周軍英 v. 樊少皇 AND ANOTHER

HCA 202/2017

[2018] HKCFI 2837

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 202 OF 2017

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D E C I S I O N

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The appeal

1.  This is the appeal of the 2^nd defendant (“D2”) against the decision of Master S. Kwang dated 7^th February 2018 ordering that Summary Judgment be entered for the plaintiff against D2 in the sum of HK$8,353,000 with interest.

The plaintiff’s claim

2.  According to the plaintiff’s Statement of Claim dated 23 January 2017, the plaintiff on 23 May 2013 made a loan (the “Loan”) to the 1^st defendant (“D1”).  D2 was the guarantor. The Loan was in the sum of RMB$4,000,000, with interest at the monthly rate of 4%.  The period of the Loan was between 27 May and 23 November 2013.  On the same day, an IOU (the “1^st IOU”) was prepared.  It bears D1’s and D2’s thumb-prints.  D1 had failed to repay the Loan.  On 24 August 2016, D2 executed another IOU (the “2^nd IOU”) in favour of the plaintiff.  He acknowledged thereby that he owed the plaintiff principal and interest in the total sum of RMB7,100,000 (equivalent to HK$8,353,000.00).  He also declared therein that he would voluntarily repay the plaintiff that total sum on 10 September 2016.  He gave the plaintiff a cheques bearing the number of 277650 in the sum of HK$8,353,000.00 (the “Cheque”). It was dated 1 September 2016, and was drawn on D2’s account with the Bank of China (“D2’s BoC A/C”).  On 18 December 2016, the plaintiff presented the Cheque for payment.  It was returned, as D2’s BoC A/C had been closed.  The plaintiff hence claims (1) against D1 as the borrower repayment of the Loan with interest; and (2) against D2 as guarantor of the Loan, and alternative the Cheque.

The application for summary judgment   

3.  By summons dated 20 March 2017, the plaintiff sought summary judgment against D2 (the “O.14 Application”).  Whilst it was not clear on the face of that summons, it has since been clarified that the sole basis of the plaintiff O.14 Application is the dishonouring of the Cheque.

4.  Relevant to the O.14 Applications there are altogether 7 affirmations: 4 by the plaintiffs (17 March, 13 April, 3 July and 7 November 2017, respectively “P/1”, “P/2”, “P/3” and “P/4”) and 3 by D2 (6 March, 16 May and 22 May 2017 (“D2/1” and “D2/2” and “D2/3” respectively).  Some of them were filed by the parties in support or opposition of an earlier summons dated 6 March 2017 taken out by D2 for an Order to stay these proceedings on the ground of forum non conveniens[1]. Those other affirmations have however either been expressly adopted by the parties for the purpose of this application or referred to by their counsel in the course of their submissions.  A lot of WeChat messages have also been produced.  The Court was requested to consider and construe them for the purpose of the O.14 Application.

5.  The plaintiff’s case for summary judgment, as set out in her Statement of Claim and expanded upon in her affirmations, is as follows (which I take primarily from the written submissions of her counsel Ms Maranda Li):

(a)  D2 is the brother of the goddaughter of the plaintiff’s ex‑husband;

(b)  On 23 May 2013, D1 as borrower and D2 as guarantor executed the 1^st IOU.  Details of the Loan were as pleaded;

(c)  Between the date of the 1^st IOU and the maturity of the Loan (on 23 November 2013), she received 6 monthly interest repayments of RMB160,000 each in accordance with the 1^st IOU.  The total sum so received was HK$ RMB960,000;

(d)  On 23 November 2013, D1 failed to repay the principal.  D2 asked the plaintiff for time, and agreed that in the meantime, interest would continue to be repaid;

(e)  Thereafter, the plaintiff did receive further interest repayments. According to what she said in P/1, he had received 7 more interest repayments (RMB1,120,000 in total), whilst according to what she later said in P/2, she only received 5 (RMB800,000 in total).  She received further interest repayments in early 2016 in the sum of HK$2 million;

(f)  In the meantime, she had been chasing D1 and D2 for repayment;

(g)  On 24 August 2016, in Hong Kong, D2 executed the 2^nd IOU. He acknowledged that he in total owned her RMB 7.1 million, which was equivalent to HK$8.353 million.  That sum included the outstanding principal and interest due under the 1^st IOU and a separate sum of RMB 300,000 owned by D2 to the plaintiff.  In return of D2 signing the 2^nd IOU, the plaintiff agreed not to take immediate action against D1 and D2;

(h)  Pursuant to the 2^nd IOU, in early September, in Sheung Shui Hong Kong, D2 issued and delivered to the plaintiff the Cheque;

(i)  On 13 December 2016, the plaintiff through her solicitors in Hong Kong gave D2 notice that she would present the Cheque on 23 December 2016;

(j)  The Cheque was subsequently presented as notified.  It was returned.  The reason was that D2’s BoC A/C had been closed.

6.  It is relevant to note the wording of the 2^nd IOU.  It did not refer to the Loan, but to a joint venture project between the plaintiff and D2, in the following terms:

「 本人蔡銘森 (香港身份證號…) 于2013年5月23日和周軍英女士 (香港身份證號…) 合作投資項目，由周軍英出資人民幣共肆佰萬元整…，本人願意支付每月回報利潤4% 給周軍英，但周軍英不參與管理，不承擔風險，由出資方出資日期起每月準時支付4%給周軍英。但由于一直以來未有按時支付，現本人承認欠周軍英本金和利潤共計人民幣柒佰壹拾萬元整…(折成港幣捌佰叁拾伍萬叁仟元正…)。本人自願于2016年9月10日立即一次性歸還所有欠款給周軍英，絕不食言絕不拖欠，如有不遵守，本人願意承擔一切后果及法律責任，特此保證! 」

At the bottom of that document was written in manuscript:

「 已付中國銀行支票編號:277645 [Number of D2’s BoC A/C]」

7.  In respect of the terms of the 2^nd IOU, the plaintiff at paragraph 18 of P/1 had this this say:

「 至於在欠條上提及的合作投資項目指的是2013年5月23日本人與[D1] 、[D2] 之間簽訂的借據，並無該借據以外的合作投資項目。」

8.  D2’s case, as can be gathered from his three affirmations, is very different and may be summarized as follows:

(a)  He became acquainted with the plaintiff in about 2011.  During a meeting, the plaintiff told him that she was running a money lending business in the Mainland.  She asked him to refer borrowers to her.  D2 had referred a client to her.  In D2/1, he said that he did that for free.  In D2/2, he said that he received from the plaintiff monthly remuneration in the sum of RMB2,000;

(b)  Through his liaison, D1 borrowed RMB 4 million from the plaintiff.  D2 agreed to be his guarantor.  On 23 May 2013, the parties met at a hotel in Shenzhen.  The plaintiff produced the 1^st IOU for D1 and D2 to execute and to apply their fingerprints;

(c)  According to the 1^st IOU, the principal was RMB 4 million. Term was 6 months.  Monthly rate during the term was 4% per month. Interest in the sum of RMB 160,000 would be payable each month.  In case of default of either interest or principal repayment, daily interest at the rate of 1% would become applicable;

(d)  D1 could not repay the principal on the date of maturity.  D1 however still made monthly interest repayments.  Yet the plaintiff found D2 and, in foul language and with threats of violence, said that if D1 did not repay the principal, she would find “古惑仔” (translated by the parties as “rouges”, which translation I will adopt below) to chop D1;

(e)  In about June 2004, D2 was a victim of a traffic accident.  He was hospitalized for a month.  He also had to take home‑rest for half a year. Since then, his business was in huge difficulty;

(f)  Throughout the time, and in particular since about mid‑2015, the plaintiff had employed various means to threaten and harass D2 and his family members.  There had been calls and messages.  D2 produced some of the WeChat massages from the plaintiff (in simplified Chinese), that:

(i)  on 30 September 2015:

「 [D1]这边你不要再维护他了，我已经无办法了，你由我自行处理吧，我打算这兩天开始做嘢」

「 [D1]你几日前已经同佢讲左了 佢态度依旧 哩次唔洗讲野 你也不用再催佢了 我会行动 忍无可忍了!! 」

(ii)  on 30 October 2015:

「 你同[D1]只冚家铲讲佢系锦个死人样 佢老母还清都要斩佢只冚家铲」

「 麻烦你将呢条信息转发俾[D1]: 如果呢几日我继续收唔到饯，我会发散揾人斩[D1]只冚家铲」

(g)  D2 said that there were in fact other menacing messages.  He said that during a meeting he had with the plaintiff at Festival Walk in Hong Kong on 30 May 2016, the plaintiff suddenly took away his phone and deleted the WeChat messages she had had with him prior to that date.  He said what were left (and produced) were photos taken with his new phone of some of those messages kept in his old phones;

(h)  D2 produced further some menacing messages from rogues;

(i)  The plaintiff and rogues kept calling and messaging him to harass and threaten him.  There were even calls to his brother’s pet shop;

(j)  D2 produced transcripts of certain voice messages he had had with the plaintiff on 10 August 2016, which he said contained threats from the plaintiff;

(k)  On about 24 August 2016, D2 met with the plaintiff against.  She was accompanied by 4 rogues.  Though those 4 rogues did not commit any act of violence, but given what the plaintiff had done before (in terms of her prior harassment and threats), D2 was in great fear.  He signed the 2^nd IOU and the Cheque under duress.

9.  D2’s case was refuted by the plaintiff.  In particular

(a)  She said at paragraph 15 of P/3 that:

「 從雙方微信中清楚可見，我雖然一次又一次地催促[D2] 趕快處理好上述事情，有時我會失去耐性責罵他再給他一個又一個的限期，但絕無他所謂的“暴力威脅” 或透過指使古惑仔對他 “暴力威脅” 或人身傷害他。」

(b)  The plaintiff further produced what she said was the transcript of the WeChat messages she had had with D2 between 5 and 10 August 2016, and between 19 August 2016 and 12 September 2016.  She also gave a lot of details about other transactions she was then having with D2.  She said that those transcripts supported her case;

(c)  In respect of the allegation that she had been carrying on a money lending business, she firstly at paragraph 13 of P/2 said she had not told D2 that she had been carrying on a money‑lending business, in the following words:

「 [D2]誓章第5段、8至10段聲稱我經營放債業務，我必須說明我從未向[D2] 表示自己在內地經營放債業務，我只是曾手頭有多餘的閒錢而有朋友剛巧出現現金周轉上的問題，我就把自己手頭上的閒錢借給朋友作短期周轉之用，而我也可賺取利息。」

      However, in paragraph 2 of P/3, she made a blanket denial, in the following words:

「 對[D2] 在其第二、三份誓章…的指控，本人重申本人沒有從事放債業務…」

Submissions on behalf of D2

10.  Mr Lincoln Cheung, counsel for D2, submitted that there is nothing incredible about D2’s defence.  It was certainly not unbelievable.  He submitted that D2’s case is a typical one of duress.  He further touched upon the high interest rate the Loan carried, and that should the Loan fall foul of the Money Lenders Ordinance Cap 163, the Cheque might not be supported by any consideration.  He however added the rider that this money lender point “may attract further argument as to the applicable law of the underlying loan and whether MLO is applicable”, which points he did not address.

Submissions on behalf of the plaintiff  

11.  Ms Li submitted that D2’s bare assertion of duress “is forcibly contradicted by contemporaneous messages between the parties.  His defence on ground of duress is totally incredible and unbelievable.”

Appeal by way of rehearing

12.  I remind myself of the following principles, which are trite and not disputed by the parties.  An appeal from the master to the judge in chambers is dealt with by way of an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him for the first time.  The judge will give the weight it deserves to the previous decision of the master, but he is in no way bound by it.  The judge in chambers is in no way fettered by the previous exercise of the master’s decision, and on appeal from the judge in chambers, the Court of Appeal will treat the substantial discretion as that of the judge, and not of the master – Hong Kong Civil Procedure 2019, paragraph 58/1/2.

Applicable legal principles on the granting of summary judgments

13.  I have been referred to quite a number of authorities.  That notwithstanding, the applicable principles are in fact well established.  The defendant must show that there are triable issues.  If an allegation or issue of fact is made, it must be credible or believable in the light of the evidence placed before the court.  When considering this issue, contemporaneous conducts and documents are important.  If that question is answered in the affirmative, the next question is whether there is fair or reasonable probability of the defendant having a real or bona fide defence.  On the other hand, the court must not embark on a mini trial on affidavits.  Unless it is obvious that the defence put forward by the defendant is frivolous and practically moonshine, Order 14 ought not to be applied.  In this regard, I find the following passage from paragraph 14/4/9B of the Hong Kong Civil Procedure 2019 of particular relevance:

“The burden on the defendant—The defence set up need only show that there is a triable issue or question or that for some 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 ( Jacobs v. Booth’s Distillery Co. (1901) 85 L.T. 262 ; Runnacles v. Mesquita (1876) 1 Q.B.D. 416). 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 or bad faith, and should not on such an examination grant the defendant conditional leave to defend, but should give unconditional leave to defend: Billion Silver Development Ltd v. All Wide Investments Ltd [2000] 2 H.K.C. 262, applying Extraktionstechnik Gesellschaft für Anlagenbau GmbH v. Oskar (1984) 128 S.J. 417…”

14.  In the present case, summary judgment being sought on the Cheque, the provisions in the Bills of Exchange Ordinance, Cap 19 are engaged. Section 30 thereof stipulates that:

“(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.”

15.  One of the main allegations which D2 has raised is duress.  In respect of the law relevant to duress, Mr Cheung has cited before me paragraphs 3-001, 3-002, 4-001, 4-017 and 4-027 of Enonchong, Duress, Undue Influence and Unconscionable Dealing (2^nd ed.).  From those passages, the following summary of general principles and considerations can be distilled:

(a)  In a claim based on duress, the first step required of the claimant is to show that some illegitimate means of persuasion was used;

(b)  For pressure to amount to duress, the pressure must be one of a kind which the law does not regard as legitimate;

(c)  The general rule is that the threat of any form of unlawful action will be regarded as illegitimate.  An action is unlawful if it is a criminal offence or amounts to a tort or a breach of contract;

(d)  The proof of that first step is however not enough to establish duress. For the claimant to make out a claim in duress, the second element of duress, namely, that the illegitimate pressure amounts to compulsion of the complainant’s will (causation), must be established;

(e)  The standard to be adopted to decide whether the second element can be established is a subjective one:

“ It was at one time the view that the law required everyone to possess a certain minimum degree of firmness and certain types of illegitimate pressure were deemed to be insufficient to deflect the will of a person who possessed the ordinary degree of firmness…

However the objective standard of the hypothetical ordinary person has long been consigned to history in favour of a modern subjective approach which recognises that duress is made out where the defendant’s illegitimate pressure induced the complainant to enter into the transaction…

Under the modern approach, the question is whether the illegitimate pressure induced the complaint to enter into the agreement, not whether it would have induced a reasonable person to enter into the agreement.  Also, the particular type of illegitimate pressure applied is no longer a crucial question.  As Sir Richard Henn Collins M.R. said in Kaufman v Gerson [1904] 1 K.B. 591 at 597, it does not matter what particular form of illegitimate pressure is used, “so long as the will is coerced…Some persons would be more easily coerced by moral pressure, such as was exercised here, than by the threat of physical violence.”

Discussion

16.  Parties have placed before me 7 affirmations said to be directly relevant to the application.  Facts are hotly in dispute.  Counsel have taken me though transcripts of substantial number of WeChat messages.  I was invited by Ms Li to conclude that D2 allegation of duress is inconsistent with those messages to the extent of being incredible.

17.  I am not able to accept that submission.  This O.14 Application ought not to be tried on affidavits.  It ought not to be turned into a mini-trial.

18.  In my view, the important point is that D2 could indeed point to some communications admittedly from the plaintiff which could be regarded as illegitimate pressure.  Express words to the effecting of chopping D1 were communicated. This must be the starting point.

19.  Why were those words communicated?  Were they meant to be carried out? Were they intended to be threats?  The Court cannot not and ought not answer those questions on affidavits. 

20.  And more importantly, what were the effects of those words on D2?  They might have been communicated some time before the issue of the Cheque, but can the Court safely conclude at this stage and on affidavits that those words could have no effect on D2’s will when he issued the Cheque.  I cannot.  This is particularly so given the subjective nature of the standard which the Court should apply.

21.  There are further disturbing features of the plaintiff’s claim:

(a)  Why was the Loan became referred to as a joint venture business between the plaintiff and D2 in the 2^nd IOU?  Why did the 4% monthly interest suddenly become profit out of the joint venture business?  And importantly, why was D2 willing to execute the 2^nd IOU in those terms?

(b)  Did the plaintiff carry on any money-lending business?  In P/2, she said that she had never told D2 that she carried on money-lending business, but just lent available cash to friends to gain interest. But in P/3, she made a blanket denial of having carried out any money-lending business.  Whether the plaintiff indeed carried on a money-lending business will be relevant when the Court comes to consider the nature of her conduct while pursuing the outstanding Loan;

(c)  The interest rate charged was objectively high.  In fact, depending upon which of the two versions that the plaintiff has put forward is correct, she has already received interest repayments for the Loan in the total amount of either RMB2.08m plus HK$2m or RMB1.76m plus HK$2m.  They were substantial repayments bearing in mind that the principal lent was only RMB4m.  Was such high interest rates consistent with the pattern of a person lending free cash to friends? I find this feature disturbing.

22.  D2’s case is not totally without issues.  The allegation that the plaintiff had taken away his phone and deleted the WeChat messages she had had with him was an unusual one.  He had also, despite invitation from the Court, failed to reveal when he closed his BoC A/C.

23.  However, at the end of the day, and having considered all the matters before me, I am not able to say that the allegation of duress is incredible. Facts are hotly in dispute.  I cannot and ought not decide them on affidavits. Triable issues have in my view been shown.  They are in my further view arguable, so that there is fair probability of D2 having a real defence.  There are disturbing and unexplained features of the claim and, to some degree, also D2’s case.  I bear in mind the considerations summarized in paragraph 14/4/9B of Hong Kong Civil Procedure 2019,which are very much relevant here.  I am not satisfied that this belongs to the type of clear cases which justify Order 14 relief.

Disposal

24.  For the reasons set out above, I allow D2’s appeal.  I grant him unconditional leave to defend.  I further grant him leave to file and serve his defence (and counterclaim if any) within 14 days from the handing down of this Judgment.  The Rules of the High Court should then be followed in the usual way.

25.  On the question of costs, I make an Order nisi that the costs of and occasioned by the plaintiff’s Summons dated 20 March 2017 for this O.14 Application (including the hearing on 7 February 2018 before the Master and this appeal) be to D2, to be taxed if not agreed.  Any submissions for variation or summary assessment should be filed within 14 days from the date hereof, the submissions in response within 14 days of receipt, and any submissions in reply within 14 days thereafter.