THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD v. LAU KIM AND OTHERS

HCMP 663/2025

[2026] HKCFI 995

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 663 OF 2025

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D E C I S I O N

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I.  INTRODUCTION

1.  Before me are:-

(1)  The Notice of Appeal filed by the 2^nd Defendant on 21 November 2025 (the “Notice of Appeal”) in respect of Master Isaac Chan’s Order (“Master Issac Chan’s Order”) against him made on 5 November 2025; and

(2)  The Summons filed by the Plaintiff on 8 January 2026 (the “D2’s Summons”) seeking:-

(a)  Leave to appeal per the draft amended Notice of Appeal thereto out of time; and

(b)  Retrospective leave to file D2’s 2^nd Affirmation (as defined below) and D2’s Chan Affirmation (as defined below).

II.  BACKGROUND

2.  The 1^st and 2^nd Defendants were joint registered owners of the property known as Unit No. A1 on Ground Floor, Block A, Fortune Factory Building, No.40 Lee Chung Street, Hong Kong (the “Property 1” defined in the case title, and since Property 1 is the only subject property in this appeal, for convenience, I shall refer to it as the “Property”). On 10 December 2019, the 1^st and 2^nd Defendants executed a mortgage (the “Mortgage”) as mortgagors over the Property in respect of all monies to be advanced by the Plaintiff (the “Bank”) to N1 Auto Mechanic Limited (the “Borrower”).

3.  Around the same time of the execution of the Mortgage, the 1^st and 2^nd Defendants signed a letter (the “Letter of Surety”) under the Bank’s letterhead addressed to them, stating, among others:-

“[The Borrower] has told the Bank that you may be prepared to provide the Security for the liabilities of [the Borrower] to the Bank…

THE BANK RECOMMENDS THAT YOU SEEK INDEPENDENT LEGAL ADVICE FROM YOUR OWN SOLICITOR BEFORE SIGNING THE SECURITY OF YOUR CHOICE. YOU HAVE ADVISED THE BANK THAT YOU WISH TO SIGN THE SECURITY AT THE BANK’S SOLICITOR’S OFFICE RATERH THAN INSTRUCTING YOUR OWN SOLICITOR. BECAUSE YOU HAVE CHOSEN THIS OPTION, IN ACCORDANCE WITH GUIDANCE ISSUED BY THE HONG KONG ASSOCIATION OF BANKS AND THE LAW SOCIETY OF HONG KONG, THE BANK IS OBLIGED TO PROVIDE YOU WITH CERTAIN INFORMATION AND WARNINGS.

Enclosed with this letter are:-

1. Warning Notice in duplicate. Please read the Warning Notice carefully. If you wish to proceed with signing the Security at the Bank’s solicitor’s office, please sign and return the Bank the duplicate Warning Notice;

2. a copy of Facility Letter.

…

Please contact [name of individual solicitor at law firm]…to make an appointment to attend the solicitor’s office, taking this letter and all its enclosures with you, and sign the Security of your choice. The Bank is obliged to advise you that it will be asking [name of law firm] for a certificate confirming that (i) you fully understand the Security of your choice, and the practical implications that granting the Security of your choice will have for you and (ii) you willingly sign the Security of your choice in the present of a solicitor from [name of law firm]. The Bank will rely upon this certificate so that once you have signed the Security of your choice you will not be able to dispute that you are legally bound by the Security.

…

Please kindly sign and return the duplicate of this letter to [the Bank]…to signify your understanding and agreement to the contents of this letter.” (original emphasis)

4.  The 1^st and 2^nd Defendants also signed an explanatory notes (the “Explanatory Notes”), explaining in both English and Chinese, among others, that:-

“1. The Mortgage secures all debts and liabilities…[of] the Borrower against the [Property]…

6. The Mortgage also makes [the 1^st and 2^nd Defendants] liable for the Borrower’s debts…

I/We confirm that I/we have read the above and the Mortgage and I/we understand the terms of the Mortgage. I/We understand that this Explanatory Notes does not explain all the clauses in the Mortgage, but only the main clauses. If I/we sign the Mortgage without legal advice I/we acknowledge that the Bank has recommended that I/we seek independent legal advice. I/We am/are willing to sign the Mortgage. I/We understand the Mortgage means that the Bank may sell the Property to repay the Borrower’s debts to the Bank, and makes me/us personally liable for all the Borrower’s debts without limit where the Mortgage is an Unlimited Mortgage or, where the Mortgage is a Limited Mortgage, up to the specified sum as described therein.”

5.  The 1^st and 2^nd Defendants also signed a warning notice (the “Warning Notice”) stating:-

“2. Before you sign the mortgage and the other security documents which you have to sign if you go on with the transaction, you should instruct a solicitor to protect your interests and to ensure that your rights… are properly protected.

3. YOU ARE RECOMMENDED TO INSTRUCT YOUR OWN SOLICITOR who will be able at every stage of the transaction to protect your interest and to give you independent legal advice.

…

7. You also have the choice not to proceed with the transaction in connection with the facilities to be granted to the Borrower.

8. Please think carefully before deciding whether to instruct your own independent solicitors… and whether to proceed with the transaction. You are free to choose whichever option you prefer.”

6.  On 12 October 2020, the Borrower and the Bank entered into a Business Card Facility Letter. By that facility, the Bank provided to the Borrower a business card facility up to a limit of HK$300,000.

7.  On 14 November 2022, the Borrower and the Bank entered into a General Banking Facility Letter (subsequently amended and supplemented by a facility letter dated 25 January 2024 (the “2024 Facility Letter”)). In the 2024 Facility Letter, the 2^nd Defendant was described as “Manager” of the Borrower.

8.  The facility consisted of the following:-

(1)  Property Mortgaged Loan I up to a limited of HK$7,451,787.98;

(2)  Property Mortgaged Loan II up to a limited of HK$3,311,908.07;

(3)  Property Mortgaged Loan III up to a limited of HK$1,572,959;

(4)  Property Mortgaged Loan IV up to a limited of HK$304,646;

(5)  Term Loan up to a limit of HK$3,395,651; and

(6)  Overdraft facilities.

9.  On 8 January 2025, the Bank issued a demand letter to the Borrower for a total sum of HK$17,662,587.66, and on 9 January 2025, the Bank issued a demand letter to each of the 1^st and 2^nd Defendants under the Mortgage, demanding the same amount.

10.  On 30 April 2025, the Bank issued the Originating Summons (the “Originating Summons”), with supporting affirmation, against, among others, the 1^st and 2^nd Defendants for payment under the Mortgage and vacant possession of the Property.

11.  On 24 June 2025, the 2^nd Defendant filed his 1^st affirmation in opposition (“D2’s 1^st Affirmation”), and on 6 August 2025, the Plaintiff filed its affirmation in reply.

12.  At the directions hearing on 12 August 2025, Master CK Chan entered judgment against the 1^st and 3^rd Defendants, and adjourned the claim against the 2^nd Defendant for substantive argument before a Master.

13.  The substantive hearing was to take place on 5 November 2025. Just two weeks before the hearing, on 22 October 2025, the 2^nd Defendant filed a summons (the “Evidence Summons”) for leave to file two further affirmations (namely, the 2^nd Defendant’s 2^nd Affirmation (“D2’s 2^nd Affirmation”) and the 1^st Affirmation of Chan Oi Mei (“D2’s Chan Affirmation”)).

14.  Upon hearing submissions from the parties, at the substantive hearing before Master Issac Chan on 5 November 2025, the learned Master dismissed the Evidence Summons, and entered judgment against the 2^nd Defendant.

15.  The time limit for appeal expired on 19 November 2025. On 21 November 2025, the 2^nd Defendant filed Notice of Appeal against the learned Master’s judgment against the 2^nd Defendant. Notably, the Notice of Appeal mentions nothing about time extension and nothing about the dismissal of the Evidence Summons.

16.  Only by D2’s Summons the Plaintiff did apply for leave to appeal out of time per the draft amended Notice of Appeal. The draft amended Notice of Appeal still does not mention anything about the dismissal of the Evidence Summons. However, in D2’s Summons, the 2^nd Defendant also seeks retrospective leave to file the very same affirmations in the Evidence Summons.

17.  Given that the Notice of Appeal was filed only 2 days late, although I do not accept the 2^nd Defendant’s explanation as valid explanation that there was change of legal team and he acted in person for some time after Master Issac Chan’s Order, I am prepared to consider the substantive of the merits. Further, although the Notice of Appeal and the draft amended Notice of Appeal do not mention anything about the dismissal of the Evidence Summons but instead the 2^nd Defendant seeks retrospective leave to file D2’s 2^nd Affirmation and D2’s Chan Affirmation, I am prepared to consider this application as also an appeal against the dismissal of the Evidence Summons, and for that purpose, as I indicated to Mr Vincent Li (leading Mr Enoch Fong), counsel for the 2^nd Defendant, and Ms Valerie Kwok, counsel for the Bank, I am prepared to consider these two affirmations on de bene esse basis.

III.  DEFENCE

18.  With the usual documents entered into, there is no dispute that the Bank has a prima facie case against the 2^nd Defendant. The question is whether the 2^nd Defendant has raised any arguable defence or triable issues against the Originating Summons.

19.  The 2^nd Defendant raises the defence of undue influence and misrepresentation by the 1^st Defendant.

IV.  UNDUE INFLUENCE

20.  To establish undue influence, the 2^nd Defendant carries the burden to prove that:-

(1)  There was undue influence on the 2nd Defendant at the time of executing the Mortgage;

(2)  The Bank was put on notice of the undue influence; and

(3)  The Bank failed to take reasonable steps to discharge the notice.

See Wing Hang Bank Limited v Liu Kam Ying and Others [2002] 2 HKC 57 at §17 per Ma J (as he then was).

21.  In the present case, the 1^st and 2^nd Defendants were not in any category of presumed influence. The 2^nd Defendant’s evidence to establish actual undue influence exerted by the 1^st Defendant is:-

(1)  “I knew the 1^st Defendant since about 1997 through the referral of friends. We worked in the same industry of auto repair and have common interests. We therefore maintained friendship and close relationships for over 20 years before execution of the [Mortgage]”: D2’s 2^nd Affirmation §3. In this regard, Mr Li submits that the 2^nd Defendant was not in commercial relationship with the 1^st Defendant, and that the 2^nd Defendant had many years of trust in the 1^st Defendant. However, there is evidence on this. Instead, while he is in such a position to say that he was not in any commercial relationship and that he reposed such trust in the 1^st Defendant, he has not said so even in D2’s 2^nd Affirmation.

(2)  The fact that the 1^st and 2^nd Defendants jointly owned the Property. Mr Li submits that this means that they were in some kind of relationship, although he is not able to really say what relationship it was. Further, there is no evidence as to the circumstances of the acquisition of the Property, while the 2^nd Defendant is in a position to depose to the same.

(3)  The fact that the Mortgage was disadvantageous to the 2^nd Defendant given that the 2^nd Defendant was neither a director nor a shareholder of the Borrower. He denies that he was “Manager” of the Borrower as stated in the 2024 Facility Letter.

(4)  The fact that the 2^nd Defendant did sign the Mortgage as the 1st Defendant asked him to without any good reason but to the 2^nd Defendant’s disadvantage means that the 2^nd Defendant was unduly influenced.

22.  In the absence of any credible evidence that the 2^nd Defendant reposed trust in the 1^st Defendant and any influence (let alone undue) exerted by the 1^st Defendant over the 2^nd Defendant, and in the absence of any credible evidence that the 2^nd Defendant had no commercial relationship with the 1^st Defendant, irrespective of the apparent disadvantage to the 2^nd Defendant, I am not satisfied that there is any arguable defence and triable issue on the existence of undue influence by the 1^st Defendant on the 2^nd Defendant.

23.  This should be sufficient for me to dismiss the defence of undue influence. In any event, assuming that there was actual undue influence, for the following reasons, I am not satisfied that the Bank was put on inquiry of the undue influence:-

(1)  From the Bank’s perspective, the 2^nd Defendant was described as “Manager” in the 2024 Facility Letter. This would explain away any apparent disadvantage to the 2^nd Defendant.

(2)  Further, the 2^nd Defendant was not in any special relationship with the 1^st Defendant where the Bank would have any clue to think that the 2^nd Defendant reposed such trust and confidence in the 1^st Defendant that the 2^nd Defendant would be unduly influenced by the 1^st Defendant.

(3)  Mr Li highlights that the Bank instructed its solicitors to use standard letters and forms for cases where there was undue influence or suspected undue influence for the 1^st and 2^nd Defendants to sign, and submits that this shows that the Bank must have known that there was undue influence, for otherwise the Bank would have instructed its solicitors simply to use those standard letters and forms for cases where there was no undue influence at all. In my view, the Bank cannot be blamed for doing more than doing less, when doing more would not harm any persons but would afford better protection while doing less would put the Bank at risk. In the present circumstances, I do not think Mr Li’s submissions would help the 2^nd Defendant at all.

24.  In any event, I am satisfied that the Bank took reasonable steps:-

(1)  The Letter of Surety, the Explanatory Notes and the Warning Notice all clearly explained the nature of the Mortgage the 2^nd Defendant was going to sign and recommended him to take independent legal advice.

(2)  The 2^nd Defendant was not English-illiterate. At most, he only said, belatedly in D2’s 2^nd Affirmation §17 that “I do not understand English well”. This is not sufficient to mount any defence of non est factum (which the 2^nd Defendant is not raising in any event). In any event, the Explanatory Notes had both the English and Chinese versions in one single document, the 2^nd Defendant signed at the signature page after the Chinese version.

(3)  The 2^nd Defendant complained that there was only about 10-15 minutes for him to sign all the documents and he was not given the documents in advance, and was not explained the documents. First, the Letter of Surety quite clearly shows that the documents were given in advance and thus asked them to contact the solicitor and bring to the solicitor the documents. Second and in any event, it is not the 2^nd Defendant’s case (let alone evidence) that he requested more time, but not illegitimately refused, and/or that he was illegitimately forced to sign all the documents by force or viable duress within a short time. A person must be held to the document he freely signs.

V.  MISREPRESENTATION

25.  The evidence in relation to the alleged misrepresentation by the 1^st Defendant is at §4 of D2’s 1^st Affirmation:-

“… At the material time, I was not explained that under [the Mortgage], I shall be liable instead of and/or as well as the Borrowers for all moneys due by the Borrower to the Plaintiff. In about December 2019, I was only requested by the 1^st Defendant to sign bank documents as a co-owner of [the Property] in relation to the loan of the Borrower and a mortgage to be provided solely by the 1^st Defendant. I had never intended to execute any mortgage or security document of my interests in [the Property] to secure all the moneys owing to the Plaintiff by the Borrower.”

26.  Such evidence is devoid of any particulars the 2^nd Defendant should condescend upon in order to raise an arguable defence or a triable issue. I am not satisfied by such evidence that there was any misrepresentation as alleged or at all.

27.  Further and in any event, in the light of the Letter of Surety, the Explanatory Notes and the Warning Notice which the 2^nd Defendant signed and thus should be held to, the 2^nd Defendant knew that by executing the Mortgage, he himself would mortgage the Property and he himself would be liable to pay the debts. Thus, even if there is any misrepresentation, the 2^nd Defendant did not rely on it at all.

28.  Therefore, the defence of misrepresentation is not arguable and there is no triable issue on it.

VI.  CONCLUSION

29.  In the premises, I dismiss the D2’s Summons, and order the 2^nd Defendant to pay the Plaintiff’s costs summarily assessed at HK$125,000 on a solicitor and own client basis, which is the agreed contractual basis under Clause 18.1(b) of the Mortgage, from which I find no reason to depart. Further, since the Notice of Appeal was filed out of time without leave (which I refused to grant by dismissing D2’s Summons), the Notice of Appeal shall be dismissed.

30.  I thank counsel for their assistance.