Tse's Finance Ltd v. Wu Kwai Yung

HCA 1979/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1979 OF 2008

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BETWEEN

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J U D G M E N T

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I.  INTRODUCTION

1.The plaintiff was/is a licensed moneylender.  Both the plaintiff and Sincere Securities Limited (“SSL”) were/are subsidiaries of Sincere Finance Holdings Limited (“SFHL”), which was/is the holding company of the group of companies owned by Tse Shiu Hoi (“Mr Tse”).  Mr Tse claimed himself to be the owner of the plaintiff.

2.The plaintiff claimed that :

(a) by “a partly oral and written loan agreement dated 3^rd August 2004” and a Loan Agreement dated 4 August 2004 (“Loan Agreement”) made between the plaintiff and the defendant, the plaintiff agreed to advance to the defendant a loan of HK$15 million (“Loan”) and the defendant agreed to repay the Loan in a lump sum on 15 October 2004 and to pay monthly interest thereon at the rate of 36% pa from the date of drawdown of the Loan payable on the 15^th day of each and every succeeding month with the first payment of interest being payable on 15 September 2004;

(b) pursuant to the aforesaid and at the specific request of the defendant who promised to attend the plaintiff’s office on 4 August 2004 to sign the Loan Agreement, the plaintiff at the instruction of the defendant caused a sum of HK$7.5 million (by cheque drawn by SFHL made payable to the defendant (“1^st Cheque”)) to be credited into the defendant’s bank account (“Account”) with Bank of China (Hong Kong) Limited (“BOC”) on 3 August 2004 (“1^st Payment”), and the balance of the Loan in the sum of HK$7.5 million (by cheque drawn by SFHL made payable to the defendant (“2^nd Cheque”)) to be credited into the Account on 4 August 2004 (“2^nd Payment”);

(c) the defendant attended the plaintiff’s office on 4 August 2004 and signed the Loan Agreement before the plaintiff released the 2^nd Payment;

(d) the defendant defaulted in paying the Loan and interest or any part thereof, including interest payable on 15 September 2004 and 15 October 2004;

(e) as at 15 October 2004, the defendant owed the plaintiff a total sum of HK$16,090,010.95 as follows:

	Amount (HK$)
Loan	15,000,000.00
Interest payable on 15/9/04 (42 days)	621,369.86
Total amount due on 15/9/04	15,621,369.86
Interest on $15,621,369.86 from 16/9/04 to 15/10/04	468,641.09
Total amount due on 15/10/04	16,090,010.95

(f) interest on the sum of HK$15,621,369.86 (being the amount due on 15 September 2004) would continue to accrue and be payable by the defendant to the plaintiff at the rate of 36% pa from 16 October 2004 until payment, and such interest from 16 October 2004 to 13 October 2008 (ie the date of the Writ of Summons in the present action) amounted to HK$22,479,365.21.

3.The following were express provisions of the Loan Agreement:

(a) The defendant thereby agreed that in the event of default in payment on the due date of any sum payable to the plaintiff either principal or interest of the Loan, the plaintiff shall be entitled to charge and the defendant agreed to pay simple interest on such sum in default in payment in accordance with section 22 of the Money Lenders Ordinance Cap 136 (“Ordinance”) at the rate of interest expressed in the Loan Agreement (ie 36% pa) from the date of default up to the date of payment (“Clause 3(b)” and clause 5).[1]

(b) The defendant thereby agreed that in the event of default in payment on the due date of any sum payable to the plaintiff either principal or interest of the Loan, the whole of the outstanding balance of the Loan and any outstanding interest thereon as on the date of default shall immediately become due and payable (“Clause 3(c)”).

(c) The defendant thereby further agreed to indemnify the plaintiff for all legal costs and other expenses incurred by the plaintiff in enforcing the Loan Agreement against the defendant (“Clause 3(d)”).

4.On 13 October 2008, the plaintiff commenced the present action against the defendant to claim for repayment of the outstanding Loan together with interest on the Loan and default interest.  On 2 December 2008, the defendant filed his Defence denying liability.

5.No further action was taken until the plaintiff filed Notice of Intention to Proceed on 3 March 2010.  On 15 June and 28 June 2010 respectively, the plaintiff filed their Amended Statement of Claim and the defendant filed his Amended Defence.  On 14 April 2011, the plaintiff filed their Re-Amended Statement of Claim.  On 24 June 2011, the plaintiff’s solicitors wrote to the defendant’s solicitors to enquire whether the defendant wished to file any Re-Amended Defence, but there was no reply.

6.No further action was taken until the plaintiff filed Notice of Intention to Proceed on 24 September 2012.  On 26 October 2012, the plaintiff issued a summons for summary judgment (“O14 Summons”) for inter alia:

(a) the sum of HK$38,569,376.16[2] or alternatively the Loan in the sum of HK$15 million together with such amount of interest as the court would deem just;

(b) contractual interest at 36% pa from 14 October 2008 until the date of repayment or alternatively interest pursuant to section 48 of the High Court Ordinance Cap 4;

(c) costs of the action on an indemnity basis, including costs of the O14 Summons, to be taxed.

7.On 26 October 2012, the plaintiff filed the affirmation of their account manager Lai Yuen Piu (“Mr Lai”) in support of the O14 Summons (“Lai 1^st Aff”).  On 19 November 2012, Master Levy granted leave for affirmation in opposition and affirmation in reply to be filed/served by the defendant and the plaintiff respectively, and also granted the following directions (“Levy Order”):

“3. There be no further affidavit evidence to be filed and served without leave of the Court;

4. Any application for leave to file further affidavit must be made not less than 14 days before the substantive hearing, supported by reasons on affidavit; ……”

On 10 December 2012, the defendant filed his affirmation in opposition (“Wu 1^st Aff”).

8.By their letter dated 14 December 2012, the plaintiff’s solicitors referred to their earlier letter dated 24 June 2011 and stated “[they] are advised by counsel that [the Wu 1^st Aff] raises matters which have to be pleaded in particular whether [the defendant] disputes the authenticity of the [Loan Agreement] which has always been the basis of [the plaintiff’s] claim”. The defendant was asked to confirm whether it was his intention to seek leave to further amend his Amended Defence, but there was no reply.

9.On 1 February 2013, the plaintiff filed Mr Lai’s 2^nd affirmation and the affirmations of Leung Ting Wai (director of the plaintiff, “Mr Leung”), Yu On Lee (former director of SSL, “Mr Yu”) and Mr Tse in reply.  The O14 Summons was adjourned to be heard before Master K Lo on 3 July 2013 (“Master Hearing”).

10.On 25 June 2013, the defendant filed (a) a summons (“Re-Amendment Summons”) for leave to re-amend the Amended Defence in the manner marked in green as per the draft attached thereto (“Draft”), and (b) the affirmation of his solicitor Cheng Siu Hang (“Mr Cheng”) in support thereof (“Cheng 1^st Aff”).

11.On 25 June 2013, the defendant also filed a summons for leave to file the defendant’s 2^nd affirmation dated 20 June 2013 (“Wu 2^nd Aff”) and to adduce the contents thereof at the Master Hearing (“Affirmation Summons”).  On 26 June 2013, the defendant further filed a summons for extension of time to take out the Affirmation Summons pursuant to the Levy Order (“Extension Summons”) with Mr Cheng’s 2^nd affirmation in support (“Cheng 2^nd Aff”).

12.At the Master Hearing, Master K Lo dismissed the Re-Amendment, Affirmation and Extension Summonses with costs to the plaintiff (and with certificate for counsel) to be taxed if not agreed (“Order”).  In respect of the O14 Summons, Master K Lo ordered the defendant to pay the plaintiff the sum of HK$38,569,376.16 together with interest thereon at 36% pa from 14 October 2008 until the date of repayment with costs of the present action including costs of the application (and with certificate for counsel) to be taxed if not agreed (“Judgment”).

13.On 12 July 2013, the defendant filed Notice of Appeal to set aside the Order and the Judgment, to seek the reliefs sought in the Re-Amendment, Affirmation and Extension Summonses with costs of and occasioned such summonses to be provided for, and to dismiss the O14 Summons with costs to the defendant (and with certificate for counsel) to be taxed if not agreed (“Appeal”). The Appeal came before me for hearing on 5 November 2013 (“Hearing”).

II.  DEFENDANT’S PLEADINGS

14.In the Amended Defence, the defendant denied liability.  He further or alternatively averred that by reason of the matters in paragraph 2(a)-(c) above and as a result of breach of section 18 of the Ordinance, which provided that no agreement for repayment of money lent by a money lender or for the payment of interest on money lent shall be enforceable unless a note or memorandum in writing of the agreement made in accordance with section 18(2) was signed by the borrower before the money was lent, the plaintiff was not entitled to enforce the Loan Agreement.  The defendant also averred that the Loan had not been advanced by the plaintiff to the defendant, and the defendant was therefore under no obligation to make repayment of the Loan or to pay any interest on the Loan to the plaintiff.

15.In the Draft, the defendant still denied liability.  He averred that in late July or early August 2004 he asked to borrow some money from his long-time business partner Mr Tse by way of a short-term loan, and after negotiations/discussions with Mr Tse, it was agreed that (a) Mr Tse would lend him HK$15 million, (b) the loan would bear interest at 5% per month, and (c) he would repay such loan to Mr Tse in Mainland China by payments in RMB from time to time to companies nominated by Mr Tse at an exchange rate of 1:1.  Pursuant to such agreement, Mr Tse advanced HK$7.5 million to the defendant on 3 August 2004 and another HK$7.5 million on 4 August 2004.  Mr Tse informed the defendant that as a matter of formality he would have to sign a written document as evidence of the agreement, so the defendant attended Mr Tse’s office on 4 August 2004 to sign such document.  It was only upon Mr Tse’s request that the defendant signed on such written document in Mr Tse’s presence.  But before he did so, Mr Tse told him he had sent someone to the bank to deposit the balance of the loan in the sum of HK$7.5 million into the defendant’s account.  The defendant admitted that the written document he signed contained Clauses 3(b)-(d), but in clause 3(a) of the Loan Agreement produced by the plaintiff (“Clause 3(a)”) the amount of monthly interest to be repaid was left blank.  The defendant further or alternatively averred that by reason of section 18 of the Ordinance the plaintiff was not entitled to enforce the Loan Agreement.  Still further, the defendant denied he was in breach of the Loan Agreement and/or he defaulted in repayment as pleaded or at all since he had fully repaid the entire loan to Mr Tse with interest in Mainland China.  The plaintiff never demanded him for repayment until 14 August 2008 because he had already repaid all sums due to Mr Tse in the manner alleged.

III. PLAINTIFF’S AFFIRMATION EVIDENCE

16.The plaintiff claimed that in/about 2001, Mr Tse became acquainted with the defendant through business dealings.  Since then the defendant came to his office many times for business discussion and for borrowing money from the plaintiff on divers occasions.  Mr Lai claimed he came to know the defendant (who was Mr Tse’s friend and who borrowed money from the plaintiff on divers occasions) whom he had met at the office many times after introduction by Mr Tse.  According to Mr Yu (who was given access to SFHL’s records for the purpose of preparing his affirmation), there was no margin account opened with SSL under the name of the defendant.

17.On/about 3 August 2004, the defendant telephoned Mr Tse to request the plaintiff for a loan of HK$15 million for an urgent need.  It was agreed that the plaintiff would advance such Loan to the defendant at an interest rate of 36% pa.  Mr Tse asked the defendant to contact Mr Lai for further arrangements. At about lunch time but before 1:00 pm, Mr Tse telephoned to tell Mr Lai it had been agreed for the Loan to be made to the defendant, who would get in touch with him.  The defendant then telephoned to tell Mr Lai that he wanted to borrow the Loan and that he had talked to Mr Tse who asked him to telephone Mr Lai.  The defendant said he needed the money in a hurry and asked whether the Loan could be deposited into his bank account. Mr Lai explained it was the plaintiff’s policy and usual/standard practice for the borrower to sign a standard form loan agreement before loan drawdown, but Mr Lai would relay his request to Mr Tse.  Mr Lai asked the defendant to write a note for him to show to Mr Tse, and he gave the defendant his fax number.  Mr Lai also asked the defendant to provide him with the account number of his bank account since the defendant requested for the Loan to be deposited into his bank account.

18.Later on the same day, Mr Lau received a Chinese note from the defendant by fax (“Note”) which gave the account number of the Account:

“致:訊匯集團謝先生

因業務關係茲向貴公司暫借港幣壹仟伍佰萬元正, 請代存入本人在中銀賬戶 (A/C NO. xxx-xxx-xxxxxxxx)內。

[簽名] 胡桂容 WU KWAI YUNG 3-8-2004

[簽名] 同意借”

19.After Mr Tse returned to the office, Mr Lai took the Note to him and relayed the defendant’s request.  Mr Tse told Mr Lai that since the defendant was his friend and had made repayments of loans in the past, Mr Lai could accommodate the defendant by agreeing to release half of the amount of the Loan (ie HK$7.5 million) into the Account as required, but Mr Lai should ask the defendant to come to their office to sign the loan agreement before the remaining amount was released.  Mr Tse then signed on the Note.

20.Mr Lai then telephoned to inform the defendant of Mr Tse’s instructions. The defendant agreed and promised to go to their office to sign the loan agreement the following day, and he requested Mr Lai to deposit HK$7.5 million into the Account that afternoon. Relying on the defendant’s promise, Mr Lai caused SFHL to draw the 1^st and 2^nd Cheques for HK$7.5 million each and instructed an office assistant to go to a BOC branch near to their office in Central to deposit the 1^st Cheque into the Account.

21.On 4 August 2004, the defendant attended the plaintiff’s office and went inside Mr Tse’s office.  After a while Mr Tse called Mr Lai into his office. As he entered Mr Tse’s office, Mr Lai saw the defendant sitting inside.  Mr Tse gave Mr Lai the Loan Agreement which was already completed and signed by the defendant, by Mr Leung for the plaintiff and by Mr Yu as witness to both of them. Messrs Leung and Yu by their affirmations confirmed that on 4 August 2004 the defendant signed the Loan Agreement before both of them, and they also signed on the Loan Agreement.  Mr Lai then asked the defendant whether he wanted to have the 2^nd Cheque, but the defendant requested that someone from the plaintiff’s office be sent to BOC immediately to deposit it on his behalf.  Mr Lai gave instructions for that to be done.  Mr Lai kept the two original deposit slips for the 1^st and 2^nd Cheques, and the defendant declined to have copies thereof.

22.Mr Tse said his dealings with the defendant in Mainland China had nothing to do with the present action.  The defendant produced copies of various judgments handed down by the PRC courts (see the Schedule annexed to this Judgment (“Schedule”), “PRC Judgments”) which involved PRC litigation between various companies.  For the sake of convenience, I shall adopt the abbreviations in the Schedule.

23.Although some individuals (eg the defendant and Mr Tse) were also parties to some of the PRC litigation, no PRC Judgment was obtained against Mr Tse by the defendant and/or his companies. As a matter of fact, the PRC Judgments showed that in respect of monetary claims, there was a judgment in favour of Mr Tse’s company東莞市凱旋門實業投資有限公司in excess of RMB57 million, and a judgment against such company for about RMB5.4 million. Further, the 1^st PRC Judgment in favour of the defendant’s company 東莞市三元盈暉投資發展有限公司was reversed on appeal on 20 November 2012.

IV.  DEFENDANT’S AFFIRMATION EVIDENCE

24.The defendant claimed he grew up in Mainland China and carried on property investment business in Dongguan, Mainland China. In 1993, he became a Hong Kong citizen.  In/about 2001, he opened a margin account with SSL as stockbroker to trade in the stock market, and was told that Mr Tse was the boss of SSL.  Being a frequent and high turnover trader, the defendant became acquainted with Mr Tse.

25.In the course of the defendant’s association with Mr Tse, Mr Tse expressed interest in property investment in Mainland China.  They saw the opportunity of cooperation, so between 2002 and 2005 they jointly invested or planned to invest in a number of property development projects in Dongguan, Mainland China with the defendant providing the land and Mr Tse injecting the capital.  The defendant also borrowed money from Mr Tse for his own property development projects in Dongguan, Mainland China from time to time for which Mr Tse would charge interest at 5% per month.  The defendant claimed he had been dealing with Mr Tse directly and he did not know Mr Lai.

26.The defendant had a margin account with SSL. He was unaware of the relationship between SFHL and the plaintiff, but knew Mr Tse was the boss of SFHL.  He claimed that Mr Tse used his PRC resident capacity and/or companies incorporated in Mainland China and in Hong Kong as vehicles for his cooperation with the defendant.  From 2002 to 2005 the defendant and Mr Tse were still on good terms. The defendant borrowed money from Mr Tse.  He could not recall whether he borrowed money from the plaintiff.  But the defendant’s cooperation with Mr Tse did not end well.  Since about 2008 Mr Tse through his controlling companies, the defendant personally and the defendant through his controlling companies sued one another in Dongguan, Mainland China, and the defendant disclosed the PRC Judgments as listed in the Schedule.

27.The defendant claimed that the present action and HCA1980/2008 by which the plaintiff claimed against him for repayment of another alleged loan for HK$20 million were initiated after the commencement of the PRC legal proceedings, apparently for the purpose of putting pressure on the defendant. Whenever the PRC legal proceedings were in a stalemate or when a PRC Judgment was given against Mr Tse and/or his controlling company, Mr Tse would cause the plaintiff to do something in the Hong Kong proceedings.

28.The defendant claimed that in/about late July or early August 2004 he spoke with Mr Tse about borrowing a sum of HK$15 million from him to be repaid with interest at 5% per month in Mainland China. The defendant did not recall if they discussed this at a meeting or over the telephone.  He never had any telephone conversation with Mr Lai or any account manager regarding such loan since he negotiated such loan with Mr Tse personally. Mr Tse never said he would arrange for another company to lend him the loan, which loan was meant to be a short-term loan to solve a short-term cash flow problem.

29.The defendant denied having drafted the Note since he could only write simplified (but not traditional) Chinese.  He agreed the signature on the Note resembled his, but could not recall whether he signed on the Note which was addressed to Mr Tse and not the plaintiff.

30.The defendant did not recall if he had gone to Mr Tse’s office specifically for such loan as he went to Mr Tse’s office on many occasions during their cooperation between 2002 and 2005. All those meetings were arranged directly with Mr Tse, and the defendant never discussed with Mr Lai about a meeting on 4 August 2004.  The defendant had no recollection of the execution of the Loan Agreement (and he was not in possession of such document) at Mr Tse’s office, but he never signed any document in the presence of Mr Leung or Mr Yu, he did not meet Mr Lai at Mr Tse’s office, and he never spoke with Mr Lai about the 1^st and 2^nd Cheques and/or the deposit slips.

31.The defendant did recall that on one occasion at Mr Tse’s office a female came and told him she lent him the sum of HK$15 million.  He found it odd but did not give it much thought since it was always his belief that the loan was advanced by Mr Tse.  When the defendant mentioned this to Mr Tse, Mr Tse said it did not concern the defendant who was only required to account for such sum in various dealings with him in Mainland China.  The defendant specifically mentioned this female because she was the only person (other than Mr Tse) whom he had spoken to about the loan of HK$15 million.

32.The defendant claimed the loan for HK$15 million had been repaid to Mr Tse “or offset in our co-operation in Mainland China.  Alternatively, Mr Tse had included the sum of HK$15 million in his various claims against [the defendant] in Mainland China”. “…… [The defendant] verily believe that the loan for HK$15 million was made between Mr Tse and [the defendant] personally. [He] also verily believe that the loan, together with interest, has been fully repaid by [him] to Mr Tse.”

33.The defendant claimed that changes to the plaintiff’s pleaded case by amendments and re-amendments were part of a concerted approach in dealing with the many disputes between the defendant and Mr Tse in Mainland China.

V.  RE-AMENDMENT SUMMONS

34.At the Hearing, both Mr Chain, counsel for the plaintiff, and Ms Yang, counsel for the defendant, agreed that the outcome of the Re-Amendment Summons would turn on the outcome of the Appeal against the Judgment.  Should I uphold the Judgment, it would be pointless for the defendant to re-amend his pleadings in the present action.  But should I set aside the Judgment and grant leave to defend on the basis that there were triable issues or arguable defences, Mr Chain accepted that in those circumstances the defendant should have leave to amend the Amended Defence as per the Draft.

VI.  AFFIRMATION AND EXTENSION SUMMONSES

(a)  Levy Order

35.The Levy Order permitted the defendant to file/serve the Wu 1^st Aff (which he did) for the purpose of resisting the O14 Summons, but leave of the court would be required for filing/adducing any further affirmation evidence in opposition and application for such leave shall be made no later than 14 days before the Master Hearing with reasons on affirmation.  Since the defendant tried to adduce the Wu 2^nd Aff to oppose the O14 Summons only nine days before the Master Hearing, he had to take out the Extension Summons to seek indulgence for such purpose.

(b)  Cheng 1^st and 2^nd Aff

36.As explained above, the defendant filed the Cheng 2^nd Aff in support of the Extension Summons. In such affirmation, Mr Cheng referred to the Cheng 1^st Aff filed in support of the Re-Amendment Summons.

37.Mr Cheng was instructed that at the time when the present action and HCA1890/2008 were commenced on 13 October 2009 the parties and their companies had been suing each other in Mainland China.  The defendant instructed his former solicitors to contest the present action.  But being a relatively unsophisticated man (ie he grew up as a peasant and became an agricultural farmer in Mainland China) with no legal knowledge and no sensitivity and/or memory of legal and written documents, the defendant took the plaintiff’s claim in the present action lightly and focused on the PRC proceedings where “bigger battles” were ongoing.

38.Mr Cheng further claimed it was the defendant’s belief and understanding that the loan was advanced to him by Mr Tse personally so the plaintiff was not entitled to sue him, and the Hong Kong proceedings were a smokescreen “to assist the Plaintiff’s case in Mainland China”.  Mr Cheng said this was reinforced by the changes to the plaintiff’s pleadings and by the periods of inaction in the present action over the years.

39.Mr Cheng explained that in/about July 2010 the defendant decided to instruct his present solicitors to take over the conduct of his defence in the present action and in HCA 1980/2008. Mr Cheng was not the handling solicitor then and he took over the case in 2011.  But save for another round of amendments to the pleadings in 2011, there was no development until the plaintiff issued the O14 Summons on 26 October 2012 supported by the Lai 1^st Aff.  Mr Cheng’s predecessor left the defendant’s solicitors in late 2011, and this case was passed to Mr Cheng for handling after receipt of the O14 Summons.

40.Mr Cheng took instructions from the defendant at a meeting in Shenzhen, Mainland China, in November 2012 (“Meeting”) and learned that the defendant had no knowledge or recollection of the documents exhibited to the Lai 1^st Aff, that he disputed the authenticity of the Note, and that he claimed full repayment of the principal and interest in respect of “the alleged debt in this action had been made by him to Mr Tse in Mainland China”.  Based on these instructions, the Wu 1^st Aff was filed on 10 December 2012 setting out the grounds of opposition to the O14 Summons and the crux of his defence.

41.Mr Cheng said that on 5 December 2012 he wrote to the plaintiff’s solicitors asking for inspection of the documents in question.  On 14 December 2012, the plaintiff’s solicitors enquired whether the defendant would further amend his Amended Defence.[3]  In fact, Mr Cheng had already advised the defendant at the Meeting to re-amend the Amended Defence since it did not properly reflect his case, and he also asked the defendant to provide his firm “with documents in support of the alleged repayments to [Mr Tse] in Mainland China”.

42.Mr Cheng said that recently the defendant decided to engage counsel in this matter.  Upon advice by counsel in meeting, the defendant on 5 June 2013 provided to Mr Cheng some primary underlying documents evidencing some of the repayments effected by the defendant (“Documents”).  Mr Cheng said there was no proper basis to re-amend the Amended Defence any sooner without having sight and verification of the Documents. But immediately upon receipt of the Documents, Mr Cheng wrote to the plaintiff’s solicitors on 5 June 2013 to notify them of the defendant’s intention to re-amend the Amended Defence, and to request another inspection of the Note to verify the date/time that such document was allegedly faxed to the plaintiff. There was no reply.

43.Mr Cheng said the defendant told him he had instructed his PRC lawyers to collate other relevant documents.  In anticipation of such documents being available in mid-June 2013, Mr Cheng scheduled another meeting with the defendant on 20 June 2013 to prepare the Wu 2^nd Aff and to sign the statement of truth to the Draft.  On the afternoon of 20 June 2013, the defendant informed Mr Cheng he could not attend the meeting due to urgent engagement in Mainland China and he had to postpone the meeting to 24 June 2013.  Mr Cheng immediately wrote to the plaintiff’s solicitors on 20 June 2013 to indicate the defendant’s intention to seek leave to file further affirmation evidence and to re-amend the Amended Defence.  Mr Cheng claimed that any prejudice to the defendant might be compensated by costs.

(c)  Wu 2^nd Aff

44.By the Wu 2^nd Aff, the defendant confirmed the contents of the Draft.  He explained it was his case that (a) the loan of HK$15 million was advanced to him by Mr Tse pursuant to an agreement reached between them and (b) he had repaid the loan together with all interest to Mr Tse in the course of business dealings between their respective companies in Mainland China. The defendant claimed that their respective companies were Mr Tse’s東莞市凱旋門實業投資有限公司 and his 東莞市三元工貿實業總公司[4] and 東莞市泰廸貿易有限公司.

45.The statement of account between Mr Tse’s and the defendant’s companies were set out in pages 6-8 of the 1^st Instance 4^th PRC Judgment, which recorded that Mr Tse’s company had paid RMB53,795,167.00 whilst the defendant’s companies had paid RMB108,888,145.00.  The defendant claimed that the payments by his companies that comprised such sum were all supported by contemporaneous bank slips, but even though he had instructed his PRC lawyers to retrieve them, owing to the passage of time and the voluminous documents in the PRC proceedings, his PRC lawyers were only able to retrieve 15 such bank slips.

46.The defendant claimed that he had very limited education in Mainland China, and he had no legal knowledge and was not sensitive to legal documents or even documents at all. At least up to the time when his dispute with Mr Tse “surfaced”, it was his practice to make and keep oral promises, and a handshake and oral promise meant more for him than legal documents. He usually signed on documents at the request of the other side without reading the same carefully.

47.In respect of the loan of HK$15 million by Mr Tse, the defendant said that after half of the loan was deposited into the Account on 3 August 2004, he went to the plaintiff’s office on 4 August 2004.  Mr Tse said his staff had just deposited the balance into the Account and the defendant should sign on a document as mere formality.  As the defendant reposed trust and confidence in Mr Tse given their many business dealings at the time which amounted to hundreds of millions in RMB, he did not pay attention to the contents of the document and believed it was only a mere formality as Mr Tse told him.  The defendant claimed this must have been the belief of Mr Tse also because the amount of interest was not inserted in Clause 3(a), which reflected their common intention that the repayment would be made in Mainland China in RMB through their respective companies. Thus, “the clause and indeed the entire document would be irrelevant anyway”.  At that time, there was only Mr Tse and the defendant in the room.

48.The defendant noted that according to the Loan Agreement he should have repaid the Loan by 15 October 2004.  He had caused his companies to repay the loan in full in/before 2007 in Mainland China.  Had Mr Tse thought otherwise, it was strange that Mr Tse did not sue on the Loan Agreement in Hong Kong prior to August 2008 even though the defendant was allegedly in default.

(d)  Legal principles

49.Order 32 rule 11A of the Rules of the High Court (“RHC”) provides inter alia as follows:

“(1) A master may – …… (b) adjourn the application to be heard before him or another master or a judge in chambers.

(2) The master may fix a date on which he may - …… (b) in the case of paragraph (1)(b), make an order that the application be heard before him or another master or a judge in chambers on a date specified in the order.

(3) The master may give such directions as he thinks necessary or desirable for the purpose of determining the application, including directions for-

(a) the setting of a timetable for the steps to be taken between the date of the giving of those directions and the date of the determination of the application;

(b) the filing of evidence and arguments; ……

(4) Where the determination of the application is adjourned for the hearing of the summons, no further evidence may be adduced unless it appears to the Court that there are exceptional circumstances making it desirable that further evidence should be adduced.

(5) Paragraph (4) is subject to a direction given under paragraph (3).”

50.The sort of exceptional circumstances under Order 32 rule 11A(4) of the RHC are likely to be along the lines of the Ladd v Marshall conditions.[5]  Saunders J in Fortune Asset Development Ltd v De Monsa Investments Ltd said as follows:[6]

“10. …… It is clear from that rule that one of the objectives of Civil Justice Reform is to ensure that parties to litigation are properly notified of the grounds upon which applications are being made for the earliest possible opportunity, and to prevent last-minute evidence being put in, save in exceptional circumstances.

11. To allow last-minute evidence, save in exceptional circumstances, would not be to ensure that a case is dealt with as expeditiously as is reasonably practicable: see O 1A r 1(b); nor would it ensure fairness between the parties: O 1A r 1(d).

12. I read the new affidavit and the exhibits de bene esse. There was nothing contained in the affidavit all the exhibits which could not have been within the contemplation of those advising De Monsa as being relevant to the issues at the time the order was made on 15 April 2009. A proper review of the potential issues that might arise in these proceedings ought to have resulted in the information contained in the affidavit being filed within time limits imposed. There was nothing in the evidence in support of the application to suggest that exceptional circumstances had arisen.

13.    I accordingly decline the application for leave to admit further evidence, and have dealt with the application on the basis of the evidence as it stood. Fortune Asset is obliged to instruct Ms Wong to prepare to oppose the application, which duly failed. There will be an order nisi that Fortune Asset shall have its costs on the application, which I fix in a gross sum of $20,000, to be paid forthwith.”

51.The Ladd v Marshall conditions are: (a) the evidence could not have been obtained with reasonable due diligence for use at the hearing, (b) the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive, and (c) the evidence must be such as is presumably to be believed.

(e)  Discussion

52.In my opinion, it is quite clear that the matters stated in and the documents exhibited to the Wu 2^nd Aff are evidence which was either available before the prescribed deadline for filing the affirmation in opposition to the O14 Summons under the Levy Order or could have been so obtained with reasonable due diligence.  But in my view, even if the Ladd v Marshall conditions were not applied with full vigour, there is still no satisfactory explanation for the delay.

53.Ms Yang argued that the Wu 2^nd Aff did not raise anything new, and it only served to flesh out contentions already disclosed by the defendant.  She submitted that the Wu 2^nd Aff essentially made two points.  First, it was suggested that the loan agreement in respect of the HK$15 million loan was between Mr Tse personally (and not the plaintiff) and the defendant.  This had been pleaded in the Amended Defence, and the Draft and Wu 2^nd Aff only have more factual particulars of such defence.  Secondly, it was suggested that the defendant had repaid the HK$15 million loan to Mr Tse or such loan had been settled by set-off in respect of their dealings in Mainland China. This was already alluded to in the Wu 1^st Aff, and the defendant by the Wu 2^nd Aff disclosed the Documents in support.  Ms Yang submitted that the Wu 2^nd Aff was not inconsistent with the defences as pleaded in the Amended Defence and did not unwarrantedly expand them by bringing in a new dimension.  It was therefore argued that the plaintiff would not be so surprised or prejudiced that they could not be compensated by costs, and in any event the plaintiff did not consider any adjournment was required at the Master Hearing.

54.Ms Yang accepted there had been delay in coming up with the Draft and Wu 2^nd Aff, but such delay must be considered in the context of the defendant’s solicitors having to take instructions from a person from Mainland China, and the defendant having to collate evidence from his PRC companies/transactions and having to rely on his PRC lawyers to go through the documentary evidence adduced in the PRC litigation.

55.On the other hand, Mr Chain supported the Order on the basis that there was no or no sufficient explanation by the defendant as to why the applications were made so late, and hence there were no exceptional considerations.

56.I agree with Mr Chain.  The present action commenced in 2008.  Since 2008 the defendant all along knew it was the plaintiff’s case that (a) the Loan was granted to him by the plaintiff, and (b) the whole of the Loan and interest thereon was still outstanding. If the defendant’s case was that the loan of HK$15 million was granted by Mr Tse and he had already repaid such loan in/before 2007, he must have been aware of such facts and matters at/before the commencement of the present action, and he had all the time since then (ie 4 years up to the time of the Wu 1^st Aff) to collate his evidence and gather the Documents. In this respect, I bear in mind that various pieces of PRC litigation took place between 2008 and 2012, and the defendant was represented by PRC lawyers. Plainly, the information in relation to the alleged loan and the documentation in support of the alleged repayments should all be available before the issuance of O14 Summons if not before the commencement of the present action.

57.Indeed, Ms Yang’s suggestion that the Draft and Wu 2^nd Aff merely fleshed out the defences already pleaded in the Amended Defence is a double-edged sword in that it also begs the question why the matters raised in the Draft and Wu 2^nd Aff were not raised at an earlier stage.

58.It has been suggested that the defendant was an unsophisticated man with roots in farming.  But such suggestion conveniently forgets that, as the defendant has confessed in the Wu 2^nd Aff, he has become a man of the world with business interests in hundreds of millions in RMB.  It also conveniently forgets that all along he has been legally represented in the PRC litigation and in the present action, and has had the benefit of both PRC and local legal advice.

59.It is interesting to note from the Cheng 1^st and 2^nd Aff that at the Meeting with the defendant the need to oppose the O14 Summons on the basis that he has made full repayment of the principal and interest in respect of “the alleged debt in this action” to Mr Tse in Mainland China has been canvassed.  It must have been plain to the defendant that he would need to provide documentation to support such contention.  Indeed, by 5 December 2012, Mr Cheng has already advised the defendant there would be a need to further amend the Amended Defence to reflect the fullness of his defence and to provide documents in support of the alleged repayments to Mr Tse in Mainland China.

60.Had the defendant properly and reasonably followed such advice, it would not have been a difficult exercise because, as explained in the Wu 2^nd Aff, pages 6-8 of the 1^st Instance 4^th PRC Judgment (which has been exhibited to the Wu 1^st Aff) has helpfully set out two schedules of payments made by東莞市三元工貿實業總公司 to東莞市凱旋門實業投資有限公司 and by 東莞市三元工貿實業總公司and its related companies to 東莞市凱旋門實業投資有限公司and its related companies respectively,[7] and it should not have been difficult for the defendant or his PRC lawyers to focus on those three pages of the judgment and extract the supporting pay slips for those payments.  Indeed, the Documents now disclosed by the defendant in the Wu 2^nd Aff are in fact some of the pay slips for those payments.[8]

61.Mr Cheng says that the defendant’s solicitors cannot attend to the re-amendment of the Amended Defence without sight of the Documents.  But this suggestion begs the question why the defendant has failed to follow Mr Cheng’s advice to provide the Documents to his solicitors for the period from November/December 2012 to June 2013 when he must have been aware of the O14 Summons, the deadline for filing affirmation in opposition, the need to re-amend the Amended Defence, and the importance to adducing sufficient evidence to raise triable issues to resist the summary judgment application.  There is also no explanation why he left these matters outstanding until the meeting with counsel in June 2013 and why he only instructed his PRC lawyers to collate other relevant documents then.  No or no satisfactory explanation is forthcoming from the defendant.

62.The above is of particular concern because the delay cannot be said to be harmless. Contrary to what Ms Yang suggests, in paragraph 15 of his written submissions dated 28 June 2013 for use at the Master Hearing Mr Chain did submit that “[to] allow the [defendant] to rely on [the Wu 2^nd Aff] will necessarily result in an adjournment, because [the plaintiff] is entitled to, and must be given a chance to respond”.  In the circumstances, if orders were granted in favour of the plaintiff in respect of the Affirmation and Extension Summonses, there would have been a real risk of derailing the O14 Summons and the plaintiff would have to incur time and costs to respond to the matters raised in the Draft and the Wu 2^nd Aff, and, more significantly, they would be postponed from the judgment seat, all of which would have been caused by the defendant’s unjustified delay.  In my view, the prejudice to the plaintiff cannot be brushed aside by a promise of compensation of costs.

63.For all the above reasons, I would have upheld the Order. But Mr Chain was content that I refer to the Draft and Wu 2^nd Aff on a de bene esse basis to consider the merits of the defendant’s resistance to the O14 Summons.  I have done so, and as a result of the analysis below, I am not persuaded that such further consideration leads to any change of view on my part in respect of the Order.

64.In my view, the defendant should not be allowed to adduce and/or rely on the Wu 2^nd Aff when such evidence ought to have been available if reasonable efforts had been made in good time to place the same before the court in compliance with the Levy Order.  The interests of justice between the plaintiff and the defendant also do not require that the defendant be allowed to put in such evidence.

VII. MASTER’S APPEAL

65.It is trite that an appeal from a master to judge in chambers is dealt with by an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him/her for the first time.  The judge will give the weight it deserves to the previous decision of the master; but he/she is in no way bound by it.[9]

VIII.  LEGAL PRINCIPLES ON ORDER 14

66.Mr Chain and Ms Yang have no essential quarrel over the legal principles on applications for summary judgment.  

67.A plaintiff may invoke the procedure under Order 14 of the RHC where there is no valid defence to his claim or otherwise a triable issue.  The rationale is set out in Hong Kong Civil Procedure 2013:[10]

“ …… The underlying policy of the summary procedure is to prevent a defendant from delaying the plaintiff from obtaining judgment in case in which the defendant clearly has no defence to the plaintiff's claim: Man Earn Ltd v Wing Ting Fong [1996] 1 HKC 225. Order 14 proceedings for summary judgment when there is no defence to a claim are an important feature of the legal process. It enables plaintiffs in cases where there is no defence to obtain expeditious summary judgment to avoid unnecessary delay. When applied for, it is for the defendant to show that there is a triable issue or an arguable defence if he is to be allowed his day in court. To deny him his day in court, if he shows a triable issue or an arguable defence, is indeed a fearful injustice. On the other hand, if he has no defence and he obtains leave to defence, equally, there is injustice to the plaintiff” (per Mortimer JA in Manciple Ltd v Chan On Man [1995] 3 HKC 459 at 466). The machinery of O.14 works on the basis that if the plaintiff's application is properly constituted, he is prima facie entitled to judgment unless the defendant shows cause to the contrary or the application is dismissed.”

68.In Ng Shou Chun v Hung Chun San,[11] Godfrey J noted it was not appropriate to embark on a mini‑trial of the action on affidavit evidence.  The court should ask itself the question whether what the defendant says is credible or believable.  If so, he must have leave to defend; if not, the plaintiff is entitled to summary judgment.

69.Hong Kong Civil Procedure 2013 goes on to say that:[12]

“ ‘In considering whether there are triable issues the Court will, of course, not take the alleged defence on its face value but test it against the evidence disclosed in the affidavit including matters such as contemporaneous documents, whether the alleged defence is inconsistent with the defence previously put forward or whether the defence is only recently raised despite opportunity being given to the defendant to respond earlier. The Court will also consider the inherent probability of the defence. But what the Court should not do is to conduct a mini‑trial on complicated factual issues.’ per Cheung J A in Paul Y Management Ltd v Eternal Unity Development Ltd [2008] HKEC 1359 at para 19.

……

On the other hand, a complete defence need not be shown. The defence set up need only show that there is a triable issue or question or that for other reason there ought to be a trial; and leave to defend ought to be given unless there is clearly no defence in law such as could have been raised on the former demurrer to the plea and no possibility of a real defence on the question of fact (Jacobs v Booth’s Distillery Co (1901) 85 L T 262, HL; Runnacles v Mesquita (1876) 1 QBD 416). Where there are unexplained features of both the claim and the defence which are disturbing because they bear the appearance of falsity and disreputable business dealings and questionable conduct, the court should not make tentative assessments of the respective chances of success of the parties or the relative strengths of their good and bad faith, and should not on such an examination grant the defendant conditional leave to defend, but should give unconditional leave to defend (Extraktionstechnik Gesellschaft für Anlagenbau Gmbh v Oskar (1984) 128 S J 417; (1984) L S Gaz 1362, CA applied in Billion Silver Development Ltd v All Wide Investments Ltd [2000] 2 HKC 262).” (my emphasis)

IX.  O14 SUMMONS

70.I now consider the appeal against the Judgment.  Ms Yang submitted that the defendant has raised triable issues and arguable defences by what I shall describe as the Delay Defence, the Repayment Defence and the S18 Defence, which shall be discussed in greater detail below.

71.Several preliminary matters are of note:

(a) Although I decline to set aside the Order, I proceed to consider the defendant’s appeal against the Judgment by considering the Draft and Wu 2^nd Aff on de bene esse basis.

(b) I am assured by Mr Chain and Ms Yang that there is no need for me to consider the PRC Judgments save and except for the parts to which they have specifically drawn my attention. In this respect, I note that both counsel focused on the 4^th PRC Judgments.

(c) Ms Yang has conceded that the defendant did sign the Loan Agreement even though he claimed that he did so in circumstances as he explained and not as Mr Lai, Mr Leung, Mr Yu and Mr Tse alleged.

(d) Ms Yang has also conceded that the S 18 Defence based on section 18 of the Ordinance only applies to the 1^st Payment and not to the 2^nd Payment.

(a)  Repayment Defence

72.Defendant’s case: Ms Yang painted a sinister picture by suggesting that the present action by the plaintiff was part of a much larger entangled web of financial disputes between Mr Tse and the defendant and their related companies (or corporate vehicles) in relation to their business dealings in the PRC and/or Hong Kong, and hence the present action could not be divorced from such wider picture which called for investigation. On such basis, it was said that the defendant should have unconditional leave to defend.

73.Ms Yang submitted that Mr Tse owned SFHL and controlled the plaintiff’s operations, and since 2001 Mr Tse had business dealings with the defendant.  She said Mr Tse was such good friends with the defendant that he was prepared to immediately advance HK$7.5 million to the defendant on 3 August 2004 and to advance a further sum of HK$7.5 million on the following day without any security purportedly using the plaintiff as lender but the loan money coming from SFHL.

74.Ms Yang reminded that in September 2004 SFHL entered into an agreement with the defendant’s company 東莞市三元盈暉投資發展有限公司 to develop a property project in Dongguan, Mainland China and injected RMB20,350,000.00 and RMB7,120,000.00 into the joint venture.[13]  In November 2005, Mr Tse’s company東莞市凱旋門實業投資有限公司 entered into another agreement with the defendant’s company 東莞市三元實業投資有限公司 to develop a property project called “盛世凱旋住宅小區”.[14]  There was a long standing and ongoing lending relationship between 東莞市凱旋門實業投資有限公司 and東莞市三元實業投資有限公司 and the defendant,[15] and there were running accounts up to 2007 with 東莞市甫城區三元里社區居委會, its subsidiary 東莞市三元工貿實業總公司, the defendant and Mr Tse personally and through various intermediaries.[16]  In fact, the defendant and Mr Tse were respectively 33% and 67% beneficial owners of東莞市凱旋門實業投資有限公司, and the defendant was found to be rightfully entitled to the profits of such company.[17]

75.Ms Yang argued that in light of such background, it would be artificial to say that the present action was entirely divorced from the other monetary transactions between the parties and their related companies, and this demonstrated that the relationship between the plaintiff and the defendant was not that of genuine lender and borrower and that the plaintiff’s claim herein was not a simple debt recovery by a licensed moneylender.

76.Ms Yang submitted that the defendant could not recall with accuracy how the loan documents for the HK$15 million loan came about, but the Wu 2^nd Aff made clear that repayments made to Mr Tse’s companies amounting to at least RMB49,280,000.00 from 28 September 2004 to 10 May 2007 as evidenced by the Documents supported the defendant’s case that such loan had already been fully repaid and/or set off in the running accounts between Mr Tse’s and the defendant’s companies.  Ms Yang contended that the accounts/disputes between the parties could not be resolved on affidavit by way of summary procedure.

77.Plaintiff’s case: On the other hand, Mr Chain submitted there was simply no or no sufficient evidence or particulars of the defendant’s new case that he had made full repayment in/before 2007 (ie before the commencement of the present action) by referring to the PRC Judgments. Indeed, the PRC Judgments were disclosed as early as in December 2012 in support of the defendant’s assertion in the Wu 1^st Aff that the loan of HK$15 million had been repaid that did not condescend upon any further particulars.  It was only in the Wu 2^nd Aff that the defendant referred specifically to the 4^th PRC Judgments and for the first time suggested that the alleged repayments in full were made in/before 2007 (ie before the commencement of the present action).  Mr Chain submitted this was plainly incredible. He argued that logic dictated that the defendant would not have omitted to raise such an obvious defence until the eve of the Master Hearing had it been a true one.  Mr Chain further argued that such reticence could not be brushed aside on a broad assertion that the defendant had limited education and that he lacked sophistication. After all, the defendant was admittedly engaged in multi-million dollar business dealings and was a trader in securities with frequent and high turnover.

78.Mr Chain further submitted that the Repayment Defence was nothing more than a bare assertion since the 4^th PRC Judgments simply did not support the defendant’s case.  As a matter of fact/record, the 4^th PRC Judgments showed that the defendant’s case before the PRC courts was that the payments had nothing to do with him in his personal capacity.[18]  It must be noted that the reference to payments made in the 4^th PRC Judgments was part of the contentions of 東莞市三元實業投資有限公司 (being the defendant therein), and they were in relation to past transactions. But in the 4^th PRC Judgments judgment was entered against 東莞市三元實業投資有限公司which was therefore liable to東莞市凱旋門實業投資有限公司for about RMB57 million, and such decision was upheld on appeal and retrial.

79.Discussion: I accept for present purpose that there has been business dealings between Mr Tse and the defendant and their respective companies. But does such background fact give rise to an arguable defence or triable issue on the merits sufficient to resist the O14 Summons?

80.At the Hearing, Ms Yang has conceded that all that can be shown in the affirmation evidence before me (including the Wu 2^nd Aff on de bene esse basis) is that there has been running accounts (ie payments and receipts) between Mr Tse’s and the defendant’s companies pursuant to their business dealings, but neither the affirmation evidence before me nor the PRC Judgments demonstrate (a) identifiable receipt(s) of the loan money of HK$15 million by the defendant and/or by his companies, and/or (b) identifiable payments attributable to the repayment of such loan of HK$15 million and interest thereon.  Quite plainly and as Ms Yang has frankly admitted, the so-called running accounts that show actual receipt of the loan and actual repayment made are not before me.

81.In short, Ms Yang’s contentions  amount to this: because of the traffic of funds between Mr Tse’s and the defendant’s companies in relation to their business dealings, which traffic of funds includes payments made by the defendant’s companies to Mr Tse’s companies some of which are evidenced by the Documents, the defendant should be given unconditional leave to defend so that he can have the opportunity to go through the running accounts to identify the sums attributable to repayments of the aforesaid loan.  In my view, this is plainly not an arguable defence or triable issue.  This is no more than a bare assertion coupled with a wish to look for an arguable defence or triable issue.

82.If the loan of HK$15 million has been repaid in/before 2007 (and given that the plaintiff has commenced the present action in 2008), the defendant has had over four years to formulate and support his defence.  His inability even now to come forth with (a) proper clarification as to what payments made in/before 2007 are attributable to repayments of the loan and/or (b) proper explanation as to why such payments are not part of the business dealings between the companies speak to the hopelessness of the Repayment Defence.

83.Ms Yang has referred to some of the evidence adduced by 東莞市凱旋門實業投資有限公司 in the 1^st Instance 4^th PRC Judgment, which she claims suggests that Mr Tse’s personal payments were intertwined with the corporate accounts:[19]

“ 7、 ……支票存根三張，內容分別為2007年6月6日付三元工貿[20] 1330000元，用途存投資款，2007年6月6日付三元工貿2,000,000元，用途為謝老板往來款，經手人葉慶球; 2007年6月7日付謝老板(三元工貿)2,642,000元，經手人葉慶球。

8、 收據一張，內答為“今收到謝兆凱先生現金9,556,000元，胡桂容，2006年1月20日”。

9、 承諾書，內容為“關於本人與謝兆凱合作沙田項目，本人愿意給謝兆凱純利潤1800萬元，於2006年11月底付清，承諾人胡桂容，2006年7月31日”。”

84.However, according to the defence case of 東莞市三元實業投資有限公司, some payments in item 7 in the aforesaid extract from the 1^st  Instance 4^th PRC Judgment are regarded as payments by 東莞市凱旋門實業投資有限公司 to東莞市三元工貿實業總公司 or as payments by their related companies:

凱旋門公司[21]與三元工貿[22]清單

序號	付款單位 (借款)	金額 (人民幣)	日期
1	凱旋門公司付給三元工貿	2,000,000	6/6/07
2	凱旋門公司付給三元工貿	1,330,000	6/5/07
3	凱旋門公司付給三元工貿	9,823,147	17/10/06
4	凱旋門公司付給三元工貿	4,800,000	15/3/07
5	凱旋門公司付給三元工貿	5,461,468	27/12/06
合計	凱旋門公司付給三元工貿	23,414,615

雙方關聯公司之間的往來眼目

序號	付款單位 (借款)	金額 (人民幣)	日期
1	老夫子貿易[23]付給三元工貿	1,000,000	31/8/04
2	老夫子貿易付給三元工貿	1,000,000	25/8/04
3	老夫子貿易付給三元工貿	2,700,000	24/8/04
4	老夫子貿易付給三元工貿	500,000	22/7/04
5	老夫子貿易付給三元工貿	8,000,000	5/3/04
6	老夫子貿易付給三元工貿	20,000,000	27/9/03
7	凱旋門酒店付給三元工貿	2,642,020	7/6/07
合計	凱旋門公司關聯企業付給三元工貿及三元工貿的 共聯企業	53,795,167

As regards the other payments and/or promises to pay in items 7-9 in the aforesaid extract from the 1^st Instance 4^th PRC Judgment, there is nothing before this court to show those payments and/or promises were not related to the business dealings in contra-distinction from the alleged loan by Mr Tse (even on the defendant’s case).

85.Ms Yang also relies on the repayments made by 東莞市三元工貿實業總公司 and its related companies in/before 2007 (partly evidenced by the Documents) to support the defendant’s case that the loan of HK$15 million has been fully repaid. In this respect, she refers to the repayments made as shown in the running accounts between東莞市凱旋門實業投資有限公司 and東莞市三元工貿實業總公司 and between their related companies being part of the defence case put forward by東莞市三元實業投資有限公司 in the 1^st Instance 4^th PRC Judgment:

凱旋門公司[24]與三元工貿[25]清單

Date	Payer	Payee	“三元工貿支付給凱旋門公司” as alleged by三元實業[26] in the 1st Instance 4th PRC Judgment (RMB)	Documents exhibited to Wu 2nd Aff (RMB)
27/10/06	三元工貿	凱旋門公司	10,000,000
27/11/06	三元工貿	凱旋門公司	5,461,468
15/2/07	三元工貿	凱旋門公司	35,000,000	35,000,000
10/5/07	三元工貿	凱旋門公司	141,000	141,000
10/8/07	三元工貿代凱旋門付規劃		887,277
10/8/07	三元工貿	凱旋門公司	690,000
			52,179,745

雙方關聯公司之間的往來帳目

Date	Payer	Payee	“三元工貿及三元工貿關聯企業付給凱旋門公司關聯企業” as alleged by三元實業in the 1st Instance 4th PRC Judgment (RMB)	Documents exhibited to Wu 2nd Aff (RMB)
6/12/02	三元工貿	恆健隆食品	1,060,000
26/3/03	三元工貿	老夫子貿易[27]	2,500,000
8/4/03	三元工貿	老夫子貿易	1,800,000
10/7/03	三元工貿	老夫子貿易	1,000,000
8/8/03	三元工貿	老夫子貿易	8,000,000
2/9/03	三元工貿	老夫子貿易	12,000,000
23/2/04	三元工貿	老夫子貿易	2,127,900
16/4/04	三元工貿	老夫子貿易	3,000,000
11/6/04	三元工貿	老夫子貿易	1,000,000
28/9/04	三元工貿	尼羅河酒店[28]	1,000,000	1,000,000
30/9/04	三元工貿	尼羅河酒店	1,000,000	1,000,000
20/10/04	三元工貿	尼羅河酒店	500,000	5,000,000
7/1/05	泰迪貿易[29]	老夫子貿易	1,500,000	1,500,000
12/1/05	泰迪貿易	老夫子貿易	500,000	500,000
19/1/05	三元工貿	老夫子貿易	500,000	500,000
21/1/05	三元工貿	老夫子貿易	80,500
4/3/05	三元工貿	老夫子貿易	1,000,000	1,000,000
31/3/05	三元工貿	老夫子貿易	1,500,000	1,500,000
14/9/05	縉升物業投資[30]	尼羅河酒店	2,000,000	2,000,000
23/9/05	縉升物業投資	尼羅河酒店	2,930,000	2,930,000
25/1/07	泰迪貿易	凱旋門公司	910,000	910,000
12/4/07	泰迪貿易	凱旋門公司[31]	800,000	800,000
13/8/07	三元工貿	老夫子貿易	10,000,000
			108,888,145

86.From the above, two matters are of significance.

87.According to the aforesaid running accounts under the defence case by東莞市三元實業投資有限公司 in the 1^st Instance 4^th PRC Judgment, monies were received by and repayments were made by or on behalf of 東莞市三元工貿實業總公司 and not by its successor company 東莞市三元實業投資有限公司. But according to the finding on p 14 of the 1^st Instance 4^th PRC Judgment, “本院經審理查明，東莞市工貿實業總公司成立於1991 年7 月4 日，是由東莞市篁村區辦事處三元里社區居委會開辦的集體所有制企業，法定代表人胡桂容，企業法人營業執照註冊號449001001464。2007 年8 月16 日，東莞市三元工貿實業總公司經核准變更為東莞市三元實業投資有限公司 ……，公司類型為有限責任公司(自然人獨資)，股東是胡桂容。”

88.I also note all the repayments in the aforesaid running accounts put forward by東莞市三元實業投資有限公司 in the 1^st Instance 4^th PRC Judgment were made before 16 August 2007 when東莞市三元實業投資有限公司 was established to substitute東莞市三元工貿實業總公司. In short, the aforesaid repayments were not made by the defendant’s own company but made by 東莞市三元工貿實業總公司 and its related companies.

89.Secondly, the 1st Instance 4^th PRC Judgment was concerned with a written acknowledgment of debt dated 8 October 2007 between 東莞市凱旋門實業投資有限公司 and東莞市三元工貿實業總公司that acknowledged the lender-borrower relationship between them and further acknowledged that up to 8 October 2007東莞市三元工貿實業總公司still owed東莞市凱旋門實業投資有限公司 RMB56,918,835.00 with agreed default charges and interest.  But the PRC court held that the underlying loan contract was unlawful and hence東莞市三元工貿實業總公司 had to make restitution of the loan money.  Since東莞市三元工貿實業總公司 had been “改制” as 東莞市三元實業投資有限公司, the latter should repay the loan principal of RMB56,918,835.00 with interest but not any default charges.

90.It was in that context that 東莞市三元實業投資有限公司 put forward the defence that 東莞市三元工貿實業總公司 and its related company東莞市泰廸貿易有限公司had made full repayments to 東莞市凱旋門實業投資有限公司 and its related company深圳市老夫子貿易有限公司.  But such defence was rejected since there were no deductions for such repayments made before 8 October 2007 in the written acknowledgment of debt. The defence of repayments by related companies was also rejected: “對於泰廸公司的付款，因凱旋門公司已提供證據證明凱旋門公司與泰廸公司存在其他的債權債務關係，故本院在此不宜直接一併認定、處理﹔對於泰廸公司與老夫子公司之間的款項往來，因凱旋門公司否認與本案有關聯性，而三元公司不能進一步提供其他證據予以佐證，故本院在此不宜直接處理”. In my view, there is a clear acknowledgment of the business relationship between various companies with no earmarking of funds to support any suggestion that the loan of HK$15 million has been repaid.

91.But more importantly, the defendant herein (who was also a defendant in the 1^st Instance 4^th PRC Judgment) claimed he was not liable for the indebtedness of東莞市三元工貿實業總公司on inter alia the following grounds:[32]

“一、 本案涉及的糾紛是企業間的非法借貸。該借貸發生於兩個企業之間，而不是胡桂容和凱旋門公司企業之間。無論是凱旋門公司提供的證據還是三元公司提供的證據均顯示，借貸往來於單位之間，與胡桂容個人無關，胡桂容不是當事人，胡與凱旋門公司之間不存在借貸關係，不應列作本案的被告。

二、 胡桂容是三元公司唯一持股人的事實，不能成為胡桂容是透格被告的依據。…… 本案中，自三元公司於2007年8月改制以來，帳目清晰，改制時廣東正量會計師事務所出具的驗資報告，及改制以來三元公司的財務報表，均可證明胡桂容與三元公司的帳目沒有混同，兩帳目各自獨立清晰。因此，…… 胡桂容不是兩案透格的被告。凱旋門公司要求胡桂容對三元公司的債務承擔連帶責任的請求沒有法律依據。

三、 凱旋門公司提出的帳目混同沒有事實上和法律上的依據。…… 三元公司財務報表的存在清楚地說明: 三元公司的帳目與胡桂容的帳目是完全分開的，各自獨立的，沒有任何混同。因此，胡桂容不應對三元公司的債務承擔連帶責任。”

92.The 1^st Instance 4^th PRC Judgment held that:[33]

“…… 三元工貿原是集體企業，有企業法人營業執照，應獨立承擔民事責任。後三元工貿於2007年9月變更為三元公司，三元公司是有限責任公司(自然人獨資)，股東是胡桂容。依據《中華人民共和國公司法》第三條規定: …… ，故三元公司以其自身財產對外獨立承擔責任。如果要求胡桂容承擔連帶責任，則需對三元公司先行審計、清算再予以判斷，故，本院認為在本案中不宜直接處理胡桂容是否應當對三元公司債權債務承擔連帶責任，凱旋門公司可另行提起訴訟。”

This conclusion was also upheld on appeal:[34]

“但根據2007年8月31日廣東正量會計師事務所有限公司出具的《驗資報告》，胡佳容已完成了出資義務，其出資的財產為了三元公司的財產，三元公司作為獨立企業法人，應以公司財產對公司債務承擔責任，股東僅以其繳的出資額為限對公司承擔責任，三元公司是否在財務上完整記載負債情況，屬三元公司內部財會管理的問題，不足以成為認定三元公司與胡桂容財產混同的理由，胡桂容和三元公司已提交公司財會資料證明三元公司的財產獨立於股東胡桂容自己的財產，對此凱旋門公司沒有提交證據予以反駁，故凱旋門公司要求胡桂容對三元公司的債務承担連帶清償責任，不應支持，原審判決駁回凱旋門公司要求胡桂容對三元公司的債務承擔連帶清償責任的訴請正確，應予維持。”

93.Indeed, such decision was not disturbed on retrial.[35]  Having considered all the circumstances, I am not persuaded that the Repayment Defence raises any triable issue. Hong Kong Civil Procedure 2013 states that “‘[a] desire to investigate alleged obscurities and a hope that something will turn up on the investigation cannot, separately or together, amount to a sufficient reason for refusing to enter judgment for the plaintiff. You do not get leave to defend by putting forward a case that is all surmise and Micawberism’ (per Megarry V.-C. in Lady Anne Tennant v. Associated Newspapers Group Ltd [1979] F.S.R. 298)”.[36]

(b)  Delay Defence

94.Ms Yang submitted that although the plaintiff alleged the defendant defaulted in repayment of the Loan and interest thereon since October 2004, the plaintiff did not make any formal demand for repayment until 2008 and did not actively progress the present action until the O14 Summons in October 2012. It was argued that such delay in bringing a summary judgment application might, in itself, be reason for refusing judgment and lead the court to examine the plaintiff’s case with more circumspection.[37]

95.But the present case has not progressed further beyond the filing of pleadings. It is not as if much time and effort has been made by the parties in, say, making discovery and preparing witness statements such that the maturity of the case properly leads one to question whether letting it proceed to trial may be a preferable route than being side-tracked by a summary judgment application that takes up time and effort that may be better expended on bringing the case forward to trial.

96.Further, if there are simply no triable issues or arguable defences, then notwithstanding some delay on the part of the plaintiff at the initial stage of the present action, I see no sensible reason for the court to withhold summary judgment and let the parties incur unnecessary time and costs to enable the case to move forward to trial.

97.In my view, since there are no merits to the Repayment Defence and (as seen below) the S 18 Defence, I am unable to read anything more sinister into the delay by the plaintiff in their claim for repayment of the Loan and interest thereon at the earlier stage of the present action. Even though it has been suggested that 2008 (ie when the present action commenced) was when the business relationship between Mr Tse and the defendant started to unravel, and both parties and/or their various companies commenced myriad lawsuits against one another (that resulted in the PRC Judgments), I am not persuaded that it amounts to an arguable defence to the plaintiff’s claim herein.

(c)  S 18 Defence

98.As Ms Yang has accepted, this defence (if viable) goes only to the plaintiff’s claim for recovery of the 1^st Payment and not the 2^nd Payment.  The crux of the complaint is that the plaintiff has released the 1^st Payment to the defendant a day before the signing of the Loan Agreement.

99.Ms Yang referred to ASG Finance Ltd v AB[38] for the relevant principles. In that case, a money lender sought summary judgment for the outstanding indebtedness due from the debtor who was a practicing solicitor. He used to act for the group of companies to which the plaintiff belonged and at one stage he was a director of the plaintiff as well as a director of the plaintiff’s holding company and another company within the group.  A Cheung J (as he then was) held that:

“17. …… I am prepared to accept that there is no rule of law that the Court cannot, at the O.14 stage, deal with the question of discretion under s.18(3), or put another way, consider whether it is beyond argument that the discretion can only be properly exercised in one way, and instead must in all cases defer the question to a full trial …… I am prepared to accept that in an appropriate case, the Court may, at the hearing of an O.14 application, conclude on the material before it, that the discretion under the money lending legislation can only be properly exercised in a particular manner, so much so that any contention to the contrary is unarguable, and deal with the application for summary judgment accordingly.

……

19. However, each case depends on its own facts. Moreover, as Bokhary JA (as he then was) observed in Cheung Chow v Cheung Ng Sheong (unrep., Civ App No 119 of 1993, [1993] HKLY 762) on pp.7-8:

It is at least reasonably arguable that, as those learned judges held at first instance, the courts should be slow to relieve money lenders who fail to comply with the Ordinance regulating their activities, since any other approach would be to frustrate rather than to promote the objects of such legislation. One can understand that point of view, as money lenders are sometimes companies, and the financial penalty is not particularly high when it comes to the criminal sanctions for breaches of the provisions of the relevant legislation. In a final appeal with all the facts having been investigated, as opposed to an interlocutory one with many relevant facts in issue, this Court would be in a position to give further guidance as to how the discretion is to be approached.

If it be correct for the courts to approach their discretion in the way in which it was approached in the two first instance decisions which I have mentioned - and I do not think that we can rule that out at this stage - then it would be important to have a full picture of the activities in general of the money lender in question. That picture is not before us. Overall, no court can say with reasonable confidence at this stage that it has a clear view of all the circumstances which fall to be considered in the exercise of the discretion here in question.”

100.In that case, the facility letter was misleading and incorrect as to the interest rate (stated to be 3.5%pa over prime when it was 6%pa over prime) and as to the purpose of the facility (stated to be for financing of securities purchased by the defendant through a specified stockbroker when the supporting affidavit stated it was for personal and/or business use).  Further, the defendant was required to provide post-dated cheques which were curiously treated by the money lender as stocks in hand in their statement of account, and there was curious fluctuation of the credit limit of the facility notwithstanding a specified limit in the facility letter.  Hence, the learned judge felt he could not conclude at the Order 14 stage that a full picture of the activities in general of the plaintiff would be wholly irrelevant or unimportant to considering how the discretion under section 18(3) of the Ordinance should be exercised.

101.Ms Yang submitted there were also peculiar features of the loan of HK$15 million in the present case against the backdrop of the parties’ close business relationship, the high interest rate and the absence of collateral, and hence this court should grant leave to defend in respect of the 1^st Payment and interest thereon.

102.On the other hand, Mr Chain argued it was a mere technical breach and in all the circumstances this court should exercise its discretion under section 18(3) of the Ordinance in favour of the plaintiff. As explained by DHCJ Le Pichon in Ontone Finance Company Limited v Ms Leung Lai Ching, Margaret & anor,[39] whether the discretion to be exercised is necessarily fact-sensitive. “Clearly regard must be had to all the facts and circumstances of the particular case. The court must be satisfied it has sufficient evidence before it to warrant the exercise of the discretion.”

103.Here, the plaintiff is a licensed money lender. It has given a full account of its dealings with the defendant, and how the Loan came about. The defendant does not dispute that he actually received the 1^st and 2^nd Payments as loan monies, and that he is contractually obliged to repay such sum with interest.  He also does not dispute that he signed the Loan Agreement.  Notwithstanding his suggestion that he was told his signing of the Loan Agreement was a mere formality, he does not raise any allegation of misrepresentation, fraud or non est factum.[40]  Further, despite his claim to his roots in peasantry, he was at the material time a businessman engaged in multi-million dollar property and hotel projects, and a frequent and high turnover trader in securities. Indeed, the interest rate for the Loan in the Loan Agreement at 36% pa was much more conservative than the interest rate of 5% per month, which according to the defendant was the rate he agreed to pay for the loan.  I am unable to see how lack of collateral has any impact in this case.  The defendant admitted he operated on oral promises and handshakes, frankly acknowledged he had to repay the loan of HK$15 million with interest, and made no complaint of any prejudice in the Wu 1^st and 2^nd Aff in respect of any absence of collateral.

104.Bearing in mind that I have rejected the Repayment Defence, in balancing the equities in this case, I see no reason to defer any exercise of discretion, which I have no hesitation in concluding must be exercised in the plaintiff’s favour. I consider it will be equitable to hold that the Loan is enforceable, and that the plaintiff is entitled to claim for repayment of the Loan with interest thereon.

(d)  Miscellaneous matters

105.The defendant raised various disputes of fact, eg the loan was granted by Mr Tse and not the plaintiff. But they are bare assertions that fly in the face of the Loan Agreement that he admittedly signed. In my view, they do not raise any triable issue or arguable defence.

106.There is also complaint that the amount of interest in Clause 3(a) has been left blank.  But the rate of interest at 36% pa was clearly specified. There is no merit to this argument.  Even if there is basis for such complaint, it would not have swayed the exercise of discretion under section 18(3) of the Ordinance as discussed above.

X.  CONCLUSION

107.The Appeal against the Order is dismissed. In respect of the Appeal against the Judgment, whilst I agree there are no merits to the Appeal, I consider the Judgment has been entered for an incorrect amount in respect of the interest allowed.

108.In the Judgment, Master K Lo adjudged that the defendant do pay the plaintiff the sum of HK$38,569,376.16 together with interest thereon at 36%pa from 14 October 2008 until the date of payment.  However, out of the sum of HK$38,569,376.16, the sum of HK$22,479,365.21 is interest on the outstanding indebtedness from 16 October 2004 to 13 October 2008 at 36%pa,[41] and I see no reason why the defendant should pay interest on such interest sum at 36%pa.

109.In the circumstances, I set aside the Judgment insofar as it allows interest on the sum of HK$38,569,376.16 at 36%pa from 14 October 2008 to the date of payment, and enter judgment against the defendant for the sum of HK$38,569,376.16 together with interest on the sum of HK$15,621,369.86 at 36%pa from 14 October 2008 to the date of payment. The costs order in the Judgment is not disturbed.

110.I see no reason why costs of the Appeal should not follow event. Mr Chain submitted that costs of the Appeal should be taxed on indemnity basis as provided for in Clause 3(d) of the Loan Agreement.  I agree, and grant a costs order nisi that the defendant do pay the plaintiff costs of the Appeal on indemnity basis to be taxed if not agreed.

Mr Benjamin Chain, instructed by Leung Kin & Co, for the plaintiff

Ms Elizabeth Yang, instructed by C L Chow & Macksion Chan, for the defendant

1.  Civil Judgment (民事判決書) by the Intermediate People’s Court of Dongguan City, Guangdong Province (廣東省東莞市中級人民法院) dated 17 November 2011 ((2010)東中法民四初字第14號) between SFHL as plaintiff (原告) against 東莞市三元盈暉投資發展有限公司 as defendant (被告) and 東莞市三元實業投資有限公司, 東莞市凱旋門實業投資有限公司 and Mr Tse as third parties (第三人);

on appeal Civil Judgment  (民事判決書) by the Higher People’s Court of Guangdong Province (廣東省高級人民法院) dated 20 November 2011 ((2012)粵高法民四終字第42號) between SFHL as appellant (plaintiff in original action) (上訴人(原告)) against 東莞市三元盈暉投資發展有限公司 as respondent (defendant in original action) (被上訴人(被告)) and 東莞市三元實業投資有限公司, 東莞市凱旋門實業投資有限公司 and Mr Tse as third parties in original action (原審第三人);

(collectively, “1^st PRC Judgments”)

2. Civil Judgment (民事判決書) by the First People’s Court of Dongguan City, Guangdong Province (廣東省東莞市第一人民法院) dated 4 January 2012 ((2011)東一法民二初字第1101號) between東莞市三元實業投資有限公司as plaintiff (原告) against東莞市凱旋門實業投資有限公司as defendant (被告)

(“2^nd PRC Judgment”)

3. Civil Judgment  (民事判決書) by the Intermediate People’s Court of Dongguan City, Guangdong Province (廣東省東莞市中級人民法院) dated 16 August 2010 ((2008)東中法民二初字第71號) between the defendant herein as plaintiff (原告) against東莞市凱旋門實業投資有限公司, 謝輝雄 and Mr Tse as defendants (被告) and東莞市三元盈暉投資發展有限公司, 劉煥詩 and 顏倫曉 as third parties (第三人);

on appeal Civil Judgment (民事判決書) by the Higher People’s Court of Guangdong Province (廣東省高級人民法院) dated 9 March 2011 ((2010)粵高法民二終字第138號) between 東莞市凱旋門實業投資有限公司 as appellant (defendant in original action) (上訴人(原審被告)) and the defendant herein as respondent (plaintiff in original action) (被上訴人(原審原告)) with 謝雄輝 and Mr Tse as defendants in original action (原審被告) and東莞市三元盈暉投資發展有限公司, 劉煥詩 and 顏倫曉 as third parties in original action (原審第三人);

(collectively, “3^rd PRC Judgments”)

4. Civil Judgment (民事判決書) by the Intermediate People’s Court of Dongguan City, Guangdong Province (廣東省東莞市中級人民法院) dated 24 October 2009 ((2008)東中法民二初字第4號) between東莞市凱旋門實業投資有限公司 as plaintiff (原告) and 東莞市三元實業投資有限公司 and the defendant herein as the defendants (被告) (“1^st Instance 4^th PRC Judgment”);

on appeal Civil Judgment  (民事判決書) by the Higher People’s Court of Guangdong Province (廣東省高級人民法院) dated 25 December 2009 ((2009)粵高法民二終字第171號) between東莞市凱旋門實業投資有限公司 as appellant (plaintiff in original action) (上訴人(原審原告)), 東莞市三元實業投資有限公司 and the defendant herein as appellants (defendants in original action) (上訴人(原審被告) (“Appeal 4^th PRC Judgment”);

upon 民事抗辯by Supreme People’s Procuratorate (最高人民檢察院) Civil Judgment  (民事判決書) on retrial (再審) by the Higher People’s Court of Guangdong Province (廣東省高級人民法院) dated 20 September 2012 ((2011)粵高法審監民再字第49號) between東莞市三元實業投資有限公司 as petitioner (defendant in original action and appellant on appeal) (申訴人(一審被告、二審上訴人)) and 東莞市凱旋門實業投資有限公司 as respondent (plaintiff in original action and appellant on appeal) (被申訴人(一審原告、二審上訴人)) with the defendant herein as appellant on appeal (and defendant in original action) (二審上訴人(一審被告)) (“Retrial 4^th PRC Judgment”)

(collectively, “4^th PRC Judgments”)