XCHRX NG SIU LAN v. INCON TRADING CO. LTD. AND ANOTHER

HCA 13497/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 13497 OF 1999

____________

_______________________

REASONS FOR DECISION

_______________________

1. The Plaintiff, Madam Ng Siu Lan, claims against the 1st Defendant ("Incon Trading Co. Ltd") and the 2nd Defendant ("Ng Pak Wong") for the sum of just over US$2.3 million.

2. At all material times, the 2nd Defendant was a director and majority shareholder of the 1st Defendant and in connection with the present transaction with the Plaintiff, the 2nd Defendant was acting for the 1st Defendant.

3. It is the Plaintiff's case that a sum of RMB19 million was lent to the 1st Defendant by paying the same into the account of one Zhongji Jiali Import & Export Corporation (Zhongji Jiali) as designated by the 2nd Defendant acting on behalf of the 1st Defendant. The 1st Defendant designated Zhongji Jiali because it had agreed to lend the money to a Landmark Investment and Development Co. Ltd (Landmark) and Landmark in turn designated Zhongji Jiali as the payee.

4. The 1st Defendant was unable to repay the loan in time as agreed and the 2nd Defendant also agreed to be responsible for the loan and interest with the 1st Defendant under a document of acknowledgement which was dated 29 September 1999 although the Plaintiff now says the document was actually executed some three months later in December of the same year.

5. There is no dispute that on the 12th and 18th of August 1999, the 2nd Defendant made two payments of RMB500,000.00 and RMB1.2 million to the Plaintiff after a letter of demand dated 15 July 1999 was sent by the Plaintiff's solicitor.

6. The Plaintiff claims against the Defendants was for the balance of the loan with interest expressed in US dollars.

7. In their Defence and Counterclaim, the Defendants raised one simple issue, namely that the 1st Defendant did not receive the loan from the Plaintiff as the money was paid to Zhongji Jiali, and hence somehow the 1st Defendant was not liable for the repayment as the condition precedent for liability had not been met.

8. The 2nd Defendant does not dispute that the two sums of RMB500,000.00 and RMB1.2 million were paid to the Plaintiff's solicitor in August 1999. But the 2nd Defendant alleges that these two sums were in fact loans to the Plaintiff, as the Plaintiff then told him that she was in financial difficulty. The 2nd Defendant on his case counterclaims against the Plaintiff for the two sums of RMB500,000.00 and RMB1.2 million.

9. On an Order 14 application by the Plaintiff against the Defendants, Master Lung granted summary judgment against the 1st Defendant in favour of the Plaintiff. The 2nd Defendant was granted unconditional leave to defend.

10. The 1st Defendant now appeals against the Order of Master Lung seeking unconditional leave to defend. The Plaintiff also applies for leave to appeal out of time against the Order of Master Lung seeking summary judgment against the 2nd Defendant as well. The application for leave to appeal out of time has been earlier granted by this court.

11. There can be no dispute that a bank draft dated 29 September 1998 for RMB19 million in favour of Zhongji Jiali was issued and paid into its account, and in a document signed by a Hong Xiaoting and dated also 29 September 1998, the 1st Defendant acknowledged receipt of the bank draft.

12. There are in fact two more documents also dated 29 September 1998 executed between the Plaintiff and the 1st Defendant. One was a Letter of Entrustment from the 1st Defendant, requesting the Plaintiff to bring a bank draft to the account of Zhongji Jiali and the other was a Loan Agreement between the Plaintiff and the 1st Defendant for a loan of RMB19 million.

13. In the Loan Agreement itself, the Plaintiff agreed to bring a bank draft to an account designated by the 1st Defendant and the 1st Defendant agreed to repay the loan by remitting the same to an overseas account designated by the Plaintiff within 8 working days from the second day of the receipt of the draft.

14. The document of acknowledgement dated the 29 September 1998 which the Plaintiff suggests was executed in December was addressed to the Plaintiff and it states:

"This is to certify that the Borrower (Incon trading Co. Ltd) obtains a loan from you and will perform the following obligations:

1. The loan amounts to RMB Nineteen Million (RMB19,000,000.00) counting from 30 September 1998 and as agreed by both parties, (the loan) will be repaid in US dollars equivalent at the exchange rate of 1:8.6 (i.e. USD2,209,302.33).

2. Both parties agree that the loan be repaid to you within eight working days from the date on which the loan is granted and the Borrowers agree that overdue amount will bear interest payable to you at the rate of 1.3% per month.

The Borrowers hereby jointly declare and affirm to Ng Siu Lan that they will be responsible for the repayment of the said loan."

15. Both Defendants signed on the document of acknowledgement as the Borrowers.

16. It is not disputed that through her solicitor, the Plaintiff demanded the repayment of the loan from the Defendant in a letter dated 15 July 1999 and the 2nd Defendant made the two payments of RMB500,000.00 and RMB1.2 million in August of 1999. The 2nd Defendant agrees that he had signed the document of acknowledgement and suggests that any liability on the part of the Defendants would only arise upon the receipt of this RMB19,000,000.00 by the Defendants which was never received.

17. As for his signature on the Loan Agreement, the 2nd Defendant suggests that he had never signed this document. The suggestion is that the signature on the document is a forgery. The 2nd Defendant further contends that the Letter of Entrustment was merely a relay of a message on behalf of a Mr Chong Chi Hoi of Zhongji Jiali to the Plaintiff.

18. At the outset, I must say, that I find the Defendants' allegations totally incredible, such allegations are simply inconsistent with the contemporaneous records, some of which are not in dispute.

19. On 15 July 1999, the Plaintiff through her solicitor demanded for the repayment of the loan of over US$2 million from the Defendant. How on earth would the 2nd Defendant then be making a loan of RMB1.7 million to the Plaintiff in August of 1999?

20. The 2nd Defendant claims that his signature on the Loan Agreement was not his, and that it was a forgery. I do not claim myself to be an expert in handwriting but I have compared the two signatures in the Loan Agreement and the document of acknowledgement which the 2nd Defendant agreed to have been signed by him. The signatures on both documents are strikingly similar.

21. In his affirmation in opposition of the Plaintiff's application, the 2nd Defendant signed in a completely different manner. I do not wish to speculate why he did it but it certainly does not make his allegation more credible.

22. I have also considered carefully the wordings in the document of acknowledgement. In that regard, I agree with Mr Chan's observation in his argument that the plain words used are simply inconsistent with the Defendants' contention. The words I have in mind included those in Chinese "書面證明借方向台端借款，經雙方同意折算以美元還款，雙方聯合向吳兆蘭聲明負責償還該欠款，特此確認". The equivalent in English, of course, has earlier been mentioned by me at the earlier part of my decision.

23. In my view, the content of the Letter of Entrustment is also plainly inconsistent with the 2nd Defendant's contention.

24. I have considered the facts of the case and counsel's submission carefully. I am persuaded that on the evidence before this court, the 1st Defendant had not demonstrated any arguable defence to the Plaintiff's claim. The allegation put forward on behalf of the Defendants are simply incredible. The learned Master was clearly right in granting summary judgment in favour of the Plaintiff against the 1st Defendant, and the appeal against the Master's decision by the 1st Defendant must therefore be dismissed.

25. I have earlier expressed my view on the credibility or otherwise of the 2nd Defendant. I have also borne in mind the alleged different stance of the Plaintiff as set out in her original Statement of Claim and in the Letter of Demand.

26. I do not consider the alleged discrepancies in those documents are too significant a factor. A party should not be prejudiced by the way in which his legal representative had chosen to present his case at some stage of the proceedings. That, of course, must not be taken as an encouragement to lawyers, not to take proper and full instructions.

27. The court must look at the evidence in its entirety in deciding if the 2nd Defendant in this case has an arguable defence to the Plaintiff's claim.

28. Mr Chan on behalf of the Defendants suggests that the alleged liability on the part of the 2nd Defendant, on the Plaintiff's case, arose insofar as documentary evidence is concerned solely on this document of acknowledgement.

29. The Plaintiff said the document of acknowledgement was in fact executed in December of 1998. In her most recent affirmation, she agrees that this date was in her handwriting and she put down the date as 29 September 1998. The Plaintiff had not initially offered any explanation for doing what she did but in her latest affirmation she said she put down the date 29 September 1998 as she thought this document was a supplement to the other agreements.

30. It is not for me at this stage to consider whether the assertion by the Plaintiff is credible.

31. In any event, in my view, it is also necessary to consider the legal effect of this particular document in the light of the surrounding circumstances. In the circumstances, perhaps it is right that this aspect of the case should be further investigated at the trial. But in the light of the background, I am not persuaded that it is proper to grant unconditional leave to defend. In my view, the proper Order to make is that the 2nd Defendant can only defend the matter upon payment into court of the amount claimed.

32. The appeal against the Master's decision of granting unconditional leave to the 2nd Defendant to defend is allowed and in substitution thereof, I make the following Order: That the 2nd Defendant be given leave to defend conditional upon the payment into court of the sum of US$2,309,028.52 within 14 days. In default, there will be judgment for the Plaintiff against the 2nd Defendant as well in terms of prayers 1 and 2 of the Amended Statement of Claim with costs to be taxed if not agreed.