XCHRX LI KAM HO ANGEL v. GREAT OCEAN INTERNATIONAL LTD.

HCA12477/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.12477 OF 1999

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J U D G M E N T

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1. This is an appeal from an order by the master whereby the master entered summary judgment against the 1st defendant. As for the 2nd defendant, the master did not grant summary judgment but ordered costs of the Order 14 application against him.

2. The action here is by the plaintiff, Angel Li ("Mrs Kwok") who is married to a Mr Kwok, against the 1st and 2nd defendants in relation to two cheques, each in the amount of $350,000, drawn by the 1st defendant on the 1st defendant's account, signed by the 2nd defendant, but payable in cash in each case. The summary judgment application was brought by the plaintiff against each of the two defendants on the basis that there is no defence.

3. The affidavit evidence that had been filed by both sides show that there is a large conflict of evidence on the principal issues. The plaintiff says that there were, over a period of something like a year or so, various loans given by Mrs Kwok to the 2nd defendant, amounting to a total of $700,000. The two cheques were given by the 2nd defendant as repayment of the loan. The defendants' case is that the 1st defendant company found itself in financial difficulties in particular in relation to a mortgage on a property where the bank was calling in the loan, or pressing the 1st and 2nd defendants. Help was sought by the defendants from Mr Kwok, the plaintiff's husband, who offered to arrange a mortgage of $7 million to be granted on the property but in return he wanted a commission of 10%, i.e. $700,000. The defendants agreed to that and the payment of $700,000 commission was effected by the somewhat unusual procedure of two cheques, each of $350,000, where there were also further photocopied at the bottom a notation which (in translation) reads :

"I, Chu Wai Ling, now borrow from Kwok Tak Yan's friend, Hong Kong Dollars three hundred and fifty thousands only. That loan shall be repaid punctually in full on the date of the above cheque. This note is hereby made as proof.

	Sd. Borrower
	Chu Wai Ling"

The date of the 'loan note', if I may call it that, at pages 35 and 36 was 25 May 1999 while the date of the cheque in each case was 28 May, so they were post-dated by about three days.

4. It is common ground that the cheques were not presented for payment until some two months later and they were dishonoured. The reason for the dishonour, according to the defendants, is because instead of the promised $7 million mortgage, only a mortgage facility of $6.5 million was made available. There was then unwillingness by the defendants to pay $700,000 commission. There were long discussions and negotiations which eventually led to the defendants refusing to pay $700,000 but the 2nd defendant made a small payment of $32,000 in July 1999 to Mr Kwok as evidenced at page 43 of the Bundle.

5. The question that the court has to decide is firstly, to what extent there is substance in the plaintiff's version that there was a loan of $700,000. It is to be noted that this allegation of a loan of $700,000 by Mrs Kwok to the 2nd defendant was mere assertion. There was no accompanying documentation, or even evidence of surrounding circumstances which strongly support that allegation. It is unusual to have so many loans over such a long period of time without any contemporaneous evidence in support. If there was no substance or a possible ground to believe that there was doubt as to the existence of the loan, then I think the plaintiff ought not to succeed in this Order 14 application. I have very serious doubt that there was such a loan.

6. The documentation in fact does not support that contention. The reason is this : if one looks at pages 35 and 36, it is apparent that the plaintiff's name was never identified, nor did it say that there had been an outstanding loan for sometime. It seems to suggest from these two documents that there was a granting of a loan on 25 May. The two cheques themselves are made payable not to the plaintiff but for cash. I think all these factors - and the fact that there were two cheques rather that one - seem to suggest to me that there is considerable doubt that there was ever any loan.

7. The late presentation of the cheques seems to be good support of the defendants' case that there was a dispute as to the payability of the $700,000 and that is why notwithstanding that the cheques should have been presented on 28 May, they were not presented. The fundamental question, of course, so far as the defendants' defence is concerned, is whether the defendants' case is incapable of belief.

8. I do not find the defendants' case as being incapable of belief. The fact that someone has to pay a large sum of money as commission in order to obtain a loan is not uncommon in Hong Kong. The contemporaneous documentation showed that the defendants were in the process of obtaining finance or trying to find out about the value of the property, that is why there is the Vigers report. There is also correspondence showing that the defendants were being pressed on their mortgage. So the $700,000 being 10% of the promised $7 million mortgage seems to make a great deal of sense to me.

9. The fact that there were these two cheques with the loan receipt wording does not in any way detract, in my mind, from the credibility of the defendants' case. As it transpired, we now know that Mr Kwok was at the material time a bankrupt, and that seems to me to point towards the possible explanation as to why the arrangement was made in this way - for two cash cheques of $350,000 each with the strange wording of the loan receipt. There was finally a reference, in the course of submission, to the evidence about the $40,000 loan. This piece of evidence was put in very late in the day on appeal, and the defendants have not had a chance to properly answer. But it is a matter of peripheral interest on credibility and in no way, to my mind, affects the overall position on my judgment that the defendants had discharged the burden of showing a triable issue.

10. I therefore must come to the conclusion that the appeal should be allowed. The defendants must be given unconditional leave to defend and the costs of the application before the master should be costs in the cause. The costs of the appeal should be to the defendants with a certificate for counsel.