XCHRX KWAN WAH CHOI v. CHAN CHEU HUNG

HCA 12669/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 12669 OF 1999

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J U D G M E N T

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1. This is an appeal against the decision of Acting Registrar C. Chan given on 20 September 1999 whereby the Defendant was given leave to defend this action. The Plaintiff had applied for summary judgment under O. 14 Rules of the High Court.

2. The Plaintiff's claim is for the repayment of $1,000,000.00 being money lent by the Plaintiff to the Defendant by way of two cheques on 7 March 1995 and 16 March 1995 respectively, at the request of the Defendant. It is pleaded in the Statement of Claim that the said cheques were presented by the Defendant on 8 March 1995 and 16 March 1995 and the Plaintiff's account has been debited with the said sum of $1,000,000.00.

3. There is no dispute that on 8 March 1995 a sum of $500,000.00 was deposited into the Defendant's account with the Hang Seng Bank Limited and that on 16 March 1995 a further sum of $500,000.00 was also deposited into the Defendant's said bank account. The Defendant, however, asserts that these deposits were made pursuant to a loan agreement with one Wendy Lam and not pursuant to a loan agreement with the Plaintiff.

4. The Plaintiff and Wendy Lam were and are shareholders and directors of Fanta Wellead Group Limited and Wellead Construction and Engineering Company Limited carrying on business in the construction industry. The Plaintiff was also in the construction industry and came to know both the Plaintiff and Wendy Lam and in about 1992, he became friends with them.

5. The Defendant denies that he has borrowed $1,000,000.00 from the Plaintiff. The two cheques for $500,000.00 each dated 8 March 1995 and 16 March 1995 respectively, which are in evidence were indeed drawn by the Plaintiff and were paid into the Defendant's bank account. However, the Defendant says that the sums were deposited directly into his bank account pursuant to the loan agreement with Wendy Lam and he was not aware whether the deposits were by cheques or otherwise and if by cheques, who the drawer was. And it is also pleaded in para. 2(8) of the Defence that if the Court finds that the two cheques were deposited into the Defendant's bank account on 8 March 1995 and 16 March 1995, the Defendant avers that this was not at the request of the Defendant and the Plaintiff was, in so doing, merely acting on the instructions of Wendy Lam or as her agent or servant.

6. The Defendant asserts that a debt collector employed by Wendy Lam, one Cheung Yan Yung, called on him in September 1998 asking for repayment of the loan of $1,000,000.00 which was made by Wendy Lam to him. He states that he was authorized by Wendy Lam to demand the repayment of $1,000,000.00 and this was confirmed by Wendy Lam to him in a telephone conversation in the presence of Cheung Yan Yung. The Defendant further says that Cheung told him that the debt had been increased from $1,000,000.00 to $1,300,000.00 to include interest and his handling fees. The Defendant says that he was informed by Cheung Yan Yung that he was a lieutenant in a triad society and that he had presented him with a copy of the two deposits slips showing the payments of the $1,000,000.00 to his bank account and he also had details of some of the Defendant's personal particulars. Out of fear, he agreed to repay $1,300,000.00 as requested.

7. The evidence shows that in September 1998, the total sum of $1,300,000.00 was paid to Cheung Yan Yung as the authorized person of Wendy Lam. Thus, on the Defendant's case, the loan of $1,000,000.00 made to him by Wendy Lam in March 1995 has been fully repaid. The evidence of Cheung Yan Yung also tends to support the Defendant's evidence that Wendy Lam had employed Cheung Yan Yung to collect the repayment of the $1,000,000.00 loan from him. Also, Cheung Yan Yung had in his possession the two original deposit slips whereby the two cheques drawn by the Plaintiff were deposited into the Defendant's bank account and which said original deposit slips were handed over to the Defendant by Cheung Yan Yung after receiving cheques towards the repayment of the loan granted to the Defendant by Wendy Lam. This tends to support the Defendant's assertion that he himself did not present the two cheques for payment in 1995 but that they had been paid directly into his bank account.

8. In her evidence, Wendy Lam disputes that Cheung Yan Yung was authorized to collect repayment of the sum of $1,000,000.00. She asserts that she had made a loan of $2,000,000.00 to the Defendant, which is denied by the Defendant, and it was in respect of the loan of $2,000,000.00 that Cheung Yan Yung was employed by her to seek repayment from the Defendant. She says that this was different from the $1,000,000.00 loan made by the Plaintiff to the Defendant which is being sued on.

9. Clearly, in my view, triable issues of fact have been raised.

10. The principles governing O. 14 applications are well-known and clear. A useful reminder is what Godfrey J. (as he then was) said in Unic Co. v. Centus Development Ltd. [1988] HKC 643 at 647:

"The power to give summary judgment under Order 14 is intended to apply only to cases where there is no reasonable doubt that the Plaintiff is entitled to judgment and where therefore it is inexpedient to allow the Defendant to defend for mere purposes of delay: see Jones v. Stone [1894] AC 122.

As a general principle, where a Defendant shows that he has a fair case for defence or reasonable grounds for setting up a defence, or even a fair probability that he has a bona fide defence, he ought to have unconditional leave to defend. Leave to defend must be given unless it is clear that there is no real substantial question to be tried, or that there is no dispute as to the facts or law which raises a reasonable doubt that the Plaintiff is entitled to judgment. Order 14 is not intended to shut out a Defendant who can show that there is a triable issue applicable to the claim as a whole from laying his defence before the court, nor to make him liable in such a case to be put on terms of paying into court as a condition of leave to defend."

11. It has also been said that it is not a proper course for the Court to embark at this stage on a mini-trial of the action based on affidavit evidence alone. It is sufficient for the Court to ask itself whether the Defendant's assertions are believable. (Ng Shou Chun v. Hung Chun San [1994] 1 HKC 155)

12. And it was helpfully said by Godfrey J. A. in the Court of Appeal in the case of Man Earn Ltd. v. Wing Ting Fong [1996] 1 HKC 225 at 228:

"Unless it is obvious that the defence put forward by the Defendant is 'frivolous and practically moonshine, Order 14 ought not to be applied': see Codd v. Delap [1905] 92 LT 510, per Lord Lindley at 511."

13. The Defendant's assertions are, in my view, believable. Whether or not they are to be believed is a matter to be determined at trial. I have considered Counsel's submissions. It seems to me that issues of fact have been raised which must be resolved at trial after pre-trial discovery. The matter cannot be resolved on affidavit evidence alone without cross-examination of witnesses. I should, of course, not embark on a mini-trial of the action at this stage.

14. There is, in my judgment, clearly a triable issue of fact raised as to whether it was the Plaintiff rather than Wendy Lam who did lend the Defendant $1,000,000.00 in March 1995. The Defendant is, in my view, entitled to unconditional leave to defend the action. And in my judgment, Acting Registrar C. Chan was correct in granting the Defendant leave to defend. The appeal is dismissed.