SIN YUK HUNG v. SIN TUNG SAN

HCA 474/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 474 OF 2013

____________

____________

_____________

D E C I S I O N

_____________

I. BACKGROUND

1.  The plaintiff Sin Yuk Hung is the second elder sister of the defendant Sin Tung San (who ranks third amongst the five Sin siblings (“Siblings”)) and the wife of Lau Kin Bun (“Lau”).  There is a younger sister Sin Yuk Mei (“Yuk-mei”) whose boyfriend Wang Jian Hui (“Wang”) is, according to the defendant, employed by the plaintiff, and a younger brother Shan Donqi or Sin Tung Hei (“Don-qi”) whose wife is Zhao He-fei (“Zhao”).  The remaining Sibling is their eldest sister.

2.  The eldest sister amongst the Siblings lives in Bowen Road, Hong Kong.  The plaintiff and Lau live at Pacific Palisades, Braemar Hill Road, Hong Kong (“P’s Home”).  The defendant and Don-qi claimed that at all material times they were ordinarily resident in Shenzhen, Mainland China, and since 2000 the defendant lived with their parents at a unit in Wei Deng Bie Shu, Shenzhen (“SZ Address”).  Don-qi gave another unit at Wei Deng Bie Shu as his address.  According to the defendant and Don-qi, all Siblings (including the plaintiff) had been to the SZ Address to visit their parents and the defendant.  At the material time, Wang lived at an address at Hang Ying House in North Point, Hong Kong (“HK Address”). The defendant’s wife was working in Macao.

3.  The background to the dispute between parties involved four cheques (according to the plaintiff) or five cheques (according to the defendant) drawn by the defendant on a specified bank account in his name with The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) (“HSBC Account”):

There was no dispute that (a) the 1^st, 2^nd and 3^rd Cheques and the Cheque were signed blank cheques duly given by the defendant to the plaintiff through Don-qi, (b) the defendant through Don-qi agreed to the amounts and dates inserted in the 1^st, 2^nd and 3^rd Cheques, (c) the 1^st, 2^nd and 3^rd Cheques were honoured when the plaintiff presented them for payment, (d) the Cheque was dishonored upon presentation for payment for the reason “Refer to Drawer”, and (e) notice of dishonor was dispensed with under section 50(2)(c)(iv) of the Bills of Exchange Ordinance Cap 19 (“Ordinance”).

4.  On 18 March 2013, the plaintiff commenced the present action to claim against the defendant as drawer of the Cheque for the sum of HK$7,168,300 (“Sum”) with interest and costs.

II.  STATEMENT OF CLAIM

5.  In the Statement of Claim filed on 18 July 2013 (“SoC”), the plaintiff claimed that by an oral agreement made in June 2012 she gave a loan of HK$13,700,000 to the defendant (“Alleged Loan”), which was advanced by several tranche deposits into the HSBC Account and the defendant’s account with Bank of China (Hong Kong) Limited (“BOC”), and which was repayable on demand with interest at 3% per month.  On 21 January 2013, the plaintiff demanded the defendant to repay the Alleged Loan with interest.  In February and March 2013, the defendant through Don-qi handed over the 1^st, 2^nd and 3^rd Cheques and the Cheque to the plaintiff, and instructed that the Cheque (which was for the balance of the Alleged Loan and interest due thereunder) be presented for payment after 11 March 2013.  As explained above, the Cheque was dishonoured upon presentation for payment.

III.  PROCEDURAL HISTORY

6.  According to the affirmation of service filed on 9 April 2013 (“Service Affirmation”), the plaintiff purportedly served the Writ of Summons on the defendant at the HK Address on 18 March 2013 by registered post and insertion into the letterbox.  No acknowledgement of service was filed.

7.  On 16 April 2013, the plaintiff applied for and Bharwaney J (“Ex Parte Judge”) granted inter alia the following order (“Ex Parte Order”):

(a)   an ex parte mareva injunction restraining the defendant from disposing of, dealing with or diminishing (i) the value or stocks/shares held in any securities accounts or sub-accounts of any securities agent(s) and broker(s) (collectively, “D’s Shares”) (including specified accounts with China Galaxy International Securities (Hong Kong) Co Ltd (“China Galaxy”) and BOCOM International Securities Limited (“BOCOM”), and non-specified accounts with KGI Securities (Hong Kong) Limited (“KGI”) and China Everbright Securities (HK) Limited (“China Everbright”) (collectively “D’s Securities Accounts”)), and (ii) moneys in the HSBC Account and non-specified bank accounts with BOC and Standard Chartered Bank (Hong Kong) Limited (collectively, “D’s Bank Accounts”), up to the value of the Sum;

(b)   in the event that D’s Shares or any part thereof had been sold prior to service of the Writ of Summons the defendant shall pay into court the sale proceeds or part thereof within seven days from the date of service of the Ex Parte Order on him;

(c)   the defendant could apply to court at any time to vary or discharge such order, but if he wished to do so he should first inform the plaintiff’s solicitors.

The plaintiff’s application for the Ex Parte Order was supported by her first affirmation (“P’s 1^st Aff”) and by her counsel’s written submissions (“Submissions”) filed/submitted on the same day, ie 16 April 2013.

8.  On the following day (ie 17 April 2013), the plaintiff issued an inter partes summons for inter alia continuation of the Ex Parte Order and an affirmation by the defendant to disclose details of the accounts or sub-accounts with all securities agents (including their names) under which D’s Shares are held (“Continuation Summons”).

9.  The defendant claimed he became aware of the Ex Parte Order and the present action when notified by China Galaxy’s Simon Chan (“Chan”) on 17 April 2013. Through Chan’s introduction, he engaged Messrs Hampton Winter & Glynn (“HWG”) to act for him in the present action.  On 19 April 2013 (Friday), HWG filed Notice to Act on his behalf.  On 20 April 2013 (Saturday), the plaintiff entered default judgment against him (“Judgment”), so HWG’s attempt to file acknowledgment of service on 22 April 2013 (Monday) was refused.

10.  On 25 April 2013, the plaintiff filed her second affirmation in relation to her counsel’s oral submissions at the hearing on 16 April 2013 in response to queries raised by the Ex Parte Judge (“P’s 2^nd Aff”). On the same day, the defendant filed the first affirmation of his solicitor Lam Man Wai Albert (“Lam”) to oppose the Continuation Summons. On 26 April 2013, G Lam J granted an order by consent that the Continuation Summons be adjourned for argument and the Ex Parte Order be continued until the disposal of such summons.

11.  On 25 April 2013, the defendant filed a summons to set aside the Judgment on the ground there was no proper service of the Writ of Summons (“Setting Aside Summons”).  On the same day, the defendant filed Lam’s and his own affirmations in support of the Setting Aside Summons.  On 2 May 2013, Master de Souza adjourned the Setting Aside Summons for argument and granted directions for affirmations to be filed. Notwithstanding extensions of time granted on 22 and 29 May 2013, the plaintiff failed to file/serve affirmation in opposition.  On 14 June 2013, Master Levy set aside the Judgment upon such default.

12.  On 7 June 2013, the defendant filed his first affirmation to oppose the Continuation Summons and to discharge the Ex Parte Order (“D’s 1^st Aff”). As explained above, the plaintiff filed her SoC on 18 July 2013.  On 26 July 2013, the plaintiff filed a summons for summary judgment for the Sum and interest thereon with costs (“O14 Summons”). On the same day, the plaintiff filed her third affirmation in reply to D’s 1^st Aff for the Continuation Summons (“P’s 3^rd Aff”), and her fourth affirmation for the O14 Summons (“P’s 4^th Aff”).  On 5 August 2013, Master Hui granted an order by consent that the O14 Summons be adjourned to be heard together the Continuation Summons.  On 20 August 2013, the defendant filed his third affirmation (“D’s 3^rd Aff”) and Don-qi’s affirmation (“DQ Aff”) to oppose the O14 Summons.

13.  On 13 August 2013, the defendant filed his Defence together with an ex parte summons for discharge of the Ex Parte Order with costs (“Discharge Summons”).  On the same day, the defendant filed his second affirmation in support of the Discharge Summons (“D’s 2^nd Aff”).  On 23 August 2013, Anthony Chan J granted an order by consent that the Ex Parte Order be varied to the following effect (“Chan Order”):

(a)   the order set out in paragraph 7(a) above be replaced by the following:

(i) the defendant be restrained from (1) disposing of, dealing with or diminishing moneys in D’s Bank Accounts up to the value of the Sum, and (2) withdrawing D’s Shares or disposing of, dealing with or diminishing the moneys held in any securities accounts or sub-accounts of any securities agent(s) and broker(s) including those held in D’s Securities Accounts up to the value of the Sum;

(ii) the aggregate assets of the defendant affected by (i) above shall not in any event exceed the Sum;

(iii) in the event that D’s Shares or any part thereof had been sold prior to service of the Chan Order on the defendant, he shall pay into court the sale proceeds or part thereof within seven days from the date of service of the Chan Order on him;

(b)   adding a further order that notwithstanding the provisions in (a)(i)-(iii) above, the defendant be allowed to manage his securities accounts or sub-accounts set out above, including the sale and purchase of shares and stocks;

(c)   adding a further order that the Chan Order did not prohibit the defendant from withdrawing money from his securities accounts or sub-accounts for the purpose of complying with (a)(iii) above and/or pursuant to the exceptions set out in the Ex Parte Order.

Pursuant to the Chan Order, the defendant paid the sum of HK$1,387,985.22 into court on 12 September 2013.

14.  On 4 September 2013, the plaintiff filed her fifth affirmation in reply for the O14 Summons (“P’s 5^th Aff”).  On 17 September 2013, the defendant filed Lam’s second affirmation to oppose the O14 Summons. The Continuation, O14 and Discharge Summonses were heard before me on 24 September 2013 (“Hearing”).

15.  On 5 September 2013, the defendant filed a summons returnable at the Hearing to seek answers to requests for further and better particulars of the SoC (“F&BP Summons”).  Such summons would only be relevant if I decline to grant summary judgment, so at the Hearing I adjourned such summons sine die with costs reserved, but required the defendant to restore the F&BP Summons for three-minute call-over hearing before master in chambers within seven days after the final disposal of O14 Summons. 

16.  Both Mr Chong (with him Mr Leung), counsel for the plaintiff, and Mr Mak, counsel for the defendant, agreed that the following matters were before me at the Hearing:

(a)   whether summary judgment ought to be granted;

(b)   whether the Ex Parte Order ought to be discharged;

(c)   if yes to (a), whether any mareva injunction ought to be granted in aid of execution;

(d)   if no to (a) and yes to (b), whether any new mareva injunction ought to be granted;

(e)   if no to (a) and (b), whether the Ex Parte Order as varied by the Chan Order ought to be continued.

Both counsel also agreed I could refer to all of the aforesaid affirmations for the Continuation, O14 and/or Discharge Summonses insofar as they might be relevant to any and/or all of the above matters.

IV.  LEGAL PRINCIPLES: SUMMARY JUDGMENT

17.  Both counsel had no essential quarrel over the applicable legal principles.  A plaintiff may invoke the procedure under Order 14 of the Rules of the High Court where there is no valid defence to his claim or otherwise a triable issue.  The rationale is set out in Hong Kong Civil Procedure 2014:[1]

“ …… 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: Man Earn Ltd v Wing Ting Fong [1996] 1 HKC 225. Order 14 proceedings for summary judgment when there is no defence to a claim are an important feature of the legal process. It enables plaintiffs in cases where there is no defence to obtain expeditious summary judgment to avoid unnecessary delay. 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” (per Mortimer JA in Manciple Ltd v Chan On Man [1995] 3 HKC 459 at 466). 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.”

18.  In Ng Shou Chun v Hung Chun San [1994] 1 HKC 155, Godfrey J noted it was not appropriate to embark on a mini‑trial of the action on affidavit evidence.  The court should ask itself the question whether what the defendant says is credible or believable.  If so, he must have leave to defend; if not, the plaintiff is entitled to summary judgment.

19.  Hong Kong Civil Procedure 2014 goes on to say that: [2]

“ ‘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.’ per Cheung JA in Paul Y Management Ltd v Eternal Unity Development Ltd [2008] HKEC 1359 at para 19.

……

  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 (Jacobs v Booth’s Distillery Co (1901) 85 L T 262, HL; Runnacles v Mesquita (1876) 1 QBD 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 and bad faith, and should not on such an examination grant the defendant conditional leave to defend, but should give unconditional leave to defend (Extraktionstechnik Gesellschaft für Anlagenbau Gmbh v Oskar (1984) 128 S J 417; (1984) L S Gaz 1362, CA applied in Billion Silver Development Ltd v All Wide Investments Ltd [2000] 2 HKC 262).”

V.  LEGAL PRINCIPLES: DISHONOURED CHEQUES

(a)  Section 30 of the Ordinance

20.  It is unnecessary for the person who seeks to enforce a cheque against a party liable to him on the instrument to plead or prove that the engagement of that party constituted by his signature of the instrument was given for consideration, since every party whose signature appears on the instrument is prima facie deemed to have become a party thereto for value.[3]

21.  Section 30(2) of the Ordinance provides inter alia that 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.  But the words “if it is admitted or proved” mean no more than that “some evidence of circumstances in the nature of fraud, etc, must be given sufficient to be left to a jury”, and “it is sufficient that the defendant, in his affidavit in reply to an application for summary judgment, give prima facie proof that the acceptance, issue or subsequent negotiation of the bill was affected by one of the vices mentioned in the subsection”.[4]

22.  “Fraud” in section 30(2) of the Ordinance means common law fraud but can extend to fraud practised on third parties.  Fraud affecting the acceptance or issue of the bill or its subsequent negotiation will shift the burden of proof to the claimant, but this subsection refers only to the case where the negotiator obtains the bill, or the acceptance thereof, by fraud.[5]

(b)  Section 20 of the Ordinance

23.  Section 20 of the Ordinance provides that:

“(1) Where a simple signature on a blank paper is delivered by the signer in order that it may be converted into a bill, it operates as a prima facie authority to fill it up as a complete bill for any amount, using the signature for that of the drawer, or the acceptor, or an indorser; and, in like manner, when a bill is wanting in any material particular, the person in possession of it has a prima facie authority to fill up the omission in any way he thinks fit.

(2) In order that any such instrument, when completed, may be enforceable against any person who became a party thereto prior to its completion, it must be filled up within a reasonable time and strictly in accordance with the authority given. Reasonable time for this purpose is a question of fact: Provided that if any such instrument after completion is negotiated to a holder in due course, it shall be valid and effectual for all purposes in his hands, and he may enforce it as if it had been filled up with a reasonable time and strictly in accordance with the authority given.”

24.  The purpose of such section is to confer prima facie authority on the holder or person in possession of the inchoate instrument to supply the omission and convert the document into a valid bill.[6]  The burden of proving want of authority rests upon the person alleging authority to be absent.[7]

25.  The first part of section 20(1) deals with the case of a “simple signature on a blank paper”.  The inchoate instrument must be delivered by the signer, and if so delivered and the signature is used for that of the drawer, the prima facie authority conferred extends to the insertion of an order to pay, the amount of the bill, the date, the maturity, and the names of the drawee and payee.[8]  The second part of section 20(1) deals with a bill which is “wanting in any material particular”. In a like manner, the person in possession of the bill has a prima facie authority to fill up the omission, eg the name of the drawee or of the payee, the amount of the bill in words, and the date of payment.[9]

26.  But section 20(2) expresses a condition of general application to all the cases covered by section 20(1).  Where authority is given, for the completed inchoate instrument to be enforceable against a person who became a party to it prior to its completion, it must be filled up within a reasonable time and strictly in accordance with the authority given.[10]

(c) Summary judgment

27.  A bill of exchange is to be treated as cash and honoured unless there is some good reason to the contrary.  Only in exceptional circumstances will a court deprive a claimant of judgment on a claim based on a cheque.[11]  Further, Lord Russell of Killowen in Nova (Jersey) Knit Ltd v Kammgarn Spinnerei GmbH said :[12]

“…… The bill is itself a contract separate from the contract of sale. Its purpose is not merely to serve as a negotiate 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 ……”[13]

28.  Total failure of consideration or the contract being void for fraud is a matter of defence against an immediate party. Even though the orders the court may make on an application for summary judgment remain a matter for the discretion of the court, it would appear that, as between immediate parties, it is “beyond argument” the application should be dismissed if there has been a total failure of consideration.[14]

29.  Hong Kong Civil Procedure 2014 further provides as follows:[15]

“ In an action on a bill of exchange, the mere assertion by the defendant of fraud …… affecting the bill is not in itself enough to entitle him to leave to defend, but equally if the defendant sets out facts supporting a case of fraud …… affecting the bill, the mere assertion by the plaintiff that he took the bill in good faith and for value will not in itself deprive the defendant of his entitlement to leave to defend, but if the plaintiff’s claim to be a bona fide holder for value is uncontested or he can establish such claim by unchallenged or unchallengeable contemporary documents, the plaintiff is entitled to judgment, since he will thereby have discharged the onus put on him by section 30(2) of the Bills of Exchange Act 1882 (see [the Ordinance], s.30(2)) ……

When fraud is alleged, the burden of proof is on the holder to prove both that value has been given, and that it has been given in good faith without notice of the fraud ……; an affidavit by the plaintiff in reply swearing that he is the holder for value is not sufficient to deprive the defendant in such a case of the right to unconditional leave to defend …… but unless the defendant can show facts which if true would impugn the plaintiff’s title, the plaintiff is entitled to judgment ……” (my emphasis)

VI. O14 SUMMONS

(a)  Alleged Loan

30.  The defendant claimed there were triable issues because the plaintiff (a) dishonestly retained the Cheque, wrongfully filled out the date/amount and presented it for payment without his knowledge/ authorisation, and (b) did not grant the Alleged Loan at all so there was total failure of consideration for the Sum allegedly payable under the Cheque.

31.  Notwithstanding any presumed consideration,[16] the crux of the matter plainly turns on the existence or otherwise of the Alleged Loan. If the defendant’s contentions on this matter raise triable issues, then the case should proceed to trial.  After all, without the Alleged Loan there would be no indebtedness due to the plaintiff and no consideration to support the Cheque whereupon any knowing act by the plaintiff to fill out and pay herself the Sum under the Cheque might arguably be dishonest and/or wrongful.  Mr Chong also relied on forbearance to sue as supporting consideration for the Cheque, but if there were arguable defences over the existence of the Alleged Loan, then any alleged right to repayment of the Alleged Loan and interest that underpinned such forbearance might also be suspect.

32.  In my view, despite the plaintiff’s elaborate arguments and Mr Chong’s reminder that this is a claim on dishonoured cheque, the defendant has sufficiently raised factual disputes, triable issues and/or arguable defences over the existence of the Alleged Loan that cannot be resolved on affidavit. These matters ought to be left for trial, and I set out my analysis below.

33.  In P’s 1^st and 4^th Affs, the plaintiff claimed that by an oral agreement in June 2012 she granted to the defendant the Alleged Loan made by deposits into the HSBC Account and his account with BOC (which account number she could not recall) (“BOC Account”) on various dates from June to September 2012, and it was further agreed the Alleged Loan was repayable on demand with interest at 3% per month (“Oral Agreement”).

34.  The defendant (a) denied the Oral Agreement, (b) denied any deposit by the plaintiff into the HSBC Account whether pursuant to the Oral Agreement or at all, and (c) claimed he did not have any BOC Account at the material time.  To date the plaintiff failed to identify the BOC Account, and until P’s 4^th Aff she also failed to particularise the dates, amounts, sources/manner of payment and corresponding recipient accounts of the “several deposits” she purportedly made into the HSBC and BOC Accounts pursuant to the Oral Agreement, or to provide any documentary support.

35.  In P’s 4^th Aff, the plaintiff clarified that by/about 17 June 2012 a sum of HK$1,700,000 was first advanced to the defendant (“1^st Tranche”), and thereafter until 17 September 2012 further sums in the aggregate amount of HK$12,000,000 (“Other Tranches”) were transferred to the defendant’s bank accounts, and these payments together comprised the Alleged Loan of HK$13,700,000. But up to the time of P’s 4^th Aff, the plaintiff still failed to (a) provide particulars/documents for the Other Tranches, (b) identify the source of payment, corresponding recipient bank account and/or documentary support for the 1^st Tranche, or (c) identify the BOC Account.

36.  On the other hand, the defendant tried to make good his case in paragraph 34(b) above by adducing bank statements (with irrelevant entries redacted) of the HSBC Account for June to October 2012  (“HSBC Statements”) which showed there some deposits by various companies but no record of (a) any deposit by the plaintiff of “a sum” of HK$1,700,000 on/about 17 June 2012 and/or (b) any further deposit/transfer by the plaintiff between 17 June and 17 September 2012.

37.  There is (or can be) no positive proof of the negative assertion in paragraph 34(c) above, so the defendant urged the plaintiff to identify the BOC Account by looking through her own papers/records and making enquiries with her own bank. But all she said was that she could not remember the account number of the BOC Account.  I find it strange that the plaintiff’s bank/other records in respect of the “several deposits” for the Alleged Loan of HK$13,700,000 made only 1½ years ago cannot be or have not been traced.

38.  On 22 August 2013, the plaintiff asked to inspect clean versions of the HSBC Statements to check the deposits made during the period from June to September 2013, but the defendant declined such request on 27 August 2013 on grounds of privacy and confidentiality. The plaintiff still did not turn to her own documents despite the importance of establishing the Alleged Loan (especially in face of the HSBC Statements that suggested she did not make any deposit during the relevant period and the DQ Aff that denied her version of events), and she conspicuously failed to provide particulars of the deposits for the Alleged Loan. All she did was to refer to the redacted HSBC Statements and in P’s 5^th Aff claimed that the deposits therein showed that (a) on/about 17 June 2012 she advanced the 1^st Tranche of HK$1,700,000, and (b) thereafter until 17 September 2012 the Other Tranches in the aggregate sum of HK$12,000,000 were “transferred to the Defendant’s bank account”.

39.  For the 1^st Tranche, the plaintiff claimed (a) the HSBC Statements showed she deposited HK$2,000,000 and HK$3,000,000 into the HSBC Account on 8 June 2012 but HK$3,500,000 was transferred out to her on 12 June 2012 leaving a net deposit of HK$1,500,000, and (b) on 28 June 2012 she caused HK$200,000 to be deposited into the defendant’s securities account with BOCOM (“BOCOM Account”).

40.  In my view, the plaintiff’s case on the 1^st Tranche raises more questions than answers. First, it flies in the face of her explanation in P’s 4^th Aff that she advanced “a” sum of HK$1,700,000 (not separate deposits) to the defendant by/about 17 June 2012 (not 8, 12 or 28 June 2012) into the HSBC Account and/or BOC Account (not the BOCOM Account).

41.  Secondly, even though the HSBC Statements did not on their face identify the drawer for the cheque deposits of HK$2,000,000 and HK$3,000,000 on 8 June 2012, the plaintiff did not produce her current account bank statement to verify the source of these cheque deposits or alternatively bespeak copies of those two cheques from her own bank.

42.  Thirdly, the plaintiff produced the counterfoil (with manuscript notation of BOCOM as payee) for the cheque deposit of HK$200,000.  But she admitted to have a securities account with BOCOM herself and shared the same stockbroker Ms Law (“Law”) with the defendant.  In my view, such counterfoil record is equivocal and does not clearly establish any payment to the defendant.  The plaintiff did not provide documentary support, which she could have done, by her own bank statement, copy cheque obtainable from her own bank or written confirmation obtainable from BOCOM.

43.  Fourthly, the plaintiff did not explain why such an elaborate scheme (which did not sit well with her earlier assertions) was adopted in lieu of a straightforward deposit of HK$1,700,000 into the HSBC Account for the 1^st Tranche.

44.  For the Other Tranches, the plaintiff in P’s 5^th Aff went on to say she made further deposits into the HSBC Account through PRC money changers in September 2012,[17] and the total deposits of HK$12,478,095 supported her case that in September 2012 (particularly until 17 September 2012) “an aggregate sum of HK$12,000,000.00 was advanced to the [HSBC Account] ……”:

Date	Deposits	Amount (HK$)
13/9/12	XXX HK Trading Limited	929,179
13/9/12	House Cheque	850,000
13/9/12	Cash Deposit	400,000
13/9/12	XXX Company Add Flat	2,820,791
14/9/12	XXXX Company Limited	2,999,985
17/9/12	Limited Ass. Uni	4,478,140
		12,478,095

45.  The plaintiff’s Reply filed on 10 September 2013 averred that the defendant could not “have his cake and eat it”, ie failing to provide clean copies of the HSBC Statements but at the same time demanding details of the deposits made by or on behalf of the plaintiff.  Mr Chong asked me to draw adverse inference against the defendant for failing to produce clean copies of the HSBC Statements, but for reasons below I disagree.

46.  It must be remembered that when the defendant declined inspection of clean copies of the HSBC Statements in August 2013,[18] he would not know the plaintiff would say in P’s 5^th Aff (filed in September 2013) the deposits for the Other Tranches were made by PRC money changers on her behalf and not by her personally (even though the SoC and P’s 1^st and 4^th Affs referred specifically to several tranche deposits of the Alleged Loan into the HSBC and BOC Accounts).

47.  Mr Mak suggested that the plaintiff made up her story as she went along and concocted a new story upon information gleaned from the HSBC Statements (which inconveniently contradicted her earlier assertions and which was why she wanted sight of the clean versions to patch up her concocted story). Although there is no need for me to go so far, it is plain that the plaintiff’s case on the Alleged Loan in P’s 5^th Aff was materially different from and inherently inconsistent with her case in the SoC and P’s 4^th Aff. Neither case is supported by documents that show how the 1^st/Other Tranches were sourced from her monies or monies to her order.  The entries for transfers/deposits by companies, house cheque and cash deposit in the HSBC Statement for September 2012 only demonstrate that monies were deposited into the HSBC Account, but they do not aid the plaintiff’s bare assertion that they represented payments made by her or on her behalf by PRC money changers[19] whom she did not name but whose identities she should have known or should have been able to find out even without sight of clean copies of the HSBC Statements.

48.  As Mr Mak submitted, the plaintiff’s explanations about the 1^st and Other Tranches in P’s 5^th Aff also had other problems.  By saying in P’s 5^th Aff that the deposits in the HSBC Account for the 1^st and Other Tranches exceeded HK$13,700,000, the plaintiff was in effect saying the Alleged Loan was wholly paid into the HSBC Account and not the BOC Account at all, which contradicted the SoC and P’s 1^st and 4^th Affs, but she did not offer any explanation.  Further, she did not explain why she remitted almost half a million dollars more than the balance of the Alleged Loan of HK$12,000,000 to the defendant.

49.  Mr Chong complained that the defendant never gave any explanation about the substantial deposits into the HSBC Account (such as “gifts” or “business dealings”) when, according to the plaintiff, he lived off their parents and never had a permanent job.  In my view, at least at this interlocutory stage, such criticism is unjustified because (a) the plaintiff did not allege those deposits were made by her or on her behalf until P’s 5^th Aff, and (b) she knew the defendant had investments in the Hong Kong stock market[20] and had the ability to engage in high value stock trading.[21]

50.  In view of the inherent inconsistencies within the plaintiff’s own case and the analysis below in relation to the 1^st, 2^nd and 3^rd Cheques and the Cheque, I find the defendant has sufficiently demonstrated that his denial of the Alleged Loan is arguable.  If the existence of the Alleged Loan is suspect, then the plaintiff’s contention that the defendant instructed her to fill out and present the Cheque for payment for the purpose of repaying the Alleged Loan and interest thereon necessarily becomes questionable. This is further highlighted by the DQ Aff that confirmed the 1^st, 2^nd and 3^rd Cheques and the Cheque were not for repayment of (and had nothing to do with) the Alleged Loan.  In the premises, it must also be arguable there was total failure of consideration for the Cheque.

(b)  1^st, 2^nd and 3^rd Cheques and the Cheque

51.  The parties pleaded/deposed different versions of the factual background that led to the 1^st, 2^nd and 3^rd Cheques and the Cheque.  In particular, the plaintiff claimed she was authorised by the defendant through Don-qi and/or she followed the past practice in relation to the 1^st, 2^nd and 3^rd Cheques to fill out the payee, date (8 March 2012) and amount (the Sum) on the Cheque and to present it for payment, but the defendant (supported by the DQ Aff) denied this.

52.  As seen below, there are substantial factual disputes which, in my view, cannot be resolved on affidavit. Despite the attractive simplicity of Mr Chong’s submission that I should not be concerned with such underlying disputes in an action based on dishonoured cheque alone, it misses the point that such factual disputes reflected on the core issue of the existence or otherwise of the Alleged Loan (and hence on the issue of whether or not there was total failure of consideration) which the plaintiff put forward as consideration for the alleged repayment of the outstanding balance and interest by way of the Cheque.  Any credible or believable undermining of the plaintiff’s case on such core issue will raise triable defence contention based on total failure of consideration that ought to be left for trial.

53.  The defendant (as corroborated by the DQ Aff) claimed the present dispute arose from money disputes in the latter half of 2012 between Don-qi and Lau (who had business connections/dealings for many years) of which he was unaware. In/about October 2012, Don-qi entrusted HK$9,000,000 to him which he deposited into his securities account with China Galaxy (“CG Account”). I note that although the plaintiff denied this in P’s 5^th Aff, she did not state the source of her hearsay information that Don-qi never entrusted any money to the defendant.  

54.  The plaintiff also denied Don-qi had money disputes with Lau.  First, she claimed the defendant failed to particularise the business transactions between Lau and Don-qi when, according to her, the defendant and Don-qi lived off their parents and did not have any permanent job, property or business.  But, as explained in paragraph 49 above, such assertion is triable, and on the defendant’s case Don-qi entrusted HK$9,000,000 to him and he eventually returned such sum to Don-qi by drawing signed blank cheques at his direction, which cheques became inter alia the 1^st, 2^nd and 3^rd Cheques.  Secondly, the plaintiff suggested Don-qi could have issued legal proceedings in Hong Kong or Mainland China against Lau or alternatively repaid Lau directly without the defendant drawing cheques (including the Cheque) to make payment to the plaintiff. But the defendant (supported by the DQ Aff) claimed that it was the plaintiff (being a Sibling) who inflicted pressure on him[22] and (together with Yuk-mei and Lau) on Don-qi to repay monies owed by Don-qi,[23] which eventually led to Don-qi signing the IOU[24] that clearly stated Don-qi (and not the defendant) was the borrower,[25] and the plaintiff gave no explanation as to why such IOU (which she did not disclaim) describe Don-qi as “borrower” when she never averted to Don-qi owing her monies. In my view, these matters need to be resolved at trial, and I am not persuaded the defendant’s case is, as Mr Chong suggested, incredible or unbelievable.

55.  The defendant claimed that in/about mid to late January 2013, whilst he was staying at P’s Home, the plaintiff snooped through the monthly statements of D’s Securities Accounts and became suspicious that part of the monies in such securities accounts was entrusted to him by Don-qi.  The defendant confirmed this when she questioned him about it, so she pressed him to hand over such monies by saying such monies belonged to Lau but was wrongfully appropriated by Don-qi, and it would be in his and Don-qi’s best interest to do so before Lau found out.

56.  In P’s 5^th Aff the plaintiff denied this: she never saw and could not have snooped through the monthly statements sent to the SZ Address which the defendant never brought to P’s Home, and she never said the monies in D’s Securities Accounts belonged to Lau and they should be returned to him. Further, even though the defendant used to stay at P’s Home whenever he came to Hong Kong to deal with his investments in the Hong Kong stock market, after the end of 2012 he stayed at the HK Address. [26]  In my view, these factual disputes cannot be resolved on affidavit, but it would be unsurprising if the defendant did bring monthly statements of D’s Securities Accounts with him when he came to Hong Kong to deal with his stock investments.

57.  The defendant claimed that in/about mid to late January 2013, he telephoned to inform Don-qi (who was in Xi’an, Mainland China) of the matters in the paragraph 55 above.  Don-qi was furious and told the defendant not to hand over the monies to the plaintiff without his consent and to stay out of his disputes with Lau.  The defendant claimed he was put into a difficult position for he knew Lau to be a ruthless person and he feared for his own personal safety in refusing to hand over monies which Lau claimed to be his, but he could not bring himself to betray Don-qi’s trust by acceding to the plaintiff’s demand to hand over HK$9,000,000 to Lau. Don-qi was also concerned that the defendant, who was under a lot of pressure from the plaintiff and who was afraid of Lau (whom they all knew to be a ruthless person with connections to the underworld and thugs), would succumb to the plaintiff’s demand. But the defendant finally decided not to accede to the plaintiff’s demand without Don-qi’s directions/consent, and Don-qi was relieved when told of such decision on/about 28 January 2013.

58.  The defendant went on to say he told Don-qi he would fly to Xi’an, Mainland China to discuss the situation with him face to face.  On 28 January 2013, before he left Hong Kong for X’ian, he sent a telephone text message “對不起二姐，我闖大禍了，我已經回不了頭了” (“Messsage”) to the plaintiff which, according to the defendant, meant he was saying sorry to his second sister for not acceding to her demand, and he knew he got himself into big trouble for keeping Don-qi’s monies that Lau claimed to be his but he could not turn back the clock.  He then switched off his mobile phone as he did not want the plaintiff to further pressurise him over a matter which he had already made up his mind.  He later learned from P’s 1^st Aff that she had sent him a number of telephone text messages including one in which she said she had ways to resolve the matter (ie “我有辦髮”), and one in which she tried to soothe him by saying that Lau had not yet found out Don-qi had appropriated monies belonging to him and entrusted HK$9,000,000 to the defendant (ie “斌不知道”).

59.  On the other hand, the plaintiff in P’s 1^st Aff claimed that on/about 21 January 2013 she orally “demanded repayment of the [Alleged Loan] from the Defendant altogether with interest of HK$2,468,300 at HK$16,168,300” (my emphasis), and in P’s 4^th Aff she gave the following breakdown for the interest sum of HK$2,468,300:

Period	Calculation (HK$)	Amount (HK)
17/6/12 – 17/9/12	13,700,000 x 3% x 3	153,000
18/9/12 – 17/2/13	13,700,000 x 3% x 5	2,055,000
18/2/13 – 8/3/13	13,700,000 x 3% x 19/30	260,300
		2,468,300

The plaintiff did not explain why on 21 January 2013 she would demand payment of interest calculated up to 8 March 2013 (ie the date of the post-dated Cheque) when on her case as at 21 January 2013 no one had any idea about the signed blank cheques that were only handed over on 26 February and 5 March 2013. Indeed, according to P’s 1^st and 4^th Affs, she was then expecting prompt payment by the defendant from sale of his stocks and shares.[27] But in any event, the breakdown is incorrect because it failed to take into account partial payments of HK$3,000,000, HK$3,000,000, HK$3,000,000 and HK$600,000 made on or before 5 March 2013 that would reduce the principal amount to HK$4,100,000.00, but the plaintiff still maintained such claim for interest at HK$2,468,300 even in P’s 5^th Aff.  In my view, this sails perilously close to Mr Mak’s submission that the plaintiff was making up her case as she went along, but it is unnecessary for me to so find when at the very least such demand for interest on the Alleged Loan that forms part of the Sum in the Cheque raises a triable question.

60.  In P’s 1^st and 4^th Affs, the plaintiff went on to claim that on/about 23 January 2013 the defendant told her he would realise some of his shares to repay part of the Alleged Loan, and after usual clearance the sale proceeds (HK$12,685,500) would be transferred to the HSBC Account.  On 25 January 2013 (Friday), the defendant confirmed to her the sale proceeds had been transferred to the HSBC Account, but he claimed he could not repay the Alleged Loan on that day but would transfer repayment on 28 January 2013 (Monday). In P’s 4^th Aff, the plaintiff claimed that in/about late night on 27 January 2013 or after midnight on 28 January 2013 the defendant called her to say he was at the HK Address and would meet her at 9:00am the following day to arrange the transfer.  The plaintiff in P’s 1^st and 4^th Affs said that on 28 January 2013 she received the Message, which she understood to mean “I am deeply sorry my sister, now I have myself to be in a very big trouble, and I am now at a ‘point of no return’”.  According to P’s 3^rd Aff, the Message was sent from a number in Mainland China, which caused the plaintiff to believe the defendant was then in Mainland China.

61.  But the defendant was not at the HK Address or in Mainland China.  In fact, he was about to be or was on his way to Macao shortly before/after midnight on 27-28 January 2013, and he was on a ferry journey back to Hong Kong from Macao when the Message was sent at 8:45am.  According to the defendant’s immigration records, he went to Macao at about 1:00am on 28 January 2013,[28] and returned to Hong Kong at 9:47am.[29]

62.  In P’s 3^rd, 4^th and 5^th Affs, the plaintiff claimed that in light of the factual matrix and the timing of the Message, she feared the defendant (who had a habit of going to Macao to gamble and often losing) “had gone to Macau and lost the money which he would be repaying [her] with, therefore running into difficulties to repay the [Alleged Loan] to her”, and hence the Message to her.  “[She] genuinely believed that [he] had gone to the casino during these few hours.”

63.  But the plaintiff’s suggestion that the defendant lost by gambling in Macao the “monies which he would be repaying …… the [Alleged Loan] to her”, ie the sale proceeds of the shares in the sum of HK$12,685,500 already deposited with the HSBC Account, does not sit well with the defendant’s ability to pay HK$9,000,000 from the HSBC Account under the 1^st, 2^nd and 3^rd Cheques in February/March 2013.  Further, bearing in mind the defendant’s case that he made up his mind to reject the plaintiff’s demand to pay over Don-qi’s monies and to leave for Xi’an in the morning to meet Don-qi and that his wife was working in Macao, I am not convinced at this interlocutory stage that the defendant’s overnight visit to Macao necessarily has any sinister connotations.

64.  In P’s 3^rd Aff, the plaintiff claimed she was anxious to help the defendant as she was concerned over what “trouble” he got himself into, so she wanted him to call and discuss how to resolve the outstanding repayment before involving Lau, which led her to send text messages to the defendant asking him to call her quickly (ie “快找我”, “快” and “聽電話”) so she could help him (ie “我有辦髮” and “斌不知道”).

65.  The plaintiff claimed the defendant left Hong Kong and absconded to Mainland China with a view to escape and hide from her to avoid repaying his debt. According to P’s 4^th Aff, the defendant’s Hong Kong and PRC mobile phones were switched off. She reported the defendant’s sudden disappearance to the Hong Kong and Macao police on 2 and 3 February 2013 respectively, and claimed that a few days later the Hong Kong police told her the defendant had left Hong Kong by air after 2:00pm on 28 January 2013.[30] In P’s 3^rd Aff, the plaintiff claimed she grew suspicious of why he would not answer her calls, which he easily could have done had he not been avoiding her, and the only reasonable inference was he did so out of a desire to avoid repaying the Alleged Loan to her.  

66.  Again, these are factual disputes that need to be resolved at trial.  Significantly, the defendant did not dispute he cut off contact with the plaintiff and left for Mainland China to meet Don-qi, but he explained he did so because he did not want the plaintiff to continue to put pressure on him to pay over Don-qi’s monies to her/Lau when he had already decided not to accede to her demands without Don-qi’s consent.[31]  On such basis, it is arguable whether or not his departure for Mainland China was evasive abscondment.  Even on her own case, despite her prompt “missing person” report to the police, the plaintiff was conspicuously silent as to what efforts she made to raise enquires with their parents (whom she said supported the defendant’s living expenses) and other Siblings (including Don-qi with whom she had contact even after 28 January 2013 when she received from the defendant through him the 1^st and 2^nd Cheques on 26 February 2013 and the 3^rd Cheque and the Cheque on 5 March 2013) as to his whereabouts.

67.  In my view, the plaintiff appears to accept (albeit obliquely) that she knew the defendant usually stayed in Mainland China:

(a)   the plaintiff on her own case admitted she used to accommodate the defendant at P’s Home whenever he came to Hong Kong to deal with his investments in the Hong Kong stock market because her sons were studying abroad, but it became inconvenient when they returned for Christmas holidays at the end of 2012, and as a long term measure she asked the defendant to move to the HK Address, which assertions, in my view, suggested that the plaintiff knew the defendant was not ordinarily in Hong Kong;

(b)   the defendant’s immigration records showed that from January 2012 to July 2013 he stayed overnight in Hong Kong only for brief periods:

Month	Nights spent in Hong Kong	Month	Nights spent in Hong Kong
Jan 2012	0	Nov 2012	3
Feb 2012	1	Dec 2012	4
Mar 2012	0	Jan 2013	13
Apr 2012	2	Feb 2013	0
May 2012	8	Mar 2013	0
Jun 2012	7	Apr 2013	0
Jul 2012	0	May 2013	0
Aug 2012	7	Jun 2013	0
Sep 2012	8	July 2013	0
Oct 2012	6

(c)   the plaintiff suggested the defendant stayed at the HK Address at least 3-5 days a week and went to Shenzhen for weekends before he disappeared on/about 28 January 2013, but his immigration records showed he was in Hong Kong only for four nights in December 2012 and 13 nights in January 2013;

(d)   the defendant sent a telephone text message to the plaintiff on 2 October 2012 “二姐我回到深圳了” (my emphasis), which suggested that Shenzhen was his place of “return”;

(e)   P’s 1^st to 5^th Affs did not deny the defendant lived with their parents at the SZ Address and the Siblings visited him there;

(f)    the defendant produced the HSBC Statements (2010 to 2013) and transaction statements from China Galaxy, BOCOM and China Everbright (2013) all posted to the SZ Address.

68.  The defendant claimed that on/about 22 February 2013, Lau and two thugs (with the assistance of the plaintiff and Yuk-mei) gained access to Don-qi’s home in Shenzhen, forcibly imprisoned him there for hours, tied and beat him up, and finally forced him to sign an IOU in the plaintiff’s favour for the sum of HK$9,600,000 (“IOU”):

“欠條

單東起証件號(XXXXXXXXXXXXXXXXXX)欠單玉紅港幣(9600000)0玖佰陸拾萬圓整

欠1303匯力資源210萬股

余2013年2月28日前歸還。

借款人: 單東起

2013年2月22日

On the morning of 23 February 2013, Don-qi told the defendant what happened, and said he had an understanding with the plaintiff that HK$9,000,000 would be paid to her in three tranches of HK$3,000,000 each towards settling the IOU.  The defendant raised concern that there might not be readily available funds for making three equal tranche payments of HK$3,000,000, and he might have to sell shares to raise cash in which case the full sum of HK$9,000,000 might have to be paid by using more than three cheques.  Don-qi therefore asked the defendant to entrust him with some signed blank cheques drawn on the HSBC Account, and let him work out the actual payment arrangements with the plaintiff and Lau.

69.  On the other hand, the plaintiff in P’s 1^st and 4^th Affs claimed that with Lau’s assistance she instructed some debt collecting agents to assist her to locate the defendant in Mainland China and to collect the Alleged Loan from him.  In P’s 2^nd Aff, the plaintiff explained such debt collecting agents were not professional debt collectors but a mutual friend of Lau and the defendant Mr Shing Yuk-fan whom the plaintiff believed would be able to help her contact the defendant. In P’s 1^st, 2^nd and 3^rd Affs, the plaintiff claimed that through such efforts she was contacted by Don-qi whom she believed had personal contact with the defendant because on 26 February 2013 the defendant through Don-qi gave her the 1^st and 2^nd Cheques in partial repayment of the Alleged Loan, and on 5 March 2013 the defendant through Don-qi further gave her the 3^rd Cheque and the Cheque to repay the balance of the Alleged Loan and interest.  The plaintiff in P’s 5^th Aff claimed the defendant was still hiding from and avoiding her, and she only communicated with and sought repayment of the Alleged Loan from him through Don-qi as middleman.

70.  The plaintiff doubted whether Don-qi made the IOU out of duress and physical coercion since there was no evidence that he made any report to nearby police stations or clinics/hospitals and/or issued any legal proceedings to set aside the IOU.  But the plaintiff’s own case also raises questions.  There is no evidence from the plaintiff that Don-qi owed her any money, but she did not explain why Don-qi would put his name down in the IOU as “borrower” (借款人).  In P’s 5^th Aff, the plaintiff seemed to suggest the IOU reflected a promise to repay the Alleged Loan by cash and shares,[32] but naming Don-qi as borrower in such context makes it even more inexplicable. In my view, these matters should be canvassed at trial.

71.  P’s 5^th Aff complained that D’s 3^rd Aff failed to refer to some 2,100,000 shares of Huili Resources (Group) Ltd (Stock Code 1303) (“Huili”) in the IOU that were to be “returned” (歸還) to the plaintiff. The plaintiff claimed that the aggregate of the sum of HK$9,600,000 and the market value of such Huili shares in the IOU of about HK$4,000,000-HK$5,000,000 was approximately the value of the Alleged Loan (ie HK$13,700,000) that she had advanced to the defendant. She referred to the matters in paragraph 60 above and noted that at the time of signing the IOU the balance in D’s Securities Accounts was about HK$12,600,000.  She claimed the defendant did not have sufficient cash to repay the Alleged Loan, but was unwilling to liquidate so many Huili shares at the same time to pay HK$12,600,000 to her in cash, so she agreed to reduce the cash repayment sum by HK$3,000,000 and for Don-qi to state in the IOU payment of a cash sum of HK$9,600,000 and settlement of the balance due under the Alleged Loan and interest thereon by 2,100,000 Huili shares.

72.  I reiterate that the plaintiff did not explain why Don-qi (and not the defendant) was named as “borrower” in the IOU, so this aspect of the IOU appears on its face to be consistent with the defendant’s case that it was Don-qi (and not he) who had money disputes, and that he was only concerned with the sum of HK$9,000,000 that Don-qi entrusted to him and not with the Huili shares to be “returned” by Don-qi as “borrower” under the IOU. On such basis, there was no reason for the defendant to deal with and explain the Huili shares referred to in the IOU.

73.  Further, the IOU only stated that 2,100,000 Huili shares were to be “returned”, and did not expressly say those shares were held in the defendant’s securities accounts. Moreover, the contents of P’s 4^th and 5^th Affs in this respect do not sit well together. In P’s 4^th Aff, the plaintiff claimed that the defendant confirmed to her in late January 2013 the sale proceeds realised from disposal of shares in D’s Securities Accounts in the sum of HK$12,685,000 had been deposited in the HSBC Account, and she “genuinely believed” he lost them by gambling in Macao.[33]  But in P’s 5^th Aff, she claimed that in late February 2013 the defendant was unwilling to sell so many Huili shares at the same time to pay HK$12,600,000 in cash (which she explained was the reason why the cash sum in the IOU was reduced to HK$9,600,000).  But if (according to P’s 4^th Aff) the plaintiff believed the defendant had already sold his shares and squandered the proceeds in late January 2013 before the IOU was signed, it is not easy to follow why the defendant was unwilling to sell Huili shares even in late February 2013.  There are plainly triable doubts as to the plaintiff’s explanations about the IOU.

74.  The defendant claimed that pursuant to Don-qi’s request and for the specific purpose of paying the plaintiff on Don-qi’s behalf the sum of HK$9,000,000, the defendant entrusted to Don-qi several signed blank cheques drawn on the HSBC Account for Don-qi to work out the payment arrangements with the plaintiff and Lau. On/about 25 February 2013, Don-qi gave three signed blank cheques to the plaintiff for payment of the sum of HK$9,000,000 towards settling the IOU, two of which were completed by the plaintiff on Don-qi’s specific directions (after learning from the defendant that funds were available in the HSBC Account) by filling out her name as payee and HK$3,000,000 as the amount payable (ie the 1^st and 2^nd Cheques), and they were presented by the plaintiff for payment on/about 27 and 28 February 2013 respectively.

75.  The defendant further claimed that sometime after 28 February 2013, Don-qi gave another two signed blank cheques to the plaintiff specifically for payment of the remaining HK$3,000,000 (out of the sum of HK$9,000,000 to be paid towards settling the cash payment under the IOU) after the plaintiff told Don-qi she had wrongly filled out (and therefore wasted) one of the three signed blank cheques given to her earlier (ie the Alleged Wasted Cheque). On/about 5 March 2013, on Don-qi’s specific directions (again after learning from the defendant that funds were available in the HSBC Account), the plaintiff completed one of the two signed blank cheques by filling out her name as payee and the sum of HK$3,000,000 as the amount payable (ie the 3^rd Cheque), and she presented the same for payment. In all, only three signed blank cheques were used, and when the 1^st, 2^nd and 3^rd Cheques were honoured upon presentation for payment, the whole HK$9,000,000 that Don-qi entrusted to the defendant was returned to Don-qi by paying the same over to the plaintiff.

76.  On the other hand, the plaintiff in P’s 5^th Aff claimed that subsequently the defendant through Don-qi agreed with her to repay the Alleged Loan by cash, so Don-qi altogether handed over four signed blank cheques to her, three of which were honoured upon presentation for payment in accordance with payment instruction/arrangements given by the defendant through Don-qi. The plaintiff in P’s 5^th Aff claimed that on/about 26 February 2012 the defendant through Don-qi gave her the 1^st and 2^nd Cheques which bore consecutive cheque numbers, and in P’s 4^th Aff she claimed that on 5 March 2013 the defendant through Don-qi gave her the 3^rd Cheque and the Cheque.

77.  In P’s 3^rd and 4^th Affs, the plaintiff said the defendant (through Don-qi) agreed that the date and amount of HK$3,000,000 be inserted in each of the 1^st, 2^nd and 3^rd Cheques, and that they be presented for payment. Again, the defendant (through Don-qi) agreed with her to insert the date and amount (ie the outstanding balance of the Alleged Loan and interest) in the Cheque, so she entered the Sum as the amount payable. In P’s 1^st Aff, the plaintiff claimed the defendant instructed that the Cheque (post-dated to 8 March 2013) be presented for payment after 11 March 2013 to repay the outstanding balance of the Alleged Loan and interest.  On 13 March 2013, the Cheque was dishonoured upon presentation for payment. The plaintiff claimed that “…… in respect of the payment instructions and arrangements, the Defendant’s evidence is that he plainly accepted the practice of the parties above ……”, and the Cheque was filled out pursuant to such prior practice in accordance with instructions given by Don-qi to the plaintiff.

78.  I am not persuaded that the defendant’s case in this respect is unbelievable or incredible, and indeed the plaintiff’s own case raises a number of questions.  First, the IOU was dated 22 February 2013 and envisaged partial cash repayment of HK$9,600,000 together with the return of 2,100,000 Huili shares.  The plaintiff did not explain why on her own case the parties changed their minds within a few days (ie by 26 February 2013 for the 1^st and 2^nd Cheques and by 5 March 2013 for the 3^rd Cheque and the Cheque) and agreed to full cash repayment when there was no apparent change of circumstances.

79.  Secondly, the plaintiff argued that the defendant’s assertion to the effect that the 3^rd Cheque and the Cheque were given to her after 28 February 2013 to repay the remaining HK$3,000,000 out of the sum of HK$9,000,000 did not make sense because even on the defendant’s own case each tranche payment was HK$3,000,000, and it was logical to infer that apart from HK$3,000,000 to be paid by the 3^rd Cheque the outstanding balance of the Alleged Loan and interest in the Sum was to be paid by the Cheque.  But in my view, given the deadline imposed in the IOU for the cash payment (ie 28 February 2013) and bearing in mind that HK$9,000,000 was to be paid by three equal tranches (unless there were not enough readily available funds), the defendant’s case that Don-qi handed over three blank signed cheques on 25 February 2013 arguably made logical sense. The plaintiff did not explain why on her case she did not complain when she was only given two signed blank cheques by 26 February 2013 and told to fill out HK$3,000,000 as the amount payable for each, thus making breach of the repayment deadline in the IOU inevitable.

80.  Thirdly, on the defendant’s case, the reason why payment of the third tranche of HK$3,000,000 was deferred was due to clerical error in writing out the Alleged Wasted Cheque, and as a result she was given the 3^rd Cheque and the Cheque on 5 March 2013. Given the history of wasting the Alleged Wasted Cheque and the uncertainty as to whether there would be readily available funds, I cannot say at this stage that the defendant’s case of handing over two cheques on 5 March 2013 is incredible.

81.  Fourthly, whilst I accept on the affirmation evidence the Cheque was not handed over as a result of fraud, it is the defendant’s case that the plaintiff dishonestly and knowingly filled out the Cheque with the payee, the date and the Sum and presented it for payment. He disagreed with the plaintiff’s suggestion that the alleged “practice” in relation to the 1^st, 2^nd and 3^rd Cheques could apply to the Cheque.  On the other hand, the plaintiff in P’s 3^rd Aff alleged that the defendant never complained of or challenged such alleged practice prior to the present action. For reasons explained below, the defendant’s contentions are arguable.

82.  Mr Chong submitted that the Cheque was duly signed by the defendant and delivered to the plaintiff, so she had prima facie authority to fill out the Cheque “in anyway she thinks fit”, hence the defendant’s assertion that she lacked authority to do so was practically moonshine, especially when pitched against the “practice” in relation to the 1^st, 2^nd and 3^rd Cheques.

83.  But I note it was the plaintiff’s own case as set out in P’s 4^th Aff that she was to complete and present the 1^st, 2^nd and 3^rd Cheques as instructed and agreed with the defendant through Don-qui, and she also completed and presented the Cheque as instructed by and agreed with the defendant through Do-qui for repayment of “the outstanding balance of [the Alleged Loan] and interest” (ie the express instruction and agreement was not to pay herself the Sum).  The plaintiff went so far as to describe this as “the practice” and “the practice of the parties”, so even on her own case she had express and not prima facie authority to fill up the 1^st, 2^nd and 3^rd Cheques and the Cheque. Further, according to her latest case set out in P’s 5^th Aff, the sum total of “the outstanding balance of [the Alleged Loan] and interest” was HK$6,568,000 only and not the Sum.[34]  It is therefore highly arguable even on the plaintiff’s own case her filling out and presenting the Cheque for the payment of the Sum was not strictly in accordance with the authority given as required under section 20(2) of the Ordinance, which would render the Cheque unenforceable against the defendant.[35]  It had been suggested that section 20(2) of the Ordinance only applies to a holder, but even if that were correct the plaintiff as payee and person in possession of the Cheque was necessarily a holder.[36]

84.  Further, there was in fact factual dispute as to whether or not there were instruction and agreement with the defendant for the plaintiff to complete the Cheque as she suggested since the defendant denied he ever gave any instruction or reached any agreement for the plaintiff to complete and present the Cheque for repaying “the outstanding balance of [the Alleged Loan] and interest”. Don-qi also deposed he had not conveyed any such instruction or authorisation to the plaintiff. Whether there was such actual authority is a matter for trial.

85.  Mr Chong next submitted that even on the defendant’s own case there was valid consideration for the Cheque because there was an outstanding sum of HK$3,000,000 due to the plaintiff when Don-qi handed over the 3^rd Cheque and the Cheque to the plaintiff “specifically for the repayment of the remaining HK$3,000,000”.  “In the circumstances, the consideration for handing [the Cheque] over by [the defendant] (through [Don-qi]) to [the plaintiff] was to repay [her] the outstanding sum of HK$3,000,000 ……”, so there was valid consideration for the Cheque. In my view, this argument is misconceived.  On the defendant’s case, even if the remaining HK$3,000,000 was outstanding when the 3^rd Cheque and the Cheque were handed over to the plaintiff, such consideration was spent by the time the plaintiff cashed the 3^rd Cheque for HK$3,000,000 on 5 March 2013, which left no basis for her to fill out Cheque and attempt to pay herself the Sum that the defendant never agreed to pay whether through Don-qi or otherwise.

86.  Mr Chong then suggested there was consideration to support the Cheque because on the plaintiff’s case she granted forbearance to sue for repayment of the balance of the Alleged Loan and interest due on 28 February 2013 under the IOU (ie the Cheque was post-dated to 8 March 2013 and presented for payment on 13 March 2013), which was sufficient consideration under section 27(1)(a) of the Ordinance.[37]  He distinguished May Sun Finance (International) Corporation Ltd v Wong Kwan-man[38]because the plaintiff in that case did not say the cheque was post-dated in order to support any forbearance to sue. But as explained in paragraph 31 above, such argument relies on the existence of the Alleged Loan and a right to sue for repayment of the Alleged Loan and interest, and this is challenged by the defendant.

87.  There is no dispute that the remaining HK$600,000 in respect of the cash sum under the IOU was settled on 4 March 2013 by Zhao’s remittance of CNY480,000 (equivalent to HK$600,000) to the plaintiff shown in the Bank of Communications’ remittance record.  On 5 March 2013, right after the presentation of the 3^rd Cheque and Zhao’s remittance of the remaining HK$600,000, the plaintiff signed an acknowledgment of receipt (收條) for HK$9,600,000 in Don-qi’s favour confirming settlement of the cash sum in the IOU, ie “現在單玉紅收到單東起還款960萬元正(港幣)玖佰陸拾萬元正” (“Acknowledgment”).

88.  The defendant claimed that the plaintiff told Don-qi she had torn up and destroyed the last remaining (unused) signed blank cheque (ie the Cheque), but it transpired she dishonestly retained possession of it and on/about 13 March 2013 wrongfully, dishonestly and without the defendant’s knowledge, consent, direction or authorisation (whether given directly or through Don-qi) completed the Cheque by filling out her name as the payee and the Sum as the amount payable, and presented the same for payment. Don-qi also said he was surprised and shocked to learn of this from the defendant.

89.  On the other hand, the plaintiff denied she tore up any signed blank cheque or filled out the Cheque without the defendant’s consent.  In P’s 4^th Aff, the plaintiff claimed that since HK$9,000,000 had been repaid by the 1^st, 2^nd and 3^rd Cheques, the balance of the principal sum due to her was HK$4,700,000 (ie HK$13,700,000 – HK$9,000,000). The Sum entered on the Cheque was the aggregate of such sum of HK$4,700,000 and the interest sum of HK$2,468,300.[39]  In P’s 5^th Aff, the plaintiff claimed she was unable to refer to the Acknowledgment in her previous affirmations because she did not have a copy of the same.  But since she did receive HK$9,600,000 from the defendant, she was prepared to give credit for HK$600,000 and hence the Sum should be reduced by HK$600,000 to HK$6,568,300.  Mr Chong submitted that this would not detract from the plaintiff’s authority to fill out the Cheque for the Sum and to present it for payment.  He asked for judgment to be granted on the Cheque whereupon the plaintiff would give credit for HK$600,000 upon execution of the judgment.

90.  In my view, a number of inherent problems arise from the above.  First, no explanation is forthcoming by the plaintiff as to why Zhao (ie Don-qi’s wife) would pay her HK$600,000 and she would accept such payment when on her case the debtor was the defendant and not Don-qi.  Rather, such payment sits well with the defendant’s case that the cash payment and return of shares under the IOU were Don-qi’s responsibility, and he merely paid HK$9,000,000 entrusted to him by Don-qui at Don-qi’s direction.

91.  Secondly, the Acknowledgement for HK$9,600,000 was signed by the plaintiff in favour of Don-qi and not the defendant. This again corresponds with the status of Don-qi as “borrower” in the IOU.

92.  Thirdly, the plaintiff in P’s 4^th Aff claimed the outstanding balance of the Alleged Loan stood at HK$4,700,000 and the Sum allegedly payable under the Cheque represented the sum total of such sum and interest of HK$2,468,300. But when confronted with the Acknowledgment executed on 5 March 2013 immediately after the plaintiff cashed the 1^st, 2^nd and 3^rd Cheques for HK$9,000,000 and received Zhao’s remittance of HK$600,000, the plaintiff in P’s 5^th Aff deposed a lesser amount (HK$4,100,000) as the outstanding balance of the Alleged Loan at the time when the Cheque was completed and presented for payment on 13 March 2013.  But she did not explain why, when she received the Cheque from Don-qi on 5 March 2013 (ie a day after she received HK$600,000 from Zhao), (a) she inserted the Sum and not HK$6,568,300 in the Cheque, (b) she did not try to effect a correction before it was presented for payment, or (c) she still demanded for payment of the Sum thereafter.  Even though she might not have a copy of the Acknowledgment, there is no plausible reason why she could not have referred to her receipt of the remittance of HK$600,000 and her signing of the Acknowledgment in her pleadings and earlier affirmations.  Such inherent discrepancies in respect of the plaintiff’s own case raise triable issue as to whether she was entitled to insert the Sum in the Cheque to present it for payment.[40]

93.  Ultimately, there are triable issues of fact as to whether there was in fact the Alleged Loan being a personal loan of HK$13,700,000 advanced by plaintiff to defendant, and whether such loan was deposited in the HSBC and/or BOC Accounts as alleged.  There was also the question of whether the 1^st, 2^nd and 3^rd Cheques of HK$3,000,000 each were for partial repayment of the defendant’s Alleged Loan or for partial settlement of Don-qi’s IOU, and in the latter case there is the question whether the defendant was discharged by paying HK$9,000,000 under the 1^st, 2^nd and 3^rd Cheques as confirmed by the Ackowledgment.  If so, it may then be argued that the plaintiff has retained the Cheque under false pretence and upon total failure of consideration such that there was no basis for her to complete and present the Cheque for payment of the Sum to herself.  In my view, the defendant (supported by the DQ Aff) has amply demonstrated there are real and bona fide defences to the plaintiff’s claim, and given the inherent inconsistencies within the plaintiff’s own case, I dismiss the O14 Summons and thereby grant the defendant unconditional leave to defend. In light of such conclusion, there is no need for me to further consider whether post-judgment mareva injunction is required.

VII.  EX PARTE INJUNCTION: MATERIAL DISCLOSURE

94.  Hong Kong Civil Procedure 2014 provides as follows:[41]

“On any ex parte application, the applicant must proceed “with the highest good faith” …… The fact that the court is asked to grant relief without the person against whom the relief is sought having the opportunity to be heard makes it imperative that the applicant should make full and frank disclosure of all material facts ……, where the applicant fails to make full and frank disclosure, the order may be set aside without regard to the merits.”

The applicant must make proper enquiries before making the application.[42]  The duty of disclosure therefore applies not only to material facts known to the applicant but also to any additional facts which he would have known had he made such inquiries.  The extent of such enquiries depends on all the circumstances of the case.

95.  The material facts to be disclosed are all matters which are material for the judge to know and which are necessary to enable him to exercise his discretion properly. “The plaintiff should give particulars of his claims against the defendant, stating the grounds of his claims and the amount thereof and, in addition, should fairly state the points made against him by the defendant ……” (my emphasis)[43] In Citibank NA v Express Ship Management Services Ltd,[44] it was held that the court was not concerned with whether the matters not disclosed would if they had been disclosed have caused it to refuse to grant the ex parte order; rather, the test was whether the court should have these matters in the weighing scales.  In dealing with an application for discharge of an ex parte injunction, Kwan J (as she then was) in Securities and Futures Commission v “A” summarised the relevant principles on material non-disclosure as follows:[45]

“40. For information to be material for this purpose, it must be something which would have affected the judge’s decision on the application. It is a matter relevant to the weighing operation which the court has to make …… Unless the courts use the sanction only when the non-disclosure is of matters which are relevant to the ex parte judge’s weighing operation, an impossible burden would be placed on applicants and their advisers and the court may get itself in a position of what might be called ‘counter-abuse’ ……

41. The answer to the question whether the non-disclosure was innocent, in the sense that the fact was not known to the applicant or its relevance was not perceived, is an important consideration whether the ex parte order should be discharged, although it is not decisive ……

In the majority of cases, the matter has to be approached on the basis of considering the quality of the material which was not disclosed without making any final decision whether or not there has been bad faith in the failure to disclose ……” (my emphasis)

96.  Materiality is to be decided by the court and not by the assessment of applicants or their advisers. But it is the duty of legal advisers and counsel to call the judge’s attention to everything that he must see if there is a mass of material,[46] and to point out to the judge any points which are to the applicant’s disadvantage, which the judge should take into account in considering whether or not to grant the injunction.[47] After all, it is difficult for a judge upon an ex parte injunction at short notice to grasp all relevant points. The duty to disclose cannot simply be fulfilled by exhibiting voluminous documents without making any distinct reference to the points in the body of the supporting affidavit itself or when addressing the judge at the often short hearing.[48]

97.  Where material non-disclosure is established, the court will ensure that the party seeking to obtain the injunction is deprived of any advantage derived from a breach of the duty as to the disclosure. This has a two-fold purpose: (a) to deprive the wrongdoer of an advantage improperly obtained, and (b) to serve as a deterrent to ensure that applicants realise they have a duty of disclosure and the consequences if they fail in such duty.[49] If this carries a risk of the defendant dissipating his assets, the applicant has only himself to blame for not making the ex parte application properly.

98.  Hong Kong Civil Procedure 2014  further states as follows:[50]

“ In exercising its discretion whether to discharge an injunction for material non-disclosure, the court will consider factors including: whether the non-disclosure was innocent or deliberate; the excuse or reason for the material non-disclosure; and the importance of the omitted fact to the issues which were to be decided by the judge, in particular whether the non-disclosure would have resulted in the original order not being made in the first place. …… the fact that the non-disclosure was innocent, though an important consideration, is not decisive. On the other hand, where material non-disclosure which justifies or requires the discharge of an ex parte injunction is established the discharge of the injunction does not necessarily automatically follow because ‘a locus poenitentiae may sometimes be afforded’ ……

Where there has been non-disclosure of material facts at the ex parte application for a Mareva injunction, but full disclosure is made at the hearing inter partes, the court has a discretion to continue the ex parte injunction or to discharge it and immediately regrant substantially the same injunction ……”

VIII.  MAREVA INJUNCTION: RISK OF DISSIPATION

99.  The burden of proving a real risk of dissipation of assets rests on the applicant who must lead “solid evidence” of such risk of dissipation. The mareva injunction order, being a very serious infringement of the rights and liberties of the defendant, can only be justified on appropriately clear and strong facts and risks. The standard of proof of the risk of dissipation is relatively high.

100.  DHCJ Winnie Tam SC in Eastman Chemical Ltd v Heyro Chemical Co Ltd (No 2) set out the following legal principles:

“……

(2) when considering whether there was unacceptably low commercial morality to infer a risk of dissipation of assets, the Court should scrutinize the evidence with care and should not too readily infer a real risk of dissipation from the defendant’s conduct or commercial morality …… ;

……

(4) the fact that a defendant may be short of money to pay his debt is not itself a good reason for a Mareva injunction, the purpose of which is not to put the claimant in a better position over other creditors …… ;

(5) the plaintiff cannot beforehand prevent the defendant from disposing of his assets merely because he fears that there will be nothing against which to enforce his judgment nor can he be given a secured position against other creditors. …… ;

(6) the plaintiff is required to show that at least objectively, the effect of the defendant’s conduct would be to frustrate the enforcement of any judgment. The conduct in question must be used otherwise than for normal and proper commercial purposes. …… ;

(7) the fact that the defendant has not been forthcoming with information of its financial position is neither here nor there, even where the claim against the defendant is strong …… ;

(8)      the burden is squarely on the claimant to adduce cogent evidence of commercially sharp practice. The failure of the defendant to give assurances of retention of assets to settle a debt, when the plaintiff is not entitled to such assurance in law, is irrelevant. ……”

101.  DHCJ Winnie Tam SC held that “[the] dissipation of assets must be shown to be with an intention or for the purpose of defeating the plaintiff’s claim, or otherwise “improper” ……”, but DHCJ John Yan SC in Grandview Industries Company Limited v Leung Yiu Kei trading as AGFA Manufacturing Company [51] disagreed and held that on the present state of the authorities it is not the law that in order to succeed on an application for a mareva injunction the plaintiff has to show dissipation of assets with an intention or for the purpose of defeating the plaintiff’s claim.  Rather, DHCJ John Yan SC held that the test is an objective one of assessment of the risk that a judgment may not be satisfied, and there is no requirement to prove nefarious intent.  

102.  In Hong Kong Civil Procedure 2014, it is further said as follows:[52]

“…… Therefore evidence that the defendant intends to dispose of certain assets in the ordinary course of business without more would be insufficient to show a risk of dissipation …… The plaintiff must show at least that the defendant intends to use its assets otherwise than for normal and proper commercial purposes (Mobil Cerro Negro v Petroleos de Venezuala [2008] Lloyd’s Rep. 684).”

IX.  DISCHARGE SUMMONS

(a)  Ex Parte Order

103.  The Ex Parte Order was sought on the basis of the plaintiff’s allegations made to the Ex Parte Judge that there was inter alia a real risk of dissipation of the defendant’s assets within the jurisdiction, ie

(a)     she did not know the whereabouts of the defendant who had absconded to Mainland China since 28 January 2013 and avoided all contact with her particularly after the Cheque was dishonoured;

(b)     the defendant failed to acknowledge service of the Writ of Summons that was issued and purportedly served on the defendant at the HK Address on 18 March 2013;

(c)     there was causal connection between (i) sale of some of D’s Shares and (ii) the Cheque being dishonoured and/or the Writ of Summons being issued and purportedly served, ie since 19 March 2013 (which was one day after the issuance of the Writ of Summons) the defendant started to sell the Huili shares held with the CG and BOCOM Accounts “in a well planned and systemic dissipation of shares over the last 2 weeks in an increasing manner”.

104.  P’s 1^st Aff claimed the defendant’s only substantial asset in Hong Kong was D’s Shares held in D’s Securities Accounts,[53] and the sale proceeds thereof. In view of the volatile stock market which would enable the defendant to dispose of D’s Shares easily and to transfer the sale proceeds to D’s Bank Accounts after usual clearance, the plaintiff believed that unless the defendant was restrained by the court he would sell D’s Shares “to defeat and frustrate the enforcement of judgment that [the plaintiff] will be seeking under this present action by reason of the dishonoured cheque”.  On 16 April 2013, the plaintiff applied for and obtained the Ex Parte Order.

105.  The defendant argued that the Ex Parte Order ought to be set aside since it was obtained on inaccurate information as to the amount of the alleged outstanding indebtedness, false and misleading evidence,[54] and non-disclosure of the following material facts which the plaintiff knew or ought to have known upon proper enquiries:

(a)   how the Writ of Summons was allegedly served on the defendant;

(b)   the daily turnover volume of Huili shares at the material time;

(c)   material information on the CG and BOCOM Accounts.

(b)  Good arguable case

106.  There is no dispute that the plaintiff has to establish a good arguable case on a substantive claim over which the court has jurisdiction in order to obtain the Ex Parte Order.  Mr Chong submitted there was a strong arguable case on the plaintiff’s claim for dishonoured cheque based on the plaintiff’s arguments discussed under Part VIII above.  Mr Mak submitted otherwise, saying that the plaintiff’s case fell far short of the threshold required to be met.

107.  On the plaintiff’s own case as clarified in P’s 5^th Aff, the outstanding balance of the Alleged Loan due to her was HK$4,100,000 and not HK$4,700,000, and the interest calculated up to 8 March 2013 due to her must be less than HK$2,468,300 (since the breakdown in paragraph 59 above failed to take into account partial payments of HK$3,000,000, HK$3,000,000, HK$3,000,000 and HK$600,000 received by the plaintiff before 8 March 2013).  The plaintiff must have known of the receipt of these partial payments prior to her application for the Ex Parte Order. This immediately calls into question the plaintiff’s entitlement (if any) to fill out the Cheque by specifying the Sum and presenting it for payment. For the reasons given in paragraphs 26 and 82-83 above, I am not persuaded the plaintiff has a strong or good arguable case.  Her case also suffers from the inherent concerns discussed in Part VIII above.

108.  Moreover, I find that even on the plaintiff’s own case there was material non-disclosure in that she failed to disclose to the Ex Parte Judge by way of P’s 1^st Aff and the Submissions the matters set out in paragraphs 87 and 89 above, in particular that she received HK$600,000 on 4 March 2013 (which constituted pro tanto discharge of the balance under the Alleged Loan) and that she signed the Acknowledgment on 5 March 2013 (ie the very day she received the signed blank Cheque), yet she post-dated the Cheque to 8 March 2013, inserted the Sum (which she must have known was more than actual balance and interest due to her) thereon, and presented it for payment on 13 March 2013. These matters, which I have no hesitation in concluding were material to the weighing exercise for the grant of the Ex Parte Order, were not disclosed until P’s 5^th Aff.

 (s) Abscondment to Mainland China?

109.  The plaintiff in P’s 1^st Aff claimed the defendant had absconded to and was in Mainland China.  Mr Chong submitted that the defendant was a habitual gambler who made a flying overnight visit to the casinos in Macao and lost the sale proceeds of his stocks/shares that were meant for repayment of the Alleged Loan. He argued that this was borne out by the defendant’s grave trouble and “irreversible” desperation as reflected in the Message, and hence the defendant fled from Hong Kong to avoid the plaintiff. Mr Chong said these matters lent themselves to an inference of real risk of dissipation of assets.

110.  On the other hand, the defendant claimed that at the material time the plaintiff knew (a) the HK Address was rented by/for the use of Wang who was working for the plaintiff, (b) (as also confirmed by Don-qi) his usual place of residence was the SZ Address where he lived with their parents since 2000, and (c) he did not live in Hong Kong on a regular basis and did not have any place of residence in Hong Kong.  It was said that all Siblings (including the plaintiff) knew he lived at the SZ Address, and they would visit him and their parents now and then.  The defendant said that in the past with his parents in Shenzhen and his wife in Macao, he either stayed with their eldest sister or the plaintiff (ie at P’s Home) when he stayed overnight in Hong Kong.  But he ceased to visit Hong Kong or contact the plaintiff after 28 January 2013 because of what she did to Don-qi.[55]  He claimed it was incorrect for the plaintiff to say she did not know his whereabouts.

111.  Mr Mak submitted the defendant could hardly “abscond” to Mainland China as he ordinarily resided in Shenzhen.  The defendant was not required to keep in contact with the plaintiff, and on his own case he had good reason for not contacting her.  But even on the plaintiff’s case, the defendant through Don-qi gave her four cheques after his alleged “abscondment” to Mainland China on 28 January 2013 and three such cheques in a total sum of HK$9,000,000 were honoured upon presentation for payment. Mr Mak argued that plainly these were not acts of evasion.

112.  Even on the plaintiff’s own case, she did let the defendant stay at P’s Home up to Christmas in 2012 (ie just a month before his alleged abscondment) whenever he came to Hong Kong to deal with his investments in the Hong Kong stock market, and in the period just before 28 January 2013 he would be at Shenzhen if he was not in Hong Kong.[56]  In my view, these are necessarily material facts for the weighing scales to be placed before the Ex Parte Judge to enable him to properly assess the allegation that the defendant had allegedly absconded to Mainland China.  The duty to make disclosure applies not only to material facts known to the plaintiff but any additional facts which she would have known had she made proper enquiries, and as I have pointed out earlier,[57] there is paucity of information in P’s 1^st Aff and the Submissions as to proper enquiries within the family as to the defendant’s whereabouts.

(d) Failure to file acknowledgment of service

113.  In P’s 1^st Aff in support of the application for the Ex Parte Order, the plaintiff stated that “[she was] advised that the defendant did not file any acknowledgment of service to the said writ”.  The defendant claimed (a) he had never been served with the Writ of Summons, (b) the HK Address was Wang’s address and not his usual or last known address in that he did not own or reside at that address (and he ordinarily resided at the SZ Address), and (c) to the plaintiff’s knowledge he was not in Hong Kong from 18 to 25 March 2013.  Mr Mak therefore suggested that the plaintiff knew the evidence she alleged would demonstrate risk of dissipation of assets to be untrue and would not support her application for the Ex Parte Order.

114.  There is no dispute that the HK Address was occupied by Wang. In P’s 3^rd Aff, the plaintiff said that after the end of 2012 she asked the defendant to move to the HK Address, and he lived there for about 3-5 nights a week and went to Shenzhen for weekends before he disappeared on/about 28 January 2013. [58]  The plaintiff further claimed the defendant lived at the HK Address long enough to see the need to apply for and install internet service there under his own name, and the application form he signed gave the HK Address as his residential address and he used his credit card to pay for such service.  The plaintiff claimed she did not know where the defendant was when the Writ of Summons was served on 18 March 2013, which was why it was served to the HK Address being the address last known to her and his usual address.  On such basis, the plaintiff submitted there was no misrepresentation to the court.

115.  On the other hand, the defendant claimed he was not the owner of and he did not reside at the HK Address. He further claimed when Wang (whom he came to know as Yuk-mei’s boyfriend and who did not have any Hong Kong identity card or credit card) started to live in Hong Kong at the HK Address, Wang asked for his assistance to secure internet connection for the HK Address by entering into an internet service contract in his name for the HK Address. Hence, the purported service ofthe Writ of Summons to the HK Address (which the plaintiff knew was Wang’s address and not his usual or last known address) was a charade made with a view to obtain default judgment purportedly on the basis of alleged non-action on his part and not genuinely for bringing the Writ of Summons to his knowledge.

116.  As explained in paragraph 113 above, P’s 1^st Aff stated that the defendant did not file any acknowledgment of service to the Writ of Summons. Notwithstanding the plaintiff’s suggestion that whether or not the HK Address was the defendant’s last known or usual address was not the “main reason” why she thought the defendant might dissipate his assets, it is plain that the defendant’s lack of response upon purported service of the Writ of Summons to the HK Address was put forward by the plaintiff as part of the factual matrix relied upon to demonstrate his alleged evasive avoidance with a view to dissipate assets.

117.  It was suggested there was no material non-disclosure because the mode of service of the Writ of Summons was made known to the Ex Parte Judge because the Service Affirmation was included in the hearing bundle before the learned judge on 16 April 2013.  Even so, I still find there was material non-disclosure for the application of the Ex Parte Order. First, the plaintiff must have known that service of the Writ of Summons to the HK Address is only permissible if the defendant was within and not outside Hong Kong.  According to the plaintiff’s own case, she believed that the defendant had absconded to Mainland China since on/about 28 January 2013.  Indeed, a few days afterwards she was told by the Hong Kong police the defendant had left Hong Kong by air on 28 January 2013.[59]  It is also the plaintiff’s case that since then the defendant avoided her and she could not contact him. She did not claim to have any purported knowledge of (a) the defendant’s subsequent return to Hong Kong or (b) his being in Hong Kong from 18 March 2013 until 16 April 2013.[60] It is therefore incumbent upon her to draw the Ex Parte Judge’s attention to the probability that the defendant might still be outside the jurisdiction and that service of the Writ of Summons to the HK Address might not be effective, such that the Service Affirmation and the defendant’s failure to give notice of intention to defend must be viewed through the prism of such considerations.

118.  Secondly, the plaintiff in P’s 3^rd Aff suggested it was highly unlikely that in granting the Ex Parte Order the Ex Parte Judge placed any reliance on the fact that the defendant did not file acknowledgment of service because he was fully aware of the fact and submissions from her counsel that the defendant had absconded to Mainland China.  In my view, the plaintiff’s reliance on the allegation that the defendant fled to Mainland China actually reinforces the concerns expressed in the above paragraph.  I also repeat my observations in respect of plaintiff’s allegations about the defendant having absconded to Mainland China in paragraphs 60-67 above.

(e)  Sale of Huili shares

119.  In P’s 1^st Aff, the plaintiff claimed that on/about 10 April 2013, through BOCOM’s Law and “other sources and channels” (which, according to P’s 2^nd Aff, was China Galaxy’s stockbroker Mr Simon Lee (“Lee”) with whom Lau was acquainted) she was able to confirm with the defendant’s stockbrokers and securities agents (which, according to P’s 2^nd Aff, were Law and Lee) that “since 19^th May 2013 (which is one day after the issuance of the Writ), the Defendant had started via online banking disposing of his shares of [Huili] held in the [CG and BOCOM Accounts] with China Galaxy and BOCOM ……”, ie the defendant disposed of 1,110,000 Huili shares over 13 trading days between 19 March and 11 April 2013 inclusive. She also claimed that “[it] could be seen …… that the shares disposed of by the Defendant on a daily basis is in an increasing manner.” She further claimed in P’s 1^st Aff that she understood from the defendant’s stockbrokers that the total value of D’s Shares still held with D’s Securities Accounts were of the value of HK$7,600,000.[61]

120.  In P’s 3^rd Aff, the plaintiff expressed concern about the sale of the Huili shares but had no means of prying into D’s Securities Accounts “other than through friendly agents who told [Lau] and [her] of the disposals because they knew [she] funded a large part of the Defendant’s portfolio”. She had no way of stopping the defendant from withdrawing the sale proceeds of the Huili shares he liquidated, which he easily could have done.

121.  The plaintiff contended that since she informed the Ex Parte Judge (a) the Writ of Summons was issued on 18 March 2013, and (b) the defendant began to sell the Huili shares on and after 19 March 2013, she did not conceal any material facts from the court. But such simple formulation is belied by the innuendo urged by the plaintiff upon the court that the suspicious timing of the sale of the Huili shares just one day after the issuance of the Writ of Summons (which, according to the Service Affirmation was purportedly served on the very day it was issued to the HK Address by insertion in its letterbox) evinced an intention on the part of the defendant to dissipate assets. But given my conclusions in Part IX(d)-(e) above, question necessarily arises as to the causal connection between (a) and (b) above.  Mr Chong reminded that during the short interval between the grant and the service of the Ex Parte Order the defendant sold HK$1,387,985.22 worth of shares. This information plainly would not have been available at the time of the application for the Ex Parte Order.

122.  In my view, full and frank disclosure would require the plaintiff to highlight the abovementioned concerns as to whether or not the Writ of Summons would have been brought to the attention of the defendant on or before 19 March 2013 or any time prior to the application for Ex Parte Order for the learned judge to fairly and properly assess whether or not there was sufficient causal connection between the issuance of the Writ of Summons and the defendant’s sale of the Huili shares as from 19 March 2013 to support the allegation of risk of dissipation of assets.

(f) Daily trading volume of Huili shares

123.  The defendant complained that the plaintiff did not inform the Ex Parte Judge the daily turnover volume of Huili shares in the stock market during such period (which ranged from 1,436,000 to 6,346,000 shares and was a matter of public record available via the internet), which if disclosed would have revealed to the learned judge that the defendant could have sold the whole lot of 1,110,000 Huili shares on 19 March 2013 or within one to two normal trading day(s) had he intended to dissipate assets, and it made no sense for him to spread the sale over 13 separate trading days.  The defendant argued that the plaintiff’s description of the sale of Huili shares over the period from 19 March to 11 April 2013 as “a well planned and systemic dissipation of shares” was unjustified.

124.  The plaintiff argued that the defendant’s subjective intention was irrelevant, and high turnover for a particular trading day would not be indicative of whether or not the defendant intended to dissipate assets.  The risk of dissipation was real since the proceeds of sale of the Huili shares even over 13 trading days could easily be dissipated.  At the time when the plaintiff made the application for the Ex Parte Order, she did not know whether such proceeds still remained in D’s Securities Accounts or not.

125.  I agree with Mr Chong that the non-disclosure of the daily trading volume of the Huili shares over the relevant period was not material.  The plaintiff had disclosed the daily sales of the Huili shares by the defendant as known to her.  Dissipation of assets can come in many guises, and it is not necessarily in the form of a quick bulk sale.  The greater concern is whether all material facts have been disclosed in respect of the contextual circumstances to enable the learned judge to proper weigh and assess the allegation of risk of dissipation of assets.

(g)  Information concerning CG and BOCOM Accounts

126.  In P’s 1^st Aff, the plaintiff explained that through Lee and Law she found out information about the CG and BOCOM Accounts and the defendant’s sale of the 1,110,000 Huili shares held therein.  The defendant therefore suggested that the plantiff must be taken to know or ought to have known upon proper enquiry with her alleged sources at China Galaxy and BOCOM the following information about the CG and BOCOM Accounts, which she did not disclose to the Ex Parte Judge:

(a)   the defendant did not withdraw/transfer or cause any withdrawal/transfer of the sale proceeds of the 1,110,000 Huili shares in the CG and BOCOM Accounts or any monies in those securities accounts since 18 March 2013;

(b)   he purchased shares worth about HK$27,500,000 through the CG Account between 19 March and 11 April 2013 (ie the same period during which he sold 1,110,000 Huili shares worth no more than HK$2,500,000);

(c)   the CG and BOCOM Accounts were margin accounts;

(d)   the CG Account was actively traded, often with shares worth hundreds of thousands of dollars being bought and sold on one single trading day (eg shares worth about HK$41,000,000 were bought and shares worth about HK$43,000,000 were sold within the one month period from 18 March to 18 April 2013).[62]

127.  It was suggested that if the above information were disclosed it (a) would have negated any allegation that the sale of the 1,110,000 Huili shares was for dissipation of assets, (b) would have revealed such sale to be part of the defendant’s normal trading activities, and (c) would have allowed the learned judge, when weighing relevant factors on the issue of balance of convenience, to properly consider the defendant’s legitimate right to continue trading and his ability to meet his margin liabilities.

128.  In my view, the complaints by the defendant in paragraphs 126-127 above do not amount to any material non-disclosure on the part of the plaintiff.  It does not follow from the fact that she was able to glean some information from friendly stockbrokers that she would become entitled or that Lee and Law would be bound to tell her wide ranging information about the CG and BOCOM Accounts, which essentially was the defendant’s personal information. There is no merit to this complaint.

(h)  Summary

129.  In Tiong King Sing v Sam Boon Peng Yee,[63] Chung J reiterated the principles set out in paragraph 97 above but went on to say as follows:

“18. Nonetheless, the court retains a discretion not to discharge the ex parte order, or to make a new order on terms. A typical example where the discretion will be so exercised is:

(a) the non-disclosure is innocent; and

(b)   an injunction would still have been granted even had the facts been properly granted.”

130.  By reason of the above analysis and the reasons discussed below, I find there is lack of a good arguable case and the plaintiff has failed to discharge the above duty. In the circumstances, the Ex Parte Order is discharged.

131.  Mr Chong submitted that even if I discharge the Ex Parte Order I should re-grant the mareva injunction in terms of the Ex Parte Order as varied by the Chan Order until trial on the basis that (a) the plaintiff had a good arguable case, (b) there are assets within the jurisdiction, (c) the balance of convenience is in favour of the re-grant, and (d) there is a real risk of dissipation of assets or removal of assets from the jurisdiction which would render the plaintiff’s judgment of no effect.

132.  I am not prepared to do so. First, the plaintiff is still unable to cross the hurdle of establishing a good arguable case, and indeed concerns are heightened rather than allayed by her latest P’s 5^th Aff. [64]  Secondly, it is now abundantly clear from the defendant’s immigration records that he was not in Hong Kong from 10 February to 22 April 2013.  He could not have known of the Writ of Summons posted to and inserted in the letterbox at the HK Address. That being the case, the plaintiff is unable to demonstrate his failure to file acknowledgment of service prior to the Ex Parte Order and/or his commencing sale of the Huili Shares on 19 March 2013 and/or his sale of further shares prior to service of the Ex Parte Order were causally connected to the issuance of the Writ of Summons.

133.  Thirdly, the plaintiff knew the defendant was all along engaged in stock trading in Hong Kong, and the CG Account was all along an active trading account in which the defendant not just sold but also bought substantial volume of stocks and shares even after the Cheque was dishonoured and/or the Writ of Summons was issued.[65]  Between the time when the Ex Parte Order was granted and the suspension of D’s Securities Accounts on 17 April 2013, total gross proceeds of shares sold through the CG and BOCOM Accounts were HK$2,814,600 and HK$191,225.22 respectively without any withdrawal/transfer out of such accounts.[66]  As of 23 May 2013, although the CG Account has a negative balance of HK$5,969,317.33 with accrued debit interest of HK$28,211.17, the total market value of the stocks with such account was HK$9,890,040.  As at 31 May 2013, there was an outstanding margin call in respect of the BOCOM Account in the sum of HK$1,023,390.11.  The defendants’ securities accounts with KGI and China Everbright were dormant and/or not actively traded.[67]

134.  Plainly, the defendant has not disposed all of his stock and shares since 28 January 2013 (when he was alleged to have absconded to Mainland China), 13 March 2013 (when the Cheque was dishonoured) and/or 18 March 2013 (when the Writ of Summons was issued). It must be remembered that ordinary trading activity even in liquid assets does not lend itself to ready inference of risk of dissipation of assets (see the principles in paragraphs 100 and 102 above).

135.  Even though Mr Chong raised the spectre that the defendant would be able to sell his shares in D’s Securities Accounts and transfer monies in such accounts and in D’s Bank Accounts (which appear to be the defendant’s only assets in Hong Kong) out of the jurisdiction via on-line banking before the plaintiff can obtain final judgment, I am not persuaded that even on an objective assessment the plaintiff has established a viable case of dissipation of assets. The plaintiff cannot prevent a defendant from disposing of his assets merely because she fears there will be nothing against which to enforce her judgment. In my view, there is no basis to proceed to consider the matter of balance of convenience.  I therefore decline to re-grant any mareva injunction in terms of the Ex Parte Order as varied by the Chan Order.

X. CONCLUSION

136.  In conclusion, the O14 Summons is dismissed. I further direct that the plaintiff shall within 14 days from today file and serve a case management summons, failing which the defendant shall within 7 days thereafter issue and serve a case management summons. There is no reason why costs should not follow event. I therefore grant a costs order nisi that the plaintiff shall pay the defendant costs of the O14 Summons (including all costs reserved if any) to be taxed if not agreed.

137.  In respect of the Discharge Summons, I order that the Ex Parte Order as varied by the Chan Order be discharged. There is no reason why costs should not follow event. I therefore grant a costs order nisi that the plaintiff shall pay the defendant costs of the Discharge Summons (including all costs reserved if any) to be taxed if not agreed.

138.  I also dismiss the Continuation Summons. Paragraph 3 of the Continuation Summons asked for an affirmation by the defendant for disclosure of “details of the accounts or sub-accounts with all securities agents (including the names of such agents) under which the Shares of the Defendant are currently held”. Since the Ex Parte Order is discharged for the reasons explained above, I see no justification for granting such relief. I grant a costs order nisi that the plaintiff shall pay the defendant costs of the Continuation Summons (including all costs reserved if any) to be taxed forthwith if not agreed.