CLOUD ROSY VENTURES LTD v. SUN SHAOFENG AND ANOTHER

CACV 105/2022, [2024] HKCA 250

On Appeal From [2021] HKCFI 1710

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 105 OF 2022

(ON APPEAL FROM HCA NO 35 OF 2020)

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BETWEEN

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J U D G M E N T

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Hon Au JA (giving the Judgment of the Court):

A. INTRODUCTION

1.  By the action herein, the plaintiff claimed against the 1^st defendant (“Mr Sun”) and the 2^nd defendant (“Capital Mate”) the sum of HK$100m and interest of some HK$24m pursuant to a loan receivables transfer agreement dated 6 June 2016 (“the Transfer Agreement”).

2.  On 1 December 2020, the plaintiff applied by summons (“the O14 Summons”) for summary judgment against Mr Sun, which was later heard before Master Lai. By way of an order dated 11 February 2021, Master Lai refused the application and gave unconditional leave to Mr Sun to defend (“the Master’s Order”).

3.  The plaintiff then appealed the Master’s Order to Deputy High Court Judge Winnie Tsui (“the Judge”). After hearing, by way of her written Decision dated 25 June 2021 (“the Decision”) ([2021] HKCFI 1710), the Judge made an order (“the Order”) dismissing the appeal and confirmed the Master’s Order.

4.  This is an appeal brought by the plaintiff against the Order[1]. The plaintiff asks for the Order to be set aside and that judgment be entered against Mr Sun as sought in the O14 Summons, or alternatively that conditional leave be granted to Mr Sun to defend upon payment into court of the sum of HK$100m.

5.  After hearing the appeal, we reserved our judgment to be handed down later. This is what we do now.

B. BACKGROUND

6.  As mentioned above, the plaintiff brought its claim on the Transfer Agreement, which provided essentially that the plaintiff agreed to sell and Mr Sun agreed to buy a loan receivable owed by Keen Wood Group Limited (“Keen Wood”) to the plaintiff for a consideration of HK$100m. It further provided that Mr Sun shall pay the plaintiff the HK$100m together with interest (at 8% per annum) within three years from the date of the agreement (ie, by 5 June 2019).

7.  There is no dispute that the Transfer Agreement was signed by the plaintiff through its sole director, Mr Chan Ka Chung (“Mr Chan”), and Mr Sun on 6 June 2016.

8.  However, the parties have a very different case as to what led to the signing of this agreement. The parties’ respective cases in this respect have been set out in detail by the Judge at [1] - [12] of the Decision, which we would adopt. For the present purposes, we would only need to highlight the following.

B1. The plaintiff’s case

9.  The plaintiff’s case is essentially this[2].

10.  Mr Sun is the chairman, chief executive officer and executive director of China Green (Holdings) Limited (“China Green”), and a well-known wealthy individual in the Mainland.

11.  In May 2016, a Mr Cho Kwai Chee Roy (“Roy Cho”) told Mr Chan about Mr Sun and that Mr Sun was looking to borrow HK$100m and was prepared to pay interest at 8% per annum.

12.  At that time, the plaintiff held a loan receivable owed by Keen Wood, which loan was interest-bearing. As Mr Chan wanted this stream of revenue in the form of interest to continue, he agreed to lend money to Mr Sun.

13.  As a result, the plaintiff entered into the Transfer Agreement with Mr Sun which was signed on 6 June 2016. This was the first time Mr Chan met Mr Sun, but given that Mr Sun was a well-known wealthy man in the Mainland, he was prepared to make the unsecured loan to Mr Sun.

14.  At the same time when the Transfer Agreement was entered into, the plaintiff and Mr Sun also signed in duplicate a receipt in Chinese (還款收據) (“the Receipt”), which provided that the plaintiff acknowledged that Mr Sun had repaid the consideration and interest under the Transfer Agreement, but with the date of receipt left blank. Each party had a signed copy of the Receipt. It is the plaintiff’s case that it issued and signed the Receipt in escrow for “administrative convenience”. The full content of the Receipt is as follows:

“還款收據

1. Rosy Cloud Ventures Limited (「甲方」)；及

2. 孫少鋒，中國身份証號碼 ... 持有人（「乙方」）。

     雙方在2016年6月6日簽訂「債權轉讓協議」。現在甲方確認乙方已於 年 月 日償還所有代價及利息。還款收據一式兩份，雙方各持一份。本補充協議受香港法律管轄，並按香港法律解釋。”

15.  It is common ground that thereafter, Mr Sun gave the relevant payment instruction to IR Resources Ltd (“IRR”)[3] in relation to the loan receivable, which resulted in HK$100m being deposited into Capital Mate’s account on 13 June 2016.

16.  After some inquiries by correspondence were made by IRR between July and September 2019 regarding the Transfer Agreement, the plaintiff through its then solicitors issued a demand letter on 13 December 2019 to Mr Sun and Capital Mate for the payment of the consideration and interest under the Transfer Agreement. Eventually, the plaintiff brought the present claim against them on 8 January 2020.

B2. Mr Sun’s case

17.  In defence to the plaintiff’s claim, Mr Sun’s says he is not liable to pay any sum under the Transfer Agreement as the written terms do not reflect what was indeed agreed between the parties. In support of the defence, Mr Sun’s essential factual case leading to the signing of the Transfer Agreement is as follows[4].

18.  In around May 2016, Mr Sun urgently needed funds outside Mainland China to repay a loan borrowed by Capital Mate. Mr Sun was the guarantor of the loan. The date of repayment was 24 June 2016.

19.  Through the introduction, suggestion and assistance of Roy Cho, Mr Sun orally agreed to perform a foreign currency swap with the plaintiff such that Mr Sun would acquire a HK$100m loan receivable from the plaintiff outside Mainland China, where in return Mr Sun would pay a sum of RMB100m to the plaintiff within Mainland China (“the Oral Currency Swap Agreement”). The difference between the two sums in HK$ and RMB, which amounted to about HK$19m, was service fee for the arrangement. Mr Sun agreed to the significant service fee as, given the time pressure he was under, he had no bargaining power over it.

20.  Pursuant to the Oral Currency Swap Agreement, on or about 12 May 2016, Mr Sun transferred a total of RMB100m to two companies in Mainland China. The instruction of transferring those sums to the two Mainland companies came from Roy Cho. At that time, Mr Sun was under the impression that the plaintiff had designated these two companies as the recipients of the sums and conveyed the instruction to him through Roy Cho[5].

21.  However, in his third affirmation filed on 29 January 2021 in opposing the O14 Summons, Mr Sun stated at paragraph 9 that it was only earlier that month that he managed to get in contact with Roy Cho again and learnt from him that there was a separate agreement between the plaintiff and Roy Cho in April 2016 (“the 2016 Side Deal”), under which the plaintiff had the obligation to pay RMB100m. The plaintiff discharged his obligation under the 2016 Side Deal through Mr Sun’s payment of RMB100m on 12 May 2016 to the two recipient companies, which were in fact designated by Roy Cho. At that time of the payment, Mr Sun was not told by either Roy Cho or the plaintiff about the 2016 Side Deal and Mr Sun had no knowledge of its details.

22.  However, after he had paid the plaintiff the RMB100m as mentioned above, Roy Cho informed Mr Sun that the plaintiff required him to sign a loan receivable transfer agreement for “special operational arrangement” for it to pay HK$100m to Mr Sun under the Oral Currency Swap Agreement. Mr Sun therefore met Mr Chan for the first time in Xiamen for the purpose of signing that agreement. However, when he read the Transfer Agreement, Mr Sun was initially unwilling to sign as by then (6 June 2016) he had already made payment of RMB100m (on 12 May 2016) in discharge of his obligation under the Oral Currency Swap Agreement. Yet the Transfer Agreement contained an express obligation that Mr Sun was still required to pay the consideration. The Transfer Agreement therefore did not reflect reality. After some discussion, in order to alleviate Mr Sun’s concern, the parties signed the Receipt at the same time when they signed the Transfer Agreement. This was an acknowledgement that Mr Sun had in fact already paid the consideration for the HK$100m that the plaintiff would later transfer to him. Given that he had already paid RMB100m under the Oral Currency Swap Agreement, without the Receipt, he would not have agreed to sign the Transfer Agreement.

23.  In the premises, there was a common assumption that the Transfer Agreement did not reflect what was in fact agreed, and the plaintiff is now estopped by convention from claiming the HK$100m and the interest accrued thereunder pursuant to the Transfer Agreement[6]. Alternatively, by signing the Receipt, the plaintiff confirmed that no consideration or interest was owed under the Transfer Agreement and is contractually estopped[7] from claiming otherwise.

C. THE DECISION

24.  As mentioned above, by way of the Decision, the Judge dismissed the plaintiff’s appeal against the Master’s Order in giving unconditional leave to Mr Sun to defend.

25.  The principal reasons for the Judge’s conclusion are these.

26.  Notwithstanding the legitimate doubts raised by the plaintiff on Mr Sun’s factual allegations made in support of his defence[8], given the Receipt and the “vague” explanation by the plaintiff as to why it was signed[9], Mr Sun’s factual case is supported by the Receipt and thus at least believable and there are further factual issues, including the authority of Roy Cho in representing the plaintiff, which ought to be tried. See [77] of the Decision.

27.  In turn, Mr Sun’s said factual case is capable of giving rise to a defence as a matter of law in the form of estoppel by convention. The Judge explained this at [78] and [79] as follows:

“78. I am also satisfied that the 1^st defendant’s factual case is capable of giving rise to a defence as a matter of law in the form of estoppel by convention. According to the evidence, the plaintiff and the 1^st defendant entered into the Transfer Agreement on the common assumption that it did not reflect what was in fact agreed. That common assumption was arguably manifested in the signing of the Receipt by both parties, which effect was to prevent the plaintiff from subsequently enforcing the payment obligation contained in the Transfer Agreement. The plaintiff is now estopped from claiming that the Transfer Agreement reflected what was in fact agreed.

79. That appears to me to be a viable defence as the essential elements of an estoppel by convention as set out in First Laser are arguably satisfied.”

28.  Given these conclusions, the Judge did not find it necessary to deal with the defence of contractual estoppel. She also rejected the plaintiff’s alternative contention that only conditional leave to defend should be given to Mr Sun as she did not find the defence to be a sham one or that the court was prepared very nearly to give judgment for the plaintiff. See [80] and [81] of the Decision.

D. THIS APPEAL

D1. Grounds of Appeal

29.  In the Amended Notice of Appeal (“ANOA”), the plaintiff has raised the following grounds of appeal to say why the Judge was wrong in holding that Mr Sun may rely on estoppel by convention as an arguable defence:

(1) The Judge erred in deciding that the Oral Currency Swap Agreement between the plaintiff and Mr Sun gave rise to an arguable defence in estoppel by convention[10].

(2) The Judge erred in principle in failing to consider all the requirements of estoppel by convention as laid down in First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd (2012) 15 HKCFAR 569 when she found that Mr Sun’s factual case was capable of giving rise to the defence of estoppel by convention[11].

(3) The Judge erred in principle when she ruled that the issue of authority of Roy Cho as the plaintiff’s agent is potentially arguable either way[12].

(4) The Judge erred in principle when considering the Receipt and the remittance records as relied on by Mr Sun[13].

(5) In light of the views expressed by the Judge in [53], [54], [64] - [69] of the Decision, the Judge should have granted only conditional leave to defend[14].

D2. Applicable principles

30.  For the purpose of the present appeal, the parties do not dispute that the following well-established general principles apply to an O14 application and its appeal.

31.  In essence, once the plaintiff is able to show a prima facie case, the defendant bears the burden of showing that there are triable issues and must condescend to give particulars: Ju Yan Di Emperory Genesisy v Yau Wai Han [2015] 1 HKLRD 822 at [14] - [17]; see also White Book 2023 at §14/4/1.

32.  Where a defendant can satisfy the Court that there are circumstances that ought to be investigated, unconditional leave to defend should be granted: Talent Wise Ltd v Cheung Shui Ching [1998] 2 HKLRD 744 p.748 D-E.

33.  Where the appeal from the judge’s refusal to grant summary judgment concerns facts which are held to be triable, it is “exceptional” for the Court of Appeal to disturb the finding. The position is different where questions of law are concerned: Treewell Development Ltd v Tsang Chun Wah [2003] 4 HKC 401 at [10] - [11].

34.  Bearing these principles in mind, we now turn to consider the grounds of appeal.

D3. Discussion

35.  Although the plaintiff has raised the above various grounds of appeal, as rightly submitted by Mr Chan SC for the plaintiff, the focus of the appeal is whether the Judge was correct in holding that Mr Sun may rely on estoppel by convention as an arguable defence. Underlying this conclusion, the Judge held that Mr Sun’s evidence and, importantly, the Receipt, show that there are triable issues on his factual case in relation to the Oral Currency Swap Agreement and Roy Cho’s authority to represent the plaintiff in his dealings with Mr Sun.

36.  In these respects, Mr Chan SC contends that the Judge is plainly in error.

37.  Counsel points out that, relevant to this appeal, the essential elements of an estoppel by convention are these[15]:

(1) The parties entered into some transaction or legal relationship on the basis of an assumption that was shared by or common to them both;

(2) Such assumption was communicated between the parties and acted upon;

(3) D1 would suffer a detriment as a result of having entered into the Transfer Agreement and P is allowed to enforce its terms.

38.  The burden is on Mr Sun to prove there are triable issues on all of these three elements. However, Mr Chan SC submits that, for the following reasons, Mr Sun plainly has failed to discharge that burden[16].

39.  First, it is essential to Mr Sun’s case of estoppel by convention that there existed the Oral Currency Swap Agreement between him and the plaintiff. However, it is common ground that before the signing of the Transfer Agreement on 6 June 2016, Mr Sun had never met Mr Chan of the plaintiff, and had been dealing only with Roy Cho. Further, and crucially, it is not pleaded by Mr Sun in his Defence or mentioned in his evidence that Roy Cho was the plaintiff’s authorised agent in his dealings with Mr Sun, including the entering into the Oral Currency Swap Agreement. In other words, it is not Mr Sun’s pleaded case or evidence that Roy Cho was or acted as the plaintiff’s agent in allegedly entering into the Oral Currency Swap Agreement. There is therefore simply no evidence at all in support of a case that before the Transfer Agreement, there existed the Oral Currency Swap Agreement which was made between Mr Sun and the plaintiff.

40.  Further, other than that there is no positive case or evidence to allege that Roy Cho was the plaintiff’s authorised agent in his dealings with Mr Sun in relation to the Oral Currency Swap Agreement, Mr Sun’s own evidence indeed shows that he was not:

(1) It is now Mr Sun’s own evidence that the payment of RMB100m in May 2016 was made to the two Mainland companies designated by Mr Cho, but not the plaintiff.

(2) The relevant payment remittances also stated clearly that those were in relation to payments for goods and had nothing to do with “currency swapping” as alleged to be the nature of the agreement with the plaintiff.

41.  Second, once there cannot be a case or evidence that there was the Oral Currency Swap Agreement between Mr Sun and the plaintiff, there also cannot be any arguable case that there was a common assumption between the plaintiff and Mr Sun that the Transfer Agreement did not reflect what was in fact agreed. In particular, it is not Mr Sun’s evidence that he communicated the existence of the Oral Currency Swap Agreement to Mr Chan when they met for the first time on 6 June 2016.

42.  In this respect, Mr Chan SC has further repeatedly emphasized in his oral submissions that Mr Sun’s payment of RMB100m is in any event “past consideration” and cannot assist his defence. This is so as:

(1) The two Mainland entities which allegedly received Mr Sun’s payment of RMB100m on 12 May 2016 were, on Mr Sun’s own admission[17], designated by Roy Cho and not the plaintiff. Accordingly, there is no way in which the plaintiff may be said to be involved in or benefited from those payments.

(2) These payments were made a month before the conclusion of the Transfer Agreement and cannot constitute consideration for the making of the Transfer Agreement as it would be past consideration.

(3) These payments therefore plainly cannot constitute evidence corroborating the existence of the Oral Currency Swap Agreement or showing that the plaintiff shared a common assumption that the true nature of the transaction was a currency swap.

43.  Third, for the same above reasons, Mr Sun cannot show by way of any evidence of an arguable case that he had suffered any detriment in entering into the Transfer Agreement by reason of his payment of RMB100m under the Oral Currency Swap Agreement.

44.  Finally, Mr Chan SC says the Receipt cannot assist Mr Sun’s case as:

(1) As a matter of principle, a documentary receipt in law is never conclusive. Its effect and nature must be dependent on its terms objectively understood against the factual context when it is signed.

(2) In the present case, the Receipt itself is ambiguous as the date of receipt of the payment was left blank.

(3) Further, the Receipt was signed on 6 June 2016 together with the Transfer Agreement, the Receipt therefore itself cannot support or show any prior communication or common assumption between the plaintiff and Mr Sun when they were not in contact, nor does it show or corroborate Roy Cho’s authority to represent the plaintiff as, for the above reasons, it was never Mr Sun’s case or evidence that Roy Cho was the plaintiff’s authorised agent.

(4) Given that there cannot be any issue of Roy Cho acting as the plaintiff’s agent in his dealings with Mr Sun, there is also no possibility of proving that there is the Oral Currency Swap Agreement between the plaintiff and Mr Sun. It would therefore defy logic to regard the Receipt as evidence of a common assumption that the Oral Currency Swap Agreement existed. This is particularly so when the plaintiff has provided good reasons to explain why the Receipt was signed as an escrow arrangement[18].

45.  In the premises, Mr Chan SC submits that the Judge was plainly incorrect in holding that there are triable issues on Roy Cho’s authority and Mr Sun’s defence of estoppel by convention.

46.  With respect to Mr Chan, we are not persuaded by these submissions.

47.  Central to Mr Chan SC’s above submissions are the following two fundamental contentions:

(1) Given that it is neither Mr Sun’s pleading nor evidence that Roy Cho was the plaintiff’s authorized agent, he simply cannot raise any arguable case that there was the Oral Currency Swap Agreement between himself and the plaintiff or that that agreement had been communicated to the plaintiff before the Transfer Agreement was signed. Without this, Mr Sun has no arguable case to prove the essential underlying elements of common assumption, communication of that assumption and detriment in support of the defence of estoppel by convention.

(2) In this respect, the Receipt cannot even arguably support Mr Sun’s factual case that there was the Oral Currency Swap Agreement between the plaintiff and Mr Sun because the Receipt on its own is ambiguous and the plaintiff has provided a good reason to explain why the Receipt was signed.

48.  Insofar as the first contention is concerned, for the following reasons, we do not accept that Mr Sun’s evidence and Defence do not give rise to the issue of Roy Cho’s authority to represent the plaintiff in entering into the Oral Currency Swap Agreement.

49.  First, Mr Sun pleaded at paragraph 5.2 of the Defence in relation to the Oral Currency Swap Agreement (defined as the Exchange Agreement in the pleading) as follows:

“On the introduction, suggestion and arrangement of [Roy Cho], the Plaintiff and the 1^st Defendant [Mr Sun] agreed orally that the 1^st Defendant would acquire a HKD100 million loan receivable from the Plaintiff outside Mainland China in consideration for the sum of RMB 100 million paid by the 1^st Defendant to the Plaintiff within Mainland China (the ‘Exchange Agreement’).”

50.  In reply to this specific plea, the plaintiff pleaded at paragraph 4.13 as follows:

“4.13 As to Paragraph 5.2 specifically, the Plaintiff denies that there was any or any oral Exchange Agreement between the Plaintiff and the 1^st Defendant whereby the 1^st Defendant would acquire the Loan Receivables of HKD 100 million from the Plaintiff outside Mainland China in consideration for the sum of RMB 100 million paid by the 1^st Defendant to the Plaintiff or its order within Mainland China whether as alleged or at all. It is further denied that Cho Kwai Chee Roy had suggested, arranged and/or otherwise facilitated the alleged oral Exchange Agreement between the Plaintiff and the 1^st Defendant. The Plaintiff avers as follows:

4.13.1 The only agreement between the Plaintiff and the 1^st Defendant was the written Loan Receivables Transfer Agreement and the Undated Receipt as pleaded in paragraph 4.9 herein signed by both parties in Xiamen on 6 June 2016.

4.13.2 There was no prior agreement, whether written or oral, concluded between the Plaintiff and the 1^st Defendant before the execution of the written Loan Receivables Transfer Agreement on 6 June 2016.

4.13.3 The Plaintiff has never been involved in providing or facilitating foreign currency swaps.

4.13.4 The Plaintiff has never authorised Cho Kwai Chee Roy or any other person or companies to make any proposal for any foreign exchange swap arrangement. Until after the commencement of the proceedings herein, the Plaintiff has never heard of any suggestion of any foreign exchange swap agreement entered or to be entered between the Plaintiff and the 1^st Defendant.” (emphasis added)

51.  It is plain that, in reply to Mr Sun’s plea as to how the Oral Currency Swap Agreement was entered into through the “introduction, suggestion and arrangement” of Roy Cho, the plaintiff itself regarded and understood Mr Sun’s case as asserting that the plaintiff through Roy Cho entered into the agreement with Mr Sun, and hence its reply at paragraph 4.13.4 denying it had ever authorised Roy Cho to propose the foreign exchange swap arrangement. The issue of Roy Cho’s authority has thus been plainly raised by Mr Sun and the plaintiff through the pleadings.

52.  Similarly, in response to Mr Sun’s evidence that there was the Oral Currency Swap Agreement between the plaintiff and himself, Mr Chan deposed to at paragraphs 11 - 13 of his 3^rd Affirmation as follows:

“11. I note that the 1^st Defendant had made repeated references to the dealings he had with Mr. Cho as a ‘middleman’ (‘中間人’) (§11 of Sun 3^rd).

12. I should make clear that the Plaintiff has never authorised Mr. Cho to act on its behalf, or represented to the 1st Defendant that Mr. Cho had authority to act on its behalf. I note that this is consistent with 1st Defendant’s evidence, where he admitted that (§§11 of Sun 3^rd):

(a) His only interaction with the Plaintiff occurred on the date of signing (‘當時本人與原告人並沒有什麼接觸，主要倚賴曹貴子先生作為中間人進行聯絡。本人只是在2016年6月6日簽約當日與原告人的授權代表寒暄了一番...’)

(b) The instruction to pay the two Shenzhen Companies came from Mr. Cho, rather than the Plaintiff (‘... 本人一直以為匯款給指定帳戶是原告人的指示，直至曹貴子先生告知本人上述第9段的新資料，本人才意識到指定帳戶應該是曹貴子先生本人的指示...’)

13. All these inconsistencies demonstrate that the alleged payment of RMB 100 million and the payment receipts had nothing to do with the Agreement. In the premises, I verily believe and am advised that whatever arrangement/understanding which may have been reached by the 1^st Defendant and Mr. Cho was a matter between themselves. Such arrangement/understanding (if any) could not and does not bind the Plaintiff and cannot affect the 1st Defendant’s contractual obligation to the Plaintiff under the Agreement which he had signed and which he does not dispute to be valid and effective.” (emphasis added)

53.  As rightly submitted by Mr Sussex SC for Mr Sun, the description of Roy Cho by Mr Sun in his evidence as “中間人” when understood in its context as a whole must cover the assertion that he was acting for the plaintiff in proposing and entering into the Oral Currency Swap Agreement. Again, the plaintiff itself has also so regarded Mr Sun’s evidence to be implicating that Roy Cho was acting as the plaintiff’s agent and thus sought to rebut the same through these parts of its evidence. The issue of Roy Cho’s authority has also been clearly raised by the parties in evidence.

54.  We therefore reject Mr Chan’s contention that there is simply no issue of Roy Cho’s authority to represent the plaintiff in his dealings with Mr Sun. In other words, Mr Chan’s submission that Mr Sun simply cannot raise any arguable case on his own evidence or pleading that there was the Oral Currency Swap Agreement between Mr Sun and the plaintiff is incorrect and must be rejected.

55.  Insofar as the second contention is concerned, the mere fact that the Receipt was signed at the time of the Transfer Agreement objectively lends support to Mr Sun’s case that he would not agree to sign the Transfer Agreement as he had already paid RMB100m for receiving the HK$100m from the plaintiff and the plaintiff was aware of this, as rightly observed by the Judge at [55] - [58] of the Decision as follows:

“55. On the other hand, the Receipt is arguably a significant piece of contemporaneous document which goes to support a material part of the 1^st defendant’s case. It is indisputable that the Receipt was signed by the parties on the same day as the Transfer Agreement. That would appear to be the only occasion when the 1^st defendant met with Chan. The Receipt on its face corroborates the 1^st defendant’s explanation as set out in paras 40 to 43 above.

56. While he would on the face of the Transfer Agreement take up an express obligation to pay the consideration and interest in the future, he would not in reality be exposed to any risk of enforcement of such contractual term since he held the Receipt in his hand which signifies the discharge of such obligation. Hence the Receipt fits in with his case that he did not want to sign the Transfer Agreement initially but eventually proceeded to sign it as the plaintiff’s signing of the Receipt helped to address his concern.

57. The significance of the Receipt in the present application is that the 1^st defendant’s explanation is not based on his bare assertion but is arguably supported by a piece of contemporaneous document.

58. There is of course the question as to why the date of receipt was left blank in the Receipt. The 1^st defendant has provided an explanation to that which, in my view, is not liable to be dismissed out of hand as incredible.”

56.  Hence, unless the plaintiff can provide a plainly credible explanation or reason why it issued and signed the Receipt even before receiving any payment of the consideration and interest from Mr Sun under the Transfer Agreement, the Receipt must constitute an objective contemporaneous documentary evidence (issued by the plaintiff itself) which prima facie supports Mr Sun’s factual case and defence of estoppel by convention.

57.  In this respect, the plaintiff’s explanation for its issue of the Receipt was that this was done in escrow for “administrative convenience” as deposed to by Mr Chan at paragraph 24 of his 3^rd affirmation as follows:

“24. As to the 1^st Defendant’s allegation that it was commercially unwise to sign an undated repayment receipt (§15 of Chan 2^nd), I disagree and reiterate what I have said previously (§12(g) of Chan 2^nd). I also wish to note that:

(a) As I have said before, I considered it to be common practice for parties to a financing transaction to sign undated documents in advance (e.g. share charges, bought and sold notes) for administrative convenience.

(b) To me, whether the 1^st Defendant has or has not repaid the loan would obviously be determinable by actual evidence of payment, such as a remittance or a cheque. I did not consider that merely providing the 1^st Defendant with an undated receipt could be used to take the place of actual evidence of payment.

(c) The wordings of the receipt were contradictory to the 1^st Defendant’s case that what he agreed to was a currency swap transaction. For a start, the undated document did not record or evidence a currency swap. Instead, the undated receipt clearly refers back to the Agreement, which provides for a repayment of the Principal and Interest in 3 years’ time (SoC §6). The reference to repayment of Principal and Interest is inexplicable on the 1^st Defendant’s case, since his evidence was that the whole transaction was a currency swap and the agreed consideration had been paid in full prior to signing (in which case, no principal or interest would have been payable).

(d) I did not see any issue with this because of the reasons given in (a) and (b) above and because the repayment date was left blank, and each party signed and retained one copy, which prevents the 1^st Defendant from making improper alterations (e.g. unilaterally filling in the repayment date and alleging that repayment had been made).”

58.  However, as submitted by Mr Sussex, this explanation is far from satisfactory which renders the reason for the signing of the Receipt as triable, as again rightly observed by the Judge at [61] and [62] of the Decision (which we fully agree and adopt):

“61. In my view, it has to be said that the plaintiff’s explanation of ‘administrative convenience’ is a little vague. The signing of a receipt is usually for the benefit of the paying party. It is so that he would have in his hand direct proof from the receiving party that a payment has been made. In the present case, why would the plaintiff be prepared to sign the Receipt in advance of payment for the benefit of the 1^st defendant? In the context of a loan transaction (which is in effect what the Transfer Agreement was about on the plaintiff’s own case), how often would one come across a lender who is prepared to sign a receipt in advance and allow the borrower to hold on to the signed copy for ‘administrative convenience’?

62. It is not for me to answer these questions now. As regards the circumstances in which the Receipt was signed, when one juxtaposes the 1^st defendant’s explanation with the plaintiff’s, it is clear to me that the rival factual cases can only be resolved at trial when the evidence will be tested by cross-examination. The 1^st defendant’s case on this point is not incapable of belief and cannot be rejected outright summarily.”

59.  For all the above reasons, the Judge was plainly right after assessing the evidence before her in concluding that there are triable issues regarding (a) Mr Sun’s factual case on the Oral Currency Swap Agreement, including the authority of Roy Cho to represent the plaintiff in his dealings with Mr Sun, and (b) the reasons why they signed the Transfer Agreement and the Receipt, which in turn may support the defence of estoppel by convention.

60.  In the premises and for the same reasons, the Judge was also plainly right in refusing to give conditional leave to Mr Sun to defend as she did not find the defence to be shadowy or if the case is almost one in which summary judgment should be ordered.

61.  All the grounds of appeal therefore fail.

E. DISPOSITION

62.  We dismiss the appeal.

63.  There is no reason why costs should not follow the event. We therefore further make an order nisi that costs of the appeal be to Mr Sun, with certificate for two counsel, which will be summarily assessed. Mr Sun shall lodge and serve his statement of costs within 7 days of today and the plaintiff shall lodge and serve its reply written comments (not more than 1 page) within 7 days thereafter. Unless otherwise directed, the summary assessment will be conducted on paper.