SIMSEN CAPITAL FINANCE LTD v. JIANG QUANLONG

HCA 1461/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1461 OF 2015

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D E C I S I O N

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Introduction

1.  The plaintiff in this action applies for summary judgment against the defendant, for the repayment of an alleged loan of HK$190m plus accrued interest, and the total amount was at the date of issue of writ over HK$212m.

2.  The plaintiff (“P”) is and was at all material times a licensed moneylender under the Money Lenders Ordinance, Cap 163.  It is a sub-sub-subsidiary of Simsen International Corporation Limited (“Simsen International”), a company listed on the Main Board of the Stock Exchange of Hong Kong (Code 0993 HK).  On 5 October 2015, Simsen International changed its name to Huarong International Financial Holdings Limited (“Huarong”).

3.  The defendant (“D”) is and was at all material times the co-founder and Chairman of China Rare Earth Holdings Limited, also listed on the Main Board (Code 0769 HK), of which D held together with his wife Qian Yuan Ying/錢元英 (“Qian”) 31.80% shareholding as at 17 September 2015.  He is also the Chairman of another listed company on the Main Board, Pan Asia Environmental Protection Group Limited, of which D held together with his son Jiang Lei 72.21% of the shareholding as at 23 September 2015.

4.  The writ endorsed with the statement of claim was issued by P on 30 June 2015.  D filed his defence on 7 October 2015 (“Defence”). P’s reply (dated 14 December 2015) was filed on 11 January 2016 (“Reply”). P issued the summons for summary judgment on 12 May 2016. 

5.  A director of a subsidiary of Simsen International namely United Simsen Securities Limited, Chiu Ka Him (“Chiu”), had filed an affirmation on behalf of P in the present application.  D had filed an affirmation himself.  His wife Qian and his personal assistant Zhang Wei/張偉 (“Zhang”) each filed an affirmation in support of D’s case.  D had also arranged for a lawyer in Macau Mr Leong Hon Man (“Leong”) to file an affirmation on Macanese law.

6.  No affirmation was filed by Chiu or any one on behalf of P in reply to those affirmations filed by and on behalf of D.

7.  Ms Janine Cheung appeared for P at the hearing. Mr Ronny Tong SC and Mr Justin Tong appeared for D.

General legal principles

8.  The principles of an Order 14 application are well established and a defendant must show that there are triable issues, and that he has to satisfy the court that he has a “real or bona fide defence” or “a fair probability or reasonable grounds that a bona fide defence exists”[1]. 

9.  It is also well established that an Order 14 application is not intended to be a mini-trial of the action on affidavits.  As set out in Ng Shou Chun v Hung Chun San [1994] 1 HKC 155, it would be sufficient for the court to ask itself the simple question: “Is what the defendant says credible?”  If so, he must have leave to defend.  The issue is not whether the defendant’s assertions are to be believed but whether those assertions are believable[2].

10.  Mr Tong had referred the court to Re Safe Rich Industries Ltd unrep, CACV 81/1994, November 3, 1994, where Bokhary JA had said[3] :

“The test at the summary stage is indeed as simple as whether the defendant’s assertions are believable. But it must be recognised - because failure to recognise it would create a debt-dodgers’ charter - that whether the defendant’s assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as is either undisputed or beyond reasonable dispute.”

11.  Further, Mr Tong had also referred this court to Billion Silver Development Ltd v All Wide Investments Ltd [2000] 2 HKC 262.  It has been held therein that a defendant only needs to show that there is a triable issue or question or that for some other reason there ought to be a trial; then leave to defend ought to be given.  Where there are unexplained features of both the claim and the defence which are disturbing because they bear the appearance of falsity and disreputable business dealings and questionable conduct, the court should not make tentative assessments of the respective chances of success of the parties or the relative strengths of their good or bad faith, and should not on such an examination grant the defendant conditional leave to defence, but should give unconditional leave to defend[4].

12.  There was no dispute on the above general legal principles.

P’s case

13.  P’s case in its statement of claim is a simple and straightforward one and is based on a loan agreement dated 27 June 2014 signed between the parties (“Loan Agreement”)[5].  Under the Loan Agreement, P agreed to lend to D a sum of HK$190m (“Loan Amount”) pursuant to the terms of the Loan Agreement with interest at 18% per annum.  The Loan Amount was said by P to be fully drawn down by D on two occasions, HK$90m on 30 June 2014 and HK$100m on 9 July 2014, and D had failed to repay the Loan Amount on due dates.

D’s case

14.  D’s case on the other hand is that there was a history of events leading up to the signing of the Loan Agreement which would directly affect the enforceability of it.

15.  According to D, in about early 2013, he was invited by one Jiang Liqun/蔣力群 (“JLQ”) to play at one of the VIP rooms of a gaming promoter Hang Seng Sociadade Uniperssoal Limitada/恆升一人有限公司 (“Hang Seng”). According to D, JLQ was an agent working for Hang Seng.

16.  Through JLQ’s introduction, D said he got to know one Shao Weiwei/邵巍巍 (“Shao”) who was introduced to him as a partner of Hang Seng. On about 3 May 2013, D entered into an agreement in Macau with Shao as lender and JLQ as guarantor, for Shao to lend HK$20m worth of gambling chips to D for use in the VIP rooms for both “on the table” and “under the table” gambling and that in the event that he were to lose, he had to repay the gambling debt at an interest rate of 3% per month after the first month of non-payment, and this agreement was headed a gentlemen agreement/“君子協定”(“Gentlemen Agreement”)[6].

17.  It was D’s case that on the same day of the Gentlemen Agreement, he won about HK$48m in the VIP rooms, but on about 6 May 2013, JLQ misappropriated and/or lost all of D’s winnings without authorization of D, and this was evidenced by an IOU signed by JLQ in favour of D[7].

18.  Thereafter, according to D, in or about end of May to early 2013, he was introduced to one Xu Yan/徐岩 (“Xu”) who then became D’s gambling promotion agent of his account with Hang Seng.

19.  In the fall of 2013, Xu arranged a meeting and introduced D to one Ji Xiaobo/Jason Ji/紀曉波of Esteem Capital Success Limited (“Ji”).  Both Xu and Ji’s his secretary Cai Lingli/蔡靈麗 (“Cai”) were also present at this meeting.  It was D’s case that Ji was introduced to him as a boss of the Hang Seng VIP rooms.  According to D, Ji was also an executive director and a substantial shareholder of Simsen International, P’s parent company. 

20.  D said thereafter he and Ji met for dinner from time to time and D had mentioned to Ji and Cai at a dinner that he had some HK$48m lost or misappropriated by JLQ.  According to D, Ji said he would take care of that for him and eventually D was offered by Ji gambling chip limit of HK$200m for the purpose of gambling “on and under the table” at the VIP rooms of Hang Seng.

21.  From fall of 2013 to June 2014, D said he and Zhang had travelled to Macau at least twice a month and had gambled at VIP rooms operated by Hang Seng at various casinos.

22.  It was D’s pleaded case that in about early 2014 he had incurred gambling debts of about HK$150m in the VIP rooms.

23.  D further said that in March 2014, he received a call from Cai and was asked to go to Ji’s office at Suites 7001-7002, Two International Finance Centre (“IFC Address”).  Cai told D that he had already incurred gambling loss of nearly HK$190m after gambling both on and under the table in various VIP rooms of Hang Seng (“Gross Gambling Loss”) and that Cai requested D to go and sign some documentation to cover the Gross Gambling Loss and threatened him that if he failed to sign, he would get into trouble and that his reputation would be in tatters. 

24.  D said as he was in Hong Kong at the time, he and Zhang then went to Ji’s office at the IFC Address that day (“March 2014 Meeting”) and during that meeting he was assured by Ji that he did not need to repay the Gross Gambling Loss immediately and that D would be offered an additional gambling chip limit of HK$200m provided that D would sign certain documents with P and to pledge his assets.  According to D, Ji told him that P was another department of his company.  D said he did not sign any documents on that occasion.

25.  The March 2014 Meeting was what was referred to by D in his affirmation as the “1^st Meeting” at the IFC Address, but in the Defence, the “1^st Meeting” pleaded by D was the one on 19 June 2014. To avoid confusion, I have followed the terminology in the Defence, and I will refer the above meeting in this judgments as the March 2014 Meeting.

26.  It was not disputed by D that in or around March 2014 he had incurred the Gross Gambling Loss of about HK$190m at the VIP rooms although the exact amount he said he was unable to specify without full and proper discovery.  According to his pleaded case, about HK$50m of the Gross Gambling Loss was from “on the table” gambling and about HK$140m of the Gross Gambling Loss was from “below the table” gambling[8].

27.  After the March 2014 Meeting, D said he received many calls from Cai from time to time reminding him of the Gross Gambling Loss   and that he was urged to sign documents to confirm the additional gambling chip limit of HK$200m and to pledge assets as security.  Thereafter, between March and June 2014, D said he and Ji had met on several occasions and that on one of such occasions while having tea at the Four Seasons Hotel, Ji had assured him that he could be given a further HK$200m gambling chip limit to continue to play at Hang Seng if he signed some documentation with P and Ji persuaded D not to go to play at other places (“Four Seasons Meeting”). Ji had also assured D that the documents were signed for sake of convenience and would not be used against him.  D said it was on that occasion that D was introduced to Dino Ng/Wu Guofei/吳國輝, the financial controller of P (“Dino Ng”).

28.  Then, according to D, on 17 June 2014, Cai called him and said as the Gross Gambling Loss had amounted to almost HK$200m, D should go to their office to sign documentation the following day and to confirm the arrangements for the additional gambling chip limit of HK$200m[9]. In the Defence, what D had pleaded was HK$100m[10], which appeared to be an error.

29.  On 18 June 2014, D and Zhang flew to Hong Kong and on 19 June 2014, they went to Ji’s office at the IFC Address (“1^st Meeting”).  According to D, upon arrival, they were brought into a meeting room where they met Chiu, Dino Ng and one Dani Zhou/Zhou Danqing/周丹青 (“Zhou”), a solicitor Natalie Chan and a legal executive Billy Mak, both of solicitors firm Messrs Lam & Co.

30.  D said he was handed some documents and was told that Ji had asked him to sign those documents.  The legal representatives had briefly told him that the documents included a loan agreement and various other  documents and indicated to him the places that he needed to sign[11].  D said the documents were not read to him clause by clause and as he did not understand English, he could not read and did not appreciate the true nature of the documents.

31.  According to D, it was during the 1^st Meeting that D signed the Loan Agreement and other documents as per arrangement by Ji and relying on what he had been told by Ji earlier about the nature of those documents.  D said at no time he was told he would be provided a loan, nor did he ask for a loan, and that he did not need a loan at the time.

32.  Further, according to D, Zhang took copies of all the documents at the 1^st Meeting, whether signed or not signed, and these were then produced by D in his affirmation (“19.06.14 Documents”)[12].  The 19.06.14 Documents were:

(i) An application for allotment to D of 36 shares in a company called Asia Global Tech Group Limited (“Asia Global”) signed by D, and application of allotment to Qian of 54 shares in Asia Global;

(ii) A written shareholders’ resolution for the issue and allotment of 90 new shares in Asia Global, and for 36 new shares be allotted to D and 54 new shares to Qian, and signed by D;

(iii) A written resolution of the board of directors of Asia Global, namely D and Qian, approving the allotments, and signed by D;

(iv) 3 copies of written resolutions of directors, one of which signed by D, to approve the Loan Agreement to be entered into between P and D and a Deed of Share Charge in respect of 51 shares by Qian, signed by D;

(v) Confirmation of Independence by D, signed by D;

(vi) Memorandum under s 18 of the Money Lenders Ordinance signed by D;

(vii) The Loan Agreement signed by D;

(viii) A notice of drawing signed by D (“Notice of Drawing”).

33.  It was D’s case that all the above documents signed by D were undated.  In particular, in the Notice of Drawing, the date thereof, the date of the Loan Agreement, the amount of drawing, and the method of transfer were all left blank[13].

34.  After the 1^st Meeting, D said Cai called him again on or about 23 to 24 June 2013 and asked him to go to Ji’s office to sign some outstanding documents, and that he had to bring along his wife Qian to act as a guarantor.  Thus, on 26 June 2014, D, Qian and Zhang flew to Hong Kong, and on 27 June 2014, they all went to P’s office (“2^nd Meeting”).  This time they met Chiu and Zhou.  Qian was told that D had already signed certain documents and that Qian was asked to sign some documents presented to her.  D said he was also asked to sign and did sign some documents which may or may not have been signed by him at the 1^st Meeting (“27.06.14 Documents”)[14].  Anyway, the 27.06.14 Documents were:

(i) Application of Allotment of 54 shares in Asia Global signed by Qian;

(ii) Application of allotment of 36 shares in Asia Global signed by D;

(iii) 4 written resolutions of directors/shareholders signed by both D and Qian;

(iv) 2 Confirmations of Independence, signed respectively by D and Qian;

(v) 3 copies of the Loan Agreement signed by D;

(vi) 3 copies of the Memorandum under s 18 of the Money Lenders Ordinance signed by both D and Qian;

(vii) Deed of Guarantee signed by Qian;

(viii) 3 copies of Deed of Share Charge signed by Qian in her personal capacity and sign by Qian on behalf of Asia Global;

(ix) Instrument of Transfer of 51 shares in Asia Global and the Bought and Sold Notes, signed by Qian, but undated with name of transferee left blank;

(x) Letter of resignation as director of Asia Global, signed by D but undated;

(xi) Letter of resignation as director of Asia Global, signed by Qian but undated;

(xii) Letter of authority and undertaking, signed by D and Qian;

(xiii) Resolution of directors approving the transfer of Qian’s 51 shares and resignations of D and Qian as directors, signed by D and Qian and undated.

35.  Thereafter, according to D, on 2 July 2014, Zhou sent an email to Zhang (“02.07.14 Email”) and requested D to sign a “Authorisation and Indemnity in respect of Third Party Remittance/Deposit” dated 30 June 2014 in both Chinese and English (“1^st Authorisation”)[15].  D claimed he was simply told by Zhou to sign and did not fully understand the contents of the document, and after signing, Zhang had sent Zhou a copy of the signed 1^st Authorisation by email.

36.  The 1^st Authorisation authorized P to advance a loan in the amount of HK$90m to the bank account of one Sun Lian Hai (“Sun”) which was alleged by P to be D’s friend.  D claimed he never met Sun, never gave instruction to P to transfer the sum of HK$90m to Sun and never received the sum of HK$90m.

37.  After the 2^nd Meeting, D had received the hard copies of originals of the documents signed by him sent by Zhou pursuant to the 02.07.14 Email[16].

38.  On 9 July 2014, according to D, he was requested to go to P’s office again (“3^rd Meeting”) and was asked to sign another authorization authorizing P to advance a loan in the amount of HK$100m to the account of Sun (“2^nd Authorisation”)[17].  D was also asked to sign a confirmation in Chinese dated 10 July 2014 confirming the signing of the Notice of Drawdown, the 1^st Authorisation and the 2^nd Authorisation and that a total amount of HK$190m was transferred to Sun, which was deemed to be D’s drawdown of the amount (“Confirmation”)[18].

39.  D said after signing of the 2^nd Authorisation and the Confirmation, he was given use of further gambling chip limits at the VIP Rooms of Hang Seng.  D said that on 30 October 2014, Zhang had made a payment of HK$11.2m to P on his behalf as part payment for the Gross Gambling Loss.

40.  Essentially, D raised 3 defences[19]:

(i) The Loan Agreement and all ancillary documents signed were but a sham and only served to mask a purported collection of the Gross Gambling Loss and is unenforceable as such (“Sham Arrangement”);

(ii) The Loan Agreement, all ancillary documents signed and the arrangements whereby the Gross Gambling Loss were incurred are illegal by both Macanese and Hong Kong Law and thus unenforceable (“Illegality”);

(iii) There is a fundamental disparity between the true legal effects of the documents, in particular the Loan Agreement, and the documents as it was believed by the D.  Thus, the Loan Agreement is unenforceable by way of the doctrine of non est factum (“Non Est Factum”).

Chiu’s evidence

41.  P admitted in the Reply that Chiu had been asked by Ji to meet with D on 19 June 2014, ie the 1^st Meeting, as D wanted to raise a loan[20].

42.  Chiu said in his affirmation that at the 1^st Meeting, he was present with Zhou and the two legal representatives of Messrs Lam & Co, and P’s legal representatives had explained in putonghua the contents of a draft version of the loan agreement (which contained an “entire agreement” clause) to D for about 2 hours, and that Zhang who reads English had read the draft version of the loan agreement.

43.  It was P’s pleaded case that at the 1^st Meeting, D was informed that P would be prepared to lend him the HK$190m requested by him provided that acceptable security was furnished, and that after discussion, it was agreed in principle that the security to be provided would be a personal guarantee from Qian who would also provide a charge over her shares in Asia Global[21].

44.  It was also P’s pleaded case that at the 1^st Meeting, the draft version of the loan agreement had provided repayment of the loan in 3 months and that D had requested for the repayment period extended to 6 months for which he was prepared to accept a higher interest rate.  This proposal required a subsequent redrafting of the draft loan agreement.

45.  After the 1^st Meeting, P had submitted the redrafted proposed terms for the loan agreement to the credit committee of Simsen International for approval as was required under the Listing Rules for disclosable transactions. 

46.  P’s pleaded case was that at no time at the 1^st Meeting or at any other time did D disclose to P that he was borrowing the Loan Amount for an illegal or immoral purpose[22].

47.  P’s case was that after approval of the proposed terms, at the 2^nd Meeting:

(i) P provided for the perusal of D and Qian the Loan Agreement, together with a Deed of Guarantee and a Deed of Share Charge for Qian to sign;

(ii) After perusing, D executed the Loan Agreement which was dated 27 June 2014;

(iii) Qian executed the Deed of Guarantee and the Deed of Share Charge;

(iv) In executing the above documents, Qian did not rely upon any representations made by or on behalf of P who made no representations to her at the meeting;

(v) Copies of the above 3 documents were supplied to D and Qian after they had executed the same.

(vi) After the execution of the Loan Agreement and its appendices, according to P, D told them that he would provide details of a bank account to which the loan monies were to be transferred and P then requested D to sign in escrow, two identical copies of the Notice of Drawing in which the details of the amount and the bank account were left blank.

48.  It was Chiu’s evidence that on about 30 June 2014, D then informed Chiu by telephone his intention to draw down HK$90m and D provided the details of the bank account of Sun to Chiu, and Chiu then filled in the information on one of the pre-signed Notices of Drawing[23].

49.  As for the 1^st Authorisation, according to Chiu, it was Zhou who entered thereon the information provided by D, which was then signed and returned by D on the same day, ie 30 June 2014.

50.  Then upon receiving D’s request to draw down the remaining of the Loan Amount of HK$100m, Zhou prepared and emailed to D on 9 January 2014 the other Notice of Drawing and the 2^nd Authorisation, and the 2^nd Affirmation was signed by D together with the Confirmation at P’s office in the presence of Chiu and Mr Lau Kin Hon, a solicitor of Messrs Tang, Tso & Lau.

51.  To summarise, P’s case in relation to the chronology of the signing of the relevant documents was thus as follows:

On 19 June 2015, the 1^st Meeting:

P’s legal representatives from Messrs Lam & Co explained the draft version of the Loan Agreement for 2 hours in putonghua, but no document was signed by D.

On 27 June 2015, the 2nd Meeting:

(i) D signed the Loan Agreement;

(ii) Qian signed the Deed of Guarantee;

(iii) Qian signed the Deed of Share Charge in respect of her shares in Asia Global;

(iv) D signed two identical Notices of Drawing in escrow with the details of the date and amount and payee left blank.

On 30 June 2014

(i) D telephoned Chiu to inform him of the 1^st drawdown and the details of the payee Sun, and Chiu inserted the information and the date of 30 July 2014 on the Notice of Drawing (“1^st Notice of Drawing”);

(ii) Zhou inserted the information provided by D on the 1^st Authorization and email the same to D for signing;

(iii) D signed and emailed back.

On 9 July 2014

(i) D requested the 2^nd drawdown, and Zhou prepared and sent by email to D a copy of the Notice of Drawing with the date of 9 July 2014 and other details filled in (“2^nd Notice of Drawing”), a copy of the 2^nd Authorization and the Confirmation;

On 10 July 2014, the 3^rd Meeting:

(i) D signed the 2^nd Authorization and Confirmation in the presence of P’s legal representative from Messrs Tang, Tso and Lau.

Sham Arrangement

52.  D raised in particular two matters to demonstrate that the Loan Agreement and all the ancillary documents signed were part of the Sham Arrangement in order to collect the Gross Gambling Loss:

(i) The involvement of Ji;

(ii) The identity of Sun, the transferee of the Loan Amount.

Involvement of Ji

53.  The main protagonist in the Sham Arrangement, according to D was Ji, the boss of Hang Seng, who was at the material times, a substantial shareholder of P’s parent company, Simsen International.

54.  Ji was the one who represented to D after they met in early June 2013, that he would “take care” of the misappropriated winnings by JLQ under the Gentlemen Agreement, and Ji was also the one who, on D’s evidence, had offered D additional betting limit on similar terms as the Gentlemen Agreement, for “on and under the table” gambling at the VIP rooms of Hang Seng.  It was also D’s evidence that Ji was the one who introduced him to P at the March 2014 Meeting which took place at Ji’s office at the IFC Address and that Ji had represented to him that P was  another department of his company[24].  Further, it was also Ji who had introduced Dino Ng to D at the Four Seasons Meeting.

55.  In the Defence, although D did not plead the exact month in early 2014 he met Ji at Ji’s office at the IFC Address, in D’s affirmation he had mentioned this meeting to be in March 2014 and had given more details about this meeting with Ji.   

56.  D’s evidence of the 4 meetings at the IFC Address was also confirmed by Zhang who had accompanied D in attending all 4 meetings.

57.  In the Reply, P had denied any involvement in the events pleaded by D, and further denied that Ji or anyone else mentioned by D had at any material time represented P.  However, as mentioned earlier, P had admitted that Chiu was asked by Ji to meet with D on 19 June 2014 at Ji’s office[25].

58.  There was no evidence that Chiu was present at the March 2014 Meeting.  There was no evidence filed by Ji, or Chiu, or any one on behalf of P at this stage to contradict what D and/or Zhang had said about what took place at the March 2014 Meeting and at the Four Seasons Meeting.

59.  It was P’s pleaded case that it had no connection with any or all of JLQ, Shao, or Hang Seng and it had no involvement in the Gentlemen Agreement and the gambling arrangements pleaded by D[26].  In the Reply, P appeared to have admitted that Ji was a shareholder of Simsen International, but P had said that Simsen International has ‘thousands of shareholders’ and denied that Ji had represented P[27].  

60.  D had produced a copy of Ji’s name card[28] which bore the name of the company Esteem Capital Success Limited/融滙資本有限公司and the office address stated on Ji’s name card was the IFC Address.  There was no dispute that the office of Simsen International was at the IFC Address.  There was no evidence from P as to where P carried on its business although its registered office on the signed documents was stated to be at another address and not the IFC Address.  In any event, D’s evidence was that the IFC Address was where the March 2014 Meeting between him and Ji took place and the IFC Address was also where D and Qian met Chiu, Zhou, and Dino Ng and where all the documents were signed by D and Qian.  There was no evidence from P to contradict this.

61.  D had produced a copy of the public announcement made by  Simsen International dated 28 November 2011[29] announcing that Ji had acquired 40% equity interest of a company which in turn was a 25.86% substantial shareholder of Simsen International, and further announcing that Ji was appointed as an executive director and chief executive officer of Simsen International with effect from 28 November 2011.  D had also produced a list of the disclosure of interests notices filed in respect of Ji’s shareholding in Simsen International from 13 April 2012 to 8 July 2014[30].

62.  Further, Zhang in his affirmation had deposed to Ji’s background and stated that Ji is a “connected person” or associate of Xu. Zhang had produced an announcement made by Simsen International on 7 July 2012[31] and that after Ji was appointed the executive director, Simsen International acquired an investment holding company which main business was management and operation of pawn and loan businesses in Shanghai and Beijing and that the acquisition was announced as a “connected transaction” because Ji’s mother Cui Lijie and Xu were the guarantors of the vendor and both of them were stated to be “connected persons” of Ji.

63.  Zhang had also produced documentary evidence in his affirmation to show that Hang Seng was sold to a company in early 2014, in which transaction Ji’s younger sister was said to be the vendor of Hang Seng, and the purchaser was said to be a company subsequently known as Imperial Pacific International Holdings Limited (“Imperial Pacific”) of which Ji’s mother was said to be controlling shareholder and Xu was said to be the project director for a casino resort project.  Cai whom D had referred to as Ji’s secretary, was said to be an executive director of Imperial Pacific.

64.  Having considered the above, from the evidence presently available before this court and notwithstanding P’s pleaded case, I am of the view that D’s assertions about the connection/s between Ji, Hang Seng and P are credible. 

65.  Even on P’s case, at the 1^st Meeting, P had already had the draft version of the Loan Agreement prepared by lawyers and P’s legal representatives were arranged to be present.  I find that D’s evidence that Ji was held out by P to be acting on behalf of P, and that it was through Ji D was introduced to P and that D was asked to attend the IFC Address by Ji, credible.  

The identity of Sun

66.  The other matter raised by D was the identity of Sun and the account into which the Loan Amount was allegedly paid after the signing of the Loan Agreement.

67.  It was D’s pleaded case that he in truth and in fact never received the alleged drawdown of HK$190m[32].  D maintained that he had no knowledge nor knew anyone by the name of Sun, nor did D make the alleged call to Chiu on about 30 June 2014 to give him the details and bank account of Sun.

68.  D did not deny having signed the 1^st Authorization a scanned copy of which was sent back to Zhou by Zhang.  D also did not deny having signed the 2^nd Authorization and Confirmation at the 3^rd Meeting.  The 1^st and 2^nd Authorization were in both English and traditional Chinese and the Confirmation was in simplified Chinese.  D however did dispute that he had signed the 2^nd Authorization and the Confirmation in the presence of Mr Lau Kin Hon of Messrs Tang, Tso & Lau.  D said he had never met Mr Lau.  D’s case was that Zhou had requested him to attend the 3^rd Meeting to sign further documents in relation to the Gross Gambling Loss and the additional gambling limit.

69.  Mr Tong had raised a number of queries, such as why would D borrow such a large amount of money and not repay his then Gross Gambling Loss to Ji or Hang Seng, and instead, asked P to pay to another person; why would Ji who arranged the alleged loan not informed P that D was already heavily indebted to Ji or Hang Seng, and if Ji did inform P, then why would P, a licensed moneylender, not be concerned with the D’s financial ability to repay.

70.  Mr Tong further pointed out that there was no evidence that P had sought a copy of Sun’s identity card or residential address as expressly required and stated on both the 1^st and the 2^nd Authorisation. 

71.  P’s case was that as D did not have a bank account in Hong Kong, the Loan Amount had to be paid to a third party, but this was contradicted by the evidence from Wing Lung Bank and Bank of China which indicated that D held bank accounts in Hong Kong at the time. 

72.  As mentioned earlier, P’s pleaded case was that two identical Notices of Drawing were pre-signed in escrow by D at the 2^nd Meeting on 27 June 2014[33].  Whether they were pre-signed at the 1^st Meeting as alleged by D, or at the 2^nd Meeting as alleged by D, Chiu admitted that it was he who filled in the information of the amount of transfer and the details of the transferee on the 1^st Notice of Drawing and dated it 30 June 2014 after D telephoned him to give Chiu the details.  The 2^nd Notice of Drawing was said to be prepared by Zhou and dated 9 July 2014.

73.  D’s case was that those details were filled in and post-dated as 30 June 2014 and 9 July 2014 without his knowledge or authorization[34].  It was further queried by Mr Tong that if it was indeed D’s intention to seek a loan and to pay the Loan Amount to Sun, then the details and bank account of Sun would have been provided by D at the time of signing and the information of Sun would have been filled in then and there.  Mr Tong submitted that the introduction of Sun as the recipient of the HK$190,000,000 was an afterthought by P.

74.  The 1^st Authorization attached to 02.07.14 Email already had the details of Sun filled in.  Mr Tong pointed out that if D was the one who provided the details of Sun to P, it would be illogical for Zhou to say in the 02.07.14 Email that the reason for signing the 1^st Authorization was because the D had no bank account in Hong Kong instead of simply saying this was as per D’s instruction.

75.  Mr Tong submitted that Sun is also the key to the whole case and that the question of whether Sun was the nominee of P or D would raise triable issue of fact which cannot be dealt with at a summary stage without a proper trial.  

76.  Anyway, it would appear that either Chiu or D was not telling the truth about the alleged telephone call from D to Chiu on 30 June 2014 in which D was said to have provided the account details and name of Sun.

77.  Further, it was P’s pleaded case that P had requested D to sign in escrow, two identical copies of the Notice of Drawing at the same time.   The 1^st Notice of Drawing[35] and 2^nd Notice of Drawing[36] produced by Chiu did not appear to be identical, in that the signature of D on the 2^nd Notice of Drawing was on a different page or 2^nd page, whereas the signature of D was on the 1^st page of the 1^st Notice of Drawing.

78.  The details of the transferee including the name on the two Notices of Drawing were also in English.

79.  In light of all the above, even though D did sign the Confirmation confirming that the Loan Amount was transferred into an account designated by D, I am of the view that D has raised a triable issue as to whether Sun was a nominee of P or of D, and/or whether the Loan Amount was ever drawn down by D and/or whether the Loan Amount was ever received by D under the Loan Agreement. 

80.  D’s evidence was also that after signing all the documents he was indeed given use of further gambling chip limits to gamble at the VIP rooms of Hang Seng[37], and at the present stage, the Gross Gambling Loss had not yet been fully repaid[38].

Other issues

81.  Mr Tong had also submitted that there was no evidence from P on any antecedent relationship between P and D, nor evidence on any credit review by P in relation to D or Qian, there was no valuable security being sought save a personal guarantee by Qian and a pledge of her 51 shares in Asia Global.  There was no information in relation to Qian’s own finances or the valuation of her shareholding in Asia Global, which is a private company. 

82.  On the other hand, P pleaded in the Reply that according to Forbes Magazine D was in 2001 the 39^th richest person in the People’s Republic of China with a personal wealth then estimated at US$137m.  P had also pleaded that D was heavily involved in two Hong Kong public listed companies but there was no evidence that Asia Global was/is connected with either of these companies.

83.  What is clear on the evidence so far is that D was not asked to provide any of his own shares or assets as security for the alleged loan and the security sought was of unknown value, as there was no evidence of Qian’s finances or that the 51 shares of Asia Global would be readily realizable or it would be sufficient security for the Loan Amount. 

84.  It was also D’s evidence that during the 1^st Meeting he was only briefly explained by P’s legal representatives from Messrs Lam & Co, and that he had never met Mr Lau Kin Hon of Messrs Tang, Tso & Lau at the 3^rd Meeting who was said to have witnessed D’s signature on the 2^nd Authorisation and the Confirmation[39].  D’s evidence was confirmed by Zhang who had accompanied D to all 4 meetings, and there was no evidence from any of the legal representatives.

My view

85.  Having considered all the above, I have come to the view that D has raised a triable issue as to whether the Loan Agreement was part of the Sham Arrangement, namely an arrangement served to mask a purported collection of the Gross Gambling Loss.

Illegality

86.  According to D’s case, the Gentlemen Agreement was made by Shao in his personal capacity. D’s pleaded case is that the Gentlemen Agreement is illegal and unenforceable because Shao is not a “gaming promoter” authorized under the Macanese law to grant gaming credits.  In this respect, as earlier mentioned, Leong, a Macanese Lawyer had filed an affirmations in support of D’s case[40]. 

87.  As stated by Leong, the Gaming Credit Law of Macau only authorizes concessionaires, sub-concessionaires and gaming promotors[41] to carry out credit granting activities in connection with gaming and betting in casinos in Macau.

88.  Further, grant of credit merely exists when the grantor transfers to a third party the ownership for gambling chips as long as there is no immediate payment, in cash, regarding that transfer, and the credit so granted is legally enforceable.  Leong then explained that very often the gaming promoter will file enforcement proceedings for payment of an amount against the gaming patrons and the basis of those proceedings will be the “marker form” which is an enforceable title as it is perceived as a debt certificate under Macau laws.  The “marker form” will state the name of the gaming patron, the amount borrowed in terms of gaming chips, the date the chips were lent, and the applicable interest rate cannot exceed that which is provided under the Macau laws.

89.  As stated by Mr Leong, the marker form would be the epicenter of enforcement proceedings and that such debts evidenced by the marker forms would be recognized by the court and deemed legal, valid and enforceable.

90.  It is common ground that in the present case that there were no “marker forms”.  However, Ms Cheung submitted that it was not pleaded in the Defence that the lack of “marker forms” made the Gross Gambling Loss unenforceable, and in any event, it was not Leong’s evidence that the lack of “marker forms” would render a gambling debt enforceable.

91.  In the present case, it was not disputed by P that Shao was not a gaming promoter on the Macau Government’s list of authorized gaming promoters and that the Gentlemen Agreement was illegal. 

92.  Ms Cheung however argued that Leong was silent on the issue as to whether gambling debts owed to unauthorized gaming promotors would be enforceable or recoverable or not, and there was no authority cited by Leong to say such debts would be irrecoverable as a matter of Macanese law.

93.  Ms Cheung further submitted that there was again no relevant statutory or legislative authority referred to by Leong to support his opinion that “under the table” bets would be illegal under Macanese law, or if the gaming loss was incurred by “under the table” gaming, such loss would be unenforceable.

94.  Leong is a qualified lawyer who has been in practice since 2004 and according to him, he has acted as principal counsel to gaming promoters as well as Macau legal advisors to Hong Kong listed companies on IPO projects related to gaming promoters’ rights and acquisitions.  There was no challenge at this stage by P as to Leong’s qualification or experience.  

95.  It is quite clear from Leong’s affirmation that any extension of credit without a marker form would be highly irregular and does not fall under the modus operandi of the gaming promoter, and the grantors of credit cannot carry on their activities through a third party and that any arrangement by which credit is granted, extended or continued to any customer through a third party in any way or manner is illegal, null and void. It was further his opinion that only gaming debts arising from a legal credit relationship under the Gaming Credit Law are legal, valid and enforceable and thus all other gaming losses such as “gaming under the table” which do not arise from a legal and valid gaming activity and/or relationship are invalid, illegal and unenforceable.

96.  Ms Cheung had referred the court to the case In re O’Shea [1911] 2 KB 981 in which it was held that that Mr L’s guarantee to the bank for an overdraft of £500 to a bookmaker Mr O’Shea to enable the latter to draw an amount to pay the latter’s loss on bets was not for an illegal consideration and was not invalid.  There were two earlier amounts which were tainted or invalid under the then Gaming Acts, one which was lent by Mr L to Mr O’Shea distinctly to enable the latter to make bets and another guaranteed by Mr L for an overdraft to further assist Mr O’Shea in his business of a bookmaker.

97.  However, in the above case, there was no doubt that Mr O’Shea had received the amount of £500 guaranteed by Mr L and further the amount was admitted to be not for further betting purposes.  The present case is different as D maintained that the signing of the Loan Agreement and all the documentation was to enable him to continue to play at the VIP rooms of Hang Seng and for him to have additional gambling limit, and that he never received the Loan Amount.

98.  Having considered all the above, in my view, D has demonstrated a triable issue on illegality in relation to the Loan Agreement and ancillary documents and the arrangements whereby the Gambling Loss was incurred.

Non Est Factum

99.  Ms Cheung had submitted that the defence of non est factum is not lightly allowed where a person of full age and capacity had signed a written document embodying contractual terms and only in exceptional circumstances is the plea available so long as the person signing the document had made a fundamental mistake as to the character or effect of the document[42].

100.  Mr Tong referred the court to Saunders v Anglia Building Society [1971] AC 1004 and submitted that to raise a plea of non est factum, one must prove (i) the element of consent in signing the document is totally lacking, that is the transaction which the document purports to effect is essentially different in substance or in kind from the transaction intended and (ii) he had acted carefully when signing the document[43].

101.  P had relied on the “entire agreement” clause in the Loan Agreement.  Further the 1^st Authorisation and the 2^nd Authorisation were in both English and in Chinese and in particular, the Confirmation was in simplified Chinese.

102.  According to D, he is currently 64 years old and that he was educated to primary school and had worked in factories for over 30 years.  He had said he could not read English and that the documents were not read to him clause by clause by P’s legal representatives, and he could not read and did not appreciate the true nature of the documents, although D did say that the legal representatives had briefly told him that the documents included a loan agreement[44].  Further, on D’s own evidence, he was also told by Ji in the March 2014 Meeting that the documentation D was to sign would include pledging of assets.

103.  Zhang said he obtained a college degree which specialized in foreign related professional secretary from the Suzhou University.  He did not deny that he could read English as alleged by Chiu, although it would appear that he required interpretation in putonghua for his affirmation.

104.  Qian had said in her affirmation that at the 2^nd Meeting she was told to sign some documents presented to her and she was never explained the contents of or the nature of the documents she was asked to sign nor was she aware of the same.  There was no evidence as to Qian’s education level or whether she could read English.  There was also no evidence that she had relied on any representations by Ji or any one in signing the guarantee or share pledge.

105.  Anyway, on D’s evidence, it would appear that he had been told that among the documents he was to sign and had indeed signed had included a loan agreement and documents for pledging of assets.  He had admitted signing the 1^st Authorisation, and further at the 4^th Meeting, he had signed the 2^nd Authorisation and the Confirmation.  The issue here is that P’s case is that the Loan Agreement and all ancillary documents were signed for the purpose of a loan and D’s case was that the Loan Agreement and ancillary documents were signed to avoid immediate repayment of and to have a record of the Gross Gambling Loss, and to acquire further gambling limit for him to continue to gamble at the Hang Seng VIP rooms. 

106.  In light of my earlier view that D has raised a triable issue on the Sham Arrangement, I am of the view that he has also raised a triable issue on non est factum.

Delay

107.  P’s summons was issued more than 10 months from acknowledgment of service and some 7 months after the filing of the Defence.  Mr Tong submitted that that delay in bringing an application may be a reason for refusing judgment and it would lead the court to examine the plaintiff’s case with more circumspection[45].

108.  In Timur Jaya Co Ltd v United Asia Trading Co [1980] HKLR 768, the delay was only 2 months from acknowledgment of service to the issue of the Order 14 summons.  Mr Commissioner Hooper had held in that case that where a plaintiff had brought an application after the ordinary time, the onus was on the plaintiff to show that the delay was justifiable under the special circumstances of the case.

109.  In the present case D had duly filed the Defence within time and had consented to P filing the Reply out of time.  Mr Tong submitted that by obtaining D’s consent to file the Reply out of time, P had unfairly and unjustly given D the wrong impression that no summary judgment application would be made.

110.  Whether there was wrong impression or not in any event, I accept that there had been delay and there was no explanation from P before this court to show why the delay was justifiable in the circumstances of this case.

Whether P’s summons should be dismissed

111.  The Defence was filed on 7 October 2015.  D filed his affirmation in June 2016 and his 3 witnesses filed their affirmations in August 2016.  As mentioned earlier, there was no reply evidence filed by P.

112.  D’s defence has been pleaded in full in the Defence.  In my view, P should know that D relied on a contention which would entitle him to unconditional leave to defend, and therefore P’s summons should be dismissed with costs under Order 14 rule 7. 

113.  Mr Tong sought certificate for two counsel.  In light of the amount involved and the issues involved, I grant such certificate.

Conclusion 

114.  My order is therefore as follows:

(i) P’s summons issued on 12 May 2016 is dismissed;

(ii) Costs be to the D in any event, to be summarily assessed and paid within 7 days of the summary assessment.  D to submit his statement of costs within 21 days, P to submit its list of objections within 14 days thereafter.