INTEGRATED CAPITAL (ASIA) LTD v. CHAN TAT CHEE

CACV 243/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 243 OF 2009

(ON APPEAL FROM HCA NO. 403 OF 2009)

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BETWEEN

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JUDGMENT

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Hon Tang VP:

Introduction

1.  The plaintiff’s case is that it made a loan of HK$5,000,000 to Abba Entertainment Group Ltd (“Abba”).  The defendant was a shareholder and director of Abba.  The defendant provided a cheque in a sum of HK$5,000,000 as security for the Abba loan (“the cheque”).  According to the plaintiff, the cheque so provided bore the defendant’s signature with the amount of HK$5,000,000 filled in in figures and words but with the name of the payee and the date left blank.  According to the defendant, the cheque was completely blank save for his signature.

2.  On about 23 July 2005, Yam Tak Cheung (“Yam”), the Third Party, who was a director of the plaintiff, demanded the repayment of the Abba loan.  According to the plaintiff, the defendant was only able to repay HK$1,000,000 which was done by a cheque dated 23 July 2005.

3.  When in late September 2005, Yam learned from the news that the defendant had been arrested by the ICAC, he filled the cheque with the plaintiff’s name as payee and the date of 6 October 2005 and presented it for payment on the same date.  The cheque was dishonoured.

4.  The plaintiff sued the defendant for HK$4,000,000 being the balance payable on the cheque.

5.  The defence was that there was a settlement as regards the balance of HK$4,000,000.

6.  In order to understand the defence, it is necessary to deal with another loan.  It is the so called “Aimstar Loan”, which is evidenced by a loan agreement dated 2 October 2003 made between Aimstar Holdings Limited (“Aimstar”) as borrower, Yam as lender, and Chan Tat Chee (“the defendant”) and his wife Tang Yuk Chee, Josephine as guarantors.  The defendant and his wife were the only shareholders and directors of Aimstar.

7.  Under the Aimstar Loan agreement, Yam agreed to lend HK$18,000,000 to Aimstar for three months at an interest of 17% above the prime rate.  The repayment date of the loan was 2 January 2004.  There is a receipt dated 2 October 2003 by Aimstar to Yam acknowledging receipt of HK$18,000,000 in cash.  Yam’s case is that when by mid-May 2004, the Aimstar Loan remained wholly unpaid, he introduced a company called Kingston Finance Ltd (“Kingston”) to the defendant with a view to see if Aimstar could obtain a loan from Kingston to repay the Aimstar Loan.  According to him, eventually Aimstar was able to borrow HK$25,000,000 from Kingston.  According to Yam, the amount payable under the Aimstar Loan was HK$21,600,000 odd if it was repaid on 20 May 2004, the total interest payable being HK$3,615,400. 

8.  Yam said in his 2^nd affirmation made on 27 May 2009:

“12. In settlement of this sum and other transactions which are unrelated to the current dispute, the Defendant on behalf of Aimstar requested Kingston Finance to issue a cheque for HK$24,250,000 to Piston International Limited (‘Piston’), a company which I controlled and which I nominated to the Defendant to be the receiving entity. I confirm that the cheque dated 20 May 2004 which I received for such purposes now appears at ‘CTC-2’ of the Defendant's Affirmation. After receiving this cheque, I then released the Share Certificate to Mrs Chu of Kingston Finance as the Aimstar Loan had been fully discharged.”

9.  The defendant’s case was set out in his defence of 23 March 2009, his third party notice dated 21 March 2009 as well as his affirmation of 5 May 2009.  This is what he said in his affirmation:

“14. On or about 19 May 2004, the Third Party personally accompanied me to go to borrow money from a money lender by the name of Kingston Securities Limited (‘Kingston’). The purpose of borrowing money from Kingston was two-fold. First, I would get money from Kingston sufficient to repay the Aimstar Loans then owed to the Third Party. Second, I would get further money sufficient for the Third Party to buy and hold 20,000,000 in trust for me. On that day, in the presence of the Third Party, I borrowed on behalf of Aimstar a loan in the sum of HK$25,000,000 from Kingston so as to repay the Aimstar Loans to the Third Party and got money for the Third Party to buy and hold 20,000,000 shares of CSCP in trust for me. After deduction of interest, Kingston issued a cheque number 971057 in the sum of HK$24,250,000 payable to Piston International Limited (‘Piston’). Piston was the company used to receive the money as directed by the Third Party at that time. I verily believe that Piston was a company owned and/or controlled by the Third Party. It should be a company registered with the British Virgin Islands and I was unable to search who were the shareholders and directors of Piston. In any event, as soon as I received the cheque in the sum of HK$24,250,000 in the office of Kingston, I immediately gave the cheque to the Third Party for settlement of the Aimstar Loans and said buying and holding of shares of CSCP. The share certificate for 295,000,000 of CSCP shares owned by Aimstar was then transferred by the Third Party to Kingston as security for the loan from Kingston to Aimstar.”

10.  The defendant went on to say in the same affirmation:

“21. On or about 23 July 2005 the Third Party represented to me that he needed money for use. As we had a running account between us, the Third Party proposed to me and I agreed that settlement and/or repayment would be made to the Abba Entertainment Loan in the following manner in full satisfaction of the Abba Entertainment Loan: (a) The Defendant would issue a cheque in the sum of HK$1,000,000 to a payee to be nominated by the Third Party as part of the repayment of the Abba Entertainment Loan; and (b) the balance of the repayment in the sum of or about HK$4,000,000 would be paid by way of set-off by reducing the number of CSCP shares then being held by the Third Party in trust for me the total price of which would be equivalent or roughly equivalent to HK$4,000,000. I would refer this as the Abba Entertainment Loan Repayment Agreement herein.

22. At the material time, the price of a CSCP share on the Stock Market of Hong Kong ranged between about HK$0.69 and HK$0.73. It was the common understanding of the Third Party and me that about 5,800,000 CSCP shares would be set-off and reduced from the account of CSCP shares held by the Third Party in trust for me.

23. Further, at that time, the Third Party told me that he was not sure of the whereabouts of the blank cheque which I had signed and given him as security for the repayment of the Abba Entertainment Loan. He told me that he would destroy and/or dispose of the said cheque without presenting it. At that time, I did not bother to ask for the return of my cheque because I trusted him just as I trusted him to hold the CSCP shares for me.

24. Pursuant to the Abba Entertainment Loan Repayment Agreement, I signed and issued a cheque dated 23 July 2005 and numbered 003466 drawn on my personal account with Wing Hang Bank and caused the cheque to be delivered to the Third Party. The payee was deliberately left blank for the Third Party to fill in. Subsequently in his own handwriting the Third Party filled in his own name as payee and banked in the cheque, copy of which was exhibited as ‘YTC-2’ to the Third Party's Affirmation.

25.       I have been advised by my legal advisers and verily believe that in the premises and pursuant to the Abba Entertainment Loan Repayment Agreement, at all material times, the Third Party held and still holds about 14,200,000 CSCP shares in trust for me.”

11.  Para. 7 of the defence reads:

“In or about May 2004, the Defendant and Yam entered into a verbal agreement pursuant to which Yam would buy and hold about 20,000,000 shares of CSCP in trust for the Defendant (the ‘Trust Agreement’).”

12.  The defence referred to the alleged agreement to pay off the balance of HK$4,000,000 payable in respect of the Abba loan as the “Abba Entertainment Loan Repayment Agreement”.  Para. 12

13.  Summary judgment was given by Master S Kwang on 19 August 2009 in favour of the plaintiff.  On 23 September 2009, the defendant’s appeal from the Master S Kwang was dismissed by Sakhrani J.  The defendant was represented by solicitors and counsel, both before the master and before the learned judge. 

14.  Essentially, the learned judge was of the view that the Trust Agreement is a bald assertion and that it was not believable.  With respect, I agree with the learned judge.

The Appeal

15.  On appeal, the defendant appeared in person.  He said that his former lawyers had misunderstood him.  There never was a Trust Agreement.  As I understand him, he asserted that having paid the plaintiff HK$24,500,000 with the money he had obtained from Kingston, he had overpaid Yam HK$6,250,000, that is because notwithstanding the Aimstar Loan agreement, no interest was payable in respect of the Aimstar Loan of HK$18,000,000.  This understanding is gathered from his affirmation (in Chinese) dated 12 November 2009 made in support of his application for a stay of execution which was refused by the learned judge, where he said:

「2.7. 最簡單的說我的案情：就算不計任德章用$18,000,000替我從姓張裏得來的370,000,000CSCP股票（我大律師所說的信託股票），任德章從金利豐替我收了$24,250,000，扣除在2003年10月2日欠他的$18,000,000，他還欠我$6,250,000.我將要求法庭判決有沒有他所說的‘其他沒有牽連的交易’和他是否答應我不收利息.」

16.  However, in his written submission dated 2 July 2010 (also in Chinese) he said:

「4. 我也請求上訴庭考慮我的案情是任仍然最低限度欠我HK$18,000,000，因為任沒有付這筆錢給我（他呈堂我簽的收據是簽約時由他準備的文件的一部份，是絕對不是在付（款）之後）. 我曾不斷要求任呈堂他曾付給我HK$18,000,000的支票在証據. 但他却到今天也不能和沒有把支票呈堂（文件冊64頁5段和我在HCA403/2009 11月12日呈堂的誓章2.2段—現附上協助法庭不用在HCA403/2009的檔案中找尋）·」

17.  There, he seemed to say that the Aimstar Loan of HK$18,000,000 was not made at all. 

18.  Mr Nip, counsel for theplaintiff, submitted that the defendant should not be permitted to make a new case on appeal, relying on the judgment of the Court of Final Appeal in Flywin Co Ltd v Strong & Associates Ltd (2002) 5 HKCFAR 356 at 368G to 369C.

19.  Moreover, Mr Nip submitted that insofar as the defendant is relying on new evidence, whether in the form of his affirmation of 12 November 2009 or his written submission of 2 July 2010, the defendant is unable to satisfy the conditions in Ladd v Marshall [1954] 1 WLR 1489, namely that (1) the evidence could not have been obtained with reasonable diligence for use at the trial; (2) the evidence must be such that, if given, would probably have an important influence on the result of the case, though it need not be decisive; (3) the evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible.  These conditions must be satisfied before new evidence can be admitted on appeal.

20.  I agree with Mr Nip that the defendant should not be allowed to make a new case on appeal.  Insofar as the new case requires new evidence, whether in the form of his affirmation of 12 November 2009 or his written submission of 2 July 2010 (the written submission does not qualify as new evidence), the new evidence is not admissible, and does not satisfy any of the three Ladd v Marhsall conditions. 

21.  Furthermore, it is not believable that the defendant had been misunderstood by his lawyers.  Indeed, he was represented by different solicitors and counsel before the master and the judge.  Moreover, his affirmation of 5 May 2009 had been interpreted to him before he affirmed it.

22.  Nor do I find his new case credible.  He now claims that the Aimstar Loan of HK$18,000,000 had never been made.  That is inconsistent with the Aimstar Loan agreement and the receipt referred to above.  Nor is it clear what his case is in relation to the Aimstar Loan.  It appears from para. 2.7 of his affirmation of 12 November 2009 that there was a loan of HK$18,000,000, but because he had repaid HK$24,250,000 there was an overpayment of HK$6,250,000.  However, in his written submission, he seemed to claim that the loan of HK$18,000,000 had not been made.  If that be the case, it is difficult to understand why HK$25,000,000 was borrowed from Kingston to pay Yam.

23.  The defendant also complained that the plaintiff had not produced evidence, for example, relating to the payment of the Aimstar Loan, apart from producing the Aimstar agreement and the receipt.  That is so, but on an application for summary judgment, the defendant must show that he has a defence on the merits and in doing so, he must condescend upon particulars.  See 14/4/4 Hong Kong Civil Procedure.  This the defendant has failed to do.

24.  For the above reasons, I would dismiss the appeal with costs.

Hon Yuen JA:

25.  I agree.