XU ZIMING v. RUIFENG PETROLEUM CHEMICAL HOLDINGS LTD

HCA 450/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 450 OF 2013

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JUDGMENT
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I. INTRODUCTION

1. The plaintiff (“P”) is a PRC citizen.  The defendant (“D”), a Cayman Islands company, is a listed company on Growth Enterprise Market (“GEM” of the Stock Exchange of Hong Kong (“SEHK”).

2. D gave P a negotiable promissory note dated 7 December 2011 for RMB140,000,000 (equivalent to HK$175,000,000) (“1^st Sum”) 2011 payable after three months, ie 7 March 2012 (“Note”):

There was no dispute the Note was a promissory note and bill of exchange under the Bills of Exchange Ordinance Cap 19 (“Ordinance”).[5] On 7 March 2012, it was dishonoured upon presentation for payment. 

3. On/about 22 August 2012, D gave P three cheques nos 001038, 001039 and 001040 all dated 28 August 2012 and drawn on Wing Hang Bank Ltd (“WHB”) (“Three Cheques”) for HK$5,000,000 each (totalling HK$15,000,000, “2^nd Sum”), and P signed three acknowledgments of receipt (collectively, “Three Receipts”) as follows:

“兹收到[D]之[WHB]支票(號碼: 001038/001039/001040)，用於支付[D]欠[P]之部份款項。

簽收:

[signature]

姓名:

日期: 2012.8.22/[blank]/[blank]”

On 28 August 2012, the Three Cheques were dishonoured upon presentation for payment for the reason of “Refer to Drawer”. 

4. On 13 March 2013, P commenced the present action to claim for (a) either (i) specific performance of the Note with all necessary/ consequential accounts, directions and inquiries, and damages for breach of contract in lieu of or in addition to specific performance with interest thereon or (ii) the 1^st Sum and interest thereon, and also (b) the 2^nd Sum and interest thereon. 

5. On 18 April 2013, P applied for summary judgment of the 2^nd Sum and interest thereon (“Summons”).  On 16 May 2013, D applied to stay the present action on the basis of forum non conveniens (“Stay Summons”). On 20 May 2013, the Summons was adjourned sine die pending determination of the Stay Summons.  In September 2013, all proceedings were adjourned pending the outcome of a winding up petition against D.  The petition was later dismissed.

6. By judgment handed down on 27 August 2014 (“Stay Decision”), DHCJ Wilson Chan dismissed the Stay Summons and extended time for D to file/serve the Defence:

“11. From its affidavit evidence, [D] admits to the following:

(1) [D] issued the [Note] and the maturity date was 7 March 2012;

(2) [D] could not repay the amount of RMB$140 million due under the [Note] by the maturity date;

(3) [D] issued the [Three Cheques]; and

(4) [D] did not have enough “cash inflow” and the [Three Cheques] were dishonoured.

12. It is noteworthy that in [D’s] affidavit evidence and skeleton submissions, there is no challenge to the validity or the enforceability of the [Note] and the [Three Cheques]. …… To put it simply, [D] has not raised or identified any defence to [P’s] claims. In short, [D] has not raised any issues to enable the court to look beyond the terms and conditions on the face of the [Note] and the [Three Cheques].

……

22. [D] is wholly unable to explain why the court should even consider the Loan Agreements and the Loan Repayment Agreement in the first place, or why the court should have to look beyond the [Note] and the [Three Cheques].  It is, of course, trite that the [Note] and the [Three Cheques], as bills of exchange, are contracts in their own rights separate from the underlying agreements.”

7. On 10 September 2014 D applied for leave to appeal, but on 29 October 2014 DHCJ Wilson Chan dismissed such application (“Leave Decision”) and said as follows:

“10. [D] has been unable to demonstrate why the Loan Repayment Agreement ought to apply to the [Note] and the [Three Cheques], which are distinct contracts in themselves. In this case, [D] has not raised any issues to enable the court to look beyond the terms and conditions on the face of the [Note] and the [Three Cheques]. It is not open to [D] to bring in the “intention of the parties” or terms under prior contracts into the picture. It is trite that when the subject matter is a promissory note or a cheque, extrinsic evidence is generally inadmissible ……”

8. On 31 October 2014, P filed an amended Summons for summary judgment of the 1^st and 2^nd Sums and interest thereon or (alternative to the 1^st Sum) interim payment of HK$160,000,000 or such other sum as the court shall deem fit (“Amended Summons”).

9. P relied on his 1^st, 2^nd, 3^rd and 4^th affirmations filed on 18 April 2013, 19 June 2013, 21 October 2014 and 30 January 2015 respectively and the affirmation of P’s assistant Choi Sio Peng (“Choi”) filed on 30 January 2015.  D relied on the 1^st, 2^nd and 3^rd affirmations of its company secretary Pang Kin Man Edmond (“Pang”) filed on 16 May 2013, 30 May 2013 and 19 December 2014 respectively and the affirmation of its director Yue Wai Keung (“Yue”) filed on 18 December 2014.  The substantive hearing of the Amended Summons came before me on 25 February 2015.

II.  LEGAL PRINCIPLES – SUMMARY JUDGMENT

10. A plaintiff may invoke the procedure under Order 14 of the Rules of the High Court (“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 2015:[6]

“ …… 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 …… 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 …… 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.”

11. In Ng Shou Chun v Hung Chun San,[7] Godfrey J noted it was not appropriate to embark on a mini‑trial 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.

12. Hong Kong Civil Procedure 2015 went on to say that:[8]

‘ “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.” …….

……

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 …… 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 ……’

13. If the court grants unconditional leave to defend, it will not be possible, having regard to the burden of proof required to make an order for interim payment.  But should the court grant the defendant conditional leave to defend, it also has power under Order 29 rule 10 of the RHC to order the defendant to make an interim payment to the plaintiff.[9]

III.  LEGAL PRINCIPLES – BILLS OF EXCHANGE

14. Lord Russell of Killowen in Nova (Jersey) Knit Ltd v Kammgarn Spinnerei GmbH said : “…… The bill is itself a contract separate from the contract of sale.  Its purpose is not merely to serve as a negotiable instrument; it is to avoid postponement of the purchaser’s liability to the vendor himself, a postponement grounded on some allegation of failure in some respect by the vendor under the underlying contract, unless it be total …… failure of consideration ……”.[10]

15. Where an application is made for summary judgment in respect of a claim on a dishonoured bill of exchange, the general rule is that leave to defend will not be given unless there are exceptional circumstances.[11] A bill of exchange is to be treated as cash and should be honoured unless there is some good reason to the contrary.[12] In an action between immediate parties to a bill of exchange, the existence of a counterclaim for unliquidated damages arising out of the same or closely related transaction is no defence to an action for dishonoured bill of exchange even though the defendant may well be entitled to maintain the counterclaim and set-off in respect of the plaintiff’s claim on the underlying contract.[13] Further, the court will not ordinarily grant a stay of execution of the judgment pending the trial of the counterclaim unless there are “exceptional circumstances”, “strong grounds” or “some good reason to the contrary”.[14]

IV.  DEFENDANT’s AFFIRMATION EVIDENCE

16. In/about 2010, D decided to expand its business into oil/energy, and identified an oil processing PRC company/enterprise 佛山市瑞豐石化燃料有限公司 (“Foshan Ruifeng”).  D entered into an agreement dated 14 September 2010 to acquire Foshan Ruifeng from its owner, director and legal representative (法人代表) Madam Ou Aihua (“Ou”) for RMB630,000,000 (about HK$717,892,630.26).  After D became Foshan Ruifeng’s wholly owned parent company, Ou still remained as its legal representative/director until 28 November 2011. 

17. Foshan Ruifeng needed a huge amount of cash[15] for its oil processing operations and as a result of previous poor management and operation losses.  It initially borrowed from local banks, but later borrowed from private money lending market at high interest rates in order to repay the bank loans.  Foshan Ruifeng negotiated with P for a loan, and was told P would arrange for three PRC companies (“3 PRC Companies”) and one natural person (collectively, “4 PRC Entities”) to act as lenders.

18. In October 2011, pursuant to seven “借款擔保契約” between Foshan Ruifeng as borrower, 4 PRC Entities as lenders and D as guarantor (“Loan Guarantee Agreements”), Foshan Ruifeng borrowed from the 4 PRC Entities seven loans for a total sum of RMB240,000,000 (“Loans”):

Lender	Amount (RMB)	Loan Period	Loan Due Date
東莞市品德貿易有限公司	30,000,000	30 days	30/10/11
廣州市盛凱貿易有限公司	40,000,000	30 days	2/11/11
廣州市盛凱貿易有限公司	20,000,000	30 days	6/11/11
廣州市盛凱貿易有限公司	70,000,000	30 days	12/11/11
廣州市盛凱貿易有限公司	70,000,000	30 days	19/11/11
增城市金泰豐燃油有限公司	8,000,000	30 days	5/11/11
楊志輝	2,000,000	30 days	5/11/11

19. Foshan Ruifeng was unable to repay the Loans by their due dates.  On 7 December 2011, P as lender, Foshan Ruifeng as borrower and D, Ou, D’s director Yu Won Kong Dennis (“Yu”) and Yue as guarantors (collectively, “Guarantors”) entered into a “還款協議書” (“Loan Repayment Agreement”):[16]

“[Foshan Ruifeng]因經營需要，向[P]借款[RMB240,000,000]，[P]通過[4 PRC Entities]等名下賬户已將上述借款借給[Foshan Ruifeng]。[Guarantors]自願作為[Foshan Ruifeng]的保證人，為[Foshan Ruifeng]向[P]提供還本付息的連帶責任保證。現[Foshan Ruifeng]向[P]出具收款人為廣州市盛凱貿易有限公司，面額為[RMB100,000,000]的銀行支票[一張面額為[RMB30,000,000](叁仟萬元，支票號碼: 09024020)，另一張面額為[RMB70,000,000](柒仟萬元，支票號碼: 09024021)] [“Two Cheques”]。關於餘下的債務[RMB104,000,000]，[P，Foshan Ruifeng and Guarantors]三方書面同意用同等價的[D]的公司債券以償還，債券期限為三個月，其後可贖回，利息雙方另議，公司債劵持有人由[P]指定。如[Foshan Ruifeng]違反此約定逾期還款，[Guarantors]應承擔連帶責任。如[P]選擇法律途徑解決，三方同意由合同簽訂地廣州市有管轄權的人民法院進行法律訴訟。

序號	划款人	實際借款人	划款金額
1	廣州市盛凱貿易有限公司	[P]	[RMB200,000,000]
2	增城市金泰豐燃油有限公司	[P]	[RMB30,000,000]
3	東莞市品德貿易有限公司	[P]	[RMB10,000,000]

  ……”

20. On the same day, pursuant to the Loan Repayment Agreement, D issued the Note in P’s name.  Then the Two Cheques were dishonoured.  D, Foshan Ruifeng and 4 PRC Entities signed a confirmation letter (a) to acknowledge the total outstanding loan due to P as at 7 January 2012 (after deducting RMB140,000,000 under the Note) was RMB100,000,000 plus interest of RMB10,400,000, and (b) to extend the deadline for repayment of the total sum of RMB110,400,000 to 31 January 2012.[17]

21. By a “清償契約” (“Repayment Agreement”) between P and D on 30 January 2012, D was to issue new shares for a total value of RMB110,400,000 (about HK$135,792,000) as repayment of the aforesaid sum of RMB110,400,000.[18] D allotted 664,020,000 shares to P, so such outstanding sum was treated as fully repaid.  D could not repay the sum of RMB140,000,000 and interest due under the Note upon its maturity on 7 March 2012.

22. On 22 March 2012, D repaid HK$200,000 by cheque no 000801 drawn on WHB in P’s favour.  In a document titled “關於瑞豐欠[P]部份債權的現金清償” that was dated 21 March 2012 and signed by the parties (“21/3/12 Document”), it was stated “[P](“債權人”)就[D](債務人)所欠之[RMB140,000,000]及相利息，現要求以現金形式清償HK$200,000 ……，匯款須於3月30日匯到以下帳號 [particulars of P’s bank account]” (my emphasis).

23. In an undated/unsigned statement titled “與東莞[P]借款情況” made by Yu in mid-2012, it was stated that:

“5. 于2012年4月30日，因[D]仍無法還款予[P]，…… [Yu]及[Yue]于是與對方代表展開商議。雙方于5月中達成和解協議，雙方同意[D]按以下時間還款[RMB170,169,863](折合[HK$209,308,931]予[P]):

2012年6月10日 - [HK$30,000,000]

2012年7月10日 - [HK$20,000,000]

2012年8月10日 - [HK$40,000,000]

2012年9月10日 - [HK$40,000,000]

2012年10月10日 - [HK$40,000,000]

2012年11月10日 - [HK$39,308,931]

6.  後因[D]仍無法按期予6月10日還款，只能分期先付[RMB10,000,000]予[P]。”

24. On 2 July 2012, a 葉灿方 (“Ye”) repaid RMB10,000,000 through a 鄭雪嗚 (“Zheng”) who paid such sum to P on D’s behalf.  The printed receipt dated 7 July 2012 that Zheng signed stated “玆收到肇慶錦繡前程貿易有限公司中國建設銀行支票兩張(號碼: 01416296、01416294)，金額名為[RMB10,000,000]，合計[RMB20,000,000]”, and the handwritten receipt dated 10 July 2010 with thumb-prints by Zheng and Ye stated “玆收到[Ye]代[D]清償[Zheng]的欠款[RMB10,000,000] (10000000.00)” (collectively, “Two Receipts”). Further, according to clause 1 of an undated/unsigned “債務清償協議書” among Ye, Foshan Ruifeng and D (“Draft Agreement”), “[Foshan Ruifeng]、[D]確認，至2012 年7月__日止，因[Ye]於2012 年7月  日代[Foshan Ruifeng]及[D]清償欠[P][RMB10,000,000]，因此[D]確認欠[Ye][RMB10,000,000]”.

25. On 22 August 2012, D issued the Three Cheques as partial repayment of the Note (and not for interest on D’s indebtedness to P), but they were dishonoured.  Yue reminded that the Three Receipts stated the Three Cheques were to “支付[D]欠[P]之部份款項” without mention of payment of interest. On 10 September 2012, D further repaid HK$7,000,000 by cheque no 001059 drawn on WHB in P’s favour.  So even if D were liable to P under the Note and Three Cheques, the total outstanding sum was not RMB140,000,000 (about HK$175,000,000) or HK$160,000,000 as alleged.

26. D put forward three substantive defences in Yue’s affirmation and Pang’s 3^rd affirmation, which D claimed raised triable issues.

27. First, Yue claimed D had no obligation to honour the Note and Three Cheques issued pursuant to the Loan Repayment Agreement.  The Loans, Loan Guarantee Agreements and Loan Repayment Agreement were governed by PRC law.  According to the PRC legal opinion by Shanghai Shanfeng Law Firm dated 18 December 2014 (“D’s PRC Opinion”),

(a) all but one of the Loans were made with the 3 PRC Companies (in contra-distinction to natural persons);

(b) according to “中國人民銀行1996年6月28日發布的《貸款通則》 第二十一條規定 …… [and] 第六十一條同時規定”, corporate/enterprise lenders must have lending licences issued by People’s Bank of China (“PBC”), but the 3 PRC Companies did not, so 6 out of the 7 Loans by them (“6 Loans”) were invalid (無效);[19]

(c) if the underlying loan agreement was invalid (無效), any guarantee agreement for such loan agreement would also be invalid (無效),  and the guarantor would not bear civil liability unless he was “at fault” (過錯) (in which case his liability would not exceed ⅓ of the amount the borrower could not repay); [20]

(d) the Loan Guarantee Agreements by inter alia the 3 PRC Companies were invalid (無效), but whether D would bear civil liability up to ⅓ of the amount Foshan Ruifeng could not repay to P for being “at fault” would have to be determined by the PRC courts;[21]

(e) the Loan by the natural person (ie 楊志輝) was valid under PRC law;[22]

(f) the Loan Repayment Agreement (which was closely related to the Loans) was to bring in more guarantors to guarantee the total loan sum of RMB240,000,000 under the Loans, but if the underlying loan agreements for the 6 Loans were invalid (無效), D’s guarantee under the Loan Repayment Agreement should also be invalid (無效).[23]

28. Secondly, according to D’s PRC Opinion, D could apply to the PRC courts to invalidate the Loan Repayment Agreement on the ground of duress under PRC contract law.  Yu prepared an unsigned statement in mid-2012 to record what happened, and Yue confirmed the truth thereof.

29. Yue claimed Foshan Ruifeng was under the control of Ou, who remained as its legal representative (法人代表) until 28 November 2011, when it borrowed the Loans.  Subsequently, Yu/Yue as Foshan Ruifeng’s representatives were asked to sign agreements to continue the Loans (續簽), but they did not know details of the Loans.  They were told the Loans would be enforced immediately if they did not sign, so they had no choice but to sign the Loan Guarantee Agreements under which D was guarantor of the Loans.  But this was not enough, and P wanted to make Yu, Ou and Yue personal guarantors for the Loans. 

30. At a meeting at 11:00pm on 7 December 2011 at a hotel room in Foshan attended by inter alia Yu, Yue, Ou and P, P demanded Yu/Yue to sign as personal guarantors of the Loans, but Yu/Yue declined.  P threatened them by saying “if the loans remained unpaid, a lot of people would die.  He also said that if [Yu/Yue] are dead, [their] family members will also be implicated”.  Yu/Yue still refused to sign and P left the scene.  But about 30 minutes later P returned with Ou who immediately signed the Loan Repayment Agreement.  P repeated his demands/threats to Yu/Yue.  “其間[Yu]友人來電，[Yu]告知友人被追迫簽署個人擔保合同，友人代[Yu]報公安。”

31. Yu/Yue were worried about their personal safety and wanted to leave the hotel, but they could not and were detained until the early hours of 8 December 2011.  Because (a) P had managed to force Ou to sign, (b) Yu/Yue were repeatedly threatened with death which threats also involved their family, (c) they were detained (and practically held captive in a hotel room) for a prolonged period, and (d) they were physically and emotionally tired, there was no other option but to give in to P’s threats/demands at about 1:30am on 8 December 2011 and to sign the Loan Repayment Agreement.  P left immediately, and “20分鐘後，公安到達[hotel room]，並詢問[Yu]及[Yue]是否被脅持。當時，因[P]等人離去，[Yu]及[Yue]告訴公安沒事”.

32. D failed to pay the 1^st Sum upon maturity of the Note.  In late April 2012 (or “于五月初” according to Yu’s undated/unsigned statement), triad members went to D’s premises and caused nuisance.  Yue suspected they were sent by P, so they had no choice but to negotiate a repayment schedule with P.[24] On such basis, Yue believed the Loan Repayment Agreement was void and invalid under PRC law because it was procured by threat and duress.  D’s PRC Opinion stated that:

“其次，我們了解到有証據表明，[Yu]和[Yue]系在[P]的威脅下簽訂了[Loan Repayment Agreement]并加蓋了[D]的公司公章。為此，[D]向我們出示了“與東莞[P]借款情況”以及2012年8日以及2013年1月兩次報香港警方的口供副本。

根據《中華人民共和國合同法》第五十四條，一方以欺詐、脅迫的手段或者乘人之危，使對方在違背真實意思的情況下訂立合同的，受損害方有權請求人民法院或者仲裁機構變更或者撤銷。我們認為，[D]在中華人民共和國境內向有管轄權的人民法院起訴或者應訴時，應當向人民法院出示相關受脅迫的報案紀錄或者証明，以証實[Yu]和[Yue]系在被脅迫的情況下被迫簽訂了[Loan Repayment Agreement]。因此，[D]應當請求有管轄權的人民法院依法撤銷[Loan Repayment Agreement]。”

33. Thirdly, without prejudice to the above arguments, Yue believed P was not entitled to ask for monetary payment under the Note.  By accepting the Note and hence Clause 5 which provided for a specific remedy in the event that D could not redeem the Note upon maturity, P agreed he “must ask [D] to issue tradable shares of [D] of an equivalent value as a means of repayment”.  D were ready and willing to comply with Clause 5 and did try to make arrangements with P to allot shares as a means of repayment, but P refused to enter into any such agreement or agree on the share price for the allotment.  As explained in paragraph 21 above, this was not the first time such an arrangement was made between the parties.  Clause 5 was included in the Note to effect the same arrangement as had happened before.

34. D claimed the dishonour of the Three Cheques (which were issued specifically to make partial payment under the Note) should similarly be treated as failure to pay under the Note, the consequence of which (pursuant to Clause 5) was to only entitle P to be allotted new tradable shares of D for a value equal to the outstanding unpaid amount under the Note.

35. Further, after the Three Cheques were dishonoured, D paid P HK$7,000,000 on 10 September 2012.[25] D claimed the parties agreed that such payment together with the RMB10,000,000 payment[26] would fully discharge the Cheques and constitute part payment of the Note, so P should not claim the outstanding amount under the Note and/or Three Cheques as a debt, and instead should have agreed to D’s proposal for allotment of new shares as a means of repayment.

V.  PLAINTIFF’s AFFIRMATION EVIDENCE

36. P claimed the following matters were irrelevant: (a) how D expanded its business into oil/energy, (b) how it acquired Foshan Ruifeng, (c) how Foshan Ruifeng became in need of cash due to poor management, operation losses and cashflow problems, and (d) how D became liable under various underlying agreements.  But in fact there was no factual dispute over the debts under the Loan Guarantee Agreements and Loan Repayment Agreement. 

37. It was not disputed that (a) Foshan Ruifeng was financially straitened and had to borrow money from P who made advances through the 4 PRC Entities, and (b) D could not pay the amounts under the Note and/or Three Cheques.  D admitted (i) P (via the 4 PRC Entities) lent RMB240,000,000 to Foshan Ruifeng for which D was the guarantor,[27] (ii) D issued the Note to repay RMB140,000,000 (or HK$175,000,000) out of such indebtedness, and (iii) the Note was dishonoured when presented for payment.[28] As regards the Two Cheques, they were dishonoured but such part of the indebtedness had been purportedly settled by D pursuant to the Repayment Agreement that was unrelated to the present action. 

38. P claimed that despite D’s allegation that its defence “hinges upon the validity of the Loan Repayment Agreement”, there was no reason to go behind the Note and/or the Three Cheques.  P further claimed D had not raised any or any bona fide defence as to the validity of the Note and Three Cheques, which as bills of exchange were contracts in their own right separate from the underlying transactions. 

39. P denied the Three Cheques were for partial repayment of the indebtedness under the Note.  After the Note and Two Cheques were dishonoured, P chased D for repayment of the indebtedness due to him, and refused D’s requests to extend the repayment deadline.  Eventually D issued the Three Cheques as payment of interest on the indebtedness due to P.  P reminded that interest was specifically mentioned in the 21/3/12 Document in paragraph 22 above, which document was in fact P’s demand letter dated 21 March 2012 to D for partial repayment of the outstanding interest on the indebtedness of RMB140,000,000 (and hence unrelated to the Note and/or Three Cheques), and not “a document signed by [P] recording the payment of HK$200,000 as part payment of the debt owed”.  It was pursuant to such demand that D issued cheque no 000801 dated 22 March 2012 for HK$200,000 in P’s name, and it was honoured upon presentation.

40. P claimed he never received RMB10,000,000 from Zheng or D and had never seen the Two Receipts.  He noted he would be asked to sign a receipt every time a payment was made, but he never signed any receipt for the alleged payment of RMB10,000,000.  Further, cheque no 001059 dated 10 September 2012 for HK$7,000,000 issued by D was for payment of interest on the Note, and it was honoured upon presentation.

41. But even if the Three Cheques and payments of HK$200,000 and HK$7,000,000 were partial repayments of D’s indebtedness owed to P, this would only constitute a counterclaim or set-off on D’s part, which would not be a defence to P’s claim under the Note and/or Three Cheques.  But should the court grant leave to defend on the Note because of such further payments, it should be on condition that D makes payment into court or alternatively makes an interim payment[29] in the sum of HK$152,800,000 being RMB140,000,000 (or HK$175,000,000) under the Note less the disputed payments, ie HK$15,000,000 (2^nd Sum), HK$200,000 and HK$7,000,000.

42. In the Stay/Leave Decisions, DHCJ Wilson Chan noted D had not raised any substantive defence to P’s claim.  P claimed the three defences newly raised in the Yue Aff were recently made up to delay the present action and were not real defences.

43. First, D never argued for the purpose of the Stay Summons it had no obligation to honour the Note and Three Cheques issued pursuant to the Loan Repayment Agreement which D now claimed to be invalid under PRC law.  But the proper law of the Note and Three Cheques (being separate contracts to be performed in Hong Kong) was Hong Kong law, and they were enforceable in Hong Kong even if the underlying agreements might not be enforceable in the PRC.  Since P was not seeking to enforce the underlying agreements, and D did not suggest performance of its obligations under the Note and Three Cheques might involve breach of PRC law, any possible invalidity of the underlying agreements would not be an answer to the Amended Summons.

44. Nevertheless, the legal opinion dated 29 January 2015 by P’s PRC lawyers Guangdong Tensheng Law Firm (“P’s PRC Opinion”) advised “[P]要求[D]及[Yue]、[Yu]、[Ou]承擔全部保証責任，于法有據”,[30] and noted “擔保人多次確認擔保的事實” and “[D]已實際履行部份債務的事實”.  P’s PRC Opinion went on to say:

(a) in the event of default by the debtor, the creditor might require the debtor to repay the creditor in full, or require any one of the guarantors of the debt to repay the creditor in full;

(b) in the event that a loan between corporations was declared invalid (無效), PRC courts in Guangdong would generally order the debtor repay the creditor the entire principal and interest at the rate set out by PBC;

(c) the guarantor of the debt might still incur civil liability under the loan if the debtor was unable to repay the creditor in full.[31]

P’s PRC Opinion concluded that (a) “[Foshan Ruifeng]與[3 PRC Companies]的總額為[RMB220,000,000]的借款合同系債權、債務人雙方在自願前提下的真實意識表示，合法有效”, (b) “[D]為[Foshan Ruifeng]與[3 PRC Companies]的總額為[RMB220,000,000]的借款合同提供保証的《借款保証合同》已經簽約各債務有效存續”, and (c) “[D]與[P]于2012年1月30日簽署的[Repayment Agreement]及于2011 年2 月7日發出的[Note]系在[D]的代表律師何文琪律師事務所見証下簽署，自願、合法、真實，無脅迫成份，也無自始無效可能，應當認定為有效” (my emphasis).  P therefore believed that in any event D would be liable to repay the principal and interest accrued, and would still be liable under the Note and Three Cheques.

45. Secondly, P/Choi denied (a) D signed the Loan Repayment Agreement under duress, (b) P threatened the personal safety of the representatives of D and Foshan Ruifeng (“Representatives”), and/or (c) P sent triads to D’s premises.  P explained that in/about late November to early December 2011, P attended several meetings with the Representatives including Yue to chase repayment of money owed to him, and he would usually bring Choi and his PRC lawyer Lam Kwok Tung (“Lam”) with him.  At one such meeting at the offices of D and Foshan Ruifeng, P encountered other creditors waiting to talk to the Representatives, and he told the Representatives he would institute legal proceedings (which Lam said could be done within a few days if instructed) if they did not make repayment to him.  The Representatives offered to pay RMB100,000,000 first, and asked whether P would accept a personal guarantee.  At that time P did not want any guarantee, and no substantive agreement was reached at that meeting.

46. P/Choi claimed that a few days later they had dinner with the Representatives to negotiate the terms of the Loan Repayment Agreement. P maintained a personal guarantee was not enough, and no conclusion was reached. Whilst Choi/P made their way home, Ou telephoned P to suggest the terms subsequently recorded in the Loan Repayment Agreement, and to urge him to return and continue the discussion.  She said there would be a promissory note from D together with three personal guarantees.  P eventually agreed to discuss the matter again that night, and told Ou to send the draft agreement to Lam.  P/Choi made their way to the hotel (where Ou said the Representatives would meet them), and on the way Lam telephoned to tell P the draft agreement was in order.

47. When P/Choi arrived at the hotel at about 11:00 pm, they were taken to a private club area where another creditor was talking to the Representatives.  When such creditor left, the finalised version of the Loan Repayment Agreement was ready to be signed, and it was done quickly.  As P/Choi left they saw people (whom P believed were creditors of D and Foshan Ruifeng) being brought to the club area.  P knew D and Foshan Ruifeng had cashflow problems, but he did not realise they had issues with so many of their creditors. 

48. In any event, D’s claim that the Loan Repayment Agreement was signed by D under duress was irrelevant since (a) D did not allege the Loans were taken out and/or the Note and Three Cheques were issued by D under duress, (b) such allegation was raised for the first time in the Yue’s affirmation and was not supported by credible evidence, (c) such allegation was only supported by an undated/unsigned statement by Yu and it was difficult to see why D only disclosed it under Yue’s affirmation if it was prepared by Yu in mid-2012 as alleged.

49. Thirdly, D’s allegation that P was bound by Clause 5 to accept D’s allotment of shares as the means of repayment of the outstanding indebtedness had been raised before DHCJ Wilson Chan, who had this to say in the Leave Decision:

“20. It is noteworthy that [D] does not challenge the validity and enforceability of the [Note] itself. [D] does not say in its affidavit evidence that the [Note] is not a bill of exchange or otherwise does not fall within the provisions of the [Ordinance]. The [Note] has the same effect of a promissory note being an unconditional promise in writing made by one person to another to pay at a determinable time in the future a certain sum of money. Hence, the [Note], as a bill of exchange has to be treated as good as cash.

21. [Clause 5] provides that [P] and [D] can “agree separately” the “number of shares issued and their price” if [P] would accept the issuance of equity in lieu of cash. The fact that [Clause 5] provides alternative means for [D] to satisfy the debt due does not undermine the effect and enforceability of the [Note] itself. The sum due under the [Note] is still payable at the agreed time of payment.

22. Further, there has been no evidence adduced that [P] and [D] had made an agreement as to the number and price of shares to be issued. I agree with [P] that this is merely an “agreement to agree” and preconditioned upon the approval of the [SEHK], which may or may not be granted.

23. The opportunistic issue now raised by [D] is also contradictory to its original case. In its own case, [D] says that it had issued the [Three Cheques] to reduce the liability under the [Note]. If the parties had agreed to issue equity in lieu of cash payments, it is difficult to see why [D] would have issued the [Three Cheques] instead of shares.

24.  In the circumstances, in my view, the matters raised by [D] by way of counsel’s submissions (and not on affidavit) are simply not arguable defences in relation to [P]’s claims on the [Note] and the [Three Cheques].”

VI.  DISCUSSION

(a) Legal principles on failure of consideration

50. Sections 27(1) and 30 of the Ordinance provide as follows:

‘Valuable consideration for a bill may be constituted by-

(a) any consideration sufficient to support a simple contract;

(b) an antecedent debt or liability.  Such debt or liability is deemed valuable consideration whether the bill is payable on demand or at a future time.” (section 27(1))

“(1) Every party whose signature appears on a bill is prima facie deemed to have become a party thereto for value.

(2) Every holder of a bill is prima facie deemed to be a holder in due course; but if, in an action on a bill, it is admitted or proved that the acceptance, issue, or subsequent negotiation of the bill is affected with fraud, duress, or force and fear, or illegality, the burden of proof is shifted unless and until the holder proves that, subsequent to the alleged fraud or illegality, value has in good faith been given for the bill.” ’ (section 30) (my emphasis)

51. “There is no consideration sufficient to support a simple contract within subsection (1)(a) if the alleged consideration is in fact void.  Where a loan is made and the circumstances are such that the loan is null and void by statute, a bill or note given by the borrower in respect of the loan will be unenforceable by the lender for want of consideration.  For the same reason a bill or note in respect of a contract or transaction which is null and void by statute or at common law will be unenforceable as between immediate parties to the instrument.”[32]

52. “A total failure of consideration will occur when the party against whom liability is sought to be enforced received no part of the benefit for which he bargained in the transaction which led him becoming a party to the bill, for example, where an advance or payment promised to him was never made …… Total failure of consideration is a defence against an immediate party.”[33]

53. “Partial failure of consideration is a defence pro tanto against an immediate party …… provided that the partial failure is an ascertained and liquid amount.  Thus if A accepts a bill drawn on him by B as the price of a specified quantity of goods at a certain price per tonne to be supplied by B to A, and B delivers part only of the contract quantity, A will have a good defence to an action against him by B on the bill to the extent of the excess in the price beyond the amount due (at the contractual rate) for the goods which are delivered.  ……”[34] (my emphasis)

54. “Nevertheless the orders the court may make on an application by a claimant under Part 24 [ie for summary judgment] remain a matter of discretion of the court.  It would appear that, as between immediate parties, it is “beyond argument” that the application should be dismissed if there had been a total failure of consideration.  Moreover, in the exercise of its discretion, the court may dismiss the application in respect of part of the claimant’s claim on the instrument if there has been a partial failure of consideration in a liquidated amount or even if there is a liquidated counterclaim arising out of the same transaction which can be raised by way of legal set-off.  The dismissal may, however, be conditional upon payment into court of a sum of money, eg  the amount in dispute.”[35] (my emphasis)

(b) Discussion on failure of consideration

55. There was no dispute that the Loan Guarantee Agreements and Loan Repayment Agreement were governed by PRC law, but the Note and Three Cheques (being bills of exchange and hence contracts in their own right separate from the aforesaid underlying agreements) were governed by Hong Kong law.[36] Clause 6 expressly provided that the Note was to be governed by Hong Kong law.  The Three Cheques were drawn on WHB in Hong Kong and presented through P’s bankers in Hong Kong.

56. Mr Hui, counsel for D, argued that the 6 Loans (in the total sum of RMB220,000,000) were, according to D’s PRC Opinion, void under PRC law because the 3 PRC Companies did not have the requisite lending licence, and D’s guarantee obligations in relation thereto under the corresponding 6 Loan Guarantee Agreements were also void.  Even though the Loan Repayment Agreement was made by P (a natural person) as lender, according to D’s PRC Opinion, the Loan Repayment Agreement was also void since it was closely connected/related to the Loan Guarantee Agreements for the 6 Loans, and consequently the Note was unenforceable by P for failure/want of consideration.  On such basis, D was under no obligation to guarantee or repay any indebtedness due to P. 

57. Mr Hui submitted that alternatively, even if the Loan Guarantee Agreement with 楊志輝 for a loan of RMB2,000,000 remained valid, there was at the very least partial failure of consideration for the Note (issued pursuant to the Loan Repayment Agreement in discharge of D’s purported liability as guarantor for the Loans) and Three Cheques (issued after the Note which were dishonoured upon presentation), and a pro tanto defence could be raised.

58. In this respect, Mr Hui relied on Goff & Jones, The Law of Unjust Enrichment, which stated that in a situation where “both parties might understand that a payment is due …… pursuant to a valid contractual obligation” and if “…… the contractual obligation is …… void), there is also a failure of basis[37] ……, the failure of basis consists in the failure of the transfer to discharge the claimant from certain legal obligations”.[38]

59. In Sharp v Ellis,[39] a depositor lent money to a company on the security of promissory notes contrary to provisions of the company’s memorandum of association.  Such contract was null and void, and there was no enforceable contract.  By subsequent legislation such transactions became lawful and further promissory notes were given by the company as the original notes fell due.  It was held that performance of the depositor of his part of the illusory bargain relating to the original deposits was not in relation to the subsequent promissory notes “consideration sufficient to support a simple contract”.  Gillard J said at p 205:

“…… it is difficult to see how the performance of any promise comprised in an alleged agreement – which is void since it is ultra vires a company – can afford any consideration for a subsequent promise made by the company to the same party to perform its obligations under the illusory contract.”

60. Further, Chalmers and Guest on Bills of Exchange, Cheques and Promissory Notes states as follows:[40]

“…… a contract on a bill, cheque or note will not be enforced in England if it is illegal by the lex loci solutionis of the obligation or if the consideration for the contract was a transaction which is illegal by its governing law. However, an English court willnot allow a party to refuse payment merely on the ground that the payment would be illegal by the law of the foreign country where he resides or carries on business, or of which he is a national. And the fact that payment is rendered illegal by the law of the foreign country where the instrument is payable will not make a party’s engagement to pay unenforceable unless payment can be required of him only on that country and not elsewhere.” (my emphasis)

61. Mr Hui also relied on In re Banquue des Marchands de Moscou (Koupetschesky) (No 2), where drafts addressed to an English bank by a Russian bank in favour of a customer were held to be unenforceable because, although the drafts were not illegal under English law, the transaction was illegal in its inception as (a) it violated Russian law, (b) the Russian bank was dissolved before the date of the documents relied on to support the claim, and (c) any liability on the Russian bank was extinguished when it was dissolved in Russia, and the debt was not provable in the winding up of the Russian bank in England since such bank resided only in Russia and the debt was situated in Russia at the date of the dissolution.

62. On the other hand, Mr D’Souza, counsel for P, submitted D’s PRC Opinion was defective in failing (a) to explain how one could “jump” from the alleged invalidity of the Loan Guarantee Agreements for the 6 Loans made by the 3 PRC Companies as lenders to the conclusion that the Loan Repayment Agreement made by P (a natural person) as lender was null and void because it was inherently connected to the Loan Guarantee Agreements, and (b) to say whether (and if so how) such alleged invalidity or unenforceability affected the Note and Three Cheques given their autonomy as bills of exchange. Mr D’Souza argued that D’s PRC Opinion did not “bite” on and was not relevant to P’s claim under the Note and Three Cheques.  Mr D’Souza reminded this court of the approach courts should take in assessing evidence of foreign law as explained in Full Wisdom Holdings Ltd & ors v Traffic Stream Infrastructure Co Ltd & ors,[41] where Le Pichon JA said at p 1025 as follows:

“23. …… In studying the validity of any opinion based on foreign law, the Court does not simply accept any stated conclusions as being correct, even where there may be no legal opinion contradicting it. The Court is entitled to (and indeed must) look at the basis of the legal reasoning as well as the terms of [the legal provision] in determining what weight, if any, should be attached to the Opinion. …… The Opinion was singularly lacking in legal analysis. In these circumstances, as a matter of principle, it would be wrong to attach any weight to it.”

63. Mr Hui countered by submitting that P’s PRC Opinion would not be of assistance in any meaningful way.  Even if the opinion therein was correct, all it showed was the PRC courts in Guangdong Province would generally order the debtor rather than the guarantor to repay the creditor the entire principal and interest at the rate set by PBC, but it did not say whether the Loans were void or not or whether the guarantor was obliged to pay the creditor or not.  If the Loans were void, there would be failure of consideration.  “The existence of a remedy available to the creditor does not validate a void/invalidated loan agreement”.  Mr Hui submitted that in any event P’s and D’s PRC Opinion suggested there would be a triable issue as to whether loan payment was void under PRC law, and if it were void it would amount to failure of consideration.

64. Mr Hui also submitted there was no merit in P’s attack on D’s PRC Opinion because it could not be said that such opinion failed to perform any necessary legal analysis, overlooked any important matters or failed to mention/consider any material matters.  He urged the court to take into account its inherent logic/reasonableness.  He suggested that even under Hong Kong law it would be difficult to see how liability of a guarantor could remain legal and valid if the underlying loan was void, and after all a mistake of law might vitiate a contract.[42]

65. Mr Hui submitted it was at least arguable the parties when entering into the Loan Repayment Agreement made a fundamental mistake that 6 out of the 7 Loan Guarantee Agreements were invalid/void such that no indebtedness was due thereunder and any guarantee obligations arising under the Loan Repayment Agreement would also be void for common mistake, and D was therefore under no obligation “to repay P in relation to the 6 out of 7 Loans under the Loan Repayment Agreement”.  On such basis, it was said that D’s PRC Opinion accorded with common sense and not inconsistent with Hong Kong law, so there was nothing so unreasonable as to persuade the court not to place weight on such opinion.

66. As regards the question whether the Loan Repayment Agreement could be severed to preserve the part that was not void, Mr Hui submitted D’s PRC Opinion opined that the Loan Guarantee Agreements (except the one with 楊志輝) were void, which “necessarily implies that severance is possible under PRC law”.  But if this was unsatisfactory and the court was minded to apply Hong Kong law, Mr Hui submitted it was well-established that where part of the terms of a contract is illegal, against public policy or prohibited by statute, the illegal part may be severed, but the court will not make a new contract for the parties and/or sever the unenforceable parts unless it accords with public policy.[43]

67. I start by noting D’s contention of total/partial failure of consideration and invalidity of the Loan Repayment Agreement does not sit well with D’s case that it had substantially performed its obligations to repay part of the indebtedness due thereunder by issuing D’s shares[44] and making a number of payments.[45] Mr Hui claimed D was mistaken, but one should not lose sight of this in the overall consideration of whether there was any arguable defence or triable issue.  Such line of defence was only first raised in Yue’s affirmation.

68. Plainly, total/partial failure of consideration occurs when the whole or part of the consideration is void in the sense that the party against whom liability is sought to be enforced never received any part of the benefit for which he bargained for.  A clear example is failure to advance payment of a loan that was promised or where a loan is rendered null and void by statute. 

69. Here, there was no dispute Foshan Ruifeng received and had the benefit of the total loan sum of RMB240,000,000 advanced under the Loan Guarantee Agreements (and D acknowledged in the Loan Repayment Agreement and in the confirmation letter in paragraph 20 above that P was the actual lender of the Loans).  So the initial question is whether PRC law rendered the Loans (being the consideration for the Loan Guarantee Agreements) null and void from inception when the Loans were advanced.

70. There is no dispute that the Loan by 楊志輝 and the corresponding Loan Guarantee Agreement were valid and enforceable.  Further, D’s and P’s PRC Opinion both accepted “廣東省高級人民法院在1999年6月30日發布《廣東省高級人民法院關于審理几類金融糾紛案件的若干意見》第38條” provided that “不具備金融業務經營權的法人、其他組織，從事貸款業務，應確認其貸款行為無效，其借貸關係不受法律保護” (my emphasis).  Mr Hui’s submissions equated this with “null and void” loan/lending, but A Cheung J (as he then was) in Guangdong Wui Lap Investment Co Ltd v Wong Man Pan[46] characterised the effect of such provision to be “invalid (無效)” rather than null and void from inception (自始無效):

“19. In any event, I have no difficulty in accepting the expert legal evidence on Mainland law that has been adduced before me. The expert evidence is to the effect that while it is true that the Plaintiff, not being an authorised financial institution, was not in a position to lend money to other companies in the Mainland and that any such loans would be “invalid” (無效), the borrower of any such loans would still need to repay the principal together with interest at the prevailing lending rate of the [PBC] to the lender. In other words, [the debtor/borrower in that case] remained liable to repay the principal amount borrowed from the Plaintiff, or the outstanding amount thereof, together with interest at the prevailing lending rate of the [PBC]. ……”

71. D’s PRC Opinion was silent on the effect of the above provision on the obligation of Foshan Ruifeng as debtor/borrower if the Loans were “invalid (無效)”.  Even though D’s PRC Opinion relied on “廣東省高級人民法院在1999年6月30日發布《廣東省高級人民法院關于審理几類金融糾紛案件的若干意見》”, it did not (as P’s PRC Opinion did) refer to “第41條” therein which provided “上述38、39條所述的情況，除本金予以返還外，一般應判借款人按[PBC]規定的同期貸款利率支付利息”.  But there is nothing in D’s PRC Opinion to contradict such provision (which was consistent with PRC law as found/accepted in Guangdong Wui Lap Investment Co Ltd) that even though the unlicensed lending arrangement between corporations “行為無效，其借貸關係不受法律保護”, for unlicensed loans that were already advanced, “除本金予以返還外，一般應判借款人按[PBC]規定的同期貸款利率支付利息” (and the interest payable was as specified in “該若干意見的附件說明第三條”).[47] On the basis of such PRC law, it is difficult to see how the 6 Loans advanced by the 3 PRC Companies were altogether null and void from inception such that it was insufficient consideration to support the corresponding 6 Loan Guarantee Agreements and D’s guarantee liability thereunder in respect of the 6 Loans.  This is supported by the conclusion in Guangdong Wui Lap Investment Co Ltd that:

“19. …… There is thus no question of the indemnity not being valid, lawful or enforceable against the Defendant, at least in relation to the repayment of the outstanding balance of the principal amount, together with the arrears of interest calculated according to the prevailing lending rate of the [PBC].”

72. Indeed, the above conclusion vis-à-vis the obligations of the debtor/borrower is consistent (if not exactly the same) with PRC law as explained in D’s PRC Opinion, ie the guarantor in such circumstances might bear civil liability depending on whether he was “at fault” (過錯) (in which case his liability would not exceed ⅓ of the amount the debtor/borrower could not repay to the lender).  D’s PRC Opinion went on to say “即使[D]被認定為存在過錯的，根據法律規定，也應由債務人，即[Foshan Ruifeng]先向債權人清償。如果[Foshan Ruifeng]無法全部清償完畢的，作為擔保人，[D]承擔責任部份也不應超過[Foshan Ruifeng]不能清償部份的三分之一”.  Given the obligation on the debtor/borrower to repay the loan so granted/borrowed and the potential liability to repay on the part of the guarantor premised on whether or not he was “at fault” (“過錯”) and whether or not there was any non-repayment by the debtor/borrower of the loan so advanced, it is again difficult to see how the 6 Loans would be altogether null and void from inception such that Foshan Ruifeng (as borrower) and D (as guarantor) under the corresponding Loan Guarantee Agreements received no part of the benefit for which they bargained in the transactions. 

73. Mr Hui submitted that since P did not suggest D was “at fault” (過錯), such potential liability did not arise in respect of D.  But D’s PRC Opinion in fact fell shy of explaining what “at fault” (“過錯”) meant under “廣東省高級人民法院在1999年6月30日發布《廣東省高級人民法院關于審理几類金融糾紛案件的若干意見》” “第41條” and/or under PRC law, and merely emphasised that such question was to be determined by the PRC courts (“需要注意的是，[D]是否存在過錯應由中華人民共和國境內有管轄權的人民法院最終判定”).  More importantly, as explained in Guangdong Wui Lap Investment Co Ltd, the obligation on the debtor/borrower to repay the loan so advanced and the potential liability by the guarantor to repay part of the indebtedness due to the lender of themselves suggested that in principle the consideration was not void from inception.

74. In the circumstances, I am not persuaded D has demonstrated any arguable case that under PRC law there was no indebtedness due under the Loan Guarantee Agreements for the 6 Loans and/or D was therefore relieved of its guarantee obligations thereunder.

75. Turning to the Loan Repayment Agreement, D claimed it was also void for being closely connected to the 6 Loans and corresponding Loan Guarantee Agreements that were void.  Such argument falls away in light of the above analysis.  But even if the 6 Loans and corresponding Loan Guarantee Agreements were void as Mr Hui suggested, I am not persuaded D has raised any arguable case or triable issue that the Loan Repayment Agreement was therefore void.

76. By the Loan Repayment Agreement, confirmation letter in paragraph 20 above, Repayment Agreement, issuance of the Note and/or Three Cheques to P and payments of HK$200,000 and HK$7,000,000 to P, D clearly acknowledged that P (instead of the 4 PRC Entities) was all along the actual lender of the Loans.  In the Loan Repayment Agreement, D confirmed “[Foshan Ruifeng]因經營需要，向[P]借款[RMB240,000,000]，[P]通過[4 PRC Entities]等名下賬户已將上述借款借給[Foshan Ruifeng]”.

77. Given such clear acknowledgment by D, D’s PRC Opinion failed to address the legal effect of the following matters on (and hence question of the validity or otherwise of) the Loan Repayment Agreement: (a) Foshan Ruifeng received and had the benefit of the loan monies, (b) the Loan Repayment Agreement was made by P (a natural person) (in contra-distinction to the 3 PRC Companies that signed the corresponding Loan Guarantee Agreements as named lenders) not merely as the named lender but also acknowledged by D and Foshan Ruifeng to be the true and actual lender ab initio, and (b) such agreement provided that Foshan Ruifeng and Guarantors (including D) were obliged to repay the total loan sum of RMB240,000,000 (instead of seven individual Loans) to P (instead of the 4 PRC Entities).  This is particularly significant since D’s PRC Opinion accepted that a loan granted by a natural person would be valid and would not contravene PRC law.  I cannot see how a broad reference to the Loan Guarantee Agreements (when in fact one of them was accepted to be valid and enforceable as having been made by a natural person楊志輝) being inherently connected to the Loan Repayment Agreement properly addressed this issue.  Further, D missed the point raised in (a) to (c) above by merely reiterating that a guarantor’s liability cannot remain legal/valid if the underlying loan was void.

78. As alluded to above, D’s PRC Opinion also did not expressly address the legal effect of the Loan of RMB2,000,000 by the named lender楊志輝 (a natural person) pursuant to the corresponding Loan Guarantee Agreement on the Loan Repayment Agreement.  Mr Hui submitted it was “necessarily implicit” that such Loan and the 6 Loans were severable since D’s PRC Opinion accepted the former was valid and enforceable but the latter was not.  However, I note that whilst the Loan Repayment Agreement acknowledged such RMB2,000,000 advance was in fact part of the total loan of RMB240,000,000 by P to Foshan Ruifeng, D’s PRC Opinion did not explain (a) how the incorporation of such advance (which was accepted to be valid and enforceable) as part of the total loan of RMB240,000,000 would impact on the validity or otherwise of such total loan and the Loan Repayment Agreement, and (b) how the total loan of RMB240,000,000 by P to Foshan Ruifeng (as acknowledged by P, Foshan Ruifeng and Guarantors (including D) in the Loan Repayment Agreement and in contra-distinction to the seven individual Loans under the Loan Guarantee Agreements) would therefore be “implicitly” severable. 

79. Mr Hui urged me to apply Hong Kong law (if I find D’s PRC Opinion unsatisfactory in this respect) to sever the unenforceable parts of the Loan Repayment Agreement.  I am not persuaded that I could or should.  First, if D’s PRC Opinion was unsatisfactory (and in the above paragraph I have found that it failed to address the relevant issues), there was other available PRC legal opinion in the shape of P’s PRC Opinion before this court without need to fallback to Hong Kong law.  Secondly, even if I were to fallback to Hong Kong law, I am not persuaded I should rewrite the contract among the various parties, especially when the Loan Repayment Agreement provided for (a) a total loan of RMB240,000,000 by P to Foshan Ruifeng and no longer maintained seven individual Loans and (b) the Two Cheques and allotment of D’s shares as repayment for such total loan that no longer drew any distinction amongst the seven individual Loans.

80. In all the circumstances, I am not convinced D had shown any arguable case or triable issue that the Loans, Loan Guarantee Agreements and/or Loan Repayment Agreement were void. But even if I am wrong on this, I am not still persuaded there is arguable or triable basis to suggest it affected the Note and Three Cheques being autonomous bills of exchange.

81. Mr D’Souza drew attention to the analysis in Guangdong Wui Lap Investment Co Ltd where a PRC corporate borrower made partial repayment of a loan granted by the plaintiff (an unlicensed PRC company), and the repayment deadline was extended in consideration of inter alia the defendant’s personal guarantee under a so-called deed of irrevocable guarantee for repayment of the outstanding loan and interest.  The plaintiff sued the defendant under the so-called deed, which on its true construction was held to be a contract of indemnity.  A Cheung J (as he then was) said:

“11. In his defence, the Defendant alleges that the loan was “inherently illegal or void and thus unenforceable” because under the relevant law in the Mainland, the Plaintiff was forbidden to lend money to LAJL and it was illegal to charge interest at higher than 10% per annum. It is therefore pleaded in the defence that the so-called deed of irrevocable guarantee, which arose out of an underlying transaction that was (allegedly) “either illegal or void”, is also “illegal and unenforceable”. It is also pleaded that the same “arose out of an illegal contract, or void contract and [is] thus unenforceable”.

……

15. In the present case, the so-called deed provides ……Clause 11 expressly says that the legality and validity of the deed would not be affected even if the whole or any part of the loan agreement were illegal, invalid or unenforceable.

16. I agree with Mr Jat that on the true construction of the document as a whole, bearing in mind particularly those clauses that I have just highlighted, the document in question is a contract of indemnity rather than guarantee.

17. In those circumstances, I further agree with counsel’s submission that the validity or lawfulness of the loan agreement under the law in the Mainland would not affect the validity of the so-called deed in Hong Kong, which also provides in clause 12 that Hong Kong law is the proper law for determining the proper construction of the document. See Kleinwort, Sons & Co. v. Ungarische Baumwolle Industrie Aktiengesellschaft [1939] 2 KB 678; Dow MBF Ltd v. Detrick Ltd [1988] 1 HKLR 344, 351H-352G; Shenzhen Development Bank, supra, at paras. 40-44.

18. In those circumstances, the so-called deed, which I will from now on refer to as the indemnity, is valid and enforceable under local law, regardless of the validity (etc.) of the underlying loan agreement and supplementary agreement under the law of the Mainland (which governs those two documents), unless there are some other grounds affecting the validity or enforceability of the indemnity in Hong Kong.”

A Cheung J (as he then was) went on to refer to the PRC law as set out in paragraphs 70-71 above, and concluded that “[however], because of my holding in respect of the true nature of the so-called deed, all this is rather academic.”

82. Mr Hui submitted Guangdong Wui Lap Investment Co Ltd was distinguishable from the present case because the learned judge concluded that the validity/lawfulness of the loan agreement under PRC law would not affect the so-called deed in Hong Kong only because (a) there was express provision in the so-called deed that its legality/validity would not be affected if the whole or any part of the loan agreement were illegal, invalid or unenforceable, and (b) the so-called deed was in fact a contract of indemnity.  On such basis, Mr Hui argued that this case did not support P’s proposition that the validity/lawfulness of the underlying loan agreements under PRC law would not affect the validity of the Note and Three Cheques. 

83. In my view, such submissions misunderstood the ratio in Guangdong Wui Lap Investment Co Ltd.  The significant considerations in that case which led to the learned judge’s conclusion that the validity or lawfulness of the loan agreement would not affect the validity of the so-called deed was premised not on the two factors described in the above paragraph but on the fact that the former was governed by PRC law and the latter was an autonomous indemnity contract with principal (rather than secondary) repayment obligations governed by Hong Kong law.  Regardless of the validity or otherwise of former under PRC law, the latter was plainly valid and enforceable under local law.  In any event (even though it was an academic point), since the debtor/borrower remained liable to repay the principal and interest in the manner specified under PRC law, there was no question of the indemnity not being valid, lawful or enforceable.

84. Likewise in the present case, the Note and Three Cheques stood as automous contracts between P and D separate from the underlying Loan Guarantee Agreements and Loan Repayment Agreement governed by PRC law.  The proper law for determining the obligations under the Note and Three Cheques was Hong Kong law, and the validity or lawfulness of the underlying agreements would not affect the validity of the Note and Three Cheques as separate contracts.  Mr Hui submitted that a crucial distinction was that the so-called deed in Guangdong Wui Lap Investment Co Ltd was governed by Hong Kong law whereas the Loan Guarantee Agreements and Loan Repayment Agreement were governed by PRC law.  In my view, such comparison is inapt.  There was no dispute that like the so-called deed in Guangdong Wui Lap Investment Co Ltd (which was in fact a contract of indemnity with primary obligations), here the Note and Three Cheques governed by Hong Kong law were autonomous contracts separate from the Loan Guarantee Agreements and Loan Repayment Agreement (no matter that these agreements contained obligations for primary and secondary liability).

85. Mr Hui also complained Guangdong Wui Lap Investment Co Ltd was not concerned with failure of consideration as a defence to a bill/ note, and hence it was irrelevant to the present case.  I cannot see the relevance of such distinction, but this nicely brings me to Kleinwort, Sons & Co v Ungarische Baumwolle Industrie Aktiengesellschaft & anor,[48] which was referred to in Guangdong Wui Lap Investment Co Ltd.  In that case, a London bank accepted bills of exchange drawn on them by a Hungarian company payable in three months in London.  A Hungarian bank sent the bills to the London bank with a guarantee by them and a letter from the drawer providing cover for the bills in London.  No cover was provided at maturity because Hungarian legislation made it illegal for Hungarian subjects to pay money outside Hungary without consent of the national bank.  It was held inter alia the proper law of contract was English law, and since the contract was to be performed in England it was enforceable in the English courts even though its performance might involve breach of Hungarian law by the Hungarian bank and drawer of the bills.

86. MacKinnon LJ said at p 693 that:

“…… In those cases the contract was to do something in a foreign country, and, when the law of that foreign country had made it illegal to do that act in that foreign country, it was held that the English Courts would not compel its performance or make the man who had failed to perform it liable in damages. …… That proposition seems to have no application whatever to the facts of this case. This is no contract to do anything in Budapest or elsewhere in Hungary, but a contract to do something in London.

The attempted extension of the principle would obviously lead to preposterous results.  Suppose the Kingdom or Legislature of Ruritania passed a law that no Ruritanian subject should pay a hotel bill which he had incurred in England.  When the Ruritanian subject was sued in the county court by the hotel proprietor the count court judge, if that principle were correct, would have to give judgment for the defendant.  That seems to be obviously absurd and I do not think that I need to discuss the matter any further.”

87. Mr Hui tried to distinguish Kleinwort, Sons & Co by saying it dealt with a point on illegality in contra-distinction to D’s arguments that the underlying contracts (ie Loan Guarantee Agreements for the 6 Loans and Loan Repayment Agreement) were void such that there was failure of consideration for the Note and/or Three Cheques.  But quite plainly, the governing law and place of performance of the Note and Three Cheques were Hong Kong and not the PRC.  Mr Hui had to fall back on the void consideration argument that the 6 Loans, corresponding Loan Guarantee Agreements and Loan Repayment Agreement were void.  I disagree and refer to my analysis in paragraphs 55-86 above and in paragraphs 88-92 below.

88. Mr D’Souza next referred to Melco Crown Gaming (Macau) Limited v Huang Haichao.[49] In that case, the defendant (a Hong Kong resident) was a guarantor of credits advanced by the plaintiff (a Macau company) to a licensed gaming proprietor in Macau under a liability agreement, and deposited a cheque with the plaintiff.  The plaintiff made the advance, but the gaming proprietor defaulted in repayment.  The cheque (drawn in Hong Kong on a Hong Kong bank and subject to Hong Kong law) was dishonoured upon presentation.  When the plaintiff sued on the dishonoured cheque, the defendant agreed there was consideration but argued the underlying liability to repay the loan was legally unenforceable under Macanese law, so payment of the cheque was not enforceable in Hong Kong.  DHCJ Seagroatt said:

‘Although the Defence suggests that the underlying liability is “unenforceable”, there is no suggestion of illegality. …… it is clear to all and on the part of all, that credit facilities were granted to [the gaming proprietor], has been guaranteed by the defendant and by his cheque. The defendant has admitted drawing the cheque and executing the Liability Statement and does not raise any dispute on the contents or authenticity of the document. …… There is therefore no ground on which the defendant can challenge the validity or enforceability of the cheque’.[50]

89. DHCJ Seagroatt in paragraphs 15-17 drew support from Sharif v Azad[51] where the plaintiff sued on two cheques drawn on an English bank which were dishonoured.  The parties were English residents and the defendant provided the cheques in exchange for a rupee cheque drawn on a Pakistani bank with the payee’s name left blank.  The Pakistani bank allocated it to a blocked account as a result of which the defendant countermanded the payment of the two cheques he provided.  The English Court of Appeal agreed there was nothing illegal in the cheque transaction in that it took place wholly in England.  Diplock LJ at p 619 said that even assuming the two cheques were issued pursuant to a tripartite contract among the parties and the provider of the rupee cheque, such contract would not have been “illegal” under English law:

“ But the plaintiff is not suing on this contract …… He is suing on the cheque which was issued by the defendant in the performance of this contract.  A cheque issued in performance of an agreement which is merely unenforceable is not “affected by illegality”, although the drawer may have an alternative defence to an action by an immediate party by showing that the immediate party did not give value, that is consideration therefor.  ……’

90. However, DHCJ Seagroatt in paragraph 18 said the alternative defence referred to by Diplock J (which Mr Hui submitted recognised the defence of total/partial failure of consideration) was not available in the case before him, and he went on to refer to the observations by Russell LJ at pp 619-620 in Sharif as follows:

“…… An English resident sues an English resident on two sterling cheques totalling £300 drawn in favour of the former by the latter in England on an English bank. To defend such an action the defendant must show that there was no consideration for the cheque or that it was tainted by illegality in English law. Plainly there was consideration: indeed, the contrary was not pleaded. Equally plainly there was no illegality in English law involved in the drawing of the cheques sued upon. ……”

91. In my view, likewise in the present case, the Note and Three Cheques were separate contracts governed by Hong Kong law and the performance of such contracts was in Hong Kong.  The Note and Three Cheques were valid and enforceable under local laws regardless of the validity and enforceability of the underlying loan/guarantee agreement(s) under PRC law.  Mr Hui submitted that the admission of consideration in Melco Crown Gaming (Macau) Limited made a difference, but here there was no dispute P did advance the total loan of RMB240,000,000 via the 4 PRC Entities as acknowledged in the Loan Repayment Agreement and the confirmation letter in paragraph 20 above.  As explained in Sharif, even if the Note was issued in performance of an agreement which was unenforceable (“行為無效，其借貸關係不受法律保護”), it was not “affected by illegality”.  After all, even P’s PRC Opinion took the view that PRC law maintained the debtor’s/borrower’s (and to a certain extent the guarantor’s) obligations thereunder. Indeed, Mr Hui confirmed at the hearing of the Amended Summons that D was not relying on any illegality defence in respect of the Note.  As for the Three Cheques, D provided them in August 2012 after the Note was dishonoured upon presentation.  There was no dispute P demanded for payment under the Note, which even on D’s own case led to partial payments, negotiations for a repayment schedule (which D again defaulted) and issuance of the post-dated Three Cheques.  In such circumstances, I agree with Mr D’Souza that P’s forbearance to sue on the Note would provide sufficient consideration for the Three Cheques. 

92. In all the circumstances, I am not convinced D had raised any arguable defence or triable issue on its alleged defence of total/partial failure of consideration for the Note and Three Cheques.

(c) Duress

93. D attempted to argue the Loan Repayment Agreement (in contra-distinction to the Note and Three Cheques) could be invalidated under PRC contract law on the ground of duress.  D claimed P demanded Yu/Yue (who were detained in a hotel room in Foshan and subjected to threats) to sign as personal guarantors, and they finally gave in to P’s threats/demands and signed the Loan Repayment Agreement.  D’s PRC Opinion advised that D might apply to the PRC courts to invalidate the Loan Repayment Agreement.  Mr Hui submitted that if the Loan Repayment Agreement was invalidated under PRC law, the consideration for the Note would fail totally and D would be under no obligation to repay P the sum under the Note (and thus under the Three Cheques).  Mr Hui further argued that since P disputed D’s version of events, such dispute could/should not be resolved summarily on affirmation evidence.

94. In my view, even though P and D gave different accounts of events that led to the signing of the Loan Repayment Agreement, I am not persuaded D raised any arguable defence or triable issue vis-à-vis the Note and Three Cheques:

(a) Despite the seriousness of alleged threats, there was no affirmation evidence from Yu or some explanation as to why he could not provide affirmation evidence.  This is especially significant when D relied on an unsworn/unsigned statement allegedly made by him, and failed to disclose two statements given to the Hong Kong police eight months after the incident as mentioned in D’s PRC Opinion.  No explanation was given as to why the matter was reported to the police only eight months later.

(b) Although D claimed Yu/Yue signed the Loan Repayment Agreement under duress on 7 December 2011, D issued the Note soon after in the presence of their solicitor (from the same solicitor firm who now acts for them in the present action).  No explanation was given as to whether legal advice had been sought in respect of the alleged duress, and if not why not. 

(c) Mr D’Souza submitted the alleged duress was only to Yu/Yue and not to D who was already a guarantor under the Loan Guarantee Agreements.  Mr Hui accepted D’s liability under the Loan Repayment Agreement was co-extensive with its pre-existing liability under the Loan Guarantee Agreements.  Indeed, the whole tenor of Yue’s affirmation evidence was that P wanted more personal guarantees from Ou, Yue and Yu as he regarded D’s guarantee liability was “not enough”, and this allegedly led to P’s threats to Yu/Yue, which threats were directed to Yu/Yue personally and to their families.  So even on D’s version of events, the pressure was on Yu/Yue personally rather than on D.  More importantly, if it were said, as Mr Hui suggested, that the alleged duress was on D to enter into the Loan Repayment Agreement and to issue the Note, there was no suggestion at all that D at any stage wished to resile from its pre-existing responsibility as guarantor for the Loans, and there was no explanation why it gave the Note in the presence of their solicitor.

(d) D’s PRC Opinion did not say what effect such duress on Yu/Yue had on D’s obligations under the Loan Repayment Agreement.  All it said was that there was prima facie evidence of duress in the execution of such agreement (“我們了解到有証據表明，[Yu]和[Yue]系在[P]的威脅下簽訂了[Loan Repayment Agreement]並加蓋了[D]的公司公章。為此，[D]向我們出示了“與東莞[P]借款情況”以及2012年8日以及2013年1月兩次報香港警方的口供副本”), and D could apply to the PRC courts to invalidate the Loan Repayment Agreement, but it did not say such alleged that duress against D (and not just to Yu/Yue personally) was made out under PRC law when the Loan Repayment Agreement continued D’s pre-existing guarantee obligations.  Although D’s PRC Opinion seemingly suggested D’s company chop was affixed to the Loan Repayment Agreement as a result of duress, this was not D’s case/evidence as evident from Yue’s affirmation. 

95. More importantly, there was no basis to suggest that the Note and Three Cheques were also affected by duress.  Not only was there no such assertion by D, the Note was issued in the presence of D’s own solicitor, and D would have access to legal advice if it wished.  D’s PRC Opinion further noted D first gave statement to the Hong Kong police about the alleged duress in August 2012, but the Three Cheques were issued in that very month.  Given the report to the police, D could hardly contend that the issuance of the Three Cheques 8 months after the alleged incident in Foshan was still affected by duress.  Further, even if there were arguable basis to suggest that the Legal Repayment Agreement was voidable as a result of duress, the Note and Three Cheques being autonomous contracts governed by Hong Kong law and to be performed in Hong Kong remained valid and enforceable under local laws.  There is no merit to the alleged defence based on duress.

(d) Clause 5

96. D argued Clause 5 (which represented the parties’ contractual intention at the time when they entered into the Loan Repayment Agreement) provided that the only means of enforcement upon default of the Note was to ask D to issue tradable shares of equivalent value in lieu of monetary payment.  It was said that D had been willing and ready to do so, and it was P who refused to agree the share price for allotment.  Mr Hui submitted that even if there had not been any failure of consideration and D was liable to P under the Note, such obligation should be fulfilled by allotment of shares.  D also argued that likewise the value of the Three Cheques should have been met with issuance of shares rather than cash repayment. 

97. In my view, the fact that the Note had an alternative payment scheme or collateral security in shares would not invalidate/undermine the Note as a bill of exchange which was to be treated as cash.[52] Further, such argument had been raised before DHCJ Wilson Chan, but in the Leave Decision the learned judge was skeptical of such alleged defence. DHCJ Wilson Chan also noted D’s stance contradicted its original case that it issued the Three Cheques as part payment of the indebtedness under the Note.  I respectfully agree with and gratefully adopt the learned judge’s analysis set out in paragraph 49 above.  There is no merit to this argument.

(e) Further payments

98. Mr Hui submitted if the court were to find that none of the Loan Guarantee Agreements were void, then the court should reduce the award to P by the sums of HK$200,000, RMB10,000,000 and HK$7,000,000 which were part payment of the indebtedness under the Note.

99. D claimed the Three Cheques and three payments in the above paragraph were partial repayment of the principal amount under the Note whilst P claimed (a) he never received any payment of RMB10,000,000 and (b) the Three Cheques and other two payments of HK$200,000 and HK$7,000,000 were for repayment of interest under the Note.  Mr D’Souza submitted D’s stance further contradicted D’s case that P was to receive shares in lieu of cash pursuant to Clause 5.

100. Mr Hui submitted the Three Cheques were issued because D could not repay the sum of RMB140,000,000 under the Note upon maturity and hence on/about 22 August 2010 D issued the Three Cheques to P as partial repayment of the Note in anticipation of cash inflow to D shortly.  I do not see how this would aid D’s case because Clause 2 provided interest was payable under the Note at 5% pa.  This meant the indebtedness due under the Note was not just the principal sum of RMB140,000,000 but also interest accrued thereon pursuant to Clause 2.  If the Three Cheques were for partial repayment of the indebtedness due under the Note, as Mr Hui suggested, such indebtedness would not be limited to the principal sum of RMB140,000,000, but would include outstanding interest.  In fact, several months prior to the issuance of the Three Cheques in August 2012, the 21/3/12 Document signed by both parties in respect of the payment of HK$200,000 clearly acknowledged D owed P “[RMB140,000,000]及相利息”.[53]

101. Mr Hui suggested that the Three Receipts did not mention any repayment of interest.  However, in the context discussed above in which the indebtedness under the Note comprised both outstanding principal and interest, it could not be said that the reference to “用於支付[D]欠[P]之部份款項” necessarily excluded interest on the sum of RMB140,000,000.  Likewise, for the payment of HK$200,000 on 22 March 2012, the 21/3/12 Document in referring to “[P](“債權人”)就[D](債務人)所欠之[RMB140,000,000]及相利息，現要求以現金形式清償HK$200,000 ……” also did not exclude interest payable under the Note. More importantly, it is clear from the Three Receipts and 21/3/12 Document (which were the very receipt/demand for the Three Cheques and the cheque for HK$200,000) there was no clear appropriation to principal due under the Note, and they do not support D’s bare assertion that the Three Cheques and the sum of HK$200,000 were specifically for repayment of principal and not interest.  Although there was no receipt for the payment of HK$7,000,000, there was also no suggestion that its disposition was otherwise different from the Three Cheques and the payment of HK$200,000.  It is for D to raise an arguable defence or triable issue, and it has not explained the commercial sense/logic and has not given a credible/believable reason for a creditor permitting part payment in reduction of the outstanding principal when substantial outstanding interest had not been settled.

102. Mr D’Souza argued the payments of HK$200,000 and HK$7,000,000 (even if they were for reduction of the principal indebtedness and not for interest) would not affect P’s claim on the Note and/or Three Cheques as they essentially amounted to a counterclaim by D for overpayment to P or set-off of P’s claims, both of which were no defences to claims on bills of exchange.  I do not need to consider such argument since I have found that D has not put forward a credible argument that the Three Cheques and the payments of HK$200,000 and HK$7,000,000 were part payment specifically for the outstanding principal indebtedness under the Note.

103. As regards the alleged payment of RMB100,000,000, Mr D’ Souza complained that D failed to condescend upon particulars of when and how the alleged agreement was reached between the parties (which presumably was an oral one since D did not disclose any document relating to such alleged agreement) that D would pay P RMB10,000,000 via Ye and Zheng, and P never signed any acknowledgment of receipt for such sum as he did for the Three Cheques. 

104. It is for D to raise a credible or believe case that it had paid P the sum of RMB100,000,000.  But D’s position is nothing more than a bare assertion.  It was D’s case that Ye paid such sum to Zheng who in turn paid such sum to P.  In respect of the Two Receipts, the printed receipt stated Zheng received 2 cheques each in the total sum of RMB20,000,000 drawn by “肇慶錦繡前程貿易有限公司” (and not a sum of RMB10,000,000 from Ye), and the handwritten receipt stated “玆收到[Ye]代[D]清償[Zheng]的欠款[RMB10,000,000] (10000000.00)”, which merely confirmed Ye on D’s behalf paid indebtedness owing to Zheng.  The Two Receipts did not support D’s case at all. 

105. Although the “債務清償協議書” (ie the Draft Agreement) stated “[Foshan Ruifeng]、[D]確認，至2012 年7月__日止，因[Ye]於2012 年7月  日代[Foshan Ruifeng]及[D]清償欠[P][RMB10,000,000]，因此[D]確認欠[Ye][RMB10,000,000]”, I am unable to place any reliance on such agreement since there is no evidence such draft agreement was effective at all. It was undated and unsigned by any of the alleged parties, ie Ye, Foshan Ruifeng and/or D, and clause 5 therein specified that “一式三份，自各方或其全權代理人簽字、蓋章之日起生效 ……” Moreover, it contradicted the handwritten receipt which stated Ye’s payment was made on D’s behalf for the purpose of “清償[Zheng]的欠款”.  D did not give any explanation on these matters, and did not provide any objective or documentary evidence of actual transfer of monies in respect of the substantial sum of RMB10,000,000 to P, eg deposit into P’s bank account, etc.  I am not persuaded D has established any credible or believable basis for its bare assertion that RMB10,000,000 had been repaid to P.

VII.  CONCLUSION

106. In the circumstances, I grant final judgment in favour of P against D for (a) the sums of RMB140,000,000 (or its equivalent in HK$ at the time of payment) and HK$15,000,000, (b) interest on the sum of RMB140,000,000 (or its equivalent in HK$ at the time of payment) at the rate of 5% pa from 7 December 2011 until judgment and thereafter at judgment rate until payment, and (c) interest on the sum of HK$15,000,000 from 28 August 2012 at 2.5% pa[54] until judgment and thereafter at judgment rate until payment.

107. I also grant a costs order nisi that D do pay P costs of the Amended Summons and of the action (including all costs reserved if any) to be taxed if not agreed.