ORIENTAL FA LTD v. LAM CHOK LAI AND ANOTHER

HCA 2301/2024

[2026] HKCFI 1790

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2301 OF 2024

________________________

________________________

________________________

REASONS FOR DECISION

________________________

Introduction and background facts

1.  The plaintiff is a licensed moneylender.  The 1^st defendant is the borrower under the transactions to be described below.  The 2^nd defendant, a company, is the owner of a property at Villa Corniche, No 21 South Bay Road, Hong Kong (“Mortgaged Property”). 

2.  The 1^st defendant holds 50% of the shares in the 2^nd defendant.  The other 50% shares are held by a company called Acurus Limited, which is in turn wholly owned by the 1^st defendant. 

3.  By the loan agreement (“the Original Agreement”) dated 9 August 2003, the plaintiff agreed to lend the 1^st defendant $150,000,000, which was to be repaid on 10 August 2024.  There was to be monthly interest at 11.04% per annum.  Such interest was to be paid monthly in arrears. 

4.  Clause 10.10 of the Original Agreement provides that:-

“This Agreement (together with any documents referred to herein or executed contemporaneously by the parties hereto in connection herewith) constitutes the whole agreement between the parties hereto and supersedes any previous agreements or arrangements between them relating to the subject matter hereof; it is expressly declared that no variations hereof shall be effective unless made in writing and signed by the parties or their duly authorised representatives” (“the NOM Clause”)

5.  The 1^st defendant’s obligations under the Loan Agreement were secured by a mortgage dated 10 August 2023 (“the Mortgage”), whereunder the 2^nd defendant mortgaged the Mortgaged Property in favour of the plaintiff.

6.  The plaintiff and the 1^st defendant executed a supplemental agreement (“the Supplemental Agreement”) dated 9 August 2024.  Under its terms, the tenure of the loan under the Original Agreement was to be extended for 1 year to 10 August 2025; and that the 1^st defendant shall pay the plaintiff monthly interest at 12% per annum, such interest to be paid monthly in arrears. 

7.  Clause 4.2 of the Supplemental Agreement provides that:-

“Each of the parties hereto declares and acknowledges that save as amended, supplemented or modified by this Supplemental Agreement, all the terms and conditions of the Original Loan Agreement shall remain in full force and effect.”

8.  The 1^st defendant signed a number of documents confirming his understanding of the terms of the Supplemental Agreement.  They include a confirmation in Chinese, a repayment schedule and a memorandum under section 18 of the Money Lenders Ordinance, recording the change in interest rate of the loan.

9.  The plaintiff’s case is that the defendants defaulted in failing to pay the balance of the monthly interest of HK$900,000 due on 10 September 2024.  This is not disputed.  The plaintiff says this resulted in a declaration of event of default under clause 8.1(a) of the Original Agreement by the plaintiff on 14 October 2024, with the effect that the entire loan became immediately payable.

10.  The statement of claim herein was filed on 20 November 2024. On 31 December 2024, acting in person, the 1^st defendant filed a defence which did not dispute liability under the Original Agreement.

11.  In paragraph 8 of this defence, the 1^st defendant claimed that he was “in the mistaken belief of paying a sum of HK$1,500,000 to the Plaintiff as damages for his delay in repaying the Loan and signed the Supplemental Agreement because he agreed to compensate the losses of the Plaintiff, rather than he has requested the Plaintiff to grant an extension of the tenure of the Loan… Upon being aware of the mistake after signing the Supplemental Agreement, the 1^st Defendant told the Plaintiff that he wanted to cancel the Supplemental Agreement but his request was rejected.  The 1^st Defendant then suggested surrendering the Mortgaged Property to the Plaintiff to enable the Plaintiff to exercise its power of sale to set off the principal sum of the Loan.  However, there was no positive reply from the Plaintiff.”

12.  In paragraph 9 of the defence, the 1^st defendant pleads the defendants’ efforts to sell the Mortgaged Property “for the purpose of repaying the outstanding amount of the Loan to the Plaintiff.”  In paragraph 10, he pleads in the alternative that “the Defendants are still open and are willing to surrender the Mortgaged Property to the Plaintiff to enable the Plaintiff [sic] exercise its power of sale to sell the Property to set off the outstanding amount of the Loan or to negotiate with the Plaintiff for fair terms of repayment of the outstanding amount of the Loan and interest by instalments.  The current market value of the Property by valuers is in the region of HK$150,000,000 to HK$200,000,000.  The 1^st Defendant can pay the shortfall of the sale proceeds to the Plaintiff.”

13.  It is clear that in this pleading:-

13.1     The 1^st defendant accepts liability to pay the Loan as per the Original Agreement.

13.2     His case on the Supplemental Agreement is that he thought it was an agreement for him to pay compensation for his delayed payment.

13.3     He then, at some stage after signing the Supplemental Agreement, became aware that this was not the case, and had unsuccessfully asked the Plaintiff to cancel the Supplement Agreement.

14.  The 2^nd defendant filed an Acknowledgment of Service, but failed to file its defence by the deadline of 2 January 2025.

15.  On 8 May 2025, the plaintiff took out a summons (“P Summons”) for summary judgment against the 1^st defendant; and default judgment against the 2^nd defendant for delivery of vacant possession of the Mortgaged Premises. 

16.  On 29 May 2025, the 2^nd defendant took out a summons (“D2 Summons”)for leave to file and serve a defence out of time.

17.  On 3 June 2025, the 1^st defendant took out a summons (“D1 Summons”) seeking leave to file an amended defence.  This summons was dismissed by Master SP Yip on 11 June 2025.  The 1^st defendant says (and I do not think this is disputed) that this dismissal was on the express premise that the 1^st defendant may rely on the defence outlined in the draft amended defence in his affirmation in opposition.

18.  On 8 October 2025, Master Connie Lee granted summary judgment against the 1^st defendant; entered default judgment and ordered vacant possession against the 2^nd defendant; and dismissed the 2^nd defendant’s application for leave to file a defence out of time; and ordered indemnity costs against both defendants.

19.  The defendants appealed against the Master’s decision.  The hearing of the appeal took place before me on 17 March 2026.  After hearing arguments, I dismissed the appeal, and also dealt with costs.  These are the reasons for the dismissal of the appeal.

The defendants’ defence

20.  As summarised in paragraphs 17 to 20 of the defendants’ skeleton submissions, the defendants now contend that:-

20.1     Ms Lui Yuet Ting of the plaintiff (“Ms Lui”) had represented to the 1^st defendant that:-

20.1.1     The tenure of the Original Agreement would be extended to 10 August 2025, provided that the 1^st defendant paid a compensation sum of HK$600,000 (“the Compensation Sum”).

20.1.2     Interest on the principal loan would be increased by 1% per month, but monthly payments would be suspended and such interest would be payable together with the principal on 10 August 2025.

20.1.3     The due date of 10 August 2025 would automatically be extended for another year to 10 August 2026, unless by 10 August 2025 the value of the Mortgaged Property fell below an amount sufficient to cover the unpaid principal and interest.

20.1.4     The plaintiff would not make any demand for payment before the date on which the principal and interest became due.

These alleged representations are referred to as the “1^st Representations”).

21.  The defendants say that in reliance on the 1^st Representations, the 1^st defendant agreed to vary the terms of the Original Agreement to the extent that they were in accordance with the 1^st Representations.

22.  The defendants further contend that on 9 August 2024, upon reading the draft Supplemental Agreement prepared by Madam Lui, the 1^st defendant expressed concerns that it did not reflect the 1^st Representations and pointed that out.  Madam Lui then made the following representations (“2^nd Representations”):-

22.1     Any clause in the Supplemental Agreement inconsistent with the 1^st Representations was merely a formality which the plaintiff would not enforce, and the plaintiff would adhere to the 1^st Representations.  Part of the 1^st Representations were omitted only to avoid creating a written precedent for other borrowers.

22.2     Provided that the Compensation Sum was paid, the plaintiff would neither commence any legal action to enforce the Loan Agreements nor the Mortgage against the 1^st or 2^nd defendant before 10 August 2026, so long as the Mortgaged Property’s value remained sufficient to cover the principal and interest.

Factual incredibility

23.  At the hearing, Ms Ma (together with Ms Lee for the defendants) accepted (I think rightly) that if I conclude that the defendants’ factual case is incredible, then the appeal should be dismissed.

24.  In an application for summary judgment, the Court will not suspend its critical faculties and assume that the defendant’s evidence is accurate: Oriental FA Ltd v To Yuen Fang Louise [2025] HKCFI 2689 §34(b).  But I bear in mind that as Ms Ma submitted, the burden on the defendant to raise triable issues is generally regarded as low: the question is not whether the defendant’s assertions are to be believed, it is whether those assertions are believable: Ng Shou Chun v Hung Chun San [1994] 1 HKC 155, 158G.

25.  I agree with Mr Tang (for the plaintiff) that the defendants’ latest factual contention is unbelievable on the aforesaid principles.

26.  First, the defendants’ present factual contentions are wholly inconsistent with the 1^st defendant’s pleaded defence.

26.1     As noted above, in the pleaded defence, the 1^st defendant accepted liability to pay under the Loan Agreement.  The essence of the defendants’ contention now, however, is that he should not be required to pay now, because there was an agreed moratorium.

26.2     I am of the view that it is incredible that if the defendants’ latest contentions were true, they would not have found their way into the 1^st defendant’s pleaded defence. 

26.3     I note that the 1^st defendant pleaded his defence whilst he was acting in person.  But there is no evidence that the 1^st defendant suffered from any disability such that I should assess his credibility any differently from any person in a position of borrowing HK$150,000,000 and mortgaging a valuable property. 

26.4     I am of the view that if his latest contentions were true, a promise by the plaintiff to the effect that it would not enforce the loan until August 2026 would be one of the very first things he would say, even if he received no legal assistance.

26.5     Further, if his latest contentions were true, it would also be impossible, in my view, for him to accept liability in the way he did in his pleaded defence. 

27.  Second, the defendants’ latest contentions are fundamentally inconsistent with a letter dated 9 October 2024 from Messrs Raymond TM Lau & Co, who then represented the 1^st defendant (and who represent both defendants now). 

28.  That letter stated that the 1^st defendant fully understood his duty and liability under the Loan Agreement and the Mortgage.  It also stated that the delay in paying was due to an expected delay in funding from the Mainland, and “our client will pay the outstanding sum to your client immediately upon receipt of the fund shortly.” 

29.  In that letter, there was no suggestion of any promised moratorium, or even a whiff of the representations now relied upon. 

30.  I note the 1^st defendant’s contention that he only gave limited instructions to the solicitors at the time this letter was written; the solicitors were not instructed on advise on potential defences; and that the 1^st defendant did not know that the 1^st or 2^nd Representations could affect the validity of the Supplemental Agreement. 

31.  However, for the reasons explained above, I am of the view that if the defendants’ latest contentions were true, the promised moratorium would have been one of the very first things the 1^st defendant would mention to his solicitors, and that in all likelihood would have featured in any solicitors’ letter on the subject.

32.  Third, I think it is highly material that the Supplemental Agreement was signed, and contained terms which are flatly contrary to what the defendants now contend. 

32.1     The Supplemental Agreement contains clear terms to the effect that the tenure of the Loan was to be extended by 1 year, such that it be repayable on 10 August 2025, and that interests would have to be paid monthly.

32.2     The 1^st defendant’s evidence is that he appreciated that the written terms of the Supplemental Agreement were inconsistent with what the plaintiff and him agreed. 

32.3     I think it is unbelievable that the 1^st defendant would have signed a written Supplemental Agreement containing terms materially different from what he was promised on the basis of the 2^nd Representations, without any side letter, note or message recording the true deal.

33.  Both parties have made submissions as to why their respective positions make more commercial sense.  I do not think the arguments on commercial sense would enable me to reach a view one way or another.  Yet I regard the considerations identified above as sufficient for me to come to the view that the defendants’ contentions are factually incredible.

The No Oral Modification Clause

34.  As I understand the position, if the defendants’ factual case were treated as made out on the requisite standard, then Ms Ma’s only legal contention is that that would enable the defendants to contend an estoppel, debarring the plaintiff from resiling from the representations.

35.  The NOM Clause in the Original Agreement has been recited above.  At the hearing, Ms Ma accepted that it does not matter that the NOM Clause is in the Original Agreement but not the Supplemental Agreement.  I think she was right in so doing.  As pointed out by Mr Tang, clause 4.2 of the Supplemental Agreement has the effect of incorporating the NOM Clause into the Supplemental Agreement.

36.  I agree with Mr Tang that:-

36.1     For an oral variation to be effective in the face of a “no oral modification” clause, it will be necessary to show some words or conduct “unequivocally representing that the variation was valid notwithstanding its informality”, and something more would be required for this purpose than the informal promise itself: MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2019] AC 119 §16.

36.2     I think an oral representation or variation which does not satisfy this requirement would not be capable of founding an estoppel.  Such an estoppel would essentially be debarred by the parties’ agreement (i.e. the “no oral modification” clause).

36.3     For an estoppel to arise in such a scenario, it requires the parties to acknowledge in some way the formality requirement but nonetheless choose to go ahead to vary the contract in an informal manner: Chinachem Financial Services Ltd v Century Venture Holdings Ltd [2023] HKCFI 457 §67. 

37.  I agree with Mr Tang that what has been alleged by the 1^st defendant is not sufficient.  He has not alleged that there was an acknowledgement of the formality requirement, and that the parties should nonetheless orally vary the written contract.  What is alleged was merely that the contract should be varied orally, and the writing was just a formality in the sense that it would not be insisted upon.

38.  Ms Ma pointed out in the written submissions that substantial aspects of the revised arrangements were in fact recorded in the Supplemental Agreement. But I do not think that is an answer to the NOM Clause.

No detrimental reliance founding an estoppel

39.  Ms Ma (again rightly in my view) accepted that for an estoppel to arise, she would have to demonstrate reliance by the defendants which would render it inequitable for the plaintiff to go back on its promise: Luo Xing Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1 §55.

40.  Mr Tang rightly pointed out that in the evidence, the only detrimental reliance on the 1^st and 2^nd Representations the defendants had pointed to was the payment of HK$600,000.  But the payment of money could be easily reversed, and would not make it inequitable for the plaintiff to go back on the 1^st and 2^nd Representations (even if they were factually made out).  The plaintiff has given credit for the HK$600,000, and has not included this sum in its claim. 

41.  I agree that this means that there can be no estoppel on the basis of the defendants’ contentions.

42.  For completeness, whilst in submissions Ms Ma had mentioned that the defendants had structured their affairs in reliance on the 1^st and 2^nd Representations, she rightly accepted that there is no evidence to that effect.

43.  For the above reasons, I concluded the defendants have raised no serious issue to be tried.  It follows that I believe the Master was right in entering judgment against the defendants, and disallowing the 2^nd defendant from filing a defence.  I therefore dismissed the defendants’ appeal.