YANG YUEGUANG v. DRAGON HILL DEVELOPMENT LTD AND ANOTHER

HCA 2120/2019

[2025] HKCFI 6193

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 2120 OF 2019

________________________

________________________

________________________

D E C I S I O N

________________________

Introduction

1.  This is the Defendants’ appeal against the order by Master Grace Chow dismissing their summons (“Summons”)  to strike out the Writ of Summons, Statement of Claim (“SOC”)  and Reply pursuant to RHC O.18 r.19(1)(a), (b)  and (d)and inherent jurisdiction of the Court. 

2.  The Defendants’ sole ground for striking out is on limitation. 

The Parties’ cases

3.  The following is the Plaintiff’s pleaded case, as summarized in the Plaintiff’s skeleton submission:-

(1)  In or about 2006, the Plaintiff (“P”)  lent a sum of HK$1.2 million (“the 1^st Loan”)  to the 1^st Defendant (“D1”)  and the late Mr Lee Shing (“Deceased”)  signed a loan agreement/loan receipt on 22^nd March 2006 promised to bear the liability of the 1^st Loan. 

(2)  In about July 2009, P paid a sum of HK$6 million (“the 2^nd Loans and/or Bogus Investment”)  in favour of D1 for acquiring 50,000,000 shares of Stock No. 8299 at HK$0.1 per share (i.e. HK$5,000,000)  and making an additional loan of HK$1 million to D1.

(3)  As the Deceased failed to issue the said 50,000,000 shares to P and failed to repay HK$4,672,386.80 for the said shares (which was a promise made by the Deceased to P in August 2010), the Deceased in 2014 agreed (the “2014 Agreement”)  that P could appropriate RMB 1.26 million for partial repayment of the HK$7.2 million, being the total principal of the 1^st Loan and the 2^nd Loans and/or Bogus Investment (“the Loans”)  of which HK$1 million was for settling part of the principal and HK$480,000 for settling part of the interests.  Regarding the balance of HK$6.2 million, D1 and/or the Deceased agreed to pay interest at the rate of 8% per annum. 

(4)  As D1 and/or the Deceased failed to pay for the balance of HK$6.2 million and the interests, P claimed for payment of the said outstanding balance of HK$6.2 million and interests at 8% per annum. 

4.  It is the Defendants’ case that P had been collecting rentals from certain real properties for the Deceased and the return from D1’s investment in Mainland for D1.  The Defendants do not dispute the existence of the payments of HK$1.2 million and HK$6 million from P to D1 in 2006 and 2009 but allege that they were for accounting of rentals and investment returns received by P for the Deceased and D1. 

5.  The Defendants also contend that pursuant to s4(1)(a)  of the Limitation Ordinance (Cap. 347)(“LO”), the limitation period for recovery of such alleged loans expired after 6 years, i.e. in 2012 and 2015 respectively.  As P only commenced this action in November 2019, P’s claims are time barred. 

6.  In response to the defence on limitation, P pleaded in the Reply that “The Plaintiff avers that there was ongoing discussions and negotiations and partial repayment by the Defendants … and therefore the Plaintiff’s claim is not time barred as alleged”. 

7.  It is the Defendants’ submission that P has failed to discharge the burden in showing that there were part payments by D1 of the Deceased in 2014 in respect of the alleged loans which would have given rise to a fresh accrual of the cause of action under s23(3)  of the LO.  The Defendants argued that P has failed to specify in his answer to their request for further and better particulars exactly how and when the alleged partial payments were agreed, other than suggesting that the oral agreement was made some time in 2014. 

8.  In his affirmation in opposition to the Summons, P stated that the 2014 Agreement was reached in July 2014 and pursuant to the agreement P and his wife received a total sum of RMB1,845,922 in the period between 22 September 2014 and 19 November 2017 from an employee of D1 named Lam Cheung Chi (“Mr Lam”). 

The Relevant Law

9.  The legal principles on striking out is trite.  It is only in plain and obvious cases that the court should exercise its summary powers to strike out any writ or pleading under O.18 r.19[1]. 

10.  Whilst it is for the party seeking to strike out the pleading to demonstrate a plain and obvious case, once a limitation defence is raised, the onus is on the plaintiff to prove that the cause of action relied upon accrued within the limitation period[2]. 

11.  However, for the purpose of resisting a striking out application, the burden is discharged by showing that it is arguable that the claim falls within the limitation period, without actually proving on balance of probability that the claim indeed falls within the limitation period[3]. 

Discussion

12.  For the purpose of the present application, the only issue is whether P has shown an arguable case that part payment(s)  of the Loans had been made to P by the Defendants that gave rise to a fresh accrual of P’s cause of action. 

13.  As P commenced this action on 18^th November 2019, any part payment made in respect of the Loans after 19^th November 2013 will give rise to a fresh accrual of the action and render it within the limitation period. 

14.  Thus, if the evidence adduced by P can show that it is reasonably arguable that part of the RMB1,845,922 he or his wife received from Mr Lam in the period between 22 September 2014 and 19 November 2017 represented a repayment of the Loans, P’s claim should not be struck out. 

15.  Mr Norman Nip SC[4], counsel for the Defendants, submitted that P has failed to discharge the burden in establishing that his claims fall within the limitation period.  Mr Nip argued that:

(i)  the only documentary evidence adduced by P in support is the bank statements which only show certain remittances from Mr Lam to P or P’s wife in the period without showing the nature of the remittances;

(ii)  it is P’s own evidence that Mr Lam’s payments are not entirely for the purpose of partial repayment of the Loans but also cover “repayments of other loans” and  P did not identify which of those deposits represented partial repayments of the Loans;

(iii)  P’s case on the purported part payment is inherently contradictory in that P’s pleaded case is that by the time of 2015, HK$1 million under the Loans had already been settled but the evidence adduced by P showed that the bulk of Mr Lam’s payments was made in 2016 and 2017 and a substantial part of the HK$1 million had not been repaid; and

(iv)  P’s case advanced in this action is diametrically opposite to the position he adopted in the PRC legal proceedings relating to the Mainland Properties. 

16.  Before dealing with Mr Nip’s arguments, I must stress that this court should not embark on a mini-trial on disputed facts in a striking out application.  Further, it is trite that disputed facts should be taken in favour of the party sought to be struck out.

17.  Regarding the first argument of Mr Nip, in my view, while the bank statements themselves cannot be persuasive evidence to prove part payments, they are nonetheless strong evidence proving that certain sums had been remitted by Mr Lam to P or P’s wife during the relevant period of time.  It would be for the trial court to decide whether P’s evidence is to be believed that some of them were part payments of the Loans. 

18.  For the second argument, as all the remittances were made after 19^th November 2013, for the purpose of the issue of limitation it is not necessary for P to show exactly which sum(s)  represented the part payment(s)  as any sum paid in respect of the Loans can give rise to a fresh accrual of P’s cause of action.  The fact that P did not identify which of the deposits represented partial repayments is not essential. 

19.  As regard the third argument, as submitted by Mr Victor Chiu, counsel for P, it is in fact not P’s pleaded case that the HK$1 million had been paid before 2015.  The pleaded case of P can be read to mean that the parties agreed to settle HK$1 million out of the Loans by allowing P to appropriate RMB 1,260,000 from the rentals or investments collected by P for the Deceased.  P did not explicitly plead that the HK$1 million had been paid before 2015. 

20.  Concerning the PRC proceedings, it is Mr Nip’s submission that P testified in the PRC proceedings that the Deceased never repaid him the HK$1.2 million loan in over 10 years (“李誠借了我120萬元己經十幾年，但現在他都不還款。”).  Mr Nip submitted that P’s position in the PRC proceedings shows that any alleged appropriation of the rentals would have been done by P and not Mr Lam and that such appropriation had nothing to do with the alleged 2014 agreement for partial repayment of the Loans. 

21.  I agree that P’s position in the PRC proceedings is in some way contradictory to his case in the present case in that he did not mention in the PRC proceedings the alleged repayments of the Loans in his evidence on appropriation of rents.  However, I am of the view that such inconsistency is not sufficient to make P’s evidence in the present case unbelievable, or with no reasonable chance of being believed by the trial court.  Furthermore, the Chinese phrase “但現在他都不還款” does not necessarily mean “the Deceased never repaid”.  It can also mean he did not repay the outstanding sum. 

22.  In my view, P’s case on part payment of the Loans is reasonably arguable and therefore, I agree with Master Chow that this is not a plain and obvious case to be struck out. 

23.  The Defendants’ appeal against Master Chow’s decision is dismissed. 

24.  I make a costs order nisi that costs of this appeal be to P to be taxed if not agreed. This costs order nisi will become absolute unless parties apply to vary within 14 days.