NGA INVESTMENT LTD v. LAU JENNIFER P.T.

DCCJ4140/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4140 OF 2014

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J U D G M E N T

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1.  This is an application by Nga Investment Ltd (“plaintiff’) pursuant to O.14 r.1 of the Rules of the District Court for summary judgment for a sum of $660,000 against Ms Lau (“defendant’). At the conclusion of the hearing, judgment was reserved which I now give.

BACKGROUND FACTS

2.  The plaintiff is a company incorporated in Hong Kong. The defendant is a businesswoman, investing in stocks and properties. Miss Yu is the sole shareholder and director of the company.

3.  Mr Tsui was an estate agent, a friend of both Miss Yu and the defendant. Mdm Yeung was the plaintiff’s secretary and is Mr Tsui’s mother.  It is not in dispute also that Mr Tsui was an undischarged bankrupt at all material times.

4.  Pursuant to a written loan agreement dated 8 September 2011 allegedly entered between the parties (“Purported Loan Agreement”), the plaintiff allegedly lent to the defendant a sum of $500,000 (“Purported Loan” , “ Purported Loan Amount”, which abbreviations will be used interchangeably in this judgment).

5.  It is not in dispute that the Purported Loan Amount was paid to the defendant on 9 September 2011 by Mdm Yeung depositing it into the defendant’s account with the Heng Seng Bank (“HSBank”) by a cashier’s order she had purchased. The Purported Loan Amount was paid this way to the defendant, according to the plaintiff, because the plaintiff was not able to deposit the Purported Loan Amount directly into the defendant’s HSBank for it did not have an account with HSBank. As Mdm Yeung had such account with HSBank, the plaintiff suggested that it would be more convenient for Mdm Yeung to make payment on its behalf.

6.  According to the Purported Loan Agreement, the loan period was for 12 months, and the defendant was required to pay interest by monthly instalments in the sum of $10,000, calculated at the rate of 2% per month, commencing on 8 October 2011. With the last instalment on 7 October 2012, the defendant would be required to pay the Purported Loan Amount together with the last instalment of interest of $10,000.

7.  Attached to the Purported Loan Agreement was a schedule of repayment signed by the defendant as the borrower and by Mr Tsui as the guarantor.

8.  The plaintiff also claims that by an alleged oral agreement between the plaintiff and the defendant in around late August or early September 2012, the time for the repayment of the Purported Loan was extended on the condition of the defendant continuing with payment of monthly instalments of interest of $10,000 until the repayment of the Purported Loan.

9.  It is common ground that up until today, the defendant altogether made 19 monthly payments in the total sum of $201,000 (“Purported Partial Interest Payments’) to the plaintiff, 14 of which were made between 7 October 2011 and 12 November 2012; each payment was (apart from a payment on 21 May 2012 which was in the sum of $11,000) for a sum of $10,000. 

10.  The last 5 payments were made in 2013, the first of which was made on 26 March in the sum of $20,000, and the remaining payments were each in the amount of $10,000 paid in the months of July, August and September.

11.  The plaintiff claims that the Purported Partial Interest Payments represented the total monthly interest the defendant had paid under the Purported Loan Agreement, but the defendant defaulted paying any monthly interest as from September 2013.

12.  Thus, the plaintiff claims that it is entitled to recover from the defendant the Purported Loan Amount together with the outstanding accrued interest (after having taken into account of the Purported Partial Interest Payments) of $160,000 - which amount represents a total of 16 unpaid monthly instalments for interest from the date of default up to the date of the writ. The amount of the claim is therefore $660,000.

13.  The plaintiff’s case as to how the Purported Loan was advanced to the defendant is this: In about August 2011, Mr Tsui informed Miss Yu that the defendant had purchased a property in Shatin (through Mr Tsui acting as the property agent in the transaction) for a sum of $15.5 million, and that she needed to raise a further sum of HK$3 million in order to enable her to complete the purchase of the Shatin property and meet other incidental expenses. It was claimed that since the defendant, through Mr Tsui, was only able to borrow a sum of $2.5 million (“Golden Fields Loan”) from a finance company, Golden Fields Limited (“Golden Fields”) - with which the defendant later signed a second mortgage loan agreement on 25 August 2011 (“Golden Fields Agreement”) for the said loan - the defendant still needed a further sum of $500,000.

14.  The defendant therefore asked Mr Tsui to find another lender willing to lend her $500,000 on similar terms as those offered by Golden Fields.  Mr Tsui subsequently helped the defendant borrow the Purported Loan Amount from the plaintiff, which resulted in the lending of the Purported Loan to the defendant and the execution of the Purported Loan Agreement. The plaintiff further explained that most of the terms of the Purported Loan Agreement had been copied from the terms of the Golden Fields Agreement by Mr Tsui, which copying had led to the mistaken insertion of provisions for a second legal charge in the Purported Loan Agreement when in fact there was no such agreement for the provision of a second legal charge.

THE APPLICABLE LEGAL PRINCIPLES

15.  The parties have no argument about the law. The relevant test is well settled. On a summary judgment application, once the court is satisfied that a plaintiff has established a prima case, the court will next assess whether a defendant is able to discharge the burden of showing a triable defence.  In assessing a defendant’s allegations, the court must examine whether the defence is inherently capable of belief. The reasonableness of the allegations must also be tested against the evidence disclosed, including the contemporaneous documents, to see whether the defence is practically a sham: see Hong Kong Civil Procedure 2015(Vol1) (“HKCP”) §14/4/9, citing Paul Y Management Ltd v Eternal Unity Development Ltd CACV 16/2008 (unreported), 12 August 2008 and Manciple Ltd v Chan On Man [1995] 3 HKC 459 at 466G per Mortimer JA.

16.  The test is simply whether the defendant’s assertions are believable in the context of the undisputed or indisputable background.  It is inappropriate for the Court to conduct a mini-trial on affidavit evidence:  see HKCP at §§14/4/1 to 14/4/12.

17.  If the court finds there are unexplained features of or suspicions concerning a plaintiff’s case, the correct course is for the court to grant unconditional leave to defend so that the matters could be ventilated at trial: see Billion Silver Development Ltd v. All Wide Investments Ltd [2000] 2 HKC 262 at 266 D-E per Mayo JA; and Nolan v. Wright [2009] 3 All ER 823 at 837D to 838C per Judge Hodge QC.

THE DEFENCE

18.  Two lines of defence have been raised.  First, the defendant disputed that she had ever signed the Purported Loan Agreement or had had any dealings with the plaintiff. It is disputed that the Purported Loan Amount she had admittedly received was a loan and asserted that it had nothing to do with the plaintiff. The Purported Loan Amount, the defendant said,  was in fact the money Mdm Yeung paid to her on behalf of Jenny Leung (“Jenny”), the defendant’s former secretary, who was also believed to be Mr Tsui’s girlfriend, for investment purposes.  Second, the plaintiff was not a licensed money lender, and is not entitled to recover the Purported Loan.

(1) Whether the Purported Loan was a loan

(a) The real purpose of the Purported Loan

19.  According to the defendant’s case as set out in the defendant’s affirmation in opposition,  the defendant and Jenny had in the past invested in stocks together and had made profits from stock investments. The defendant’s evidence as to how she got the said sum is set out in §24 of her affirmation, in which she said:

“ 24. …… In around September 2011, she [Jenny] asked me and I agreed to make investments on her behalf, using her own funds. As to why the funds were transferred from Yeung Lai Kwan’s [Mdm Yeung’s] bank account, I verily believe that it was because Jenny Leung and Tsui were in a relationship, and Yeung Lai Kwan is Tsui’s mother so Jenny Leung borrowed such funds from Yeung or asked Tsui to advance the Sum to me through Yeung Lai Kwan’s account. ”

20.  Accordingly, it would appear from the above that Jenny was the borrower of the Purported Loan Amount, Mdm Yeung was the lender, and Mr Tsui was the arranger for the payment of the Purported Loan Amount to the defendant through his mother.

21.  It was the defendant’s evidence that her investments for Jenny yielded profits between September and December 2011, and that she had paid the profits she had made for Jenny by either bank transfers to Jenny (or to her nominee) or by cash.

22.  The defendant has not adduced any documents such as contemporaneous documents to support her alleged investment for Jenny but has put in evidence two cheque payments in this regard.

(1) A cheque payment dated 24 August 2011 (“Yeung’s Cheque-1”) (exhibited as “JPTL-7” to the defendant’s affirmation”) in the sum of $33,000 drawn by Mdm Yeung in favour of the solicitors of Golden Fields, which payment was allegedly for the payment of the fees for the Golden Fields Loan. The defendant relied on this cheque payment to illustrate the reason behind Mdm Yeung’s involvement in some of her financial transactions, which allegedly was due to the close inter-linking relationships of Mdm Yeung, Mr Tsui and Jenny.

(2) A cheque (exhibited as “JPTL-18” to her affirmation) (“September Cheque”) dated 21 September 2011 in the amount of $200,000 the defendant drew in favour of Mdm Yeung , which was allegedly for the payment through Mdm Yeung to Jenny of her investment returns.

23.  Counsel for the defendant, Mr Chen, submitted that the above documents were wholly capable of corroborating the defendant’s asserted real purpose of the Purported Loan Amount. The Yeung’s Cheque-1 was also said to have further supported the defendant’s credibility.

24.  In contrast to the defendant’s credible evidence, Mr Chen suggested,  is the absence of Mdm Yeung’s evidence to corroborate the plaintiffs alleged stated purpose for the Purported Loan when Mdm Yeung’s evidence, it was further contended,  could have been obtained easily.

25.  To counter the defendant’s evidence, the plaintiff has indeed filed evidence that includes Jenny’s evidence in denying – except that she had previously had only on two occasions in 2009 provided a total amount of $400,000 to the defendant for investment -  having provided any money to the defendant for investment.  

26.  The other and more salient evidence comes from Mr Tsui’s third affirmation (“Tsui’s 3^rd Affirmation”) exhibited to which is a cheque (exhibited as “THC-1” to Tsui’s 3^rd Affirmation) (“Yeung’s Cheque-2”)   issued on the same date as Yeung’s Cheque-1 issued by Mdm Yeung in the sum of $200,000 drawn in favour of the defendant’s conveyancing solicitors handling the purchase of the Shatin property. This payment of $200,000, according to Mr Tsui, was a bridging loan by Mdm Yeung to the defendant to help her pay for the purchase of the Shatin property. 

27.  Counsel for the plaintiff, Mr Cheng, submitted that the particulars of Yeung’s Cheque-2 when compared with those of the September Cheque demonstrated clearly that the defendant’s assertions were unbelievable.

28.  In my mind, the particulars of Yeung’s Cheque-2 and September Cheque make the defendant’s assertion that the September Cheque was a payment for the investment returns to Jenny via Mdm Yeung look hollow. The date, the amount, and the drawer of Yeung’s Cheque-2 all seem to point to a reasonable inference that Mdm Yeung, as Mr Tsui averred, had made a loan to the defendant by Yeung’s Cheque-2, as the timing, the amount and the name of the beneficiary of the September Cheque all seem to have been consistent with Mr Tsui’s averment.  

29.  Neither do I think Yeung’s Cheque-1 is capable of being corroborative of the defendant’s case.  The defendant’s purported reason for having involved Mdm Yeung on the ground of the inter-linking relationships of Yeung-Tsui-Jenny has been contradicted by her own evidence in which she had stated the reason to be due to Mr Tsui’s bankruptcy that had resulted in Mr Tsui asking Mdm Yeung to issue Yeung’s Cheque-1 for the payment on the defendant’s behalf of $33,000 to the Golden Fields’ solicitors for the payment of the charges for the Golden Fields Loan. There is also in evidence showing reimbursement to Mdm Yeung on 25 August 2011 of the same amount of $33,000  by the defendant, which seems to also support Mr Tsui’s evidence that he had to (due to his bankruptcy) use  Mdm Yeung’s account instead of his in respect of funds in connection with the defendant’s property purchase.

30.  Thus, the undisputed evidence seems to have only thrown light on the reason why Mr Tsui had been using Mdm Yeung’s account (due to his bankruptcy), but the defendant has provided no corroborative evidence for the unusual way by which the payment of the purported investment returns to Jenny were made through Mdm Yeung. Broadly stated, the defendant’s assertions regarding the purpose of the Purported Loan Amount when tested against the other evidence discussed above appear to be largely uncorroborated.

(b) The Purported Loan was not connected with property purchase

31.  As stated above, the parties’ respective cases in respect of the purpose for the Purported Loan Amount the defendant admitted receiving are completely divergent. It has been suggested by Mr Chen that there are a number of unexplained features that would cast doubt on the plaintiff’s claim that require them to be investigated at trial. The plaintiff’s stated purpose of the Purported Loan was said to be among those unexplained features.

32.  Given the chronology of the case in respect of the dates of the execution of the assignment, of the Purported Loan Agreement and of the payment of the Purported Loan, which were respectively on 26 August 2011, 8 September 2011 and 9 September 2011, the stated purpose of enabling the defendant to complete the purpose of the Shatin property does not seem to be tenable for it is plain that the assignment had been executed before the entering into the Purported Loan Agreement and the payment of the Purported Loan.

33.  It is however also in the plaintiff’s evidence that there were other expenses arising from the defendant’s purchase that the defendant needed to raise funds to pay these expenses. Thus, the question of the sufficiency of the defendant’s means (or the lack of it) has also been referred to by both parties. In extensively referring to the defendant’s evidence that included the evidence showing the defendant having completely settled the payment for the legal fees, disbursements and stamp duty for the conveyance of the Shatin property before the date of completion and the documents that show the value of the defendant’s stock portfolio (of about $5.6 million), Mr Chen argued that the evidence was cogent and the defendant should be allowed to defend the claim unconditionally.

34.  As a riposte to the defendant’s evidence in respect of her asserted financial ability to raise funds for her property purchase, Mr Cheng, after referring to the court the extracts of the financial history transaction lists from her banks, the statements of the defendant’s securities account showing the negative asset balance in her stock portfolio and the defendant’s payment of a relatively high interest rate at 30% per annum under the Golden Fields Loan, submitted that the documents contradicted the defendant’s assertions of having sufficient means to meet all the necessary expenses.

35.  In a summary judgment application, once the court is satisfied that a plaintiff’s claim is valid, it will next assess the credibility of the defendant’s defence without the need to also examine a plaintiff’s credibility. The court does not usually require the conducting of an investigation at trial in respect of a doubt the defendant raises concerning an averment made by a plaintiff especially when such an impugned averment is immaterial, viz a viz, having no impact on the validity of a claim.  In this application, the impugned averment, the stated purpose of the Purported Loan, seems to be of the type that does not affect the validity of the Purported Loan Agreement or the Purported Loan for the truthfulness or otherwise of the defendant’s given purpose for acquiring the Purported Loan (given especially the defendant’s admitted receipt of $500,000) does not affect the plaintiff’s claim materially.

36.  In any event, insofar as the defendant’s asserted means is concerned, among the evidence the defendant has put forward, as Mr Cheng has also rightly pointed out, I think the defendant’s sufficiency of means is highly doubtful. The documents, contrary to Mr Chen’s contention, in fact show that around the time of the defendant’s purchase of the Shatin property, the defendant had indeed been raising funds from various sources – apart from the mortgage loan, there were the Golden Fields Loan, and possibly also the bridging loan of $200,000 from Mdm Yeung. Further, despite showing a value around $5.6 million in the defendant’s share portfolio, the fact remains that it was in negative balance and further that the defendant had not been able to raise funds from realizing the defendant’s shares.

(c) The Purported Loan Agreement

37.  Since it is the defendant’s case that she never signed the Purported Loan Agreement and that she had no knowledge as to how and by whom the defendant’s signature in the Purported Loan Agreement had allegedly been forged, it is therefore submitted on behalf of the defendant that the defendant was unable to provide, other than the circumstantial evidence, any particulars of her fraud allegation.

38.  The circumstantial evidence that the defendant has put forward is in the main as follows.

39.  First is the defendant’s explanation for her first cheque[1] payment of 21 September 2011 in the sum of $10,000 paid to the plaintiff. Her explanation for that was allegedly due to the trust she had placed in Mr Tsui. According to the defendant, it was Mr Tsui who had asked her to make the said payment for the sum of $10,000, which she believed at that time, was for the discharge of the administrative charges for the purchase of the property and for the obtaining of the Golden Fields Loan.

40.  Second, the defendant’s explanation for having allowed her secretary, Tammy Lau,  to use her pre-signed cheques to pay to the plaintiff the monthly payments of $10,000 on the ground of her busy business activities that had kept her from Hong Kong.

41.  Third, the defendant’s explanation for why she had make monthly payments for two years amounting to the Purported Partial Interest Payments was due to the failure on the part of Mr Tsui to provide her the “loan agreement under which the repayment to Nga Investment Ltd was made” (see §37 of the defendant’s affirmation in §48 below) despite chasing by her as well as by her secretary.

42.  Fourth, the defendant’s reason for her continued payments for the two years from October 2011 to September 2013 accruing to the Purported Partial Interest Payments, apart from the trust she had allegedly placed in Mr Tsui, was the defendant’s belief that the monthly payments of $10,000 were for the payment of interest for the “loans” she obtained for the purchase of the property and that $10,000 was not a substantial sum.

43.  Fifth, she had in November 2013 reported the alleged forgery to police after she stopped the monthly payment in September 2013.

44.  Based on the above mentioned circumstantial evidence, Mr Chen submitted that the defendant has put forward sufficient material to demonstrate that there are matters which should be investigated at trial, referring to Hypermax Ltd v. Garwin Enterprises Ltd, HCA 2418/2006 (unreported) 5 February 2007 at §18 per Recorder J Fok SC (as he then was).

45.  Mr Cheng sought to dismiss the defendant’s assertions by submitting that it was inexplicable for the defendant to have continued to pay the Purported Partial Interest Payments comprising 19 payments over a period of 2 years if the plaintiff had indeed been a complete stranger to her as she had alleged she had been at the time when the payments were made. It was submitted that the materials and the explanation she had put forward were inherently improbable.

46.  Given the backdrop of this case, a key question that arises is why the defendant has continued to make monthly payments when in September 2011 she already knew that the payment had been to the plaintiff and indeed that the subsequent 19 payments had been paid to the plaintiff? Does the circumstantial evidence the defendant has put forward require investigation?

47.  Among the undisputed evidence is the defendant’s payments to the plaintiff for two years since the identity of the plaintiff had been made known to her in September 2011. These payments are undeniably inconsistent with the defendant’s assertions she has made in this application. The defendant has advanced a number of reasons for the payments that can be summarized as including her alleged trust in Mr Tsui, her alleged busy business engagements in the PRC and her alleged mistaken belief that the payments were for her loans and charges.

48.  From the defendant’s evidence, it is observed that as early as September 2011, she did not only know about the plaintiff being the beneficiary of the $10,000 payment, she had also , as evidenced in her affirmation, known about the plaintiff’s loan agreement. In §37 of her affirmation, she said: “After the cheque dated 21 September 2011 was deposited, Tammy Lau informed me that the recipient was Nga Investment Ltd. I was surprised because I had never heard of this company, let alone borrowing money from the company. I therefore instructed Tammy Lau to make enquiries with Tsui and to seek a copy of the loan agreement under which the repayment to Nga Investment Ltd was made”.

49.  The defendant’s knowledge of the plaintiff being the beneficiary of the $10,000 back in September 2011, and her unsuccessful chasing for a copy of the loan agreement cannot be, when being tested against the other materials to be discussed below, easily reconciled.

50.  On the undisputed evidence, before the defendant on 10 May 2012 obtained a loan of $5 million from Sky Credit, and before the Golden Fields Loan was discharged on 18 May 2012, the defendant had only two loans, which were the mortgage loan of $7,750,000 with the Standard Chartered Bank and the Golden Fields Loan.  When the defendant had referred to her alleged mistaken belief that that the monthly payments of $10,000 had been for the repayments for “loans”, those loans, according to the evidence, would have likely been the mortgage loan and the Golden Fields Loan and then the loan from Sky Credit after the Golden Fields Loan had been discharged. However, an examination of the monthly repayments of these loans will show that the defendant’s explanation is plainly unbelievable.

(1) There is no evidence as to the monthly repayments for the mortgage loan. However, given the substantial loan amount, I think that the monthly repayment would have likely been much larger than $10,000.

(2) The monthly repayment for the Golden Fields Loan was $62,500.

(3) After 18 May 2012, the defendant was no longer required to pay the monthly sum of $62,500 to Golden Fields, but she had fresh repayment obligations for the loan with the Sky Credit, and the monthly repayment was even larger, $130,000, which is a far cry from the $10,000 that the defendant had been paying to the plaintiff.

51.  In any event, her evidence for her alleged confusion also appears to be rather contradictory for it is the defendant’s case that she knew after 21 September 2011 that the plaintiff was the payee of the payments and not the mortgagee bank or Golden Fields or Sky Credit.

52.  Reliance has also been placed on the whatsapp message exchange between the defendant and Mr Tsui, which the defendant argues is capable of corroborating her complete lack of knowledge about the creation of the Purported Loan Agreement. Evidence that is capable of corroboration should be recent and contemporaneous, but the defendant’s denial of her knowledge of the Purported Loan Agreement in her whatsapp exchange with Mr Tsui on 25 October 2013, which was two years after she had already known about the plaintiff and a loan agreement, can in my assessment hardly be regarded as contemporaneous and capable of corroboration.

53.  Neither, in my assessment, is her report to the police in November 2013 capable of corroboration, in particular because the police made no arrests in relation to the defendant’s complaint of the alleged forgery.

54.  After having tested the reasonableness of the defendant’s allegations with all the materials including the documents that have been put forward, I do not find, according to my assessment, that the defendant’s first line of defence is capable of belief.

(2) Whether or not the plaintiff was a money lender

55.  In this line of defence, the defendant argues that she should be given unconditional leave to defend on the ground that there is material showing that plaintiff was likely to have been an unlicensed money lender, and if this can be established at trial, the Purported Loan, according to s.23 of the Money Lenders Ordinance (Cap.163), will be unrecoverable.

56.  It is in the plaintiff’s evidence that the plaintiff has been a property holding company and it does not engage in the business of money lending, and it has never applied for any money lenders’ licence.

57.  The only material the defendant has put forward to support her suggestion that the plaintiff was a money lender is the whatsapp message exchange between Mr Tsui and the defendant in the months of September and November 2013, in which Mr Tsui had in some of the text messages loosely referred to the plaintiff as “財仔 / 財務公司” – which may mean finance company.

58.  Although the reference to “財仔 / 財務公司” vernacularly may have a connotation of  a finance company in the context of the text messages, that is quite different from saying that the plaintiff was indeed a money lender by trade at the material time without having the probable validity of this suggestion being tested against other  materials. The best starting point seems to be by examining the contents of the Purported Loan Agreement.

59.  According to the plaintiff, the terms of the Purported Loan Agreement were largely a product of Mr Tsui’s “blind” coping. Thus a comparison should be made with the contents of the Golden Fields Agreement. Having compared these two documents, I form a broad view not only that the wording of their terms look evidently strikingly similar, but also that the other aspects such as their style and paragraph numbering also look almost identical.  As such, I think the plaintiff’s case of Mr Tsui having mistakenly included the provisions for the second legal charge in the Purported Loan Agreement as a result of Mr Tsui’s “blind copying” from the terms of the Golden Fields Agreement has more than a ring of truth. As an example, the clauses for the provision of the second legal charge provided in §§ 1 to 5 of the Purported Loan Agreement similarly appear as §§ 1 to 5 (with identical words) in the Golden Fields Agreement.  Also, had it not likely been due to the blind copying, the Purported Loan Agreement being later in time than the Golden Fields Agreement, the provision for the legal charge in the Purported Loan Agreement ought to have been the third legal charge instead of the second legal charge, as it was in the Golden Fields Agreement.

60.  The salient feature of the striking similarity between the Purported Loan Agreement and the Golden Fields Agreement mentioned above is, in my assessment, an indication that the plaintiff was not engaged in the business of a money lender at the material times, otherwise there would be, as common sense would suggest, hardly any need for the plaintiff to have copied from another loan agreement of a professional money lender, Golden Fields.

UNEXPLAINED FEATURE OF THE PLAINTIFF’S CASE

61.  In order to cast doubts on the plaintiff’s case, Mr Chen has highlighted a number of the unexplained features and suggested that these features make the plaintiff’s case look suspicious and the court should have them investigated by granting the defendant unconditional leave to defend.

62.  Among the unexplained features Mr Chen puts forward are the purpose of the Purported Loan, the defendant’s source of the funds, and the inclusion of the provisions for the second legal charge, which are in fact overlapping with the defendant’s lines of defence, and have already been discussed above.

63.  The other unexplained features, though Mr Chen has labeled them under separate headings in his written submission, are the issue of guarantee and the extension of the Purported Loan under the alleged oral agreement.

64.  The unexplained features in respect of the guarantee concern firstly the dual roles Mr Tsui played by acting as a guarantor as well as the negotiator of the Purported Loan Agreement. Secondly, the unclear liability of Mr Tsui as guarantor after the Purported Loan had been allegedly extended by the alleged oral agreement. Thirdly, the oddity of the plaintiff in having abandoned (as evidenced, Mr Chen contended, by Mr Tsui’s evidence filed in support of the application) its right to enforce the guarantee against Mr Tsui without explanation.

65.  Broadly viewed, the various unexplained features Mr Chen had referred to arise from Mr Tusi’s acting as a guarantor under the Purported Loan Agreement. This issue, in my view, is not material. The provision for the guarantee is problematic for the plaintiff as Mr Tsui was an undischarged bankrupt (for it is doubtful whether he had been given permission by the trustee in bankruptcy to have taken on these liabilities). As a consequence, the plaintiff might have lost the usual protection a proper guarantee would have provided to it, which however only affects the plaintiff but has no effect whatsoever on the validity of the claim or the Purported Loan Agreement. Hence, all the features Mr Chen have highlighted, for the purpose of this hearing, should not, for the purpose of this application, require further investigation.

66.  Unexplained features that would require a further investigation, according to  Billion Silver Development and Nolan v Wright, should be those that would have excited disquiet and cast doubts or suspicion affecting the validity of a plaintiff’s claim and some elements of bad faith, illegality or scam are generally need to be shown.

67.  For example, the unexplained features as found by the court in Billion Silver Development was in respect of a plaintiff’s sham loan agreement that had been used to conceal the plaintiff’s investment in an overseas project that was contrary to the PRC’s trading regulations: Billion Silver Development at 265B-C.

68.  Nolan v Wright is about a claim for the recovery of a loan, which original loan amount was £16,000 but the unexplained feature was that the claimant claimed a sum in excess of £ 1 million and interest at a rate of £960 per day. There were also allegations of fraud in the entire case, and the claimant’s explained involvement concerning the resort to subterfuge and the creation of false documents: Nolan [2009] 3 All ER 823 at 836c-d.

69.  The unexplained features Mr Chen has highlighted above are quite different to those features found in Billion Silver Development or Nolan v Wright. The allegations, in my assessment, are either bare or uncorroborated or irrelevant. 

CONCLUSION

70.  After having fully considered all the materials the defendant put forward and the parties’ arguments, I come to the conclusion that the defence is so shadowy that I should not grant the defendant unconditional leave to defend.

71.  Neither do I find that there are unexplained features that would drive the court to grant the defendant unconditional leave to defend.

72.  Having made a broad assessment of the evidence, I come to the conclusion that this is a case where there are good grounds for believing that the defendant’s defence is shadowy and I am prepared very nearly to give judgment for the plaintiff. According to the established legal principles,  a court in such circumstances should  grant a defendant leave to defend by imposing a condition requiring the defendant to pay the full amount claimed or a part thereof into court as a condition to defend: see HKCP p269 at §14/4/16.

73.  This will be the order that I make.

74.  In determining an appropriate sum to be ordered to be paid as a condition to defend, I have considered the principles set out in great detail in HKCP pp 269-270 at §14/4/16, which principles are largely these: a court should consider all the circumstances, which include a consideration of the financial circumstances of a defendant. The court should also not impose a condition, e.g. the payment into court of such a sum of money as would make fulfillment of the condition impossible, and that impossibility was known or should have been known to the court by reason of the evidence placed before it such as it would be a wrong exercise of discretion to grant the defendant leave to defend on condition that he should pay into court a sum which he would never be able to pay. The burden however is on the defendant to adduce sufficient and proper evidence as to his means.

75.  In this case, the defendant has not adduced any evidence as to her means in the event that the court was to impose a condition of requiring her to make a payment into court.

76.  After having taken into account all the circumstances of the case, in particular the fact that the Purported Loan Amount was undisputedly paid to the defendant, and further that there is evidence showing that the defendant has the ability to raise money either from her own funds or from friends, relatives or business associates or by borrowing from financial institutions, I am satisfied that the defendant should pay a sum of $500,000 as a condition to defend.

77.  For the above reasons, I’m inclined to exercise my discretion by allowing the defendant a reasonable time to make the payment, and 28 days from the date of the handing down of this judgment, in my view, is reasonable.

ORDER

78.  It is ordered that:

(1) Unless the defendant pays $500,000 into court within 28 days from the date of the handing down of this judgment, the plaintiff may enter judgment against the defendant for the amount claimed in the statement of claim with interest and costs, which costs are to be taxed if not agreed.

(2) If that sum is so paid into court, the defendant may defend the action by serving her defence within 7 days of the payment into court.

(3) On a nisi basis, the costs of and occasioned by this application be costs in the cause, including costs reserved, with certificate for counsel.

79.  Lastly, I wish to thank counsel for their helpful submissions in this application.