HUANG CHANG FA v. TONG YUK PING

HCA 1201/2022

[2023] HKCFI 1894

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1201 OF 2022

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D E C I S I O N

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A.  Introduction

1.  The plaintiff seeks recovery of a debt of HK$2 million from the defendant pursuant to 2 loan agreements[1]. The plaintiff learnt that the defendant would sell the property charged to him. So he applied for a Mareva injunction to prohibit the defendant from dealing with her assets up to the value of HK$2 million. The application was adjourned to this hearing for substantive arguments, upon the defendant’s undertaking not to remove her assets up to HK$2 million (“defendant’s undertaking”).

2.  The defendant claims that the so-called loan agreements were actually for the gambling credit advanced by a casino which operated that VIP room where the defendant gambled. The plaintiff was a junket operator working at the casino who gave the defendant non-cash chips instead of cash. The defendant denied that she owed the plaintiff money. All debts had been fully repaid. The defendant asserts that many details (including a purported “charge” of a property she jointly owned with her husband) were put into the loan agreements without her consent after she had signed them.

3.  At this hearing, the defendant disputes the existence of a good arguable case, the risk of dissipation of assets and claims that the plaintiff has failed to make full and frank disclosure in the application.

B.  Plaintiff’s case

4.  On 17 June 2019, 19 June 2019 and 16 January 2020, by way of 3 loan agreements, the plaintiff lent HK$500,000, HK$1 million and HK$1 million, respectively, to the defendant. There is no dispute that the defendant had repaid the first loan in full.

5.  The plaintiff alleges that it was agreed between the parties that:

(1)  The property jointly owned by the defendant and her husband (“Mr Mak”) at Unit A, Shop no. 2 on G/F, Tai Shing Building (Block H of Cosmopolitan Estate), Nos. 70 to 86 Ivy Street, Kowloon (“the Property”) was charged as security for the loans under each of the 2^nd and 3^rd loan agreements,

(2)  The repayment date for the 2^nd loan was to be 15 September 2019; and

(3)  The repayment date for the 3^rd loan was to be 15 March 2020.

6.  It is common ground that when the defendant first signed the 2^nd and 3^rd loan agreements, some terms were missing (“the Incomplete Versions”).

7.  In respect of the 2^nd loan agreement, these were missing:

(1)  The name and ID card number of the lender;

(2)  The place where the cash was to be passed to the defendant;

(3)  The words meaning “at the time of the loan, cash given and received”;

(4)  The due date for repayment; and

(5)  Witness and his particulars.

8.  In respect of the 3^rd loan agreement, §7(1)-(5) above were missing. In addition,

(6)  The amount of the loan was missing; and

(7)  The address of the Property was not here.

9.  The missing details stated in §§7-8 above will be referred to below as “Added Details”.

10.  The plaintiff’s explanations are as follows. He had made known to the defendant that he did not have so much cash and he was not sure whether he, or his wife or some other person would be the lender. The defendant nevertheless signed first so that the plaintiff would have written proof to show his wife and potential lenders that the defendant was the borrower. Also, as he was not sure if the money would be paid in cash or by transfer, the words “借款時以現金交收” were not there. It was the defendant who requested the plaintiff not to put in the repayment date until the plaintiff shall pass her the full loan amount. The parties also agreed that when the plaintiff passed the cash to the defendant, the plaintiff’s elder brother would be the witness and sign on the loan agreements. At that time, the missing details would be filled in in front of the elder brother.

11.  The plaintiff’s wife was later willing to lend cash from her relatives but let the plaintiff be the lender and the repayment date to be 3 months from the date of the 2^nd loan agreement. The plaintiff proceeded to fill in the missing details and have them witnessed by his elder brother, as agreed to by the defendant.

12.  The position with the 3^rd loan agreement was similar save that the defendant told the plaintiff that she might want to charge another property as security for the loan and thus the details of the property were left blank. The defendant later told the plaintiff that she had confirmed with her husband that they did not have any other property in Hong Kong and so she charged the Property as security again.

13.  The plaintiff kept the originals of the 2^nd and 3^rd loan agreements and passed the copies to the defendant for her record.

14.  The defendant had defaulted in repayment. The defendant promised to repay HK$1 million to the plaintiff forthwith, but the promise was not honoured.

15.  On the evidence, the first written demand by the plaintiff to the defendant for repayment was on 6 August 2022, followed by 2 letters of demand from the plaintiff’s solicitors (“TPY”) on 7 and 14 September 2022.

C.  Defendant’s case

16.  The defendant claims that she has only signed the first page of each of the Incomplete Versions. She had never seen the witness at the time she signed. The Added Details had never been agreed upon by her. There were no pages 2-3 of the 2^nd and 3^rd loan agreements (ie ID card copies and particulars of the plaintiff and his elder brother).

17.  She claims to have settled the HK$1 million under the 2^nd loan agreement – HK$400,000 by way of bank transfer to the plaintiff’s wife (at the direction of the plaintiff) and HK$600,000 by way of cash handed to the plaintiff. The plaintiff denies these, claiming that the transfers to the wife were for loans lent by him and his wife to the defendant over the years, but he has not specified the amount involved. He also denies receiving the cash of HK$600,000.

18.  In respect of the 3^rd loan agreement, the defendant had obtained some non-cash chips from the VIP Room in the casino earlier but later decided not to use it as she felt sick and had to leave the casino. In order to “secure the plaintiff’s interest and as the condition to allow [her] to leave the casino”, she signed the 3^rd loan agreement although she only took only about HK$100,000. On 26 February 2020, she transferred HK$100,000 to the plaintiff’s wife on the plaintiff’s instructions. Nothing was since owed by the defendant. The plaintiff denies these. He appears to be saying that the HK$100,000 was to repay debts owed to him and his wife over the years.

D.  Application for Mareva injunction

19.  It came to the plaintiff’s knowledge that the defendant and Mr Mak entered into a sale and purchase agreement dated 17 June 2022 to sell the Property, with a completion date on 20 September 2022.

20.  On 15 September 2022, the plaintiff applied, ex parte for a Mareva injunction against the defendant but it was declined by Cheng J.

21.  The matter came before Cheng J on 19 September 2022 on an inter partes basis. By that hearing, the sale and purchase of the Property had already been completed. The defendant disclosed, and later put on affirmation, that she has another property (“Booman House Property”) in her own name. Upon the defendant’s undertaking, the injunction application was adjourned to this hearing for argument.

E.  Legal principles relating to the grant of Mareva injunction

22.  The legal principles are not in dispute. According to Hong Kong Civil Procedure 2023, §29/1/65, the plaintiff must show that:

(1)  there is a good arguable case on the merits;

(2)  there are assets within the jurisdiction;

(3)  there is a real risk of dissipation of assets;

(4)  the balance of convenience is in favour of the grant; and

(5)  the plaintiff must comply with the strict duty of full and frank disclosure.

23.  Even if the defendant can show a good arguable defence, this does not necessarily negate a good arguable case: -

(1)  It is sufficient for the purposes of showing a good arguable case to demonstrate a case “which is more than barely capable of serious argument. And yet not necessarily one which the judge believes to have a better than 50% chance of success”.

(2)  At the interlocutory stage, both the claim and the defence may be more than barely capable of serious argument and not necessarily having a better than 50% chance of success.

(3)  For a Mareva injunction, there is no requirement that the plaintiff shows that he/she has a “much better” case or argument than the defendant: Pacific Rainbow International Inc. v Shenzhen Wolverine Tech Ltd & Ors, HCA 3023/2016 (unrep, 2 May 2017), §§39-42, DHCJ Douglas Lam SC.

24.  Specifically, on the requirement to demonstrate a real risk of dissipation: -

(1)  There must be solid evidence to support an inference of risk of dissipation, which may depend on a holistic consideration of all the circumstantial materials that are indicative of risk including matters that point to such risk, or matters which raise an inference that the respondent cannot be relied upon: Convoy Collateral v Cho Kwai Chee, CACV 197/2020 [2020] HKCA 537, §§37-41.

(2)  In some cases, the strength of the underlying substantive claims could also be regarded as supporting a case of real risk of dissipation: Convoy, §42. In particular, real risk of dissipation can be established in cases where the defendant engaged in dishonest or other serious wrongdoings – even if those acts are not themselves acts of dissipation: Convoy, §§42-53.

(3)  When considering whether there was unacceptably low commercial morality to infer a risk of dissipation of assets, the Court should scrutinise the evidence with care and should not too readily infer a real risk of dissipation from the defendant’s conduct or commercial morality: Honor Resources (International) Co Ltd v Savvy Resources Ltd [2010] 4 HKC 50, §26, per Chu J (as she then was).

(4)  The fact that the defendant is a heavy and habitual gambler and a defendant who has a history of heavy gambling are matters that may establish risk of dissipation: Great Silver Investment Limited v Sky Trend Global Limited and Another, [2020] HKCFI 2090, §§19-25, per DHCJ Anthony To.

F.  Good arguable case

25.  On the facts, there are 3 major limbs of factual dispute.

(1)  Whether the Added Details were added with consent of the defendant;

(2)  Whether there had been full repayment of the 2^nd loan; and

(3)  Whether the 3^rd loan was owed at all.

26.  With regard to the first limb of factual dispute, Ms Ng, counsel for the plaintiff, submits that it was incredible for the defendant to have signed the loan agreements with so many terms missing. With respect, it is also her client’s case that the Added Details were not there when the defendant first signed.

27.  What is incredible, rather, is that the plaintiff (in demanding repayment) sent images of the Incomplete Versions to Mr Mak on 5 September 2022 by WhatsApp. That puts to the forefront the query – when did the plaintiff fill in the Added Details and whether they were agreed by the defendant?

28.  The plaintiff explained that he only had the Incomplete Versions in his iPhone and so he sent them to Mr Mak. The original loan agreements were with TPY.

29.  The plaintiff’s explanation was odd, to say the least:

(1)  The plaintiff could have easily asked TPY to send him images of the original loan agreements through WhatsApp, so that he could forward the same to Mr Mak, and yet the plaintiff had not done so.

(2)  When TPY first demanded for repayment on 7 September 2022, they referred to their client as the plaintiff’s wife. It was by another letter a week later, on 14 September, that TPY claimed that to be a mistake as to the relevant parties and that it was the plaintiff who was the lender. How could a solicitor’s firm have got such a fundamental thing as its client’s identity wrong when, as claimed by the plaintiff, the original loan agreements were already with his solicitor?

(3)  Instead of making full and frank disclosure, the explanation as to how the plaintiff allegedly put in the Added Details only came about after the defendant has gone on affirmation to resist the injunction application.

(4)  In the WhatsApp messages on 4 September 2022 between the plaintiff and Mr Mak, the plaintiff invited discussion, otherwise “his boss” would ask solicitors to take action. When challenged as to whether there was someone behind who was the real lender of the money, the plaintiff claims that the “boss” meant “his wife”. Once again, this raises the query as to when the identity of the lender was put into the Incomplete Versions sent to Mr Mak.

30.  For the reasons given in §§27-29, there are legitimate doubts, as pointed out by the defendant, as to when the plaintiff put in the Added Details (which could have been on or after 5 September 2022) and whether the defendant had agreed to them.

31.  With regard to the second limb of factual dispute, the defendant has produced documentary proof of cash withdrawals in support of her repayment of the 2^nd loan agreement. The plaintiff, nevertheless, claims that part of the repayment was made by the defendant for loans granted by him and his wife “over the years”. The plaintiff has not condescended upon particulars, let alone evidence, to account for those loans. Such conduct of the plaintiff immediately cast doubt on the credibility of his case as to the amount owed by the defendant.

32.  With regard to the third limb of factual dispute, I find it incredible that, having returned HK$900,000 worth of non-cash chips to the plaintiff, the defendant would have signed the 3^rd loan agreement for HK$1,000,000 “as security and condition to leave the casino”.

33.  However, despite knowing that the defendant has a husband with a business and that he had a charge on the property, the plaintiff has never demanded for repayment for 3 years since June 2019 to September 2022. This is evidenced by the WhatsApp messages produced by Mr Mak. The plaintiff disputes the completeness of the WhatsApp messages and relies on the authority of Chan Sung Lai v Chan Sung Lim Paul [2015] 4 HKLRD 268, §33 to submit that it is unfair to the plaintiff that he had no opportunity himself to examine the WhatsApp messages to determine whether or not other messages should be put before the Court. The plaintiff invites the Court not to place weight on the WhatsApp messages.

34.  With respect, Chan Sung Lai is distinguishable. In that case, whilst admitting that there were more than 15 sets of recording which were secretly filmed, D1 had not produced all of them. Here, as the plaintiff has lost the WhatsApp messages and has not applied for restoration of those messages, he simply has nothing to contradict what Mr Mak has produced.

35.  I also find it far-fetched for the plaintiff to invite the Court, based on Mr Mak’s failure to produce WhatsApp messages, to draw the inference that the defendant was playing a game of hide and seek, which constituted dishonest and fraudulent conduct, which established real risk of dissipation.

36.  Whilst the Court need not resolve the conflicts in evidence in this application, I agree with Mr Edward Chan, counsel for the defendant, that the plaintiff’s case is riddled with information gaps that he has either neglected to fill in or deliberately skimmed over. The plaintiff’s case is barely arguable.

G.  Risk of dissipation of assets

37.  Apart from a bare assertion in his first affirmation, the plaintiff has not provided evidence, let alone solid evidence, to support the alleged risk of dissipation of assets. The assertions that the plaintiff was a heavy gambler and failed to comply with court orders were only mentioned in the plaintiff’s reply affirmation.

38.  However, any heavy gambling has, according to Mr Mak, ceased since early 2022. The plaintiff has nothing to contradict it. The failure to comply with only one court order on discovery was not evidence of risk of dissipation of assets.

39.  Further, the defendant had admittedly repaid the 1^st loan very promptly. Even on the plaintiff’s own case, the defendant had repaid another HK$400,000 of loans owed to him and his wife.

40.  On the other hand, Mr Mak, operator of a hot-pot restaurant at the property, stated affirmatively that his business ceased operation. He sold the Property (then free from mortgage) at a price of HK$36,980,000 in the year 2022. Such evidence was credible in the light of the poor business climate – the prevalence of the covid pandemic from early 2020 to 2022.

41.  The provisional sale and purchase agreement was signed on 17 June 2022, 2 months before the plaintiff’s first demand letter in August 2022. Meanwhile, there had been no demand for repayment or no legal action taken by the plaintiff for about 3 years before that demand letter. There is simply nothing to connect the sale of the property with an intention to evade possible liability owed by the defendants to the plaintiff. As submitted by Mr Edward Chan, it is far‑fetched to think that the defendant and Mr Mak would sell such an expensive property and dissipate the same in order to avoid a 2 million-dollar debt.

42.  The act of moving the completion date of the property forward to 5 September 2022 was plainly initiated by the purchaser, as evidenced by the letter dated 5 September 2022 from the purchasers’ solicitors to the solicitors of the defendant and Mr Mak. That letter was issued before the plaintiff issued the writ or even indicated any sign of seeking an injunction.

43.  It also transpired that, on the defendant’s own disclosure, that she owns the Booman House Property. That property has never been subject to a mortgage since she acquired full ownership in 1997 and there is no evidence that she will dispose of it.

44.  Applying the principles set out in §24 above,

(1)  There is no solid evidence to support an inference of risk of dissipation.

(2)  Notwithstanding her reliance on §24(2) and (3) above, Ms Ng has not shown how the defendant exhibited signs of dishonesty, serious wrongdoings, low commercial morality, fraud or dishonesty.

(3)  Even if the defendant was a heavy and habitual gambler, she (assisted by her husband) had repaid HK$1.6 million in less than a year, notwithstanding that, on her case, no repayment dates were prescribed in the Incomplete Versions.

45.  Looking at all the evidence holistically, I am not satisfied that the risk of dissipation of assets has been proved on balance of probabilities.

H.  Lack of full and frank disclosure

46.  I would not go into details of Mr Edward Chan’s arguments. The lack of full and frank disclosure of how the Added Details came to be put into the 2^nd and 3^rd Loan agreements and the wrong lender being asserted in TPY’s first demand’ letter have been referred to above.

47.  Despite the defendant’s express denial of cash (as opposed to chips) being given to her, the plaintiff has never shown the source of the loan. It should not have been difficult because, on his case, the money had come from his wife.

48.  Despite the defendant’s expressed challenge as to where the cash was passed to her, the defendant has never been forthcoming on the location.

49.  All of these undermine the plaintiff’s case that the Added Details were added with the consent of the Defendant.

I.  Conclusion

40.  The plaintiff needs not show he has a better case than the defendant. Balancing the convenience to the parties, for doubt as to existence of a good arguable case, lack of evidence as to risk of dissipation of assets and lack of full and frank disclosure, I decline to grant such a draconian injunction.

J.  Costs

41.  On a nisi basis, costs of this application (including costs reserved) should follow the event and be to the defendant.

42.  The defendants’ solicitors (“EAC”) have not produced a costs statement with counsel’s submission for the hearing but asks for taxation. Their failure to prepare a costs statement was because, according to Mr Edward Chan, the costs of the drafting of affirmations were incurred before the current solicitors came on record. The failure came about despite reminder of counsel and the fact that the defendant had paid off the previous firm of solicitors.

43.  In respect of the defendant’s costs, I decline to order taxation of such a simple matter. I fail to see why EAC could not prepare a costs statement based on the costs that the defendant had paid her previous firm of solicitors, with proper apportionment of the amount incurred for the present application. EAC has to do it anyway if taxation is ordered.

44.  A solicitor who fails to submit a costs statement together with counsel’s written submission should face a reduction in the hourly rates as they breach PD 14.3, §8, a standard direction which has existed for over 10 years. The solicitor may be required to bear the wasted costs personally representing the difference between the party-and-party costs which the Court would have awarded to his / her client on the usual hourly rates and on the reduced hourly rates applied by the Court as a result of that solicitor’s default.

45.  Since the hearing, EAC has prepared the costs statement. I summarily assess costs on the normal party and party basis at $220,000 but reduce it to $200,000 due to the default of EAC. The difference is not recoverable by EAC from the defendant.

K.  Conclusion

46.  I order as follows:

(1)  The Summons be dismissed.

(2)  On a nisi basis, the plaintiff do pay costs to the defendant summarily assessed at $200,000.

(3)  On a nisi basis, difference of $20,000 in party and party costs is not recoverable by EAC from the defendant.