EASY GOLD CONSULTANT LTD v. LAU JENNIFER P.T.

DCCJ1144/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1144 OF 2013

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DECISION

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1. By way of summons filed on 24 September 2013, the plaintiff is applying for summary judgment or alternatively interim payment against the defendant pursuant to Order 14, Rule 1 and Order 29, Rule 10 of the Rules of the District Court.

2. Pursuant to Registrar Lui’s order made on 17 October 2013, the plaintiff’s summons was adjourned to a date to be fixed for argument before a judge in chambers.  The hearing before me is for this purpose.

The plaintiff’s case

3. The Amended Statement of Claim was filed on 24 May 2013.  In support of its application for summary judgment, the plaintiff filed Affirmation of Lau Chin Nam (hereinafter referred to as “Alex Lau”) on 24 September 2013. 

4. The plaintiff’s case is that pursuant to a “客戶委託申請貸款及轉介協議書” dated 20 September 2012 (hereinafter referred to as “the Appointment Form”), the defendant agreed to appoint the plaintiff as the defendant’s consultant and introducer in restructuring or re-financing the defendant’s 3 outstanding mortgage loans concerning the defendant’s property known as House C3, Ville De Jardin, Nos 33-35 Sui Wo Road, Shatin, New Territories (hereinafter referred to as “the Property”).

5. Under clause 3 of the Appointment Form, the defendant agrees to pay the plaintiff consultancy and referral fee at the rate of 2.5% of the new loan to be granted to the defendant if the plaintiff successfully refers a new lender to the defendant.

6. In December 2012, the plaintiff successfully procured for the defendant a mortgage loan in the sum of HK$18,060,000 granted by Lei Shing Hong Credit Limited (hereinafter referred to as “LSH”) which enabled the defendant to discharge her 3 existing mortgage loans.  On 12 December 2012, the defendant executed a First Legal Charge in favour of LSH.

7. The plaintiff says that pursuant to the Appointment Form, the defendant should pay the plaintiff consultancy and referral fee in the sum of HK$451,500 ie HK$18,060,000 x 2.5%.

8. The plaintiff has failed to do so and the plaintiff is now claiming the defendant for this sum of HK$451,500 with interest and costs.

The defendant’s position

9. The defendant filed her affirmation in opposition on 28 November 2013.

10. The defendant admits that she had signed on the Appointment Form relied on by the plaintiff and she obtained a loan from LSH by executing a First Legal Charge in favour of LSH on 12 December 2012.

11. The arguments advanced by the defendant can be summarized as follows:-

(a) Misrepresentation Argument – At the time the Appointment Form was produced to her for signature, Alex Lau explained to her that the rate of consultancy and referral fee could in fact be negotiated and agreed later.  She was told that unless she signed on the Appointment form, Alex Lau could not make any preliminary enquiry on her behalf.  The defendant’s signature was required as a matter of company procedure and formalities and the Appointment Form would not bind her in any way.  When the defendant signed on the Appointment Form, the rate of consultancy and referral fee under clause 3 was blank.  Moments after she signed, Alex Lau then wrote down “2.5” as the rate.  The defendant protested. Alex Lau told her that the figure was just written down for showing to the company.  Alex Lau assured her that it would not bind her and the actual rate could be discussed later.

(b) Unauthorised Additions to Appointment Form – The plaintiff has produced the Appointment Form as exhibit “LCN-1”. The defendant has produced a photocopy of the Appointment Form given to her by Alex Lau as exhibit “JLPT-1”.  The defendant says that when comparing “LCN-1” and JLPT-1”, there are some unauthorised additions to “LCN-1” without her prior knowledge.  These include (i) the amended date of “20.9.2012” written on the first page; (ii) “Alex Lau” as the follow-up consultant on the first page; (iii) the appearance of the defendant’s phone no. on the first page; (iv) the details of the defendant’s existing mortgages at the bottom of the first page and (v) the amended date of “20.9.2012” on the second page.

(c) Appointment Form Expiry Argument – The defendant says that there is an implied term that the Appointment Form will expire after 3 months from the date of signing.  As such, the Application Form had already expired by the time she executed the First Legal Charge in favour of LSH on 12 December 2012.  She does not agree to the plaintiff’s version that the Appointment Form was signed on 20 September 2012.  She said it was signed much earlier than September 2012.

(d) Personal Agreement Argument – According to the defendant’s evidence, about 5 months after she signed the Appointment Form, Alex Lau promised the defendant that he would personally obtain the mortgage loan for her without charging her in exchange for the defendant giving him business advice on transactions and deals he might come across.  The defendant agreed to this and a personal agreement between the defendant and Alex Lau came into existence (hereinafter referred to as “the Personal Agreement”).  The defendant now says that her obtaining of the mortgage loan from LSH on 12 December 2012 was procured by Alex Lau in performance of the Personal Agreement.  The obtaining of the loan from LSH was not pursuant to the Application Form and the defendant denies any agreement ever existed between the plaintiff and the defendant.

The plaintiff’s responses

12. The plaintiff’s responses to the defendant’s arguments can be found in the 1^st Affirmation of Lau Chin Nam filed on 24 September 2013 and the 2^nd Affirmation of Lau Chin Nam filed on 27 December 2013.  They can be summarized as follows:-

(a) Misrepresentation Argument – Alex Lau does not agree to the defendant’s allegation that he had made misrepresentations. At the first meeting with the defendant, Alex Lau filled in the Appointment Form in front of the defendant.  He showed and explained the same to her before inviting her to sign.  He then signed on behalf of the plaintiff and sealed with the plaintiff’s chop.  When Alex Lau put down “2.5” as the rate of consultancy and referral fee on the Appointment Form, the defendant did not protest but said she understood the term.

(b) Unauthorised Additions to Appointment Form – Regarding the differences in exhibit “LCN-1” produced by the plaintiff and exhibit “JLPT-1” produced by the defendant, Alex Lau explains that it is his practice that he would ask a client to sign after filling in and explaining the most important particulars.  The less important and tedious particulars would be left blank and filled in later.  At the same time, he found it embarrassing to fill in the defendant’s mortgage details one by one, thereby exposing the defendant’s indebtedness right in front of her.  As he had already received the mortgage documents from the defendant, he preferred to complete the Application Form when he returned to his office.  As to the dates on the first and second page of “LCN-1”, Alex Lau says he had made a mistake when putting down the dates as “20.12.2012” and so he amended the month from “12” to “9”.

(c) Appointment Form Expiry Argument – Alex Lau denies that there is any trade practice imposing a time limit of 3 months on agreements with loan agents or referral agencies.  As such, there is no implied term that the Appointment Form would be valid for 3 months only.

(d) Personal Agreement Argument – After the initial meeting, Alex Lau said there was a meeting attended by him, the defendant and 2 representatives of LSH, namely Mr Marco Tse and Mr Alfred Lam.  After that, Alex Lau would phone the defendant from time to time to exchange business information.  They would introduce to each other potential clients and business opportunities.  But Alex Lau denies that he had agreed to obtain the mortgage loan for the defendant without charge in exchange for the defendant giving him business advice on transactions and deals he might come across.

Legal principles on application for summary judgment

13. The legal principles on application for summary for judgment can be found in paragraph 14/4/9 of Hong Kong Civil Procedure 2014:-

“Leave to defend - unconditional leave - “It is appropriate to be reminded of the principles applicable to an O 14 application. They are well-known and in fact not disputed by the parties. The plaintiff (a defendant to the second defendant’s counterclaim) must show that there are triable issues. He has to satisfy the court that he has a ‘real or bona fide defence’” (see Ackner LJ in Banque de Paris et des pays-bas (Suisse) SA v Costa de Naray [1984] 1 Lloyd’s Rep 21 at 23) or “a fair probability or reasonable grounds that a bona fide defence exists” (see Ma CJHC in Toy Major Trading Co Ltd v Plastic Toys Ltd [2007] 3 HKLRD 345). If he makes an allegation it must be credible or believable in the light of the evidence placed before the court. As Bokhary JA said in Re Safe Rich Industries Ltd ([1994] HKLY 183):-

‘The test at the summary stage is indeed as simple as whether the defendant’s assertions are believable. But it must be recognized - because failure to recognize it would create a debt-dodger’s charter – that whether the defendant’s assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as [is] either undisputed or beyond reasonable dispute.’ …

It is trite law that the mere assertion in an affidavit of a given situation does not, ipso facto, provide leave to defend, since the defendant must satisfy the court that he has a fair or reasonable probability of showing a real or bona fide defence, ie that his evidence is reasonably capable of belief (per Ackner LJ in Banques de Paris et des Pays-Bas (Suisse) SA v Costa de Naray [1984] 1 Lloyd’s Rep 21 at 28; followed in Bhagwandas Kewalarm Murjani & Others v Bank of India [1990] 1 HKLR 586 at 588-589, and see also, Tandy/Rank Video & Another v Yee Hing Cassette Factory Ltd [1991] 1 HKC 136). After reviewing all the authorities, the English Court of Appeal has laid down a definitive ruling that if the evidence of the defendant is incredible in any material respect, it cannot be said that there is a fair or reasonable probability that the defendant has a real or bona fide defence and judgment will be given to the plaintiff (National Westminster Bank Plc v Daniel [1993] WLR 1453; [1994] 1 All ER 156 applied in Ng Shou Chun v Hung Chun San [1994] 1 HKC 155 at 158), following the Banque de Paris case. “There is a difficulty because the court cannot resolve issues of fact on affidavits. However, there are some cases in which the defendant’s own case, although apparently it raises issues which, if found in his favour, would provide him with a defence, are so incredible or so contradicted by contemporaneous documents or circumstances that it becomes clear that his defence is a sham”: per Mortimer JA in Manciple Ltd v Chan On Man [1995] 3 HKC 459 at 466. Two tests are appropriate, namely “Is what the defendant says credible?” and “Is there a fair or reasonable probability of the defendant having a real or bona fide defence?” Where an issue of fact is raised, the first question must be answered in the affirmative before considering the second.”

Discussions on summary judgment application

14. With the above principles in mind, I proceed to deal with the defendant’s arguments one by one.

Misrepresentation argument

15. The defendant says that Alex Lau had misrepresented to her that the rate of consultancy or referral fee could be negotiated and agreed later.  The signing of the Appointment Form was just a formality to enable Alex Lau to make enquiry on her behalf.  Moments after she and Alex Lau had signed the Application Form, Alex Lau put down “2.5” as the rate in clause 3 of the Appointment Form.  The defendant protested.  At the end of the day, she did not insist that her signature be crossed out or the Appointment Form be returned to her or destroyed because she was reassured by Alex Lau that the figure would not be binding on her and the actual rate could be discussed later.

16. The Misrepresentation Argument can be easily raised but difficult to rebut.  One should consider this argument together with the background of the defendant.  At the material time, she was employed by Charter Field International Limited as General Manager with a monthly income of HK$250,000.  In respect of the Property, she had previously entered into 3 mortgage loan agreements with Standard Chartered Bank (Hong Kong) Limited, Sky Credit Limited and United Asia Finance Limited and was seeking to restructure her mortgage loans and obtain surplus cash for investments in Mainland China.  On her own evidence, she said she was able to and did give business advice to Alex Lau.

17. With her experience and sophisticated background, one would certainly doubt whether she would sign the Appointment Form with the rate of consultancy and referral fee in blank just on the suggestion by Alex Lau that the signing was merely a formality.  This becomes even more incredible when she said she actually knew that the prevailing rate was at most 1% to 1.5%.  If so, there would be no reason why she would not insist an acceptable figure be put into the Appointment Form before she signed.

18. She said she signed the form blank and the Alex Lau wrote down “2.5%” as rate of consultancy and referral fee.  It would be absurd and strange that after her alleged protest, she would leave the matter there after being assured by Alex Lau that the rate would not bind her and could be discussed later.

19. From what has been described by the defendant, she was acting in a most naïve way which does not match a person with her experience and background.  I find that the defendant’s Misrepresentation Argument wholly incredible.

20. Counsel for both sides have made legal submissions on whether the Parole Evidence Rule applies so that the defendant is prevented from adducing extrinsic evidence to contradict, vary or add to the Application Form.  Based on my analysis above, it is sufficient for me to say that even if the defendant is not prevented by the Parole Evidence Rule to challenge the validity of the Application Form, the Misrepresentation Argument will not afford her a bona fide defence.

Unauthorised additions to appointment form

21. I have looked at the differences between “LCN-1” produced by the plaintiff and “JLPT-1” produced by the defendant. The so-called unauthorised additions alleged by the defendant include (i) the amended date of “20.9.2012” written on the first page; (ii) “Alex Lau” as the follow-up consultant on the first page; (iii) the appearance of the defendant’s phone no. on the first page; (iv) the details of the defendant’s existing mortgages at the bottom of the first page and (v) the amended date of “20.9.2012” on the second page.  These are all general information that needed to be filled in so as to make the Application Form complete.  Apart from the issue as to whether the defendant signed the Application Form on 20 September 2012, the defendant is not disputing the accuracy of the information that had been filled in by Alex Lau.  I do not see how the filling in of such information would prejudice the defendant. 

22. I accept Alex Lau’s explanation that it is his practice that he would ask a client to sign after filling in and explaining the most important particulars while the less important and tedious particulars would be left blank and filled in later.  The need for amending the dates on the first and second page of “LCN-1” was due to a mistake when putting down the dates as “20.12.2012” and so he amended the month from “12” to “9”.

23. Even one disregards “LCN-1” and just looks at “JLPT-1” produced by the defendant which was signed by her and Alex Lau on behalf of the plaintiff, one can already deduce there is an agreement between the plaintiff and the defendant that the defendant would pay consultancy and referral fee at the rate of 2.5% for the services rendered by the plaintiff.

24. I do not think that the Unauthorised Additions to Appointment Form argument would provide a bona fide defence to the defendant.

Appointment form expiry argument

25. As to the defendant’s argument that there should be an implied term that the Appointment Form would expire 3 months from the date of signing if the borrower customer does not succeed in executing the necessary formal loan documents, there is no evidence supporting the existence of such an implied term apart from the defendant’s own allegation.  Looking at the Whatsapp communication records “JLPT-2” produced by the defendant, when Alex Lau chased for the commission on 20 December 2012 at 20:57, 24 December 2012 at 19:12, 2 January 2013 at 19:54, there was no immediate response from the defendant that the Application Form had expired.  It was only until 23 March 2013 at 10:51 that the defendant raised the issue that the “agreement” had expired.  Even if one interprets the “agreement” referred to by the defendant as the Application Form, there was no mention of a 3-month time limit now alleged by the defendant.

26. I find this Appointment Form Expiry Argument not supported by independent evidence or contemporaneous records.

Personal agreement argument

27. As to the defendant’s saying that Alex Lau had entered a Personal Agreement with her under which he would personally obtain the mortgage loan for her without charging her in exchange for the defendant giving him business advice on transactions and deals he might come across, I have looked at the Whatsapp communication records “JLPT-2” produced by the defendant.  The communications between the plaintiff and the defendant seem to be more in line with Alex Lau’s explanation that he and the defendant would introduce potential clients and business opportunities to each other.  The communications do not look like the defendant providing business advice to Alex Lau unilaterally pursuant to the alleged Personal Agreement.

28. The defendant relies on exhibit “JLPT-3” which is an e-mail from Alex Lau to her on 21 November 2012 as support for the existence of the Personal Agreement.  In this e-mail, Alex Lau described to the defendant why he thought the loan package offered by LSH to the defendant was acceptable.  There is nothing in the e-mail indicating that Alex Lau accepted there was such a Personal Agreement.

29. One also needs to consider the reasonableness of the defendant’s suggestion of a Personal Agreement.  Alex Lau is a director and 50% shareholder of the plaintiff.  Under the Appointment Form, the plaintiff would be able to earn HK$451,500 as consultancy and referral fee from the defendant.  It would not be reasonable for Alex Lau to personally agree to obtain a mortgage loan without charge in exchange for the defendant’s business advice.  By doing so, Alex Lau would be depriving the plaintiff a handsome amount of income from which he could benefit as director and shareholder.  At the same time, Alex Lau simply would not know if the so-called business advice from the defendant would yield any return to him at all.

Defence filed on 21 June 2013

30. In paragraphs 4(b)(iv) and (v) of the Defence filed on 21 June 2013, it was pleaded that the defendant signed the Appointment Form after Alex Lau made misrepresentations to her and the rate of consultancy and referral fee of 2.5% was already put in the Appointment Form before she signed. 

31. In the defendant’s affirmation filed on 28 November 2013, the defendant put forward a different version by saying that Alex Lau made representations to her and she signed the Appointment Form.  When she signed, the figure for the rate of consultancy and referral fee was blank.  After signing the Appointment Form, Alex Lau filled in the rate as 2.5%.  She then protested and Alex Lau made further misrepresentations to her.

32. In the Defence filed on 21 June 2013, there was no mention of an implied term based on trade practice that the Appointment Form will expire 3 months after the defendant’s signing.  This was raised for the first time in the defendant’s affirmation filed on 28 November 2013.

33. In paragraph 4(d), it was pleaded that Alex Lau would continue and complete the mortgage loan application with LSH for the defendant without requiring her to pay any consultancy and referral fee. 

34. But in the defendant’s affirmation filed on 28 November 2013, it was mentioned for the first time that Alex Lau would personally obtain the mortgage loan for the defendant without charging her in exchange of the defendant providing Alex Lau business advice.

35. By a summons filed on 25 February 2014, the defendant is now seeking to amend her Defence in line with her affirmation filed on 28 November 2013.  But one still begs for an answer as why 2 different versions of facts on misrepresentation would be raised in the first place and why material facts relevant to the so-called Implied Term and the Personal Agreement would not be raised in the original Defence.  In this connection, I find a passage from AVC Property Development Company Limited v Joyful Grace Trading Limited & Anor, HCA 529/2013, relied on by the plaintiff’s counsel, instructive.  At paragraph 75 of the judgment, Deputy High Court Judge Marlene Ng said this:-

“In Ko Hong and Ko Chi Ching both trading as Wing Yick Chau Chong, which concerned Order 14 rule 4(1) of the Rules of the District Court which provides that a defendant may show cause “by affidavit or otherwise to the satisfaction of the court”, I said at paragraph 48 therein that a defendant is not necessarily bound by his pleaded defence in resisting a summary judgment application, and if the affirmation in opposition raised triable issues or arguable defences it would be open to the defendant to apply for amendment of the defence in due course especially if it were at an early stage of the proceedings.  But that said, the court may view the newly raised defence contention (especially if it relates to factual matters that ought to have been within the defendant’s knowledge and information at the material time or at the time when the defence pleadings were filed) with a jaundiced eye when assessing whether or not in all the circumstances such new contention is believable or credible …”

Date of signing application form

36. Alex Lau of the plaintiff says that the Application Form was signed by the defendant at their first meeting in Tsim Sha Tsui on or about 20 September 2012.  The defendant says that the date of signing was much earlier than September 2012.  She says the Tsim Sha Tsui meeting should be around March or April 2012.

37. The date on which the defendant signed the Application Form would only have a bearing if there is an implied term that the Application Form will expire 3 months after the defendant’s signing.  As discussed earlier, I find the Appointment Form Expiry Argument not supported by independent evidence or contemporaneous records.  So this factual dispute should not have any significance.

Other factual disputes

38. In paragraph 4(b)(vii) of the Defence filed on 21 June 2013, the defendant challenged Alex Lau’s authority to bind the plaintiff.  But this point is not pursued by the defendant’s counsel. The defendant has deleted this paragraph 4(b)(vii) in the draft Amended Defence attached to the defendant’s summons for amendment filed on 25 February 2014.

39. The defendant’s counsel in his submissions stated that there are areas that need to be explored at trial and these include:-

(a) How was the Application Form signed?

(b) How was the rate of consultancy and referral fee of 2.5% arrived at?

(c) When did Alex Lau obtain the necessary mortgage documents from the defendant?

(d) Whether the Personal Agreement existed? and

(e) How was the mortgage loan for the defendant obtained from LSH?

40. One should not forget that in an application for summary judgment, the burden is on the defendant to raise a bona fide defence.  It is not enough for the defendant to say that there should be a trial because she wants to find out more.  One should not forget the important aspect of this case is that the defendant had signed the Application Form.  When one looks at the version produced by her as “JLPT-1”, one can already deduce that there is an agreement by her to pay 2.5% of the mortgage loan from LSH as consultancy and referral fee.

41. According to paragraph 14/4/9 of Hong Kong Civil Procedure 2014 which I have quoted, “if the evidence of the defendant is incredible in any material respect, it cannot be said that there is a fair or reasonable probability that the defendant has a real or bona fide defence and judgment will be given to the plaintiff.”

42. I find that the defendant’s evidence in relation to the Misrepresentation Argument wholly incredible and this is a material aspect of her case.

43. But at the same time, I bear in mind that the Court must not embark on a mini trial on affidavits in an application for summary judgment.

44. In paragraph 14/4/16 of Hong Kong Civil Procedure, the following is stated:-

“Leave to defend conditional on the full amount claimed being paid into court may be ordered where the defence is “shadowy” (per Lord Denning MR in Van Lynn Developments Ltd v Pelias Construction Co [1969] 1 QB 607; [1968] 3 All ER 824 and see also Suen Ho Sun v Kamenar International Ltd [1989] 1 HKC 135) or there is little or no substance in it or the case is almost one in which summary judgment should be ordered (Ionian Bank Ltd v Couvreur [1969] 1 WLR 781; [1969] 2 All ER 651, CA) …”

45. I have come to the view that the issues raised by the defendant, if they amount to a defence at all, would only be a shadowy defence.  Therefore, I will only give conditional leave to defend to the defendant.

Summons for amendment of defence

46. As said earlier, the defendant took out a summons for amendment of Defence on 25 February 2014.  The matter came before me on 7 March 2014 and I adjourned the summons to today to be heard together with the plaintiff’s summons taken out on 24 September 2013.  Today, I have also heard the submissions from the both sides regarding the defendant’s summons for amendment.  I have come to the view that whether the defendant should be given leave to amend her defence should depend on whether the defendant is able to satisfy the condition for leave to defend.

Conclusion

47. I order as follows:-

(a) Unless the defendant pays HK$451,500 into Court within 21 days from the date hereof, the plaintiff may enter final judgment against her for the amount of HK$451,500 with interest thereon at judgment rate from the date of Writ of Summons until payment in full and costs of this action, including the costs of and occasioned by the plaintiff’s summons taken out on 24 September 2013 with certificate for counsel, to be taxed if not agreed; and

(b) The defendant’s summons taken out on 25 February 2014 for amendment of Defence be dismissed with costs to the plaintiff including the costs of the hearing on 7 March 2014, to be taxed if not agreed.

(c) But if the sum of HK$451,500 is so paid into Court, the defendant may defend this action and the costs of the plaintiff’s summons taken out on 24 September 2013 be costs in the cause with certificate for counsel, to be taxed if not agreed;

(d) The defendant do have leave to file and serve her Amended Defence as per the draft attached to the defendant’s summons taken out on 25 February 2014 within 7 days from the date of payment into Court;

(e) The plaintiff do have leave to file and serve its Reply (if so advised) within 28 days thereafter; and

(f) The costs of and occasioned by the defendant’s summons taken out on 25 February 2014, including the hearing on 7 March 2014, be to the plaintiff in any event, to be taxed if not agreed.

48. I am aware that the plaintiff’s summons taken out on 25 September 2013 includes an alternative application for interim payment.  I have come to the conclusion that the defendant only has a shadowy defence.  But I cannot exclude the possibility that the defendant may succeed at trial.  I believe the order I have already made will do justice to both the plaintiff and the defendant.  Therefore, I am not ordering the defendant to make an interim payment.

49. Last but not least, I thank counsel for both sides for their thorough submissions and assistance rendered to the Court.