ROSY CLOUD VENTURES LTD v. SUN SHAOFENG AND ANOTHER

HCA 35/2020

[2021] HKCFI 1710

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 35 OF 2020

_________________

_________________

_______________

DECISION

_______________

INTRODUCTION

1.  This is the plaintiff’s appeal against the decision of Master Lai made on 11 February 2021.  The master refused to grant summary judgment against the 1^st defendant and gave him unconditional leave to defend the action.

2.  The plaintiff is a company incorporated in the British Virgin Islands.  Mr Chan Ka Chung is its sole director.  Chan gave affirmation evidence in support of the summary judgment application.

3.  The 1^st defendant is the chairman, chief executive officer and executive director of China Green (Holdings) Limited (“China Green”), a company listed on the Hong Kong Stock Exchange.  According to Chan’s evidence, the 1^st defendant has been on the Forbes List of Richest Chinese since 2004.

4.  The 2^nd defendant is a company incorporated in the BVI.  The 1^st defendant is a director and sole shareholder of the 2^nd defendant.  The 2^nd defendant is a minority shareholder of China Green.

5.  The plaintiff’s claim against the 1^st defendant is for a sum of HK$100 million together with interest, which the plaintiff says are due and payable by the 1^st defendant under the express terms of a loan receivable transfer agreement (債權轉讓協議) dated 6 June 2016 entered into by the parties (“the Transfer Agreement”).

6.  It is common ground that the plaintiff and the 1^st defendant signed the Transfer Agreement.

7.  The 1^st defendant, however, contends that he is not liable to pay any sum under the Transfer Agreement.  His defence is, in gist, that its written terms did not reflect what was in fact orally agreed between the parties and that the plaintiff is now estopped from claiming that they did and enforcing the payment obligation stipulated there against the 1^st defendant.

8.  As disclosed by the affirmation evidence, the key factual dispute revolves around the circumstances in which the Transfer Agreement was signed on 6 June 2016.  The plaintiff’s case is that the Transfer Agreement is valid and binding on the parties and its claim is a straightforward claim for a sum contractually due under a written agreement. On the other hand, the 1^st defendant deposed to events which he claims took place in May and June 2016 preceding and around the time of the signing of the Transfer Agreement.  By reason of these events, the 1^st defendant contends that estoppel by convention and/or contractual estoppel arises against the plaintiff.  The effect is that the plaintiff is precluded from making the claim under the Transfer Agreement.

9.  Mr Edward Chan, SC, appearing with Ms Kate Poon for the plaintiff, highlighted in his oral submissions that the 1^st defendant’s own factual evidence adduced in this application is ever-revolving and at times conflicting.

10.  It is convenient to state at the outset that there are three affirmations made by the 1^st defendant before me. His 1^st and 2^nd affirmations were made in support of his earlier application to set aside the default judgment entered against him in May 2020.  The affirmations were both dated 22 October 2020, although the first one was apparently prepared in June 2020.  The 1^st defendant set out his defence in both affirmations.

11.  The plaintiff took out the summary judgment application in December 2020.  The 1^st defendant filed his 3^rd affirmation in opposition in January 2021.  As will be seen below, the 1^st defendant made some new revelations in that affirmation which effect was to amend some aspects of the evidence as set out in his earlier affirmations.

12.  I should add that there is also before me a defence filed by the 1^st defendant just two days before the appeal hearing. That defence was not before Master Lai.

LEGAL PRINCIPLES

13.  An appeal from a master to a judge under Order 58, rule 1(1) of the Rules of the High Court is by way of re-hearing.  I should treat the summons as though it came before me for the first time: Hong Kong Civil Procedure 2021 at 58/1/2. 

14.  The Order 14 principles are well-known.  The court should first determine whether, factually, what the defendant says is believable. If so, the court should then consider whether as a matter of law what he says amount to an arguable defence in law.  See, eg, Schindler Lifts (Hong Kong) Ltd v Ocean Joy Investments Ltd [2003] 1 HKC 438 at para 10.

15.  On the first question, the question is not whether the defendant’s assertions are to be believed; it is whether those assertions are believable: Ng Shou Chun v Hung Chun San [1994] 1 HKC 155 at 158.  It is not appropriate to embark on a mini-trial of the action on affidavits.  The mere assertion of a given situation by the defendant does not ipso facto ground leave to defend. 

16.  The court will not take what the defendant says at face value but will test it against the evidence disclosed including contemporaneous documents and the inherent probability of the defence.

THE PLAINTIFF’S CASE

17.  As disclosed by Chan’s affirmations, the plaintiff’s case is as follows.

18.  Since December 2015, the plaintiff held a loan receivable owed by Keen Wood Group Limited.  At that time, the company was a wholly-owned subsidiary of IR Resources Limited (“IRR”), a company listed on the Hong Kong Stock Exchange.  The plaintiff and IRR are sister companies in that they are owned and operated by the same team.  The loan to Keen Wood was interest-bearing. 

19.  In May 2016, Mr Cho Kwai Chee Roy (曹貴子) told Chan about the 1^st defendant and that the 1^st defendant was looking to borrow HK$100 million and was prepared to pay interest at 8% per annum.  Chan said:

“The Plaintiff wanted this stream of revenue (in the form of interest income) to continue and therefore agreed to lend money to the 1^st Defendant.”

20.  On 6 June 2016, the plaintiff entered into the Transfer Agreement with the 1^st defendant.  Under the agreement, the plaintiff would sell the loan receivable to the 1^st defendant for HK$100 million and the 1^st defendant would pay the plaintiff HK$100 million plus interest at 8% per annum within three years from the date of the Transfer Agreement, ie by 5 June 2019.

21.  The operative clause read:

“出售應收款的總代價（「代價」）為港幣１億元，乙方須於本協議日期起計3年內（「支付代價日期」），向甲方以現金或甲乙雙方所同意的其他方式支付代價。期間，乙方向甲方支付年利率為8%（按代價計算）的利息（「利息」）。於支付代價日期，乙方一併支付代價及利息。”

22.  On 8 June 2016, the 1^st defendant issued a payment instruction to IRR, informing IRR of the transfer of the loan receivable and directed IRR to pay HK$100 million into a bank account of the 2^nd defendant.

23.  On 13 June 2016, IRR deposited the sum into the 2^nd defendant’s bank account as directed.  It is common ground that the sum of HK$100 million was paid by IRR under the 1^st defendant’s instruction.

24.  The plaintiff contends that under the express terms of the Transfer Agreement, the 1^st defendant was obliged to pay the sum of HK$100 million with interest accruing at 8% per annum from 6 June 2016 to the plaintiff within three years of the agreement.  The 1^st defendant failed to make such payment.

25.  There was some correspondence exchanged between IRR and China Green between July and September 2019 regarding the Transfer Agreement. 

26.  On 15 July 2019, IRR wrote to the 1^st defendant referring to the 1^st defendant’s payment instruction issued on 8 June 2016 and requesting the 1^st defendant to send a copy of the Transfer Agreement to it.  I pause here to note that there was no reference made to any outstanding sum owing by the 1^st defendant under the Transfer Agreement in this letter.

27.  It was followed by a chaser letter dated 31 July 2019.  Again, there was no mention of any outstanding sum.

28.  There was then a reply letter from China Green dated 12 August 2019 stating that the 1^st defendant did not have a very clear recollection about the circumstances surrounding the Transfer Agreement (“孫少鋒先生表示不太記得當時之情況”).

29.  The first letter of demand from the plaintiff is the letter dated 13 December 2019 from its then solicitors, Messrs Baker & Mckenzie.  In that demand letter, contrary to the express terms of the Transfer Agreement, it was stated that the 1^st defendant was obliged to pay within one year from the date of the Transfer Agreement, ie on or before 5 June 2017.  A demand was made to the 1^st defendant to repay forthwith.  The solicitors further reiterated the demand (previously made by IRR) that the 1^st defendant should provide a copy of the Transfer Agreement to the plaintiff.

30.  The plaintiff issued the writ shortly afterwards on 8 January 2020.  In the statement of claim endorsed on the writ, the plaintiff continued to claim that repayment was due by 5 June 2017.  It was only on 26 May 2021 that the plaintiff filed an amended writ pursuant to Order 20, rule 3 with the date of repayment changed to 5 June 2019.  Mr Chan described the amendment as a “minor” amendment to correct the mistake in the statement of claim.  The important point here, Mr Chan submitted, is that the writ was in any event issued after 5 June 2019, which is the correct date of repayment.

31.  In summary, the plaintiff says that it has a straightforward claim against the 1^st defendant for the sum together with interest due and owing under the express terms of the Transfer Agreement.

THE 1^ST DEFENDANT’S CASE

32.  The 1^st defendant’s case is set out in his three affirmations, together with the defence filed shortly before the appeal hearing.

33.  In around May 2016, the 1^st defendant needed funds outside mainland China to repay a loan borrowed by the 2^nd defendant.  The 1^st defendant was the guarantor of the loan.  The date of repayment was 24 June 2016.

34.  Through the introduction, suggestion and assistance of Cho, the 1^st defendant agreed to perform a foreign currency swap with the plaintiff such that the 1^st defendant would acquire a HK$100 million loan receivable from the plaintiff outside mainland China.  In consideration, the 1^st defendant would pay a sum of RMB100 million to the plaintiff within mainland China.  The difference between the two sums in HK$ and RMB, which amounted to HK$19 million, was service fee for the arrangement.  The 1^st defendant agreed to the service fee, given the time pressure he was under.  He had no bargaining power over it.

35.  The 1^st defendant’s case is that the foreign currency swap was an agreement reached orally between the plaintiff and the 1^st defendant (“the alleged oral agreement”).

36.  The plaintiff and the 1^st defendant did not know each other before this transaction.

37.  On or about 12 May 2016, the 1^st defendant transferred a total of RMB100 million to two companies in mainland China in discharge of his obligation under the alleged oral agreement.

38.  When the 1^st defendant filed his first and second affirmations, he was under the belief that the two companies were designated by the plaintiff.  However, in his third affirmation filed in January 2021, he stated that it was only earlier that month that he managed to get in contact with Cho and learnt from him that there was a separate agreement between the plaintiff and Cho in April 2016 (“the 2016 Side Deal”).  The two recipient companies had in fact been designated by Cho.  And the payment of RMB100 million on 12 May 2016 to those two companies was to discharge the plaintiff’s obligation under the 2016 Side Deal.  At that time, the 1^st defendant was not told by either Cho or the plaintiff about the 2016 Side Deal and the 1^st defendant had no knowledge of its details.

39.  As to why the parties signed the Transfer Agreement, the 1^st defendant has the following explanation.

40.  It was Cho who informed the 1^st defendant that the Transfer Agreement needed to be signed for special operational arrangement.  Initially, the 1^st defendant was unwilling to sign as by then (6 June 2016) he had already made payment of RMB100 million (on 12 May 2016) in discharge of his obligation under the alleged oral agreement.  Yet the Transfer Agreement contained an express obligation that the 1^st defendant was still to pay the consideration.  The Transfer Agreement did not reflect reality.  After some discussion, in order to alleviate the 1^st defendant’s concern, the parties signed an acknowledgement of receipt (“the Receipt”) at the same time when they signed the Transfer Agreement. 

41.  The Receipt was a short document and signed by both the plaintiff and the 1^st defendant.  I reproduce the content below:

“ 還款收據

1. Rosy Cloud Ventures Limited (「甲方」)；及

2. 孫少鋒，中國身份証號碼 ... 持有人（「乙方」）。

     雙方在2016年6月6日簽訂「債權轉讓協議」。現在甲方確認乙方已於   年   月   日償還所有代價及利息。還款收據一式兩份，雙方各持一份。本補充協議受香港法律管轄，並按香港法律解釋。”

42.  It is notable that the date of receipt was left blank.  The 1^st defendant says that since he believed that payment had in fact been received by the plaintiff, there was no need to fill in the date of receipt.

43.  The explanation of the 1^st defendant as to why he proceeded to sign the Transfer Agreement notwithstanding that its express terms did not reflect the commercial bargain reached between the parties is a material part of his case.  I reproduce below his explanation in his own words:

“另外，起初本人並不願簽署債權轉讓協議，因為盡管本人已於2016年5月12日將一億元人民幣的代價繪入了原告人的指定賬戶，債權轉讓協議第二條卻聲稱本人仍需要支付代價，這未能反映事實情況。而且本人不理解原告人為何需要用如此複雜的方式完成一個貨幣兌換的交易。在經過一番談論之後，各方才同意為了打消本人的顧慮，安排雙方在簽署債權轉讓協議的同時也要簽署還款收據。而本人為了確保第二被告人的資金能夠及時到位就接受了這樣的安排。所以本人在收到原告人代表所簽署的還款收據正本時，本人確信原告人已確認收到本人支付的款項，便以為沒有必要填寫支付代價的日期。”

44.  Then, on 13 June 2016, the plaintiff caused the sum of HK$100 million to be transferred.  The transfer was the performance by the plaintiff of its obligations under the alleged oral agreement.

45.  In the circumstances, the 1^st defendant says that the plaintiff is estopped from claiming that the Transfer Agreement reflected what was in fact agreed.  The 1^st defendant relies on estoppel by convention: First Laser Limited v Fujian Enterprises (Holdings) Company Limited (2012) 15 HKCFAR 569 at para 79.  The signing of the Receipt by the plaintiff is in line with the common assumption that the Transfer Agreement did not reflect what was in fact agreed.

46.  As an alternative, the plaintiff relies on contractual estoppel.  By signing the Receipt, the plaintiff confirmed that no consideration or interest was owed under the Transfer Agreement.  The plaintiff is now contractually estopped from contending otherwise: Ng Yuk Pui Kelly v Ng Lai Ling Winnie [2021] HKCA 724; Asgain Co v Cheng Ka Yan (No 2) [2018] 2 HKLRD 641.

DISCUSSION

47.  In assessing the “believability” of the 1^st defendant’s factual case, the starting point of the analysis must be the signing of the Transfer Agreement.  It is common ground that it was signed by the plaintiff and the 1^st defendant in a meeting on 6 June 2016.  It is not the 1^st defendant’s case that he was not aware of the terms of the agreement.  On the contrary, it is his case that he knew what the agreement said and was fully aware that the terms did not reflect the commercial bargain that he had agreed with the plaintiff.

48.  Mr Chan submitted that factually, it is very surprising for the 1^st defendant to sign a written agreement which did not serve his purpose.  There is of course much force in the submission, particularly given the indisputable personal background of the 1^st defendant – he was the chairman and chief executive officer of a Hong Kong listed company – and given further that a sizable sum was at stake.

49.  The burden is therefore squarely on the 1^st defendant to explain why he would choose to sign on a document and commit himself in writing to some obligation which did not reflect the agreed commercial deal.  My task is to determine whether on the evidence before me, his explanation is a believable one such that his defence ought to be tried.

50.  In support of his explanation, the 1^st defendant primarily relies on two sets of contemporaneous documents. 

51.  First, copies of the remittance advices showing that sums totalling RMB100 million were transferred by a company called廈門惠兵貿易有限公司to two mainland companies in the name of深圳市灃泰資產有限公司and深圳市興昀春貿易有限公司on 12 May 2016.  The 1^st defendant says that these documents support his case that prior to the Transfer Agreement, he had already transferred RMB 100 million to two companies designated by Cho in performance of his obligation under the alleged oral agreement.

52.  Secondly, the Receipt.

53.  There are questions which immediately come to one’s mind upon a review of the remittance advices.

(a)  In each of the advices, a remark appeared as follows: “附言:貨款”.  On its face, the remarks would suggest that the payment was made to settle the purchase price of goods.  The 1^st defendant has not explained why such remark was inserted.

(b)  There is also no explanation from the 1^st defendant on how he was related to the remitting company.

54.  Accordingly, while the remittance advices show that a total sum of RMB100 million was transferred involving the three named companies on 12 May 2016, the documents do not, on their face, go to support the 1^st defendant’s assertion that the transfers were made by him to companies designated by Cho.  Cho’s name was not referred to in the WhatsApp messages that were sent around the same time.  In other words, these documents do not reveal any apparent connection between the remittances and the terms of the alleged oral agreement.

55.  On the other hand, the Receipt is arguably a significant piece of contemporaneous document which goes to support a material part of the 1^st defendant’s case.  It is indisputable that the Receipt was signed by the parties on the same day as the Transfer Agreement.  That would appear to be the only occasion when the 1^st defendant met with Chan.  The Receipt on its face corroborates the 1^st defendant’s explanation as set out in paras 40 to 43 above. 

56.  While he would on the face of the Transfer Agreement take up an express obligation to pay the consideration and interest in the future, he would not in reality be exposed to any risk of enforcement of such contractual term since he held the Receipt in his hand which signifies the discharge of such obligation. Hence the Receipt fits in with his case that he did not want to sign the Transfer Agreement initially but eventually proceeded to sign it as the plaintiff’s signing of the Receipt helped to address his concern. 

57.  The significance of the Receipt in the present application is that the 1^st defendant’s explanation is not based on his bare assertion but is arguably supported by a piece of contemporaneous document. 

58.  There is of course the question as to why the date of receipt was left blank in the Receipt.  The 1^st defendant has provided an explanation to that which, in my view, is not liable to be dismissed out of hand as incredible.

59.  The plaintiff’s case on the Receipt is that it was signed “for administrative convenience”.  The date of receipt was intentionally left blank until the actual date of repayment took place.  Chan elaborated on this in his reply affirmation:

“(a) As I have said before, I considered it to be common practice for parties to a financing transaction to sign undated documents in advance (e.g., share charges, bought and sold notes) for administrative convenience.

(b)  To me, whether the 1^st Defendant has or has not repaid the loan would obviously be determinable by actual evidence of payment, such as a remittance or a cheque.  I did not consider that merely providing the 1^st Defendant with an undated receipt could be used to take the place of actual evidence of payment.”

60.  Ms Queenie Lau, appearing for the 1^st defendant, submitted that it is incomprehensible how signing an acknowledgement of payment before payment can achieve any sort of “administrative convenience”.  She further submitted that it is much more likely that payment had in fact been made before the Receipt was signed.  In any event, this is an issue that should be tried.

61.  In my view, it has to be said that the plaintiff’s explanation of “administrative convenience” is a little vague.  The signing of a receipt is usually for the benefit of the paying party.  It is so that he would have in his hand direct proof from the receiving party that a payment has been made. In the present case, why would the plaintiff be prepared to sign the Receipt in advance of payment for the benefit of the 1^st defendant?  In the context of a loan transaction (which is in effect what the Transfer Agreement was about on the plaintiff’s own case), how often would one come across a lender who is prepared to sign a receipt in advance and allow the borrower to hold on to the signed copy for “administrative convenience”?

62.  It is not for me to answer these questions now.  As regards the circumstances in which the Receipt was signed, when one juxtaposes the 1^st defendant’s explanation with the plaintiff’s, it is clear to me that the rival factual cases can only be resolved at trial when the evidence will be tested by cross-examination.  The 1^st defendant’s case on this point is not incapable of belief and cannot be rejected outright summarily.

Doubts over the 1^st defendant’s factual case

63.  The plaintiff has raised doubts over other aspects of the 1^st defendant’s factual case.

64.  The more notable ones are as follows. 

65.  First, it is said that the 1^st defendant’s factual evidence has been evolving in the course of the present application.  In his third affirmation, the 1^st defendant admitted that he only met Chan of the plaintiff once and did not have any real contact with the plaintiff on the transaction.  This is, the plaintiff submits, in sharp contrast with the picture painted by the 1^st defendant in his first affirmation in which he said that since the beginning of May 2016 he had started negotiating with the plaintiff through Cho’s introduction and assistance (“經曹貴子先生的引薦及協助，本人[於]2016年5月初與原訴人開始磋商”).

66.  Secondly, the plaintiff submits that the 1^st defendant’s assertion that he was unable to obtain funds outside mainland China at the time is unbelievable given his apparent reputation and connections.  Further, it sits ill with the fact that he was apparently able to put up the purchase price for the acquisition of a property in Sydney for a consideration of AUD20 million around the same time of the transaction.

67.  Thirdly, in the letter dated 8 June 2020 from the 1^st defendant’s solicitors, the 1^st defendant’s stance in response to the plaintiff’s claim was that “the loan which is the subject-matter of the Action has been re-paid”.  That was the first substantive response made by the 1^st defendant in light of the plaintiff’s demand.  Yet there was no mention of the foreign currency swap which forms the crux of the 1^st defendant’s present case.

68.  Separately, when one looks at the 1^st defendant’s chronology of events, it is notable that he first paid out RMB100 million to Cho’s designated companies on 12 May 2016 but yet he only received the sum of HK$100 million a month later on 13 June 2016.  Meanwhile, there was no document whatsoever that had allegedly been signed.  On the 1^st defendant’s own evidence, he appeared to be willing to pay upfront in May 2016 without the plaintiff agreeing at the same time to any specific timeline for the payment to the 1^st defendant.  The inherent probability of that happening is also open to query. 

69.  The above queries raised on the 1^st defendant’s evidence are, in my view, legitimate questions which, if not answered properly, cast doubt on the credibility of his factual case.

70.  The question for me in the present application is whether all the doubts raised on the 1^st defendant’s evidence are such as to render his defence unbelievable.  On the whole, I do not find that to be the case.  These doubts have to be looked at and weighed against the entirety of the 1^st defendant’s evidence, including most importantly the Receipt.  Having gone through that exercise, I have come to the view that the 1^st defendant’s evidence so far produced has surmounted the “believability” threshold and triable issues have been raised.

71.  I should also at this juncture deal with the plaintiff’s submission that even on the 1^st defendant’s own case, there is no averment (or evidence) made by him that Cho was acting as the plaintiff’s agent or that Cho had the authority to act on behalf of the plaintiff so as to bind the plaintiff to any arrangement with the 1^st defendant.  In his third affirmation, the 1^st defendant admitted that his only interaction with the plaintiff occurred on the date of the signing of the Transfer Agreement when he had some casual conversation with Chan.

72.  In fact, the 1^st defendant confirmed that the two mainland companies were designated by Cho himself, not the plaintiff.  In the circumstances, the plaintiff submits that even on the 1^st defendant’s own case, he cannot be said to have reached any agreement with the plaintiff as the dealings were solely between him and Cho.

73.  I do not think that the submission about the lack of authority can be definitively determined in the plaintiff’s favour at this stage.  The submission focuses solely on the events which preceded the signing of the Receipt but ignores the significance of the Receipt itself.  On the 1^st defendant’s case, the plaintiff signed the Receipt because it had already received the payment from the 1^st defendant in accordance with the alleged oral agreement.  Arguably, implicit in this evidence is that the plaintiff considered itself bound by the alleged oral agreement.  In the circumstances, the issue of authority is potentially arguable either way and should be left to be determined at trial.

Doubts on the plaintiff’s factual case

74.  In her submissions, Ms Lau raised a number of queries which she contended cast doubt on the plaintiff’s factual case and merit investigation during trial.

75.  She queried the inherent plausibility of the allegation that the plaintiff would advance a huge loan of HK$100 million to the 1^st defendant whom it had never dealt with before, apparently without conducting any serious due diligence and without asking for any security.  She also submitted that there are curious features about the initial demand letter sent by the plaintiff’s former solicitors which had got the repayment date wrong.  In fact, the mistake was carried through to the writ.  One would expect that a lender would be well-versed in the terms of the loan, especially when the sum at stake is sizable like the present one.  But apparently that was not the case with the plaintiff here.  Furthermore, one would expect the lender to have kept the document which evidences the HK$100 million loan.  But again that did not seem to be the case here.  IRR had to send a number of letters to China Green for a copy of the Transfer Agreement. 

76.  In an Order 14 application, the burden is on the defendant to raise triable issues.  The burden is not thrust upon the plaintiff to adduce evidence in support of its case.  But here the parties are putting forward conflicting versions as to the circumstances in which the Transfer Agreement and the Receipt were signed.  The apparent inability of the plaintiff to recall the key contractual terms correctly and the fact that it did not seem to have retained the Transfer Agreement would seem to go to support the 1^st defendant’s case that the Transfer Agreement was never meant to be observed (as it did not reflect the commercial deal reached between the parties).  In the circumstances, the doubts over the plaintiff’s case have the effect of bolstering the credibility of the 1^st defendant’s case. It reinforces the conclusion that the claim and the defence ought to be allowed to be tried.

Overall assessment of the 1^st defendant’s factual case

77.  In summary, having scrutinised the evidence before me, including most notably the Receipt, I am of the view that the 1^st defendant’s factual case is at least believable and there are factual issues which ought to be tried.

Arguable defence in law

78.  I am also satisfied that the 1^st defendant’s factual case is capable of giving rise to a defence as a matter of law in the form of estoppel by convention.  According to the evidence, the plaintiff and the 1^st defendant entered into the Transfer Agreement on the common assumption that it did not reflect what was in fact agreed.  That common assumption was arguably manifested in the signing of the Receipt by both parties, which effect was to prevent the plaintiff from subsequently enforcing the payment obligation contained in the Transfer Agreement.  The plaintiff is now estopped from claiming that the Transfer Agreement reflected what was in fact agreed.

79.  That appears to me to be a viable defence as the essential elements of an estoppel by convention as set out in First Laser are arguably satisfied.

80.  Given the view stated above, it is not necessary to consider the alternative defence of contractual estoppel.

Proper order to be made

81.  For the above reasons, the 1^st defendant should be allowed to defend the claim.  No condition should be imposed.  This is not a case where the defence is a sham one or the court is prepared very nearly to give judgment for the plaintiff.

82.  Ms Lau asked for the Order 14 application to be dismissed.  I do not consider that to be the proper order to make. 

83.  It is true that when the plaintiff took out the summary judgment application, it had already been made aware of the defence which was disclosed in the first and second affirmations of the 1^st defendant filed in support of the setting aside application.  On the other hand, the 1^st defendant made some new revelations in his third affirmation which effect was partly to correct what he had said in the previous affirmations and which are relevant to my evaluation of the evidence as a whole.  In the circumstances, the proper order to make would be to grant unconditional leave to the 1^st defendant to defend the action.

CONCLUSION

84.  I uphold the master’s decision and dismiss the plaintiff’s appeal.

85.  I make an order nisi that the 1^st defendant do have costs of the appeal, which will be summarily assessed.  The 1^st defendant has handed up his statement of costs.  If the plaintiff has any comment, it should lodge a list of objections within 7 days of the handing down of this decision.  The summary assessment will be conducted on the papers after the deadline.