of instruments including mortgages or guarantees, and delivery of vacant possession of the mortgaged properties. 

2.Amongst the defendants, each of the 2^nd, 3^rd, 4^th and 5^th Defendants had executed a mortgage in favour of P to give security for the indebtedness of the 1^st Defendant Extra Ideas Limited (“D1”)  to P.  In particular, the 4^th Defendant Concept Properties Limited (“CPL”)  had executed a mortgage dated 31 October 2017 (“the 2^nd Mortgage”)  to secure D1’s indebtedness.  Further, each of the 3^rd Defendant (“Thomson”)  and CPL had given two unlimited guarantees in favour of P to give security for D1’s indebtedness.  The two guarantees given by CPL were dated 28 March 2018 and 27 December 2019 respectively (“the 2^nd and 3^rd Guarantees” respectively).  As at 2 July 2024, D1 had accumulated an indebtedness in the order of some HK$44 million.

3.CPL had also executed a mortgage dated 29 February 2016 in favour of P for its own indebtedness to P (“the 1^st Mortgage”); whereas the 6^th Defendant (“Doreen”)  had given a guarantee dated 25 February 2016 to give security for CPL’s indebtedness (whether CPL was to be liable as “principal or guarantor or surety”), subject to an overall limit HK$8,180,000 (“the 1^st Guarantee”).  As at 29 November 2024, CPL’s own indebtedness was of some HK$6.09 million.

4.Defaults having occurred in the repayment of D1’s liabilities towards P, demand letters were issued on or about 14 May 2024 to the Defendants, demanding them to pay up all liabilities under the banking facility to D1.  On 6 June 2024, P commenced this action by filing the OS. 

5.The only parties opposing the OS are CPL and Doreen.  The only property in issue is Duplex Flat C on 41^st Floor and 42^nd floor with Flat Roof of Tower 3, Island Harbourview, owned by CPL (“the Property”).  The outstanding questions for determination are the liabilities of CPL and Doreen to pay P, if any, and P’s claim for vacant possession of the Property.

6.At the hearing of the OS on 13 December 2024, P invited the Court to enter summary judgment against CPL and Doreen, contending that there was no triable issue on the evidence.  On the other hand, CPL and Doreen sought an order for oral evidence to be given at a substantive hearing of the OS.  At the conclusion of the hearing, the parties were directed to file further written submissions on certain matters (including costs)  and judgment was reserved to be handed down.  This is the Court’s judgment. 

The relevant legal principles

7.In  Dah Sing Bank Ltd. v Sun Create Richly Holdings (Asia)  Ltd. & Anor. [2024] HKCFI 1512, Deputy High Court Judge Le Pichon (as she then was)  stated:-

“13. It is common ground that:-

(1)  even though the matter is litigated by way of Order 88 procedure, the Court can give judgment summarily in favour of the plaintiff if there is no triable issue on the evidence: see Bank of China (Hong Kong)  Limited v China Hong Kong Textile Co Ltd [2011] 4 HKLRD 457 at §5;

(2)  unlike Order 14 applications where the defendant is obliged to provide sufficient grounds to justify the action continuing to trial, the burden in summary judgment applications under the originating summons procedure is on the plaintiff to justify its entitlement to summary judgment.  However, once this is prima facie demonstrated on the evidence, it is then up to the defendant to show that he does have a defence or defences to the claim.  In this way, there may in practice be little difference between an application for summary judgment in originating summonses and an application for summary judgment under RHC, Order 14: per Ma J in Wing Hang Bank Ltd v Liu  Kam Ying & Ors [2002] 2 HKC 57 at §10.”

P’s case

8.It is P’s case that CPL and Doreen are liable to pay P on the following bases.

9.First, D1’s indebtedness to pay for D1’s banking facility was secured under:-

(a)  The 2^nd Mortgage by which CPL charged the Property to P as security for “the due payment of all moneys payable or which may at any time hereafter or from time to time become payable by the Mortgagor [CPL] and/or the Borrower [D1] to the Lender [P]…”; and “[i]n consideration of the Lender [P] agreeing to make available or enter with the Borrower [D1] the Facilities… the Mortgagor [CPL] and the Borrower [D1] jointly and severally covenant to pay on demand all Obligations to the Lender.”[1]  “Obligations” was defined as “all principal, interest and other amounts (whether present, future, actual and/or contingent)  from time to time owing by the Borrower [D1] to the Lender [P]…”[2]  The 2^nd Mortgage was signed by Doreen as CPL’s sole director at the law office of Messrs. Peter W.K. Lo & Co.  It is remarkable that at the signing page, it was printed in bold: “This Mortgage is an important legal document.  Before signing, you should read it carefully and if necessary seek independent legal advice to make sure you understand your commitment and the full consequences of signing.  If you sign this document, you will be liable together with or in place of the Borrower for the Borrower’s obligations to the Lender.  You should only sign this document if you agree to be legally bound by its terms” (“the Warning”); and

(b)  The 2^nd and 3^rd Guarantees by which CPL as a guarantor agreed and undertook to pay to P “on demand all sums of money and liabilities … whether certain or contingent, now or hereafter owing or incurred to the Bank [P] by the Principal [D1] whether as principal or guarantor or surety…”[3]  Both of the 2^nd and 3^rd Guarantees were signed by Doreen as the sole director of CPL.  At the signing page of both instruments, there was printed a warning in bold in about the same terms as the Warning in the 2^nd Mortgage.[4]

(c)  To support the OS, P produced as exhibits to one of its supporting affirmations[5] (1)  a written resolution of the sole director of CPL dated 25 October 2017 and signed by Doreen, and (2)  a written resolution of an Extra-ordinary General Meeting of CPL’s shareholder dated 25 October 2017 and signed by Doreen, that:-

(i)  “There was tabled before the Meeting the Facility Letter and [the 2^nd Mortgage] to secure the banking facilities to the extent of all sums of money to such extent as may from time to time agree to grant to [D1] by [P] and the [Property] owned by [CPL] and be mortgaged charged or pledged in favour of [P]….”;

(ii)  “[A]ll the matters and/or transactions referred to in the said Facility Letter and [the 2^nd Mortgage] are hereby approved”; in the written resolution of the sole director of CPL, it was expressly resolved that it was “for commercial benefit” of CPL to give the approval.

(iii)  “The sole director of [CPL] be authorized to sign the said Facility Letter, [the 2^nd Mortgage] and all the relevant instruments for and on behalf [CPL]…”

(iv)  “[CPL] giving an unlimited guarantee of the liabilities of [D1] in [the 2^nd Mortgage] transaction.”

(d)  Four other CPL’s written minutes/resolutions (all signed by Doreen and dated 28 March 2018 and 27 December 2019 respectively)  were also exhibited to one of P’s supporting affirmations[6] to prove that it was resolved that it was “in the interests of [CPL], to its commercial benefit and in furtherance of its objects, that [CPL] assists [D1] in obtaining the Facilities by approving and executing” the 2^nd and 3^rd Guarantees.  Two other minutes/resolution of CPL (both signed by Doreen and dated 31 March 2023)  were also exhibited and they made it clear that CPL was aware that facility letters up to that dated 16 March 2023 (i.e. the full extent of the bank facilities)  had been issued to D1 and it was resolved by CPL that it was “in the interests of [CPL], to its commercial benefit and in furtherance of its objects, that [CPL] assists [D1] in obtaining the Facilities…”

10.Secondly, CPL’s aforesaid liabilities as a mortgagor under the 2^nd Mortgage or as a guarantor under the 2^nd and 3^rd Guarantees were, as contended by P, also secured by:-

(a)  The 1^st Mortgage whereby CPL as a mortgagor charged the Property to P as security for “Amount Owing” as defined as “[a]ll money, obligations and liabilities due, owing or incurred… under the Facility Agreement or the Mortgage now or in the future…”; whereas “Facility Agreement” was defined thereunder to include “[a]ll existing or future agreements, documents, arrangements or relationships (whether documented in writing or not)  by which we make facilities available to you or under which you owe us any money, obligation or liability.”  Therefore, P contends that on the face of these express terms, the parties entering into the 1^st Mortgage clearly envisaged existing and future arrangements whereby CPL may be liable to P for all monies and other obligations such as those arising from the 2^nd Mortgage and the 2^nd and 3^rd Guarantees.  The 1^st Mortgage was signed by Doreen as CPL’s sole director at the law office of Messrs. Au Yeung, Lo & Chung.  At the first page of the instrument, an “Important Notice” is printed in bold: “This Mortgage is an important legal document.  It is legally binding on you when signed… Before signing this Mortgage, you should obtain separate independent legal advice from your solicitors of your own choice.  If you sign this document, you will be liable for: (a)  all amounts owing by you to us under the facilities which we have made available to you; or… (d)  all other obligations assumed by you under this Mortgage.”

(b)  CPL’s liabilities under the 1^st Mortgage were further secured by the 1^st Guarantee whereby Doreen as a guarantor agreed and undertook to pay to P “on demand all sums of money and liabilities (collectively “Liabilities”)  whether certain or contingent, now or hereafter owing or incurred to the Bank [P] on any account whatsoever by the Principal [CPL] whether as principal or guarantor or surety…” subject to an overall limit of HK$8,180,000.[7]  The enduring nature of the 1^st Guarantee was also stipulated[8]: “This Guarantee shall not be considered as satisfied by any intermediate payment or satisfaction of the whole or any part of any sum of money or liabilities owing as aforesaid but shall extend to cover any sum of money or liabilities which shall for the time being constitute the balance due from the Principal [CPL] to the Bank [P] upon any such account hereinbefore mentioned” (“the Enduring Guarantee Clause”).  It is further provided[9] that liability under the guarantee “shall not be impaired, reduced, discharged… by reason of… (v)  the Bank… providing any new or additional facilities to the Principal [CPL] or requiring the Principal to provide or procure any other guarantee, indemnity or security in respect of the Principal’s obligations or the obligations of any other person”.  As contended by P, these terms demonstrate the parties’ contemplation that Doreen’s liabilities under the 1^st Guarantee are not limited to CPL’s indebtedness under the 1^st Mortgage but may extend to cover CPL’s liabilities under “any other guarantee, indemnity or security” including the 2^nd Mortgage and the 2^nd and 3^rd Guarantees.  The 1^st Guarantee was signed by Doreen at the law office of Messrs. Au Yeung, Lo & Chung.  At the signing page, there was printed a warning in bold in the same terms as the warning in the 2^nd and 3^rd Guarantees.

11.At the hearing, neither CPL nor Doreen seriously challenged or disputed the fact that Doreen had signed the above instruments or minutes/resolutions as aforementioned.  In their defence, they sought to raise allegations concerning the circumstances in which such instruments or minutes/resolutions were signed.

12.Having considered P’s case and observed that it is supported by the various instruments and minutes/resolutions and their express terms as afore-mentioned, I am satisfied that P has demonstrated on the evidence that it is, prima facie, entitled to summary judgment.  It is up to CPL and Doreen to show that they do have a defence or defences to P’s claim.  

The Defences

13.CPL and Doreen put up two defences by raising the following issues[10]:-

(i)  The proper construction of the scope or coverage of the 1^st Mortgage and the 1^st Guarantee against the factual matrix under which they were executed (“the Construction Issue”);

(ii)  The validity and enforceability of the 2^nd Mortgage and the 2^nd and 3^rd Guarantees on the alleged ground of misrepresentation and/or undue influence by Thomson on Doreen (“the Enforceability Issue”).

14.In support of the defences for CPL and herself on these two issues, Doreen has filed a total of two affirmations dated 4 September 2024 and 9 December 2024 respectively.[11]

The Construction Issue

15.Ms Hannah Tang, counsel for CPL and Doreen, contended that as a matter of construction, the liability of CPL under the 1^st Mortgage and that of Doreen under the 1^st Guarantee were limited to CPL’s liability for its own banking facility with P (i.e. the subject borrowing of the 1^st Mortgage being an installment loan of HK$8,180,000), and it was not intended to cover CPL’s further liabilities under the 2^nd Mortgage as a mortgagor for D1 or under the 2^nd and 3^rd Guarantees as a guarantor for D1 in respect of D1’s banking facility with P.

16.In gist, Ms Tang submitted that it is inappropriate for the Court to simply look at the “natural and ordinary meaning of words” in the 1^st Mortgage and the 1^st Guarantee, when triable facts to be investigated by the Court may shed light on the context and purpose of those instruments.  Ms Tang contended that there are triable factual issues as to whether those instruments were intended by the parties to cover only CPL’s liability for the installment loan of HK$8,180,000; whether such liability was to be one-off and not continuous, and therefore not extending to cover CPL’s further liability under the 2^nd Mortgage and the 2^nd and 3^rd Guarantees which were only executed one or two years later.  Ms Tang maintained that given the time lapse, that extension - to cover CPL’s further liabilities under the 2^nd Mortgage and the 2^nd and 3^rd Guarantees - could not have contemplated.

17.Ms Tang contended that the construction of the 1^st Mortgage and the 1^st Guarantee is a “heavily factual question” that warrants this Court’s investigation at a substantive hearing with oral evidence to be called. 

Discussion on the Construction Issue

18.In Jumbo King Ltd. v Faithful Properties Ltd. & Ors. (1999)  2 HKCFAR 279, Lord Hoffmann NPJ gave the following guidance on the matter of construction (at §59):-

“… The construction of a document is not a game with words. It is an attempt to discover that a reasonable person would have understood the parties to mean. And this involves having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve. Quite often this exercise will lead to the conclusion that although there is no reasonable doubt about what the parties meant, they have not expressed themselves very well. Their language may sometimes be careless and they may have said things which, if taken literally, mean something different from what they obviously intended. In ordinary life people often express themselves infelicitously without leaving any doubt about what they meant. Of course in serious utterances such as legal documents, in which people may be supposed to have chosen their words with care, one does not readily accept that they have used the wrong words. If the ordinary meaning of the words makes sense in relation to the rest of the document and the factual background, then the court will give effect to that language, even though the consequences may appear hard for one side or the other. The court is not privy to the negotiation of the agreement - evidence of such negotiations is inadmissible - and has no way of knowing whether a clause which appears to have an onerous effect was a quid pro quo for some other concession. Or one of the parties may simply have made a bad bargain. The only escape from the language is an action for rectification, in which the previous negotiations can be examined. But the overriding objective in construction is to give effect to what a reasonable person rather than a pedantic lawyer would have understood the parties to mean. Therefore, if in spite of linguistic problems the meaning is clear, it is that meaning which must prevail.” [Emphasis added]

19.In the present case, the background of the 1^st Mortgage was CPL obtaining a banking facility from P and charging the Property as a security.  The instrument is a usual commercial mortgage which includes provisions that are similar to the familiar “all-monies” clause extensively used in the banking industry.

20.In particular, the 1^st Mortgage covers: “All money, obligations and liabilities due, owing or incurred by you (and if there is more than one person named as you, then only money, obligations and liabilities owing or incurred by those persons Jointly)  under the Facility Agreement or the Mortgage now or in the future including any unpaid interest or Expenses due and other amounts payable by you under this Mortgage.”[12]

21.“Facility Agreement” was defined widely as covering: “All existing or future agreements, documents, arrangements or relationships (whether documented in writing or not)  by which we make facilities available to you (and if there is more than one person named as you, then only facilities made available to those persons jointly)  or under which you owe us any money, obligation or liability.” [13]  

22.On the face of it, the 1^st Mortgage was clearly drafted in wide terms to cover any money, obligation or liability, existing or future, which is due, owing, incurred or to be due, owing or incurred by CPL under any existing or future agreement, arrangement or relationship under which CPL owes or may owe P any money, obligation or liability.  

23.As in the case of a familiar “all monies” clause[14], the above mentioned provisions, when read together and in light of the terms of the 1^st Mortgage as a whole, plainly show that the parties had anticipated that in the future, additional banking facility may be granted, or additional agreement, arrangement or relationship entered into, under which the mortgagor [i.e. CPL] may assume further obligation or liability after the execution of the mortgage.  These provisions clearly cater for the convenience of the mortgagor who may readily obtain further facility and use the same property as security without having to incur additional costs and time in executing any other security instruments.  They also provide for the protection of the bank so that its further advances and such further obligation or liability as assumed by the mortgagor under other arrangement or relationship (e.g. as a guarantor)  would also be secured. 

24.“All monies” clauses have been construed by the courts as having the effect of imposing on the mortgagor the obligation to repay any indebtedness owing to the bank, whether as principal or as surety, at the time of execution of the legal charge or at any time thereafter.  In the commercial banking context, the use of such clauses has become a common banking practice.[15] 

25.I also take into account the factual matrix in the present case.  CPL and Doreen do not allege that there was anything irregular in the execution of the 1^st Mortgage and the 1^st Guarantee.  

26.It should be observed that in her first affirmation dated 4 September 2024, Doreen exhibited two minutes of CPL[16] (both dated 25 February 2016 and signed by her, hereinafter referred to as “the 2016 minutes”)  and she asserted[17] that they demonstrated the intention of the parties at the time.  Doreen also exhibited P’s facility letter to CPL dated 23 February 2016 (“the 2016 facility letter”)[18] in which it was stated in wide terms that the 1^st Mortgage was to secure “all moneys in respect of general banking facilities and interest covering all money, obligations and liabilities due, owing or incurred by you… now or in the future…”[19]

27.According to the 2016 minutes, the 1^st Mortgage was tabled at the meetings and “[d]iscussion then took place on the terms of the Facility Letter and [the 1^st Mortgage].” 

28.Therefore, on Doreen’s own evidence (and the exhibits which she herself produced and relied on), she and CPL must have been fully aware of the wide provisions in the 1^st Mortgage and the 2016 facility letter which had been tabled and discussed.  Notwithstanding that, it was resolved in the 2016 minutes that Doreen be authorized to sign the 1^st Mortgage and “execute such other documents and do such things… as such director or authorized signatory may deem necessary and proper in connection therewith”. 

29.It is also remarkable that in her first affirmation dated 4 September 2024, Doreen deposed[20]: “The mortgage agreement specifies the Plaintiff could only possess [the Property] in the event of default defined therein, which in essence, include the failure to repay and/or observe the obligation arising out of all existing or future agreements, documents arrangements or relationships between CPL and the Plaintiff.”  By this statement, Doreen appeared to acknowledge that she appreciated the effect of the 1^st Mortgage to be that any failure of CPL to repay or observe obligations under future arrangements or relationships with P would also entitle P to take possession of the Property.  This acknowledgement by Doreen appears to be contrary to the contention put forward by her counsel Ms Tang, namely, that the 1^st Mortgage does not cover any of CPL’s default under the 2^nd Mortgage or the 2^nd and 3^rd Guarantees.

30.In her second affirmation dated 9 December 2024, however, Doreen asserted[21] that the 1^st Mortgage was intended to be “one-off and not continuing”.  In my view, that bold assertion is unbelievable as it is contrary to the express and wide provisions of the 1^st Mortgage as aforementioned[22], when the instrument had been tabled for discussion and approved of by Doreen herself; and it is also inconsistent with what she had deposed to in her first affirmation as set out in §29 above. 

31.Turning now to the 1^st Guarantee.  In my view, it is against very much the same background and factual matrix that the 1^st Guarantee executed by Doreen should be construed.  The instrument was executed on 25 February 2016, the same date as the 2016 minutes.  It was executed in a commercial banking context and the instrument also contained wide provisions as follows:-

(i)  “… the Guarantor HEREBY AGREES and undertakes with the Bank to pay to the Bank on demand all sums of money and liabilities (collectively “Liabilities”)  whether certain or contingent, now or hereafter owing or incurred to the Bank on any account whatsoever by the Principal [CPL] whether as principal or guarantor or surety…” subject to an overall limit of HK$8,180,000.[23] 

(ii)  By the Enduring Guarantee Clause, the enduring nature of the 1^st Guarantee is also stipulated[24]: “This Guarantee shall not be considered as satisfied by any intermediate payment or satisfaction of the whole or any part of any sum of money or liabilities owing as aforesaid but shall extend to cover any sum of money or liabilities which shall for the time being constitute the balance due from the Principal [CPL] to the Bank upon any such account as hereinbefore mentioned.”

(iii)  It was further provided that the 1^st Guarantee shall not be affected by other transactions: “This Guarantee and the liabilities of the Guarantor under this Guarantee shall not be impaired, reduced, discharged or otherwise adversely affected in any way by reason of … (v)  the Bank opening any new account or closing or redesignating any other account of the Principal or renewing any existing facilities to the Principal or providing any new or additional facilities to the Principal [CPL] or requiring the Principal to provide or procure any other guarantee, indemnity or security in respect of the Principal’s obligations or the obligations of any other person [e.g. D1]”.[25]

32.The above-mentioned provisions, read together and in the context of the whole instrument, demonstrate the parties’ contemplation that Doreen’s liability under the 1^st Guarantee was not to be one-off, but may continue and extend to cover CPL’s future liabilities under “any other guarantee, indemnity or security” (i.e. in P’s case, the 2^nd Mortgage and the 2^nd and 3^rd Guarantees). 

33.It should also be observed that the 1^st Guarantee was signed by Doreen at the law office of Messrs. Au Yeung, Lo & Chung.  At the signing page of the 1^st Guarantee, there was printed a warning in bold (as was printed at the signing page of the 1^st Mortgage), reminding Doreen of the binding nature of the instrument.[26]  As will be seen below, Doreen is an educated person and a career woman in the healthcare industry since about 2002. [27]   It is unbelievable to suggest that she had not intended to be bound by the wide provisions of the 1^st Guarantee and the 1^st Mortgage.

34.I have also carefully considered all the relevant contents in P’s supporting affirmations[28] and the two affirmations filed by CPL and Doreen[29] which may be relevant to the factual matrix and context.  In my view, any reasonable man, with all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time, would have understood the meaning of the terms of the 1^st Mortgage and the 1^st Guarantee as extending to such future obligation or liability as might be assumed by CPL; and that would include CPL’s obligation or liability as a mortgagor under the 2^nd Mortgage and as a guarantor under the 2^nd and 3^rd Guarantees.  That is to give effect to the clear intention of the parties as expressed by the language of the instruments despite the hardship to CPL and Doreen.

35.For these reasons, I find that the Construction Issue does not raise any triable issue or defence.

The Enforceability Issue

36.As regards this issue, CPL and Doreen dispute liability under the 2^nd Mortgage and the 2^nd and 3^rd Guarantees by contending that such instruments had been procured by misrepresentation and/or undue influence exercised by Thomson on Doreen.  It is also alleged that P had actual and/or constructive knowledge of the irregularities in the execution of the 2^nd Mortgage and the 2^nd and 3^rd Guarantees.  Ms Tang contended that there is a fairly arguable defence to be raised on behalf of CPL and Doreen which should be resolved by oral evidence at the hearing of the OS.

The Defence Case

37.The defence case of misrepresentation and/or undue influence as set out in Doreen’s two affirmations can be summarized as follows.

38.CPL was a property holding company which held the Property.  Family members of Doreen used to own all the shares in CPL.  Doreen got married in 2010 and acquired all the shares in CPL from her family members.  She became the sole shareholder and the sole director of CPL whereas Thomson became its company secretary.  As she did not have any experience in business management, Thomson was responsible for all the administrative works including corporate filings in respect of CPL.  Doreen was thus accustomed to signing documents presented to her by Thomson or his assistant.[30]

39.Although Thomson and Doreen are siblings, they only met a few times each year, mainly in family gatherings.  They seldom discussed their work but from time to time Thomson gave her the impression that he was embarking on various business ventures.[31]

40.On a day in 2017, Thomson asked Doreen if CPL could take out the 2^nd Mortgage and be the mortgagor of the banking facilities to be granted to D1.  Thomson represented that the maximum principal amount of indebtedness of D1 towards P would be around US$1 million; and CPL would not be prejudiced as Thomson’s business venture had always been profitable and the purpose of the 2^nd Mortgage was to secure D1’s application for P’s banking facilities.  In reliance on such representations, Doreen entered into the 2^nd Mortgage on behalf of CPL.[32]   

41.The 2^nd Mortgage was executed in the office of Messrs. Peter W.K. Lo & Company.  Thomson accompanied her at the time of the execution of the instrument.  According to Doreen’s recollection, no one explained the details of the instrument to her nor was she given the chance to read it.  No one in the law office held any individual inquiry with her about the instrument in the absence of Thomson.  The whole process of signing only lasted for less than half an hour and both Thomson and the staff of the law firm reassured her that there was “no problem” with the 2^nd Mortgage.  She claimed that she did not need to provide a board resolution of CPL for the execution of the 2^nd Mortgage.[33]

42.Doreen had never met any staff from P in relation to the 2^nd Mortgage or any security to be provided by CPL and her.[34]

43.In early 2024, a staff of P informed Doreen that D1 had failed to repay its indebtedness of over HK$43 million and that both CPL and she were responsible as mortgagor and guarantor for repaying the HK$43 million.  Doreen was in complete shock as her understanding was that CPL’s obligation towards P’s facilities to D1 had all along been limited to US$1 million and pursuant to the 2^nd Mortgage only.[35]   

44.Doreen asserted that she had entrusted and relied on Thomson not only because he is her brother but also because he was the company secretary of CPL.  As she did not have any experience in business, she trusted Thomson in assisting with the daily management of CPL and trusted that the documents he presented to her for signing or arranged for her to sign would be to the benefit of CPL and her. She asserted that only when P demanded repayment from her of the HK$43 million in early 2024 did she realize that Thomson had misrepresented the nature of the 2^nd Mortgage and had exerted undue influence on her to enter into the 2^nd Mortgage.  In her own words: “Had it not been the representations made by Thomson to me, I would not have signed or executed any of the 2^nd Mortgage and subsequent guarantees by CPL”.[36] 

45.Doreen claimed that she was shocked when she found out that there were two guarantees with unlimited liability which had been signed by her on behalf of CPL (i.e. the 2^nd and 3^rd Guarantees).  She claimed that Thomson had from time to time asked her to sign some signature pages and he never showed her the entire copies of those documents.  He merely represented to her that those pages were signature pages related to the US$1 million security provided to D1.  She had always entrusted and relied on Thomson and so she signed the signature pages.[37]

46.Doreen asserted, however, that she would not have approved of CPL bearing an unlimited guarantor’s obligation, even if Thomson had made such a request.[38]  

47.Doreen also alleged that the 2^nd and 3^rd Guarantees had not been executed with proper authority or had been procured by misrepresentation and/or undue influence by Thomson that the maximum indebtedness of D1 towards P would be around US$1 million.[39]

48.Doreen further deposed that P should have had actual or constructive notice of the irregularities regarding the 2^nd Mortgage and the 2^nd and 3^rd Guarantees: because Thomson was the brother of the sole director of CPL (i.e. the mortgagor of the 2^nd Mortgage)  and CPL was put into a manifestly disadvantageous position solely for the benefit of its company secretary’s business adventure; and it was obvious that Thomson had a conflict of interest over the 2^nd Mortgage and a proper inquiry should have been held by P to enquire into whether CPL and she had given true consent.[40]

49.After the filing of Doreen’s first affirmation, P filed a second affirmation[41] in reply, which exhibited a total of six CPL’s resolutions/minutes signed by Doreen as CPL’s director and dated between 25 October 2017 and 31 March 2023.[42] They were to the effect that the giving of the security (i.e. the 2^nd Mortgage and the 2^nd and 3^rd Guarantees)  had been properly authorized and they were resolved to be for the commercial benefit of CPL.[43]  In the two CPL’s minutes dated 31 March 2023, the various facility letters granted by P to D1 up to 16 March 2023 (i.e. the full extent of D1’s indebtedness)  were said to be noted by CPL and it was resolved to be “in the interests of [CPL], to its commercial benefit and in furtherance of its objects, that [CPL] assists [D1] in obtaining the Facilities…”

50.It was also deposed on P’s behalf that P was never made aware of any exchanges between Thomson and Doreen and the contents thereof, nor was P fixed with any actual or constructive knowledge of the “irregularities” as asserted by Doreen.[44]  

51.In light of the P’s second affirmation and the six resolutions/minutes filed with the Court, Doreen made her second affirmation in reply on 9 December 2024.  In this affirmation, Doreen acknowledged that the signatures on the two resolutions authorizing the 2^nd Mortgage resemble hers but she alleged that consistent with their usual practice, she had been asked by Thomson to sign on the signature pages without being offered the content pages of the resolutions.[45]

52.In her second affirmation, Doreen also provided more background and information to support her claim that she had been under the misrepresentation or undue influence of Thomson, which is summarized as follows:-

(i)  She had joined the healthcare industry and concentrated on her practice and her training was totally unrelated to business.  On the other hand, she knew that Thomson was a seasoned businessman who operated multiple business ventures on his own.[46]

(ii)  Thomson had had to drop out of college to salvage their parents’ business and had successfully assisted the business to generate profits.  She had been reminded by their parents and Thomson that such profits had been used to fund her education.  She thus felt grateful for Thomson’s sacrifice and had deep respect for Thomson for his business expertise in helping the family’s business out of financial crisis. Her parents occasionally requested her to consult Thomson regarding certain matters about family assets.[47]

(iii)  Although they were siblings, she tended to avoid discussing with Thomson about his business activities and in any event, she would not comprehend details of business management.[48]

(iv)  In her family, Thomson was a reliable and smart business person and they often entrusted him with different matters, whether business related or not. Therefore, she had little reason to ever doubt Thomson’s request for her to sign documents including those relating to CPL, as she had been accustomed to taking his word when it came to business and CPL.[49]

(v)  She became the sole director and shareholder of CPL in 2010.  As she did not possess expertise to manage a business and was unfamiliar with the corporate filing requirements, she agreed that Thomson should assist her in handling the company matters whilst she enjoyed the benefit of the Property which was being held by CPL.  Against this background, Thomson became the company secretary.[50]

(vi)  As the daily management of CPL (being a property holding company)  would not be very complicated, she preferred not to be bothered with the daily logistics of CPL.  She thus allowed Thomson to manage the audit requirement of CPL and she would cooperate with him to sign on whatever he asked her to sign.  It was also because she had very limited ability to comprehend intricate legal documents as she was unfamiliar with commercial matters in general.[51]  

(vii)  It became their practice that whenever her signature was required, Thomson would send her the relevant documents for her to sign.[52]  Sometimes, Thomson would bring the documents to her during family gatherings and generally explain to her the nature of the document.  Sometimes, the documents were required to be signed in haste and she did not even get the chance to study the content.  She relied very much on Thomson’s narratives and his expertise.[53]

(viii)  Upon receiving the demand letters from P, she came to realize that Thomson had betrayed her trust by soliciting her signatures on the 2^nd Mortgage and the 2^nd and 3^rd Guarantees.  She asserted that she would not have agreed to sign them had she been informed of their legal and financial implications.[54]

(ix)  As to the execution of the 2^nd Mortgage, she deposed that in 2017, Thomson had said that he needed around US$1 million for his business and he would secure the loans from P.  At the law office, Thomson told her that she would need to sign a few documents to support him “in cashing” some funds without prejudicing her interests.[55]

(x)  On 31 October 2017[56], she and Thomson arrived at Messrs. Peter W.K. Lo & Co. and a lady there asked her to sign on several documents without going through the contents and nature of such documents.[57]

(xi)  She could not remember when she had signed the 2^nd and 3^rd Guarantees.  They could have been signed in haste, consistent with her usual practice with Thomson.  She had never received any independent legal advice before signing such instruments.[58]  

(xii)  Remarkably, she confirmed that she had not felt any pressure from Thomson to sign the 2^nd and 3^rd Guarantees, or any documents, as she was unaware of what she was signing in any event.  The lack of awareness was because no one (including Thomson)  had provided her with any explanation about the matter.  At the time she executed the 2^nd and 3^rd Guarantees, she was unaware of their contents and she was not informed of nor explained the extent of her liabilities or those of D1, whether then or future.[59]

(xiii)  She asserted again that had she been informed of the full extent of the bank facilities to D1, she would not have entered into the 2^nd and 3^rd Guarantees as the loans were all in favour of D1 and it was putting the substantial assets of CPL at risk.[60]

(xiv)  She asserted that P should have been alerted as to whether the documents had been obtained under undue influence.[61]

Discussions on undue influence and/or misrepresentation

53.In Ip Kam Wah & Anor. v Fair City Group Ltd. [2005] 4 HKLRD 168 (at §8), Deputy Judge A. To (as he then was)  made the following observations on the approach in deciding whether the evidence discloses any triable issue:-

“I accept that, unlike the plaintiff in an O.14 application, the plaintiff in an originating summons procedure bears the burden of proof. When faced with conflicting affidavits from both parties, the court will be failing in its duty if it should take the assertions in the affidavits on their face value in isolation and jump to the conclusion that there is a triable issue without first considering whether the assertions in the affidavits are believable. I bear in mind the test laid down by Bokhary JA (as he then was)  in Re Safe Rich Industries Ltd (unrep., Civ App No 81 of 1994, [1994] HKLY 183)  that whether the assertions are believable is a question to be answered not by taking the assertions in isolation but by taking them in the context of so much of the background as was either undisputed or beyond reasonable dispute. In an originating summons procedure, it is only when the court is satisfied after having undertaken that exercise that factual disputes could not be resolved on affidavit evidence that oral evidence or trial should be considered.”

54.In the present case, it is clear that two issues (related to some extent)  are being raised by CPL and Doreen as maintained in her two affirmations:-

(i)  Undue influence; and

(ii)  Misrepresentation.

Undue influence

55.In Wing Hang Bank Ltd. v Liu Kam Ying and Ors., HCMP 2519/2001 (unreported and dated 6 March 2002), Ma J (as he then was)  set out the three questions which are relevant to the defence of undue influence (at §§17 and 18):-

“17. Where third parties such as banks are involved and it is alleged that the relevant contract (in the present case a guarantee)  came about as a result of undue influence being exerted on the party sued thereunder, there are three questions that the Court must deal with:-

(1)  Has it been proved that the transaction was affected by undue influence in the first place?

(2)  Was the third party put on inquiry?

(3)  If the third party was put on inquiry, did he take reasonable steps to satisfy himself that there was no undue influence?

See: Royal Bank of Scotland v Etridge at p.1054 at para.101 per Lord Hobhouse of Woodborough.

18.  Only if all three questions are answered in favour of the party being sued, would the defence succeed…” 

56.Turning to the first question, is there a triable issue that the 2^nd Mortgage and the 2^nd and 3^rd Guarantees were affected by undue influence in the first place?  Adopting the approach as set out in Ip Kam Wah (supra), I shall consider whether Doreen’s assertions are believable not by taking the assertions in isolation but by taking them in context.

57.Doreen is an educated person who has embarked upon her desired career in the healthcare industry since about 2002 and her husband is in the same field.  It is not her case that she had never dealt with a mortgage or a guarantee before.  Indeed, she herself executed the 1^st Guarantee in her own name on 25 February 2016 and the 1^st Mortgage on behalf of CPL on 29 February 2016 (and signed the 2016 minutes).  The 1^st Guarantee expressly provided for a limit of HK$8,180,000.  There is no suggestion that anything untoward had happened in the execution of those instruments in 2016 or that on those occasions, she had been influenced in any way (or given advice)  by Thomson in their execution.  In short, Doreen would have clearly understood that liability would be incurred as a result of the execution of a mortgage or a guarantee.

58.Indeed, according to her own evidence, when Thomson asked her in 2017 whether CPL could take out the 2^nd Mortgage and be the mortgagor of D1’s banking facilities, Thomson had told her that the purpose of the 2^nd Mortgage was to secure D1’s application for P’s banking facilities.[62]  She further deposed that at the law office, Thomson had told her that she would need to sign the documents to support him “in cashing” some funds.[63]  In light of what she had been told by Thomson, being an educated person with prior experience of having executed similar instruments before, it is simply unbelievable for Doreen to suggest that she did not know she was signing a mortgage at the law office on 31 October 2017 (i.e. the 2^nd Mortgage)  and that she did not appreciate the nature of the instrument.  Given her prior experience in executing the 1^st Mortgage, she must have known that the 2^nd Mortgage would subject CPL to a certain liability to secure the indebtedness of D1 to P.  It is simply unbelievable to suggest the contrary.[64]  

59.If the undisputable context is that Doreen knew the 2^nd Mortgage would subject CPL to a liability to secure the indebtedness of D1, why did Doreen execute the 2^nd Mortgage?  Her assertion is that she had trust and confidence in Thomson and she was unduly influenced by him.

60.But not every relationship of trust and confidence will give rise to the presumption of undue influence.[65] In the category of cases where Doreen is alleged to fall within (Class 2(B)  cases):-

“[T]he complainant needs to do more before the presumption arises. Here, the complainant has first to show that:-

(a)  he placed trust and confidence in the influencer or that the influencer had acquired an ascendancy or domination over him; and

(b)  the transaction cannot be readily explicable by the relationship of the parties.”[66]

61.In Bank of China (Hong Kong)  Ltd. v Wong King Sing & Ors. [2002] 1 HKLRD 358, Ma J (as he then was)  observed at §52:-

“Clearly though, the relationship between the complainant and the influencer, though not decisive, is obviously relevant. In particular, the relationship of husband and wife, though insufficient by itself to bring the case within Class 2(A), will nevertheless be relevant in Class 2(B)  situations, since a wife may well be able to demonstrate that in reality, she left decisions on financial matters to her husband, enabling her therefore to establish that she reposed trust and confidence in her husband in relation to their financial affairs: Barclays Bank Plc v O'Brien [1994] 1 AC 180 at pp.190-191…”

[Emphasis added]

62.In the present case, Doreen gave examples of her relying on Thomson (her younger brother)  in handling CPL’s corporate filing and audit requirements as its company secretary but these appear to be ordinary or routine requirements to be satisfied by CPL, it being just a property holding company.  These examples are far from showing Doreen’s reposing trust and confidence in Thomson in relation to financial decisions or affairs of CPL or hers.  Indeed, there is no suggestion in her affirmations that Thomson had ever been consulted before Doreen executed the 1^st Mortgage and the 1^st Guarantee in 2016.  The claim of trust and confidence also flies in the face of her own evidence that she and Thomson only met a few times each year, mainly in family gatherings and they seldom discussed their work.[67]

63.What is more significant, however, is Doreen’s repeated assertions in her affirmations to the effect that she would not have signed the 2^nd Mortgage or the 2^nd and 3^rd Guarantees but for Thomson’s alleged misrepresentation as to CPL’s liability being limited to US$1 million, and that she would not have approved of CPL’s unlimited guarantee even if Thomson had requested for it.[68]  These assertions in my view amount to a concession by Doreen that but for the alleged misrepresentation, she would have been able to resist and refuse Thomson’s request and would not have been influenced into signing the instruments.  In other words, she was the master of her own will, not to be suborned by Thomson.[69]  These assertions undermine and negate her own case of undue influence and show that her real complaint is one of misrepresentation.  

64.To put it in another way, her evidence, properly understood, boils down to the proposition that she was able to decide for herself whether or not to give the security requested by Thomson and she was prepared to assist Thomson so long the liability was limited to US$1 million; and had she not been misled by Thomson as to the full extent of D1’s indebtedness, she would have refused Thomson’s request for assistance.  Therefore, Doreen’s assertions, when properly seen in context, do not disclose a case of undue influence, but a case of misrepresentation (if her evidence is accepted).  This Court also takes note of Doreen’s assertion that she had never felt any pressure from Thomson to sign any documents.[70]  

65.The Court further observes that the mortgage transaction can be readily explicable by the relationship of the parties.  It is Doreen’s own evidence that Thomson had to drop out of college to salvage their parents’ business, and the profits generated by his efforts were used to fund her education and she felt grateful for Thomson’s sacrifice.[71]  As Ma J (as he then was)  explained in Bank of China (Hong Kong)  Ltd. (supra), the point is that “transactions are commonly entered into by people on the ground of friendship, relationship or charity, or for other motives on which many people ordinarily act.”[72] 

66.In any event, it is also significant that there is no evidence to show that P had been put on inquiry when the burden is now on Doreen and CPL to show a triable defence.  In Bank of China (Hong Kong)  Ltd. (supra), Ma J (as he then was)  explained that there are two requirements which have to be shown[73]:-

(a)  Knowledge by the bank of the relationship between the creditor and the surety;

(b)  That the nature of the transaction is such as to be apparently disadvantageous to the surety.

67.In the present case, there is simply no evidence before this Court to show that P was or should have been aware of the sister-and-brother relationship between Doreen and Thomson, or their alleged relationship of trust and confidence.  Indeed, P had obtained from CPL and kept as its records six of CPL’s resolutions and minutes, each signed by Doreen, and they repeatedly represented to P that the giving of the security (i.e. the 2^nd Mortgage and the 2^nd and 3^rd Guarantees)  in respect of the banking facilities to D1 had been properly authorized by CPL and was for the commercial benefit or interest of CPL.[74]  It should also be observed that P had dealt with Doreen before who had signed and produced similar minutes to P in 2016 (i.e. the 2016 minutes).  

68.Despite all that could be argued by Ms Tang on behalf of CPL and Doreen, I am of the view that there is no evidence to suggest that P would or might have been put on notice, whether actual or constructive, that undue influence was or might have been exercised on Doreen when she signed the 2^nd Mortgage or the 2^nd and 3^rd Guarantees.  Doreen alleged that she was unduly influenced by Thomson.  Even assuming this was true (which is not accepted by this Court), it cannot be shown that P had any inkling of this at all.  For this reason alone, the claim of undue influence must fail.

Misrepresentation

69.In  Dah Sing Bank Ltd. v Sun Create Richly Holdings (Asia)  Ltd., [2024] HKCFI 1512, Deputy High Court Judge Le Pichon (as she then was)  explained:-

“16. For misrepresentation, an obvious requirement is that the statement relied on be false: see Chitty on Contracts, 34^th Edn at §9-006.

17.  For a bank to be held liable for misrepresentation, it is necessary to show that the misrepresentation was made either by the bank or by its agent acting within the scope of his authority or that the bank has either actual or constructive notice of the representation: see Bank of China (Hong Kong)  Limited v Leung Wai Man [2011] 4 HKLRD 707 §§40-44.”

70.In her two affirmations, Doreen alleged that Thomson had misrepresented to her as to the maximum of D1’s indebtedness to P (to be secured by the 2^nd Mortgage)  being US$1 million.  Even if that was true, there is no allegation that Thomson was acting as P's agent when this alleged misrepresentation was made, nor is there evidence to show that P had or might have had actual or constructive notice of the misrepresentation.

71.On the evidence before the Court, this defence of misrepresentation does not even get off the ground.

Other considerations

72.Doreen also alleged that no one had explained the contents of the 2^nd Mortgage and the 2^nd and 3^rd Guarantees to her[75], and the two guarantees could have been signed in haste.  The Court, however, observes that at the signing page of each of those instruments, there was printed in bold a warning about the legal consequences of signing the instrument.   It is trite law that generally speaking, when a person signs a legal document, he or she is bound by the act of signature.  In Bank of China (Hong Kong)  Ltd v Fung Chin Kan (2002)  5 HKCFAR 515, Litton NPJ (as he then was)  stated (at p. 533):-

“ … As a matter of general law, it is no defence to say that he or she did not understand the contents of a legal document; that person takes the chance of being bound by its terms, as he or she can take the simple precaution of not signing until its contents have been fully explained and understood.”

73.Ms Tang also contended that CPL had not defaulted in making repayment under the 1^st Mortgage and thus no event of default had arisen as regards the 1^st Mortgage.  The Court however observes that events of default are widely defined in the 1^st Mortgage to include failure to observe any term of the “Facility Agreement”[76], and any action or omission which might materially and adversely affect the security provider’s ability to perform obligations under the Facility Agreement or the 1^st Mortgage or other security for the “Amount Owing”[77].  Further, under the 2016 facility letter, P has an “overriding right of demand for repayment” and such right was exercised by P by the commencement of the OS: see M.S. Fashions Ltd. & Ors. v Bank of Credit & Commercial International SA & Ors. [1993] Ch 425 at 447B-C.   

74.P has also been put to strict proof as to the sums outstanding and owed to P.  To address that issue, P relies on the “conclusive evidence” provisions in the 1^st Mortgage and the 2^nd Mortgage etc. and the contents of the Affirmation of Kwok Wing Yan Vivian dated 2 July 2024 and those of the Affirmation of Lam Teddy Ka Chun dated 23 December 2024 (the filing of which was unopposed by the defence).  Especially when there is no contrary evidence put forward by CPL and Doreen, I am satisfied that the claimed amounts can be proved.

75.Notwithstanding all the submissions and points made by Ms Tang in writing as well as orally, I find that there are no triable issues or defences in the present case.

Conclusion

76.For the above reasons, summary judgment should be entered in favour of P.

77.As was ordered against the other co-defendants and as per the terms of the various instruments, this Court will exercise its discretion and order costs against CPL and Doreen on an indemnity basis. 

Judgment and orders

78.I therefore enter judgment in favour of the Plaintiff against the 4^th and 6^th Defendants and make the following orders:-

(1)  The Plaintiff do recover against the 4^th and 6^th Defendants jointly and severally for (and for the 6^th Defendant, subject to the overall limit of HK$8,180,000.00):-

(a)  The sum of HK$44,096,303.85;

(b)  Interest at the daily rate of HK$12,869.44 from and including 3 July 2024 to the date hereof and thereafter at judgment rate until payment in full;

(c)  The sum of HK$6,096,952.25; and

(d)  Interest at the daily rate of HK$484.42 from and including 30 November 2024 to the date hereof and thereafter at judgment rate until payment in full;

(2)  The 4^th Defendant do within 28 days after service upon them of this Order deliver to the Plaintiff vacant possession of the property comprised in (a)  a Two-Party Mortgage Deed dated 29 February 2016 and registered in the Land Registry by Memorial No. 16032301170029; and (b) a Second Mortgage dated 31 October 2017 and registered in the Land Registry by Memorial No. 17112100350095 (collectively as the “Mortgages”)  and known as ALL THOSE 1,756 equal undivided 3,980,030th parts or shares of and in ALL THAT piece or parcel of ground registered in the Land Registry as KOWLOON INLAND LOT NO. 11074 And of and in the messuages erections and buildings thereon now known as No. 11 Hoi Fai Road, Kowloon, Hong Kong (“the Development”)  TOGETHER with the sole and exclusive right and privilege to hold use occupy and enjoy ALL THOSE DUPLEX FLAT C on the 41ST FLOOR and 42ND FLOOR together with FLAT ROOF thereof of TOWER 3 of “ISLAND HARBOURVIEW (維港灣) ” of the Development, which said Duplex Flats are also known as Duplex Flat C on 41^st Floor & 42^nd Floor with Flat Roof of Tower 3 Island Harbourview, No.11 Hoi Fai Road, Kowloon (“the Property”);

(3)  Upon the 4^th and 6^th Defendants paying to the Plaintiff the monies hereby ordered to be paid and all other moneys (if any)  secured to the Plaintiff by the Mortgages, the Plaintiff (subject and without prejudice to the due exercise of any power of sale for the time being vested in it)  do redeliver to the 4^th Defendant possession of the Property;

(4)  There be liberty to apply; and

(5)  The costs of these proceedings be paid to the Plaintiff by the 4^th and 6^th Defendants jointly and severally on an indemnity basis, to be taxed if not agreed.

79.Lastly, I thank counsel for their assistance.

Mr Martin Lau, instructed by Wilkinson & Grist, for the Plaintiff

Ms Hannah Tang, instructed by ZM Lawyers, for the 4^th and 6^th Defendants