MTR CORPORATION LTD v. CHINA LUCK ENTERPRISES LTD AND OTHERS

HCA 1633/2021

[2024] HKCFI 790

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1633 OF 2021

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BETWEEN

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JUDGMENT

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I. INTRODUCTION

1.  The plaintiff MTR leased Premises in Sha Tin to China Luck (the 1^st defendant), a subsidiary of Asia Catering (Holding) Limited. Carina Cheung (the 2^nd defendant) and William Chan (the 3^rd defendant) each have 18% shareholdings in Asia Catering. In addition to being a shareholder, Cheung is a director of Asia Catering. Her husband Leo Leung is Asia Catering’s Chief Executive Officer. Between them, Cheung and Leung control the group of companies (the Group) to which China Luck and Asia Catering belong. In this judgment, I will refer to Cheung and Leung collectively as “the Leungs”.

2.  In November 2022, on the MTR’s application for summary judgment, Master Lai found that Chan was liable for monies owed by China Luck to the MTR under a Tenancy Agreement. Master Lai held that Chan’s liability stemmed from a Surety Deed whereby Chan apparently guaranteed the performance of China Luck’s obligations under the Tenancy Agreement. I say “apparently” because Chan says that he only saw the Surety Deed after the summary judgment hearing. It was only then (Chan claims) that he realised that the signature on the Security Deed was not his and that he had never signed the Surety Deed. According to Chan, the Leungs had systematically been defrauding him over some time, including by forging Chan’s signature on the Surety Deed and the signatures of others on similar security documents. The forged instruments were then used (Chan says) to obtain benefits from entities such as the MTR and loan monies from banks. Chan complains that the Leungs have now absconded from Hong Kong, leaving Chan exposed to claims based on the forged instruments.

3.  Chan now appeals against Master Lai’s summary judgment. He says that, at the very least, the question whether the Surety Deed was in fact signed by him must be a triable issue. It is (Chan argues) not a matter that can be determined summarily.

II. BACKGROUND

4.  In this section, I set out Chan’s version of events. It is not accepted by the MTR.

5.  On 1 June 2018, the MTR and China Luck executed the Tenancy Agreement for the Premises. On its face, the Surety Deed was signed by Cheung and Chan on the same day. According to the Surety Deed, Chan’s signature on that instrument was witnessed by Leung.

6.  On 28 October 2021, the MTR brought the present action. The Statement of Claim pleads that, between 1 October and 3 December 2019, China Luck failed to perform its obligations under the Tenancy Agreement, resulting in HK$466,190.55 remaining outstanding. The MTR further claims that China Luck repudiated the Tenancy Agreement, leading to a loss of HK$3,164,654.69. The Statement of Claim seeks those amounts against the defendants jointly and severally, with further damages to be assessed.

7.  The Leungs engaged Wong Heung Sum & Lawyers (WHS) to represent the three defendants. The Leungs told Chan that they would handle the proceedings and pay Chan’s costs. Trusting the Leungs, Chan agreed. In April or May 2022, the Leungs falsely represented to Chan that the proceedings had been settled.

8.  In late June 2022, while in Toronto, Chan learned that the Leungs had been using the Group to defraud Chan and others. On 29 June 2022, Lai Yuk Keung (a 12.6% shareholder in Asia Catering) informed Chan that from 2018 the Leungs had caused the Group to borrow large sums from banks through fraudulent means. The Leungs (Lai said) had siphoned off the loan monies for their personal benefit, leaving the Group insolvent. That afternoon, Leung’s cousin Brian texted Chan on WhatsApp that credit companies were continuously phoning Brian, looking for the Leungs. Brian told Chan that the Leungs had fled to Vancouver. Chan tried to contact the Leungs himself, but to no avail. On 5 July 2022, it was reported in the news that Asia Catering had shut down all Group restaurants, owing employees over HK$5 million in wages.

9.  Chan returned to Hong Kong from Canada in July 2022. He started reviewing the Group’s documents and affairs. He discovered that the Group had obtained large loans from banks by forging Chan’s signatures on several guarantees between November 2017 and November 2021. For instance, Asia Catering obtained a HK$1,000,000 loan from Bank of East Asia (BEA) with the support of a guarantee dated 18 August 2021 apparently signed by Chan. BEA granted another loan of HK$2,102,758 to Asia Catering on the security of a guarantee dated 8 November 2021 ostensibly also signed by Chan. These matters have been reported to the police and were the subject of an online complaint by Chan to the Hong Kong Monetary Authority.

10.  Chan further found out that the Leungs had forged the signatures of others on guarantees to obtain finance for the Group. For example, the Leungs had forged Brian’s signature on a guarantee to obtain a loan for China Will Enterprises Limited. The Leungs had, by misrepresentation or other illegitimate means, apparently induced Lai (who cannot read) to sign a guarantee dated 14 August 2017 and a facility letter dated 16 September 2020, in support of China Will.

11.  On 13 July 2022, the MTR applied for summary judgment against the defendants. WHS then telephoned Chan to say that WHS had been unable to obtain instructions from the Leungs since 29 June 2022. Moreover, as the Leungs had not paid WHS’ fees, WHS could not continue to provide legal services to Chan. WHS consequently ceased to act, and Chan filed a notice to act in person in these proceedings.

12.  Chan asked WHS for the documents in the proceedings to enable himself to oppose the summary judgment application. But WHS exercised its lien over the documents and refused to provide them to Chan until WHS was paid its outstanding fees. Chan therefore opposed the MTR’s summary judgment application without having sight of the documents filed in these proceedings. As a result, Chan did not actually see the Surety Deed prior to Master Lai hearing the summary judgment application.

13.  Chan defended himself in person before Master Lai. Neither China Luck nor Cheung appeared at the summary judgment hearing. Master Lai gave summary judgment for HK$466,190.55 and HK$3,164,654.69, with compound interest thereon and with further damages to be assessed.

14.  It was not until July 2023 that, with the help of his present solicitors, Chan obtained a full set of the documents filed for the summary judgment application. It was then that Chan realised that the MTR’s case against him was premised on a Surety Deed that he never signed. He started to collect evidence to show that he never signed the Surety Deed. He also instructed his solicitors to appeal against Master Lai’s summary judgment.

15.  On 23 August 2023, Chan filed his Notice of Appeal against Master Lai’s judgment.

III. DISCUSSION

16.  Mr Tom Ng (appearing for the MTR) submits that I should dismiss the appeal for the following reasons:

(1) Chan’s appeal is out of time. No good explanation for the delay has been put forward, so that the time for lodging an appeal should not be extended.

(2) Chan’s defence that his signature on the Surety Deed is a forgery, is not credible. Chan knew all along that the case against him was based on the Surety Deed. Despite such knowledge, it is only now that he denies his signature on the Surety Deed.

(3) The new evidence which Chan adduces in support of his defence of forgery is of no probative value. The evidence could have been produced at the summary judgment application before Master Lai. But that was not done.

(4) In any event, Lai has admitted his signature on the Surety Deed. No application has been made to withdraw his admission. No explanation has been given as to how Chan came to make the admission in the first place and why he should be allowed to resile from it.

17.  I am not persuaded that this is an appropriate case for summary judgment. In my view, I should allow the appeal, set aside the summary judgment, and grant Chan unconditional leave to defend.

18.  First, I accept that Chan’s appeal is out of time. But this case is far from over. There remain damages to be assessed. That part of the action has yet to progress. It seems to me that if, for instance, I now give directions for the speedy trial of this matter, including in relation to the further damages, the whole action can be disposed of one way or the other quickly, with any lost time rapidly being made up. The critical issue, whether the Surety Deed was or was not signed by Chan, is a compact one that can readily be investigated at a trial. On the other hand, there would be injustice to Chan, if he is correct that his signature on the Surety Deed is forged but nonetheless shut out from running such defence. When weighed against lateness (about 9 months), the balance plainly favours the grant of an extension of time to appeal.

19.  Second, Mr Ng submits that I should dismiss, as entirely devoid of credibility, Chan’s present contention that he only belatedly realised that this dispute was about the Surety Deed. Mr Ng relies on matters such as the following in support of his case that Chan along knew that the summary judgment application concerned his liability under the Surety Deed:

(1) The Statement of Claim pleaded the Surety Deed. The Defence filed by WHS on behalf of all the defendants (including Chan) was verified by Statements of Truth signed by Cheung on behalf of China Luck, Cheung on behalf of herself, and Chan on behalf of himself. Chan does not deny his signature on the Statement of Truth. The Defence pleads in its paragraph 5: “The Defendants admit the Surety Deed and the terms of the Surety Deed as pleaded in Paragraph 9.”

(2) Chan has referred to himself as “是本案的擔保人” (“the guarantor in this case”) in a letter to the court dated 2 September 2022 and in affirmations filed with the court in September and October 2022 for the summary judgment hearing.

(3) In an exchange with Chan, Master Lai referred to Chan’s liability for the payment of interest as a guarantor and pursuant to the terms of the Surety Deed.

20.  The foregoing matters are certainly points that can be put to Chan in cross-examination at trial. They do not justify a conclusion at this stage that, on the balance of probability, Chan is lying when he avers that the Surety Deed was not signed by him.

21.  On (1), given what Chan has deposed to, it is conceivable that Chan left the Leungs and WHS to draft the Defence, and merely signed the Statement of Truth because the Leungs (whom he trusted) and WHS advised him to do so. That may have been foolhardy. But that is not a reason for summary judgment. The precise circumstances of the signing of the Statement of Truth need to be investigated at trial. On (2), Chan may simply have meant that he was the person in the case described as “the guarantor”. I do not take the words as necessarily denoting that Chan fully understood why he was being sued as “the guarantor”. On (3), Master Lai referred to the Surety Deed and Chan as guarantor in the context of liability for interest. As a layperson, Chan may have assumed that his liability for interest as guarantor under a Surety Deed arose from his involvement with Asia Catering, without any precise (as opposed to vague) idea of how his liability as surety apparently came about in the first place.

22.  Third, I do not agree that the evidence adduced for the purposes of this appeal is of such low probative value that I can dismiss the same wholesale. An application for summary judgment is not an occasion to weigh evidence and engage on a trial by affidavit. Chan has deposed that the signature on the Surety Deed is not his. He can be imprisoned for perjury and contempt of court in making a false affirmation. His current solicitors would have made that clear to him. In that context, I have to accord some weight to what he has stated, at least until tested through cross-examination at trial. The evidence which Chan has exhibited of the Leungs’ propensity to forge the signatures of Chan and others, or to procure others through misrepresentation to sign security documents, is supportive of Chan’s account of events, albeit not conclusively.

23.  Fourth, I have already dealt above with Mr Ng’s argument based on Chan’s Statement of Truth. I do not believe that the lack of an application to withdraw Chan’s Statement of Truth makes a substantive difference. Chan has explained his position in his affirmations for this appeal. In short, what he is now maintaining is that the Surety Deed is authentic and binding as far as China Luck and Cheung are concerned, but not on him because he never signed the instrument. Whether Chan is right or wrong on that is plainly a matter for trial.

24.  Mr Ng suggested that I should consider granting conditional leave. But I likewise do not believe that conditional leave is appropriate. There is nothing shadowy about Chan’s defence. He is either telling the truth or he is not. That is something that simply needs to be determined at trial.

IV. CONCLUSION

25.  Leave to appeal out of time is granted. The appeal is allowed. The summary judgment is set aside as against Chan. Chan is to have unconditional leave to defend. The summary judgment remains in effect as against China Luck and Cheung.

26.  I shall now hear the parties on costs and consequential orders. As indicated above, I am minded to direct a speedy trial. I also invite the parties to suggest appropriate directions for such.