DBS BANK (HONG KONG) LTD v. EXCELLENT ACCOUNTING AND SECRETARIAL LTD AND ANOTHER

DCCJ 3085/2019

[2023] HKDC 83

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3085 OF 2019

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(By Original Action)

(By Counterclaim)

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DECISION

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1.  By a summons filed on 28 June 2022 (“the Summons”), the plaintiff (“the Bank”) seeks summary judgment against the 2^nd defendant (“D2”) under Order 14 of the Rules of the District Court.

2.  D2 opposes this application.

Background

3.  The Bank’s case is simple and straightforward. Its claim against D2 arises out of a written Guarantee and Indemnity dated 21 July 2017 (“the Guarantee”) executed by D2 in her personal capacity in respect of a business loan owed by the 1^st defendant (“the Company”) to the Bank.

4.  The Company is a private limited company incorporated in Hong Kong. At all material times, D2 was its sole director and majority shareholder.

5.  Pursuant to a Facility Letter dated 13 July 2017 (“the Facility Letter”) and a General Commercial Agreement dated 21 July 2017, the Bank granted to the Company general banking facilities in the amount of HK$3,000,000 (“the Loan”) (comprising Overdraft up to HK$1,000,000 and Installment Loan of HK$2,000,000).

6.  D2 provided personal security for the Loan by executing the Guarantee in favour of the Bank.

7.  The Company has utilized the Loan and defaulted repayment later on.

8.  On 31 July 2019, Final Judgment was entered for the Bank against the Company in default of defence in respect of outstanding indebtedness as at 9 June 2019 and claimed at HK$2,452,091.09 with interest on (i) HK$1,018,737.24 at the rate of 14.375% per annum; and (ii) HK$1,426,954.87 at the rate of 11.375% per annum from 10 June 2019 to the date of judgment, and thereafter at judgment rate until payment; and costs.

The Law: Order 14 summary judgment

9.  The legal principle on Order 14 summary judgment are trite. The underlying policy of the summary procedure is to prevent a defendant from delaying the plaintiff from obtaining judgment in a 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. It enables plaintiffs in those cases to obtain expeditious summary judgment to avoid unnecessary delay.

10.  Once the plaintiff has established a prima facie sustainable case against the defendant, both procedurally and substantively, the burden will be on the defendant to satisfy the court that there is a triable issue and summary judgment should not be granted against him. See §14/4/1 of Hong Kong Civil Procedure 2023.

11.  The defendant will have to show, with evidence in support, an arguable defence, or that there is some other reason for trial. His affidavit must “condescend upon particulars”, and should, as far as possible, deal specifically with the plaintiff’s claim and affidavit, and state clearly and concisely what the defence is, and what facts are relied on to support it. If the defence relied on is fraud, the affidavit should state the particulars of the fraud. A mere vague general allegation of fraud is useless. See §14/4/4 of Hong Kong Civil Procedure 2023.

12.  The plaintiff has long been permitted to answer the defendant’s evidence. The court is not bound to require documentary evidence from the plaintiff, if by his affidavit in reply he can show that there is no issue to try but if the plaintiff can demonstrate (e.g. by exhibiting contemporary documents) that the evidence of the defendant is not reasonably capable of belief this will prevent leave to defend being given. See §14/4/6 of Hong Kong Civil Procedure 2023.

13.  On the other hand, the court must not embark on a mini trial on affidavits. Unless it is obvious that the defence put forward by the defendant is “frivolous and practically moonshine”, Order 14 ought not to be applied. See §14/4/9 of Hong Kong Civil Procedure 2023.

14.  In order to obtain leave to defend, the defendant must show that there are triable issues, or satisfy the court that he has a “real or bona fide defence” or “a fair probability or reasonable grounds that a bona fide defence exists”. If he makes an allegation, it must be credible or believable in the light of the evidence placed before the court. Whether the defendant’s assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as is either undisputed or beyond reasonable dispute.

15.  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 affidavits 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 give to the defendant to respond earlier. See §14/4/9A of Hong Kong Civil Procedures 2023.

16.  In Ng Shou Chun v Hung Chun San [1994] 1 HKC 155, 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 judgement.

Prima facie case against D2

17.  The Bank has adduced documentary evidence of, inter alia,: the Facility Letter signed by D2 for and on behalf of the Company and in her personal capacity, the Guarantee signed by D2, company documents showing that D2 was the sole director and majority shareholder of the Company, board resolution authorizing the Company to take out the Loan, and D2’s personal bank mortgage documents for proof of her own financial status in support of the Company’s application for the Loan.

18.  It is provided in the Facility Letter that the due execution by D2 of the Guarantee for an unlimited amount shall be a condition precedent for the provision of the Loan by the Bank to the Company.

19.  It is trite that at common law, no attestation is required in order to prove due execution of a deed. See: Champhon Industrial Limited v Hight Projects Industrial Limited (HCMP 3631/1992, 29 December 1992) [para. 2 on p.3] By signing the Facility Letter, the Guarantee and other related documents of the Loan, D2 shall be bound by the terms thereof.

20.  Having read the statement of claim and the affirmations filed by the Bank in support of the Summons, I am satisfied that the Bank has raised a plausible and prima facie sustainable case against D2. I proceed to consider whether D2 has raised any triable issue in respect of the Bank’s claim.

The defences

21.  D2 raises the following defences:

(1)  She never executed the documents in relation to the Loan and the Guarantee, and her signatures were forged;

(2)  She had acted upon the assurances/misrepresentation of one Mr Yim Chun Wai (“Yim”) with whom she had a previous romantic relationship in agreeing to be the director of the Company and signing the bank account opening and related documents in the application by the Company for the Loan from the Bank. Yim was at all material times the boyfriend and cohabitee of Ms Hilda Cheng Wai Ki (“Hilda”), a Vice President of the Bank who handled the Loan; and/or

(3)  Non est factum.

22.  On that basis, D2 lodged a counterclaim:

(1)  against the Bank (as the first defendant by counterclaim) for a declaration that the Guarantee and other security documents vis-à-vis D2 be rescinded and/or set aside and/or unenforceable; and

(2)  against Yim (as the second defendant by counterclaim) for damages for misrepresentation.

23.  In opposing the Bank’s Order 14 application, D2’s counsel argues that there are at least the following triable issues:

(1)  Under what circumstances D2 had, if at all, put her signatures on the Loan documents and the Guarantee;

(2)  Whether D2 had in fact put her signatures on those documents (including the Guarantee) as requested by the Bank in the circumstances as purported thereon (including that they were witnessed by Hilda);

(3)  Whether D2 had in fact put her signatures on the Loan documents knowing what she in fact was signing for (i.e. what she was entering into); and

(4)  Whether Hilda knew of Yim’s assurances/misrepresentation, and if so, whether her knowledge has been imputed to the Bank.

The evidence

24.  The evidence as stated in D2’s witness statement and Affirmation is that she is a corporate communications manager with work experience in the marketing industry for over 20 years. She can read English.

25.  She had previous experience in making bank loan applications such as her personal mortgage loan with HSBC.

26.  D2’s case in defence is that she became a nominee director (of Yim) of the Company upon the request of Yim who had the actual and overwhelming control of the Company. She was not responsible for the Company’s operation and never made any commercial decision. She never received any remuneration for directorship.

27.  She denies that she had any shareholding in the Company and argues that the shareholding documents were forged.

28.  She signed the account opening and related documents for Yim to proceed with the Loan application with the Bank upon Yim’s assurances that he would deal with repayment of the Loan, and that D2 would under no circumstances be personally liable for any default in repayment (ie the misrepresentation by Yim).

29.  Yim further told D2 that Hilda, the girlfriend and cohabitee of Yim at the time, knew about the fact that D2 was merely a nominee director and of his assurances (that under no circumstances would D2 become personally liable for default or repayment of the Loan). Hilda was the Vice President of the Bank who handled the Loan for the Bank, and was a witness to D2’s signatures on the Facility Letter and the Guarantee.

30.  D2 alleges knowledge and involvement of Hilda in relation to the assurances/misrepresentation made by Yim, leading to the execution by D2 of the Loan and Guarantee. She has adduced in evidence exchange of two emails between Hilda and herself: one on 21 May 2018 from Hilda to D2 attaching a copy of the (signed) Facility Letter, and the other one from D2 to Hilda on 29 May 2018 informing the latter of the policy of another bank of a minimum requirement of directorship for 3 years in loan application review.

31.  In light of D2’s defence, as supported by her witness statement dated 7 January 2021, that her signatures in the Loan and the Guarantee documents were all forged, the Bank has in these proceedings adduced (not without difficulty as D2 had at one point refused to cooperate in providing her own control signatures) hand-writing expert evidence in a Forensic Hand-writing Report dated 22 March 2022 from Dr. Daniel Wong In Jea. It was concluded that the signatures on the Guarantee and all other documentary evidence relied upon by the Bank belong to D2.

32.  D2 has elected not to adduce hand-writing expert evidence in rebuttal or challenge of that of Dr. Wong.

33.  In her recent Affirmation dated 5 October 2022 in opposing the Summons, D2 changed her evidence and withdrew the allegations that her signatures were forged. She states, in paragraphs 26 to 30 of her Affirmation, “…One of the reasons being that I have taken repeated looks at those alleged signatures on the relevant documents, and they in fact do somewhat look like my signatures…I do not recall having signed on … anything in similar form (of a guarantee, warning notice, commercial agreement, etc). I can read English and would definitely recall if I did sign so… I definitely would have recollection if I in fact did signed (sic) loan documents of this sort … Till this day, I still do not know how my signatures ended up on those WS 35 Docs. As I explained above, though those signatures do somewhat like my signatures, I cannot recall and do not recall any context or circumstances necessitating me having the need to sign those WS 35 Docs. Suffice it to say that if those were in fact my signatures, I did not have any intention to execute these documents at all.”

34.  After execution of the Loan documents in July 2017, the Company utilised the Loan.

35.  Evidence shows that shortly thereafter during the period between 14 August 2017 and 1 June 2018, the Company had issued 9 cheques, all signed by D2 as the sole signatory for and on behalf of the Company, totalling HK$619,629.05 payable to herself. There was also a cheque dated 18 September 2017 signed by D2 for the sum of HK$150,000 made payable by the Company to one Mansan Food Limited, of which D2 was the sole director and shareholder.

36.  It is also D2’s evidence that she kept a key to the safe in the office of the Company; the safe contained the Company chop together with bank cheques and e-token (ie security device) of the Company’s account with the Bank.

Analysis

37.  D2’s original defence of forged signatures to the Facility Letter and the Guarantee and other Loan documents, later abandoned upon the Bank adducing hand-writing expert evidence (concluding that those signatures belong to her), is a non-starter.

38.  It is a mere allegation devoid of any particulars or evidence in support. This court takes the view that the serious allegation of fraud, so lightly made and withdrawn by D2 subsequently, coupled with the significant change of case without good explanation, impugns her credibility and manifests a lack of bona fide defence.

39.  The arguments of D2 being a nominee director of Yim and the alleged assurances/misrepresentation made by Yim, denied by Yim in the Defence to Counterclaim, are also bare allegations not supported by any evidence of e.g. trust documents, agreements or records of communication such as WhatsApp, WeChat or email. They are on the other hand contradicted by the circumstantial evidence that D2 had access to and custody of the key to the Company safe containing the Company chop, cheque books and bank account security device, and the fact that she had signed cheques as the sole signatory drawing substantial amounts of money from the Company’s bank account and paying herself.

40.  Even if Yim had made those assurances/misrepresentation as alleged by D2, there is no evidence and it is denied by the Bank that he was acting at any time as the agent of the Bank.

41.  Nor is there evidence, as confirmed by counsel for D2 when specifically asked by this court at the hearing, showing that such assurances/ misrepresentation by Yim (even made) had been made known to Hilda and that such knowledge would impute to the Bank.

42.  The two emails exchanged between D2 and Hilda are the only evidence of their direct communication. The fact that Hilda had sent the email to D2 attaching a copy of the signed Facility Letter is inconsistent with D2’s arguments that Hilda had knowledge of the assurances/ misrepresentation allegedly made by Yim to D2, as in which case she would more likely have tried to hide from D2 the Facility Letter which sets out clearly the latter’s personal legal liability upon the Guarantee and Loan.

43.  To conclude, the alleged misrepresentation by Yim is not established by the evidence. D2 is not able to discharge the burden of showing a “real or bona fide defence” based on misrepresentation.

44.  D2 argues that there are other triable issues such as under what circumstances and whether D2 had put her signatures on the Guarantee and Loan documents, and if she had in fact done so, whether she had knowledge as to what she was signing for. D2 also criticizes the Bank’s failure to call Hilda as a witness to deal with D2’s allegations regarding Hilda’s involvement and knowledge of the assurances made by Yim nil discussion between Hilda and D2 about the Loan, and the lack of personal knowledge of the Bank’s witness Yeung Poon Lap Stanley as to the circumstances under which the Guarantee documents were actually signed.

45.  This is a wrong approach and is no more than putting the Bank to proof of the circumstances prior to the signing of the Guarantee and Loan documents and their validity and enforceability.

46.  In arguing that the Bank should call Hilda as a witness, D2 is trying to shift the burden to the Bank of disproving the defences raised by D2 – this is again a wholly wrong approach causing confusion and without assistance to the court.

47.  While it is the burden of the Bank as the plaintiff to prove its case, I am satisfied and have found that the Bank has raised a prima facie case by adducing in evidence the Guarantee and Loan documents signed by D2. In this application for summary judgment, it remains the burden of D2 to condescend to particulars in her defence and to raise triable issues. See Bangkok Bank Public Company Limited v Hui Yan Moon & Another (HCA 1441/2017, 28 February 2019 (paras 47,64,65)

48.  It is not entirely clear what D2’s defence is, when she now retracts the forged signatures allegation, but says that she cannot recall having signed any document looking like a guarantee and does not know how her signatures ended on those documents, and if those were her signatures, she did not have any intention to execute these documents at all (as quoted in paragraph 33 hereinabove).

49.  She denies having knowledge of the details and terms of the Guarantee and the Loan.

50.  The burden of proof lies on D2, but she has not provided particulars as to how and under what circumstances she had/might have put her signatures on the Guarantee and the Loan documents (now that she no longer argues that her signatures were forged) that would constitute vitiating factors at common law such as misrepresentation and non est factum now maintained in her defence.

51.  In considering D2’s arguments on the proposed triable issues that she had no knowledge of the Guarantee and the Loan details nor the intention to sign the Loan documents, reference is made to the legal principles stated in the authorities.

52.  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.”

53.  In Parker v South Eastern Railway (1877) 2 CPD 416, Mellish LJ stressed that in the absence of a vitiating factor (his Lordship specified fraud in this case), the contention that the person signing does not know its contents is “wholly immaterial”:

“In an ordinary case, where an action is brought on a written agreement which is signed by the defendant, the agreement is proved by proving his signature, and, in the absence of fraud, it is wholly immaterial that he has not read the agreement and does not know its contents.” (421)

54.  In Wing Hang Bank v Liu Kam Ying and Others (HCMP 2519/2001, 6 March 2002), Ma J (as he then was) said at [14]:-

“….the 5^th defendant is a man of full age and capacity. There is no reason at all why he should not be bound by the terms of the Guarantee which clearly states his liability on a personal basis. If he did no read the terms, this was negligence on his part and the defence of non est factum is unavailable in these circumstances.”

55.  In the present case, D2 is a woman of full age and capacity; she had over 20 years business work experience in the marketing industry. She can read English.

56.  Applying the abovcited principles to the present case, I come to the conclusion that the defence of non est factum is not open to D2. There is no reason why she should not be bound by the terms of the Guarantee signed by her, which documents state clearly her liability on a personal basis.

57.  Considering the entirety of the pleadings and affirmation evidence, the overall evidence does not in my view provide sufficient facts and particulars to show that there are any triable issues as argued by D2. What she says about misrepresentation by Yim, her lack of intention to sign the Guarantee and lack of knowledge of the terms and legal consequences of signing the Guarantee is not credible or believable.

58.  I am not satisfied that D2 has raised any triable issue or arguable defence. The Bank is entitled to summary judgment sought in the Summons.

The counterclaim

59.  Upon a summary judgment (founded on the Guarantee signed by D2) being entered for the Bank against D2 in the original action, the counterclaim by D2 against the Bank, namely for a declaration that the Guarantee and other security documents vis-à-vis D2 be rescinded and/or set aside and/or unenforceable, must fail.

60.  Counsel for the plaintiff and counsel for D2 both agree that in the event of a summary judgment being granted as sought in the Summons, this Court may strike out the counterclaim by D2 against the Bank.

61.  This court considers it appropriate to exercise the inherent jurisdiction to do so of its own motion under Order 18 rule 19 and the case management powers under Order 1A.

Conclusion

62.  I therefore grant summary judgment in favour of the plaintiff (by original action) against the 2^nd defendant (by original action) for the full amount of the plaintiff’s claim, confirmed by the plaintiff’s counsel to be in the sum of HK$2,445,692.11, together with interest on the sums of (i) HK$1,018,737.24 at the rate of 14.375% per annum; and (ii) HK$1,426,954.87 at the rate of 11.375% per annum, both from 10 June 2019 to the date of judgment herein and thereafter at judgment rate until payment.

63.  There is no reason why costs should not follow the event. I make a costs order nisi that the 2^nd defendant (by original action) do pay the costs of the plaintiff (by original actin) of the summary judgment application, with certificate for counsel, and of the action (including all costs reserved, if any), to be taxed if not agreed.

64.  The counterclaim by the plaintiff (by counterclaim) against the 1^st defendant (by counterclaim) be struck out also with a costs order nisi that the plaintiff (by counterclaim) do pay the costs of the counterclaim (including all costs reserved, if any) to the 1^st defendant (by counterclaim) with certificate for counsel, to be taxed if not agreed.

65.  I thank counsel for their assistance.