CHINA CITIC BANK INTERNATIONAL LTD v. CHEUK SHUK HING AND OTHERS

HCMP 1447/2019

[2022] HKCFI 3646

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1447 OF 2019

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JUDGMENT

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A. Introduction

1.  This judgement arises from the trial of the Order 88 Originating Summons (the OS) issued by the Plaintiff on 10 September 2019.

2.  The OS seeks relief against 5 Defendants pursuant to various mortgages and guarantees which have been provided by the Defendants relating to facility letters under which the Plaintiff bank has lent money to various parties.  There has already been judgement entered against all Defendants except for the 1^st Defendant, and consequently the only issues remaining to be decided are the liability (and any resulting quantum) of the 1^st Defendant, together with the counterclaim which is pursued by the 1^st Defendant.

3.  The trial commenced on 28 November 2022 and was fully contested by the 1^st Defendant, and she also prosecuted her counterclaim.  However, shortly after opening submissions had been made by both parties, and during the course of the evidence being given by the first witness for the Plaintiff, Mr Damian Wong, counsel for the 1^st Defendant, indicated to the court that the 1^st Defendant no longer wished to defend the matter, or to prosecute the counterclaim, and that she would not give evidence.  It appeared that she was in fact content to allow judgement to be entered against her.  The trial was adjourned to allow the parties to reach an agreed position.

4.  On the morning of 29 November 2022, at the resumption of the hearing following the adjournment, the court was informed that the 1^st Defendant would not in fact sign a consent order recording what had previously appeared to be her consent to judgement being entered.  The court was informed that she required the Plaintiff to prove its case, she would not give evidence and Mr Wong had no instructions to do anything other than appear and assist the court where requested.

5.  As a result, the Plaintiff adduced its evidence and, for all intents and purposes, the matter proceeded as if in the absence of the 1^st Defendant.  However, of course, it was not in fact in the absence of the 1^st Defendant because Mr Wong remained instructed on her behalf and so strictly the position was that the 1^st Defendant was present but chose to make no submissions and not to cross-examine the Plaintiff’s witnesses.  I gave Mr Wong an opportunity after the evidence in chief of each witness to cross-examine and, consistently with his instructions, he declined that opportunity on each occasion.  I also gave him an opportunity to make oral closing submissions after the evidence had been heard but, again consistently with his instructions, he declined that opportunity as well.

6.  I also reminded the Plaintiff that where a trial is not attended by one of the parties (which technically is not the case here) there is still an obligation of fair presentation on a Plaintiff which is less extensive than the duty of full and frank disclosure on an Ex Parte Application.  Nevertheless, in my view it is appropriate for a Plaintiff to identify points of factual or legal note which may be of benefit to a Defendant.  It is also important that a Plaintiff should not pursue claims which are not sustainable, and it should identify to the court points which a Defendant had taken before it decided to play no further part in the action. The Plaintiff should also consider, and bring to the attention of the court, points which had not been taken by the Defendant but which might well have been had it decided to defend the proceedings.  In this context I referred the Plaintiff to the decision of HHJ Waksman QC (Sitting as a Judge of the High Court) in CMOC Sales & Marketing Limited v Persons Unknown [2018] EWHC 2230 (Comm), as approved by Ng J in Moulin Global Eyecare Holdings Limited (in Liquidation) v Olivia Lee Sin Mei [2019] HKCFI 1715.

7.  I am satisfied that, through the detailed written opening submissions and the oral opening submissions made by the Plaintiff, the Plaintiff has discharged any obligation that it might have had in this respect.

8.  The Plaintiff called:

8.1  Mr Lo Wai Kei Wilkie, who was the lawyer before whom the 1^st Defendant attended when she signed the relevant documents.

8.2  Mr Chan Hing Chung, who is an assistant vice president of the Plaintiff, who says that he explained the contents of the various facility letters relating to the 3^rd Defendant to the 1^st Defendant.

8.3  Mr Fu Yat Lun Philip, who is a partner of Vincent TK Cheung Yap & Co who was the solicitors before whom the 1^st Defendant attended when signing the second mortgage over her property in respect of the debts of the 5^th Defendant (but which do not form part of this action).

8.4  Mr Choy Siu Tak, who is an assistant manager of the Plaintiff who is responsible for preparing the calculation of the amount outstanding on the 3^rd Defendant’s account, and therefore which, but for the defences, the 1^st Defendant will be liable.

B.  The Facts

9.  The primary facts do not appear to be controversial insofar as the current claim is concerned.  I note that the current claim only concerns monies owed by the 3^rd Defendant, and hence only concerns the first mortgage over the property.  There was, in fact, also a second mortgage signed by the 1^st Defendant in order to secure monies owed by the 5^th Defendant, but that is no longer relevant to the claim, save possibly in relation to the evidential assistance that the documents concerning it may provide.

10.  The Plaintiff is the mortgagee bank and the 1^st Defendant is, and was, the registered owner of a property known as Flat 71 A, Tower 3, Sorrento, No.1 Austin Road West, Kowloon (the Property). 

11.  The 1^st Defendant mortgaged the Property to the Plaintiff by way of an “all monies” legal charge dated 7 April 2017, to secure the borrowings of the 3^rd Defendant, Tideway Technology Limited.  The borrowings were granted pursuant to facility letters dated 23 March 2017 (in the total amount of HK$17 million) and 6 June 2018 in the total sum of HK$59 million.  The second facility letter superseded the first facility letter but pursuant to the terms of the mortgage the 1^st Defendant had covenanted with the bank to repay, on demand, all sums that were due and owing by Tideway Technology Limited.  It appears to be accepted that, subject to the defences run by the 1^st Defendant she will be liable to the Plaintiff for any borrowings of Tideway Technology Limited and the bank would be entitled to possession of the Property pursuant to the terms of the mortgage in the event of non-payment (which has happened).

12.  I should note that in paragraph 4 of the Defence and Counterclaim there is a denial that the mortgage was signed to secure repayment to the Plaintiff of all monies.  No further detail of that denial is given but, for the sake of completeness I record that I accept that pursuant to the terms of the mortgage it is indeed an all monies mortgage.

13.  The defence contends that the 4^th Defendant, who was previously known to the 1^st Defendant, requested the 1^st Defendant to assist him to repay a debt of HK$5,500,000.  The 4^th Defendant arranged for the Plaintiff to replace the 1^st Defendant’s original mortgagee, Wing Hang Bank, and told the 1^st Defendant that he would obtain an increased loan, lower mortgage rate and pay the monthly instalments of the mortgage.  Relying upon these representations the 1^st Defendant attended a meeting with Au-Yeung, Lo & Chung, on 7 April 2017 to execute the mortgage.  She says that the documents that she was asked to sign were not explained to her, were not translated and that she does not read English.

14.  The 4^th Defendant has not repaid the monthly instalments and she says that it was not until the Plaintiff demanded repayment from the 1^st Defendant that she understood the true nature of the mortgage and other documents that she had signed.

15.  Pursuant to the facility agreement various amounts were lent to the 3^rd Defendant and neither they, nor the interest which has accrued on those amounts have been repaid in full. Consequently, the Plaintiff sued for judgement against the various Defendants for the amounts which it is owed by each individual Defendant.  Insofar as the 1^st Defendant is concerned the amounts are set out at the end of this judgement.

C.  The Defences

16.  The 1^st Defendant pleads, at paragraph 13 of the defence, that the mortgage is void or unenforceable as against the 1^st Defendant as a result of fraud and fraudulent representations made by the 4^th Defendant.  She also pleads at paragraph 14 that it is unenforceable under the principles of undue influence and non est factum. Beyond a recital of the alleged representations by the 4^th Defendant no further particulars are given of the fraud or of the case of undue influence or non est factum.

D.  The Legal Framework

17.  The legal framework surrounding the 3 defences of fraudulent misrepresentation, undue influence and non-est factum are well documented in the authorities that have been cited to me by the Plaintiff.

18.  Insofar as fraudulent mis representation is concerned, I was referred to Haifa International Finance Co Ltd v Concord Strategic Investments Ltd [2009] 4 HKLRD 29 at §15, per Cheung JA and Chow How Yeen Margaret v. Wex Pharmaceuticals Inc., HCA 537/2013 (unrep., 13.1.2017) at §§34-40, per Au-Yeung J.  It is not necessary for me to set the principles out in this Judgment.

19.  However, it is relevant to note that in order to hold the Bank liable for misrepresentation, it is necessary to show that the alleged misrepresentation was made either by the Bank or by his agent acting within the scope of his authority or that the Bank has either actual or constructive notice of the representation: see Bank of China (Hong Kong) Ltd v Leung Wai Man [2011] 4 HKLRD 707 at §§40-44, per Chu J. (as Chu VP then was).

20.  To make out a case of undue influence, the complainant must show some underlying impropriety, eg his being forced, tricked or misled in any way by others into entering into the transaction. The defence is, at heart, a simple concept. It is all to do with informed consent. Once a court forms the view that consent was freely given with full knowledge of the consequences of entering into the relevant transaction, that is the end of the matter, however improvident the transaction may objectively appear: see Bank of China (Hong Kong) Ltd v China Hong Kong Textile Co Ltd [2011] 4 HKLRD 457 (CA), per Lam J.

21.  In Soshila Keswani v Motiram Keswani [2022] HKCA 543 at §§34-36, Chu JA (Chu VP then was) succinctly set out the legal requirements for establishing a defence of non est factum.

“For the defence of non est factum to apply, it has to be established that

“(i) the defendant was under a disability, whether permanent or temporary”;

“(ii) the document he signed was fundamentally different from what he thought he was signing”; and

“(iii) he was not careless in appending his signature to the document: Saunders v Anglia Building Society [1971] AC 1004.”

“The defendant bears a heavy burden of proof and he must establish each of the three components.” (§34, per Chu JA)

22.  At §§35-36, the Court of Appeal referred to Ming Shiu Chung v Ming Shiu Shum and said:

“35.  As the Judge correctly noted, a person of full age and capacity is normally bound by his signature to a document. This point was highlighted by the Court of Final Appeal in Ming Shiu Chung & Others v Ming Shiu Sum & Others (2006) 9 HKCFAR 334 at [84] to [86]:

“84. … Reliance is universally placed on signatures appended to documents by persons of full age and understanding as signifying the signatory’s assent or adherence to what that document states. Where such a person has signed a document which purports to have legal effect, the law has never regarded it as enough to show that he signed without knowing its contents for the document to be disavowed. It is an everyday occurrence that people sign documents without reading the small (or even the large) print and therefore sign without actually knowing the terms (or all the terms) of the document signed. But they are held to the documents which they have chosen to sign unless there is shown to be a recognized legal basis for concluding that their apparent consent has been in some way vitiated or that reliance on that document by some other person falls into some category of unconscionable conduct justifying relief in equity.

85. …

86. And in Bank of China (Hong Kong) Ltd v Fung Chin Kan (2002) 5 HKCFAR 515 at 533, Litton NPJ acknowledged:

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

E.  Discussion

23.  On the basis that the 1^st Defendant has elected not to give evidence, there is no evidence to support any of her defences, and they stand to be rejected.

24.  In any event, having read the various documents that have been presented to me as part of the trial bundle, including

24.1  The authorisation letter sent to Mr Lo’s firm asking them to obtain details for the release of Wing Hang Bank as mortgagee;

24.2  The various Facility Letters that have been countersigned by the 1^st Defendant;

24.3  The Warning Notices signed by the 1^st Defendant recognising that the various risks have been explained to her.

24.4  The confirmation of instructions signed by the 1^st Defendant in which the 1^st Defendant accepts that the matters set out in that document have been explained to her.

I accept that the 1^st Defendant was fully aware and cognisant of the obligations that she was entering into.

25.  These documents were in English in relation to the 1st mortgage but were in Chinese in relation to the second mortgage and they were virtually identical.  The second mortgage documents also recorded the liability under the first mortgage and certainly as at that date the 1st Defendant knew the position in relation to the first mortgage.  She never objected.

26.  Further, I accept the evidence of Mr Wilkie Lo that he explained the matters identified in these documents to the 1^st Defendant in Punti.  I also accept his evidence that he had no knowledge or indication that the 4^th Defendant was exerting undue influence.

27.  In the light of those conclusions, the defences of non est factum and undue influence are rejected.  The claim for fraudulent misrepresentation is rejected on the basis that, even if there were evidence of fraud of the 4^th Defendant, which there is not, there is certainly no evidence or even pleading that the bank had any notice of that.  Hence, it would at most be a matter as between the 1^st and 4^th Defendants.

28.  Consequently, I accept that the bank has proved its case and is entitled to judgment and an order for possession.

29.  As to quantum, Mr Choy produced a revised calculation of the outstanding balance on the 3^rd Defendant’s account, for which the 1^st Defendant is liable, in the total sum of HK$55,806,460.44.  I accept those figures, and that is the amount for which Judgment shall be entered.

F.  The Counterclaim

30.  There is no evidence to support the counterclaim made by the 1^st Defendant, and in the circumstances it must be dismissed.

G.  Costs

31.  The Plaintiff claims costs on an indemnity basis in accordance with the terms of the mortgage which would, subject to the discretion of the court, entitle it to indemnity costs.  The 1^st Defendant did not make any submissions on the claim for indemnity costs notwithstanding that Mr Wong did indeed make other submissions on costs.  In those circumstances it seems to me appropriate to make an order for the payment of costs by the 1^st Defendant to the Plaintiff on an indemnity basis.

32.  The Plaintiff also sought a certificate for two counsel.  The 1^st Defendant objected to that certificate on the basis that only Mr Leung appeared as named counsel for the Plaintiff in the written opening submissions.  He contended that the case was not unduly complex, and the Plaintiff clearly considered it sufficient for only one counsel up until the time of the written opening submissions.  In those circumstances there is nothing to support a certificate for two counsel.

33.  Whether to grant a certificate for two counsel is in the discretion of the court.  I must decide whether the circumstances of the case justify the involvement of 2 counsel.  I note, and it is of some relevance but not in any sense determinative, that the 1^st Defendant herself engaged two counsel and she therefore clearly considered that the case was sufficiently complex to justify the engagement of both.  However, given that the only Mr Leung was named as counsel on the written opening submissions of the Plaintiff I can only take the view that the engagement of the 2^nd counsel occurred at some point between written opening submissions and the first day of trial.  I cannot see any basis to conclude that it is objectively justified for the 1^st Defendant to pay for the second counsel engaged in those circumstances.  The Plaintiff was clearly of the view that only one counsel was necessary up until at least after the submission of written openings.  It seems to me in the circumstances that there is no justification for a certificate for two counsel and I refuse to grant one.

H.  Disposition

34.  I give judgement to the Plaintiff against the 1^st Defendant in the sum of HK$55,806,460.44, together with possession of the Property.

35.  I dismiss the counterclaim brought by the 1^st Defendant.

36.  The 1^st Defendant is to pay the Plaintiff’s costs on an indemnity basis to be taxed if not agreed.

37.  The Plaintiff’s solicitors have provided a draft judgement the terms of which I have approved subject to amendments to reflect what I have said above.