Good Harvest Finance Ltd v. Leung Lai Ching Margaret and Another
Read the full judgment text of DCCJ 1972/2005 on BabelCite. This District Court judgment.
1. This is the plaintiff’s application for summary judgment against the 1 st and the 2 nd defendants (“the defendants”) for the outstanding principal and interest of a loan made to the defendants.
Cites 2 cases
|
DCCJ001972/2005 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 1972 OF 2005 ------------------------ BETWEEN
------------------------ Coram: Deputy Judge E. Yip in Chambers (Open to Public) Date of Hearing: 5th September 2006 Date of Decision: 12th September 2006 ------------------------ D E C I S I O N ------------------------ The summons 1.This is the plaintiff’s application for summary judgment against the 1st and the 2nd defendants (“the defendants”) for the outstanding principal and interest of a loan made to the defendants. I shall refer to, say, page no. 1 of the Bundle of Court Documents as “[A1]” and, say, page no. 2 of the Bundle of Exhibits as “[B2]”. The plaintiff’s case 2.The plaintiff was licensed as a money lender under the Money Lenders Ordinance, Cap. 163 (“the Ordinance”). Pursuant to a loan agreement (“the Agreement”), it made a loan of HK$2,000,000.00 to 2 companies (“the Borrowers”). The defendants signed an official receipt (“the Receipt”). The defendants also signed a Deed of Guarantee and Indemnity (“the Guarantee”) as co-guarantors of the loan. Various parts of the loan amounting to HK$1,100,849.00 were repaid. The Borrowers were then wound up by the Court. After the winding-up, the 1st defendant drew various cheques in favour of the plaintiff as repayment on divers dates. When the defendants defaulted in repayment, the plaintiff demanded for repayment. The 1st defendant requested for an extended schedule. The plaintiff agreed to it. However, the defendants still failed to repay. The plaintiff took out a Writ of Summons to claim the outstanding balance of principal and interest. The defendants’ case 3.The defendant alleges that no money had been advanced to the Borrowers. Besides, the Guarantee was executed by the defendants under the plaintiff’s misrepresentation and undue influence. In any event, the plaintiff failed to comply with sections 18(1) and 20(1) of the Ordinance and it would be inequitable to enforce the Agreement or the Guarantee. The issues raised by the defendants 4.I have to determine the following:
The plaintiff’s evidence 5.Yeung Siu Tong was a director and shareholder of the plaintiff. He made 2 affirmations, dated 3 November 2005 [A28 – 37] and 2 August 2006 [A55 – 60] respectively. 6.On 19 June 2000, the plaintiff entered into the Agreement [B18 – 23] with the Borrowers. The Borrowers were running the business of 2 nightclubs. The loan was HK$2,000,000.00 with a fixed interest of HK$50,000.00. 7.Clause 2 provided that the loan was for the payment of wages in arrears owed to the Borrowers’ employees. 8.Clause 3(i) provided for daily instalment by an amount equivalent to half of the total gross income received by the Borrowers for the preceding date. 9.Clause 4 provided that in the event of a winding-up order against the Borrowers, the plaintiff might terminate the Agreement and demand immediate repayment of all outstanding amounts. 10.On the same date, the defendants signed the Guarantee [B62 – 66] to repay all outstanding amounts in the event of the Borrowers defaulting in repayment. They signed the Receipt [B67] stated to be for a “loan” in the sum of HK$2,000,000.00 from the plaintiff. 11.On 20 June 2001 [B68 – 70] and 1 February 2002 [B73 – 74], the Court ordered for the winding-up of the Borrowers. 12.On 13 October 2000, the plaintiff’s solicitors wrote [B109] to demand repayment for the outstanding amounts of HK$1,484,151.00 from the defendants. 13.On 10 July 2002, the plaintiff’s solicitors wrote [B110] to demand repayment for the outstanding amounts of HK$1,284,151.00 from the defendants. 14.On 5 May 2003, the plaintiff’s solicitors wrote [B111] to demand repayment for the outstanding amounts of HK$1,224,151.00 from the defendants. 15.On 17 May 2003, the 1st defendant made a repayment in the sum of HK$10,000.00 by cheque [B77]. 16.On 29 May 2003, the 1st defendant made a repayment [B76] in the sum of HK$100,000.00 by cheque [B76]. 17.On 15 May 2004, the 1st defendant drew a cheque in the sum of HK$15,000.00 in purported repayment of the loan. The cheque was dishonoured upon presentment for payment [B80]. 18.On 15 June 2004, the 1st defendant drew a cheque in the sum of HK$15,000.00 in purported repayment of the loan. The cheque was dishonoured upon presentment for payment [B79]. 19.On 15 July 2004, the 1st defendant drew a cheque in the sum of HK$100,000.00 in purported repayment of the loan. The cheque was dishonoured upon presentment for payment [B81]. 20.On 15 August 2004, the 1st defendant drew a cheque in the sum of HK$15,000.00 in purported repayment of the loan. The cheque was dishonoured upon presentment for payment [B78]. 21.On 11 September 2004, the 1st defendant wrote [B112] to the plaintiff to request for an extended schedule for repayment. 22.On 1 December 2004, the plaintiff’s solicitors wrote [B116] to demand repayment for the outstanding amounts of HK$899,151.00 from the defendants. The defendants undertook to repay in full by 5 instalments to commence from 16 December 2004. 23.On 30 December 2004, pursuant to the said undertaking, the 1st defendant drew a cheque in the sum of HK$55,000.00 in purported repayment of the loan. The cheque was dishonoured upon presentment for payment [B113]. 24.On 29 April 2005, the plaintiff filed a Writ of Summons [A1 – 10] to claim the sum of HK$949,151.00 as outstanding principal and interest. 25.On 16 May 2006, the plaintiff filed the present summons [A25 – 27]. The defendants’ evidence 26.The 1st defendant made 2 affirmations dated 3 July 2006 [A45 – 54] and 4 September 2006 respectively. The 2nd defendant made an affirmation dated 3 July 2006 [A38 – 44]. 27.At around the time of the Agreement, the 1st defendant was the administration manager of 2 nightclubs in question (“the Night Clubs”). One of the shareholders of the Night Clubs was Mr. Lee Ho Chuen. He told her that he would team up with the landlord of the premises, Mr. Yeung, to take over and run the Night Clubs in the name of the Borrowers. He said Yeung had a finance company, which could provide funds to clear debts owed by the Night Clubs. She was to sign documents on behalf of the Borrowers in the take-over as and when requested by him. As a reward she could keep her job and also have 10% of the shares in the Borrowers. 28.On about 12 June 2000, Lee and Yeung told her that if wages were not paid to the employees, the Night Clubs would have to close down immediately. Yeung told her that his finance company (“the Finance Company”) could provide HK$2,000,000.00 to the Night Clubs to pay the wages. However, it was difficult to ask other shareholders of the Night Clubs to sign documents. Lee and she, being the directors of the Borrower, would be the co-guarantors to comply with the Finance Company’s requirements. Yeung said that on second thought, Lee’s credit was not good because Lee still owed 9 months’ rental to the Landlord. Yeung asked her to get somebody else to be a co-guarantor for repayment of the loan. The take-over would be in place after payment of the wages. She thus nominated the 2nd defendant to be a co-guarantor. 29.On 19 June 2000, she and the 2nd defendant attended the plaintiff’s office. A person who identified himself to be the clerk of a solicitors’ firm told them to sign some documents on behalf of the Borrowers for a loan of HK$2,000,000.00. That person did not explain to them the contents of the documents or their right to obtain independent legal advice. 30.Prior to the signing, Yeung pulled him aside and reassured her that:
Relying on Yeung’s assurance for and on behalf of the plaintiff, they signed the Guarantee. They did not receive the signed Agreement or the Guarantee that date or until 3 years later, on about 25 June 2005. 31.At the end of June 2000, the Night Clubs closed down. The Borrowers did not take over the business. 32.In breach of Yeung’s promise, the plaintiff forced her and the 2nd defendant to repay the loan. They were even warned of legal proceedings. The law Summary judgment 33.The defendant has to demonstrate that there is a triable issue or for some reason there ought to be a trial. If the defendant’s evidence is not reasonably capable of belief, leave should be refused [14/4/9 – 12 HKCP 2006]. Misrepresentation 34.Mr. Wong refers to the case of Edgington v Fitzmaurice (1885) 29 Ch D 459. It is well-settled that before entering into a contract, if there was a representation given by a party regarding its intention of something or his action to be taken in future but in fact the party had no such intention, and that representation induced the other party into the contract, the contract will be said to be entered under a misrepresentation. Such contract will be set aside. I accept it as apposite. Undue influence 35.Mr. Wong refers to the case of Bank of Credit & Commercial International SA v Aboody [1990] 1 QB 923. To establish a plea of actual undue influence, a claimant would have to show:
I accept it as apposite. Money Lenders Ordinance 36.Section 18 of the Ordinance provides as follows:
37.Section 20 of the Ordinance provides, among others, as follows:
My findings On the defendants’ evidence 38.The defendants signed the Receipt for HK$2,000,000.00 only because Lee and/or Yeung had so requested of them. The 1st defendant was promised her present job plus a 10% share in the Borrowers. When she signed, she did not even know whether the money was actually in existence or so applied. Mr. Wong submits that they were the victim of Lee and/or Yeung’s misrepresentation and undue influence. 39.I disagree with this submission. By June 2000, she had already known that the Night Clubs had been about 9 months in arrears of rent and wages to the employees including herself [para 8 A47]. On about 12 June 2000, Lee and Yeung even told her that if wages were not paid to the employees, the Night Clubs would have to close down immediately [para 9(a) A47 – 48]. She was trying her best firstly to save her job in the Night Clubs and secondly get a 10% share in the Borrowers. I come to analyze these. Firstly, Her own wages had been outstanding for some time. Secondly, whilst there is no evidence of the value of valuation for the 10% share in the Borrowers, the business of the Night Clubs was no doubt critically bad. She had no reason to stick her neck out to be personally liable for having received this huge sum of money by signing the Receipt. 40.The defendants alleged that they were told by Yeung that the Guarantee was signed only to satisfy his partner of the Finance Company. It would not be enforced. This means that both Yeung and his partner had a say in the running of the Finance Company. However, Yeung told the defendants that he would use the Finance Company’s money obtained by a sham guarantee, part of which belonged to his partner, for his personal capital contribution to the Borrowers. The defendants were willing to perpetrate in this clear fraud upon Yeung’s partner, who would not know firstly, that the money was siphoned off this way, and secondly, that there would be no recourse because the guarantors were promised of immunity from enforcement. Yeung was not in any close personal or business relationship with the defendants. Nor was there much to gain on the part of the defendants. This alleged offer by Yeung, and acceptance by the defendants, to commit a serious crime is outrageous and fanciful. 41.Yeung told the 1st defendant to get another person (later transpired to be the 2nd defendant) to sign the Guarantee in place of Lee because Lee’s credit was not good as reflected in the arrears of rent and wages by the Night Clubs. I do not see why Lee’s credit was regarded as not good. Lee was not personally liable for the rent or wages. 42.As requested by Lee and/or Yeung, the defendants signed the Receipt in their personal capacity. Lee and/or Yeung, who were the major shareholders of the Borrowers having the use of the money, would not be personally liable. Putting aside their role as the guarantors, if the plaintiff somehow sought to recover the money from them, such as on the basis of money had and received, they would be personally liable. The 1st defendant would have only 10% share in the Borrowers whereas the 2nd defendant would not even have any benefit. 43.The defendants actually repaid part of the loan. The 2nd defendant explained that they were “forced” to do so [para 6 A40]. The 2nd defendant explained that she was misled by the plaintiff into thinking that as she had signed the Guarantee she had to repay the loan whatever the circumstances might be. I can readily see that these are contradictory statements. Besides, if the defendants had been promised of immunity from enforcement, the 1st defendant would have raised it as a defence in refusing to repay. Instead, she only requested for an extended schedule to repay [B112]. 44.I find the defendants’ evidence not reasonably capable of belief. Whether the plaintiff had made a loan to the Borrowers, who would be liable as the primary party 45.Upon rejecting the defendants’ evidence, I find that they had signed the Receipt to evidence that the Borrowers had actually received the money. There is no triable issue here. 46.The plaintiff concedes its failure to provide the Borrowers with a summary of the loan and that the memorandum lacked the details as required by section 18(2) as follows:
47.In Emperor Finance Ltd. V La Belle Fashions Ltd & Others [2003] 3 HKLRD 995, Ribeiro PJ said, at 1033:
48.In our present case, the Agreement [B18 – 23] was signed by the 1st defendant, albeit for and on behalf of the Borrowers. However, she was also the surety or guarantor. She said that upon her request, the 2nd defendant had joined her as a co-guarantor. I do not find that this breach of s. 18(2)(c) would cause any adverse consequences to the Borrowers. 49.The amount of the principal of the loan, HK$2,000,000.00 was only expressed in figures. However, the defendants had signed the Receipt [B67], which confirmed the sum and stated that to be a “loan”. I do not find that this breach of s. 18(2)(d) would cause any adverse consequences to the Borrowers. 50.The date of the making of the loan was not stated. However, the Receipt confirmed that the sum was received. I do not find that this breach of s. 18(2)(f) would cause any adverse consequences to the Borrowers. 51.The Agreement did not refer to the Guarantee as the security for the loan. However, she was also the surety or guarantor. Upon her request, the 2nd defendant had joined her as a co-guarantor. I do not find that this breach of s. 18(2)(h) would cause any adverse consequences to the Borrowers. 52.The rate of interest was not expressed as a per cent per annum. The interest charged was a lump sum of HK$50,000.00. I do not find that this breach of s. 18(2)(i) would cause any adverse consequences to the Borrowers. 53.The Agreement did not contain a declaration as to the place of negotiation and completion of the agreement for the loan. I do not find that this breach of s. 18(2)(j) would cause any adverse consequences to the Borrowers. 54.I think it is equitable to hold the Agreement enforceable. Whether the defendants would be liable as the guarantors 55.I accept the Mr. Ho’s submission that compliance with s. 20(1)(a) is in turn dependent upon compliance with s. 18(1). Likewise, the finance company may be able to convince the court that it would not be inequitable to enforce the security (Emperor Finance Ltd (op cit) at 1031; Celestial Finance Ltd v Yu Man Hon & Others [2005] 1 HKLRD 747, CFA). I repeat my findings regarding the breach of s. 18(2)(c), (d), (f), (h), (i), and (j) hereinabove. I find it equitable to hold the Guarantee enforceable. Whether the plaintiff or its agent had made any misrepresentation to them 56.Upon rejecting the defendants’ evidence, I find that the plaintiff or its agent had not made any misrepresentation to the defendants. There is no triable issue here. Whether the plaintiff or its agent had exercised any undue influence over them 57.Upon rejecting the defendants’ evidence, I find that the plaintiff or its agent had not exercised any undue influence over the defendants. There is no triable issue here. The conclusion 58.I do not find any triable issue or that for some reason there ought to be a trial. I give judgment for the plaintiff in this summons. I order costs nisi to the plaintiff with certificate for counsel. This order will become absolute 14 days from today. Dated 12 September 2006
Representation: Mr. Wycliffe Ho instructed by Messrs. Michael Cheng & Lo for plaintiff . Mr. King Wong instructed by Messrs. Amelia Cheung & Co. for 1st and 2nd defendants . |