BANK OF COMMUNICATIONS (HONG KONG) LTD v. CHINA FORTUNE ENTERPRISES LTD AND OTHERS

CAMP 115/2025, [2025] HKCA 945

On An Intended Appeal From [2024] HKDC 2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 115 OF 2025

(ON AN INTENDED APPEAL FROM DCCJ NO. 116 OF 2023)

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DECISION

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Hon Cheung JA (giving the Decision of the Court)  :

I. Application for leave to appeal

1.  This is a renewed application by the 4^th defendant for leave to appeal against the decision of Deputy District Judge Alfred Cheng dated 6 December 2024 (‘Decision’)  refusing his appeal to set aside the summary judgment granted by Master Matthew Ho against him pursuant to the application by the plaintiff.  The 4^th defendant’s application for leave to appeal against the Decision was refused by the Judge on 30 May 2025 (‘Leave Decision’).

2.  Under Order 59, rule 2A(5)(a)  of the Rules of the High Court, Cap. 4A (‘RHC’), this Court may determine an interlocutory application without an oral hearing.  Having considered the summons, written submissions and the accompanying documents by the parties, we are of the view that it is appropriate to determine the present application on paper without a hearing.

II.  Background

3.  The plaintiff is a licensed bank in Hong Kong.[1]

4.  The 4^th defendant is an 18% shareholder of a BVI company named Year Fortune Holdings Limited (‘Year Fortune’), which, along with another Hong Kong company, owns the 1^st defendant.[2]

5.  By a facility letter dated 17 November 2017 (‘the Facility Letter’), the plaintiff granted an installment loan of $8,000,000 (‘the Loan’)  to the 1^st defendant.  In consideration of the Loan, each of the 2^nd to 5^th defendants executed a Deed of Guarantee dated 22 November 2017 (‘the Guarantee’), by which they jointly and severally agreed to pay the plaintiff, on demand in writing, all sums of money owed to the plaintiff by the 1^st defendant.[3]

6.  The 1^st defendant defaulted on the repayment of the Loan.  Notwithstanding the plaintiff’s written demands, none of the 2^nd to 5^th defendants repaid the plaintiff the 1^st defendant’s indebtedness.[4]

7.  By an action commenced on 10 January 2023, the plaintiff sought to recover the 1^st defendant’s indebtedness of $2,352,797.93 from the 2^nd to 5^th defendants. The plaintiff’s claim was denied by the 4^th defendant.[5]

8.  The 4^th defendant’s pleaded case in the Defence and Counterclaim may be summarised as follows[6] :

1)  He claimed that he knew Mr Tsui King Leung Leo (‘Tsui’)  through Tsui’s wife, the 3^rd defendant, in 2015.[7]  He and Tsui had been in a business relationship since then.[8]  In 2017, he agreed to invest in Asia Catering (Holding)  Limited (‘Asia Catering’)  in which the 3^rd defendant was a director, and he was told that the 2^nd, 3^rd and 5^th defendants would also be the shareholders of Asia Catering.[9]

2)  In August 2017, at the request of Tsui, he signed various documents purportedly for Asia Catering’s daily operation.[10]

3)  In November 2017, Tsui again asked him to sign some documents purportedly for opening a bank account.  On that day, at the carpark of his residence, Tsui provided him with some signing pages.  He signed on those blank signing pages believing they were for opening a bank account in relation to Asia Catering because 1) Tsui assured him that it would be safe for him to sign on them; and 2) he saw the signatures of the 2^nd, 3^rd and 5^th defendants. His signatures on those pages were not witnessed by the 2^nd, 3^rd or 5^th defendants, or any of the plaintiff’s representatives.  It turned out that he actually signed on the Facility Letter and the Guarantee.[11]

4)  It is the 4^th defendant’s stance that (1) he had no knowledge that the plaintiff extended the Loan through the Facility Letter; (2) he did not know he became a guarantor for the Loan; and (3) he did not know he was a shareholder of the 1^st defendant.

III.  The Judge’s decision

9.  By his Decision, the Judge found that the plaintiff was entitled to summary judgment.[12]  The Judge held that the 4^th defendant failed to show why the plaintiff ought to be fixed with any constructive notice of the fraud allegedly practised on him by Tsui.

10.  The Judge rejected the 4^th defendant’s evidence on the alleged misrepresentation or undue influence by Tsui for being unbelievable and implausible.[13]  The Judge did not accept that the plaintiff knew, or ought to have known, the relationship between the 1^st and 4^th defendants was non - commercial, such that it was put on constructive notice that the Facility Letter and the Guarantee were manifestly disadvantageous to the 4^th defendant’s interest.[14]  The Judge found no evidence of Tsui having either actual or ostensible authority from the plaintiff to support the 4^th defendant’s argument that Tsui acted, or should be seen as having acted, as the plaintiff’s agent in obtaining his signatures at the carpark.[15]

11.  The Judge rejected the 4^th defendant’s submissions on non est factum and unconscionable bargain, as he failed to overcome the heavy burden on him for invoking the doctrine and to show that his bargaining position was so weak that the law should offer him protection against any alleged unfairness in enforcing the Guarantee against him.[16]  In relation to non est factum,the signing page of the Guarantee stated in English and Chinese that it was a deed of guarantee to be signed, sealed and delivered by the persons signing on that page.  It was inherently implausible that the 4^th defendant did not raise an eyebrow despite how overtly Mr Tsui allegedly hindered him from seeing the full signing page.

12.  The Judge concluded that the 4^th defendant’s counterclaim was frivolous and an abuse of the court process,[17] and dismissed his appeal accordingly.[18]

IV.  Principles

13.  The principles for granting leave to appeal are well established.  Under section 63A(2)  of the District Court Ordinance, Cap. 336, leave shall not be granted unless the appeal has a reasonable prospect of success, or there is some other reason in the interests of justice that the appeal should be heard.  Reasonable prospect involves the notion that the prospects of succeeding must be ‘reasonable’ and therefore more than ‘fanciful’, without having to be ‘probable’.[19]

V.  The 4^th defendant’s intended grounds of appeal

14.  The 4^th defendant advances six grounds of appeal in the draft notice of appeal as follows (respectively ‘Ground 1’ to ‘Ground 6’) :

1)  The Judge erred in conducting a mini-trial on affidavit as to the credibility of the parties and affirmants to the affirmations and making tentative assessment of the respective chances of success of the parties and the relative strengths of their good or bad faith.

2)  The Judge erred in not drawing any or any sufficient adverse inference from or not considering the absence of Ng as being the weakness of the plaintiff’s case when assessing the merits of plaintiff’s summary judgment application.

3)  The Judge erred in taking into account irrelevant consideration to determine whether Ng and the plaintiff ought to have known that the 4^th defendant’s signatures were procured by misrepresentation that Tsui practised on him, in particular his interest in Year Fortune and the 1^st defendant.

4)  The Judge erred in finding that Ng flouted the plaintiff’s guidelines on how documents like the Facility Letter and the Guarantee should be signed and witnessed, but at the same time found that this could not be equated to Ng being complicit in Tsui’s scam.

5)  The Judge erred in finding that Tsui was not an agent of the plaintiff by (1)  requiring proof of representation from Tsui to the 4^th defendant that Tsui was authorised by the plaintiff; (2) finding there was no conduct in Tsui that could be said to have represented the plaintiff; and (3) not analysing that Tsui was an agent of Ng who was the agent of the plaintiff, and thus Tsui was the agent of the plaintiff.

6)  The Judge erred when comparing the case of China Citic Bank International Limited v China Will Enterprise Limited & Ors [2024] HKCFI 1859 by (1) failing to take into account that Tsui had practised systematically and over an extended period fraud on others, including the 4^th defendant, in relation to similar borrowing arrangements concerning the same group of companies; (2) holding that the time at which Tsui committed the alleged equitable wrongs on the parties were different in a material and significant manner; and (3) holding that because the Facility Letter and the Guarantee were executed by the 4^th defendant at the same time, the likelihood of fraud was lower.

VI.  Our view

1)   Ground 1

15.  This ground in essence seeks to challenge the Judge’s holding that the defendant’s evidence does not have a realistic prospect of being accepted at trial.

16.  It is trite that to obtain unconditional leave to defend in summary judgment application, the defendant must show that there are triable issues and 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’.  Whilst the Court must not embark on a mini - trial on affidavit, the Court can assess the assertions raised by the defendant to see whether they are reasonably capable of belief.  In so doing, the Court must not take them in isolation but rather in the context of so much of the background as is either undisputed or beyond reasonable dispute : Hong Kong Civil Procedure 2025 at [14/4/9] and [14/4/9A].

17.  Simply put, the Court is obliged to critically assess whether the defendant’s defence is credible in light of the entirety of evidence in place : if so, he must have leave to defend; if not, the plaintiff is entitled to summary judgment.  The question is not whether the defendant’s assertions are to be believed; it is whether those assertions are believable.[20]

18.  The present case is fact-sensitive.  Having accepted the 4^th defendant’s submissions that by the nature of his case, there was necessarily a lack of contemporaneous documents corroborating his assertions,[21] the Judge, when assessing the inherent plausibility of his defence, tested his assertions in relation to the alleged undue influence or misrepresentation practised on him by Tsui against the factual context of the case, including, inter alia, 1)  the circumstances giving rise to his signatures on the Facility Letter and the Guarantee; 2) the chronology of events concerning the land search of the property in Ka Shin Street in Kowloon as well as the relevant mortgage and other written agreements; and (3) his withdrawal of investment in Hei Wo Restaurant of his own volition.[22]

19.  The Judge was entitled, on the basis of the entirety of evidence before him, to come to his conclusion in [19] of Decision that the 4^th defendant’s case was ‘plainly unbelievable’ and ‘implausible in light of the surrounding circumstances’.

20.  In our opinion, the Judge was simply evaluating whether the 4^th defendant’s evidence is credible.  It is clear that the evaluation was limited to ascertaining the inherent plausibility of the 4^th defendant’s defence, and did not extend to resolving all factual disputes in the present case.  Thus, the Judge did not conduct a mini - trial on affidavit.  His view of the matter is not tainted with any error of law, principle or approach.

2)  Ground 2

21.  The plaintiff’s case is entirely based on the Facility Letter and the Guarantee. There is no dispute by the 4^th defendant as to the authenticity of his signatures on these two documents.[23]  As such, the Judge was correct to say in [22] of Leave Decision that the plaintiff did not require Ng’s evidence to complete its cause of action against the 4^th defendant, nor to demonstrate that it was prima facie entitled to judgment.

22.  By saying that Ng flouted the plaintiff's guidelines in witnessing his signature on the Facility Letter and the Guarantee, the 4^th defendant is effectively seeking to re - argue the case afresh in the hope that this Court may come to a different view than the Judge’s evaluation of his bare assertions that the plaintiff’s case has to be suspicious when Ng’s evidence is absent.  The Judge specifically considered the allegations raised by the 4^th defendant, and rejected it for the following reasons :

1)  The 4^th defendant did not challenge the plaintiff’s knowledge about his shareholding together with the 2^nd, 3^rd and 5^th defendants in Year Fortune and the 1^st defendant from two Certificates of Incumbency respectively dated 8 May 2017 and 1 December 2017, which both bore Ng’s name stamp or signature.  The 4^th defendant did not have any challenge to the plaintiff’s knowledge about his shareholding in Year Fortune and in the 1^st defendant.

2)  There were ample reasons for the 4^th defendant to provide a guarantee for the loan extended to the 1^st defendant and for each of the 2^nd to 5^th defendants to agree to act as guarantors for a subsidiary like the 1^st defendant.

3)  There was no other evidence that may implicate Ng in the alleged Tsui’s scam, or to suggest that the plaintiff knew or ought to have known the existence of the scam.[24]

23.  The Judge was entitled to the above views and to conclude that the inference that he was invited to draw by the 4^th defendant was ‘practical[ly] moonshine’ as in [15.3] of the Decision.  

3)  Ground 3

24.  The 4^th defendant is essentially challenging the Judge’s reliance on the following factors in [15.1] – [15.2] of the Decision that :

(1)  the 4^th defendant was an 18% shareholder of Year Fortune along with the 2^nd, 3^rd and 5^th defendants as shown in the two Certificates of Incumbency issued by Year Fortune’s agent in BVI;

(2)   there was no dispute whatsoever as to the plaintiff’s knowledge as to the shareholding structure of Year Fortune and the 1^st defendant; and

(3)  there were ample reasons for the 4^th defendant to provide a guarantee to the loan extended to the 1^st defendant (being Year Fortune’s subsidiary)  from the plaintiff’s perspective.

25.  In our view, these factors are relevant considerations in determining whether the plaintiff ought to have known that the 4^th defendant’s signatures were procured by misrepresentation as claimed.  It cannot be said that the Judge erred in his view that, given the aforesaid matters, it was practically moonshine for the 4^th defendant to say that Ng must have been asked not to go to the carpark to witness the 4^th defendant’s signature, and therefore the plaintiff ought to be taken as knowing that the 4^th defendant’s signature was procured by equitable wrongs practiced by Tsui on the 4^th defendant.

26.  The 4^th defendant also argues that the Judge erred in opining that the plaintiff was not put on enquiry about Tsui’s misrepresentation simply because the 4^th defendant is a shareholder of Year Fortune (an owner of the 1^st defendant), given that the 1^st defendant and Year Fortune are two separate legal entities.

27.  The 4^th defendant, being a shareholder of Year Fortune, has an indirect interest in the 1^st defendant.  On the face of it, the Facility Letter and the Guarantee were not manifestly disadvantageous to the 4^th defendant’s interest.  The Judge cannot be faulted for taking into account the relationship between the 1^st and 4^th defendants in coming to the view that it is not arguable that the plaintiff ought to have known that the 4^th defendant had been taken advantage of in agreeing to the Facility Letter and the Guarantee.[25]

28.  Furthermore, unlike the circumstances giving rise to the wife’s signature on the mortgage document in Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 773 (which the 4^th defendant relies on), nothing here suggests that there was a special relationship of any kind between the 4^th defendant and Tsui such that the plaintiff might be put on enquiry about the possible existence of misrepresentation or undue influence.  The Judge cannot be faulted for considering that nothing in the 4^th defendant’s evidence could challenge an otherwise unexceptionable transaction that occurred in his commercial relationship with the 1^st defendant.  The Judge correctly distinguished Etridge (No 2) from the present case.

4)  Ground 4

29.  This complaint has no merits.  The 4^th defendant’s argument under this ground involves a misreading or misunderstanding of the Decision.  The Judge did not find that Ng flouted the plaintiff’s guidelines.  What the Judge said at [15.3] of the Decision was that if the 4^th defendant’s assertions on how he signed the Facility Letter and the Guarantee were believable, then Ng might have flouted the plaintiff’s guidelines; but even if Ng had flouted those guidelines, this could not be equated to Ng being complicit in Tsui’s scam.

30.  Obviously, the Judge was only making a passing comment, which was based on the assumption that the 4^th defendant’s assertions were believable for the sake of argument.  The paragraph cannot be construed as the Judge having made two contradictory findings.  The Judge did not commit any error of law, principle or approach.

5)  Ground 5

31.  This complaint can be dealt with briefly.  It was the 4^th defendant’s own account that the documents that he signed were purportedly for opening Asia Catering’s bank account, and Tsui did not seek to act as a witness to his signatures.[26] It follows that Tsui could not possibly have made any representation in the capacity of the plaintiff’s agent to the 4^th defendant for the purpose of the Facility Letter and the Guarantee.  Nor was the 4^th defendant told by the plaintiff that Tsui was its authorised agent for the matter in relation to the Facility Letter and the Guarantee.  As such, the Judge was right to find that Tsui had neither actual nor ostensible authority to act as agent of the plaintiff in procuring the 4^th defendant’s signatures.[27]

32.  We agree with the Judge in his observation in [36] of the Leave Decision that in the apparently arms’ length relationship between the 4^th defendant and Tsui/1^st defendant in the present case, the mere fact that Tsui is required by the plaintiff to obtain security for facilities afforded to him or the 1^st defendant whether by way of guarantee or otherwise and Tsui then approaches the 4^th defendant to be a surety, does not mean Tsui is acting as the plaintiff’s agent; he may well just be acting for himself in such circumstances.[28]

6)  Ground 6

33.  As we see it, this ground of appeal is premised on the rulings in China Citic Bank International Limited where the judge there found the evidence of the 2^nd defendant (the 10^th defendant in that case)  with respect to the alleged fraud perpetrated by Tsui (‘Leo’ in that case)  in cohort with the 3^rd defendant (the 2^nd defendant in that case)  against the 4^th defendant and the 5^th defendant (the 12^th and 11^th defendants respectively in that case)  and another defendant in that case over an extended period to be believable.[29]  The 4^th defendant argues that China Citic Bank ought to have been taken into consideration by the Judge for the fact that Tsui has used the same scam to defraud the same group of people in both China Citic Bank and the present case over the same period, which is relevant to his defence ‘as similar fact evidence to be raised and determined at trial’.[30]

34.  In Capital Century Textile Company Limited v Li Dianxiao & Cong Bo Wai [2018] HKCFI 729, Lisa Wong J (as she then was)  articulated the principle on the admissibility of findings of an earlier court in subsequent proceedings that :

‘ 28. In short, the exclusion of the factual findings and conclusions of an earlier court or tribunal from subsequent proceedings serves to ensure a fair trial, ... in the specific sense that the judge appointed to hear and determine the subsequent case makes his own decision on the evidence and submissions presented to him, without being influenced by the opinion of an earlier adjudicator.

   29. Such concern however does not exist in relation to the evidence referred to in an earlier judgment such as the contents of documents or the evidence of witnesses ...’

35.  Insofar as the 4^th defendant seeks to rely on any findings in China Citic Bank itself, there were in fact no factual findings of fraud.  It was a decision on an application to set aside a default judgment entered against the 2^nd defendant, and DHCJ Jonathan Wong merely found that his defence was believable.  There were therefore no findings which could have been relied on in the present case.

36.  Insofar as the 4^th defendant seeks to rely on evidence referred to in China Citic Bank (which is permissible : Capital Century Textile Co Ltd v Li Danxiao and anor [2018] HKCFI 729 at [29]), the Judge did in fact consider it, but he found that the features of that case different from those of the present case.[31]  Further, the Judge found that the 4^th defendant’s defence was plainly unarguable in other respects.  

37.  Insofar as the 4^th defendant says that there was any evidence in China Citic Bank which could be ‘considered as similar fact evidence to be raised and determined at trial’,[32] the 4^th defendant did not adduce such evidence in the present case to resist the application for summary judgment.  The 4^th defendant cannot say that he will wait until trial to adduce the evidence.

38.  We are satisfied that the Judge did not commit any error of law, principle or approach.  He was correct to exclude the factual findings and conclusions in China Citic Bank from the present case.  Contrary to the 4^th defendant’s complaint, the Judge did examine and compare the evidence in China Citic Bank with that of the present case before coming to his own findings and conclusions.

VII.   Conclusion

39.  In light of the above, we are not satisfied that there is any reasonable prospect of success in the intended grounds of appeal.  Nor are we satisfied that there is any other reason in the interests of justice to grant leave to appeal.  The application for leave to appeal is refused.

40.  As this application is totally without merit, we further make an order pursuant to Order 59, rule 2A(8)  of the RHC that no party may under rule 2A(7)  request the determination of this Court to be reconsidered at an oral hearing inter partes.

VIII.  Costs

41.  The 4^th defendant shall pay the plaintiff’s costs of this application. The plaintiff asked for costs on an indemnity basis, which we grant, given that Clause B(d)  of the Guarantee provides that the plaintiff’s costs in relation to the Guarantee are to be paid by the guarantors on a full indemnity basis.

42.  The plaintiff asked for $80,700.  Having considered the plaintiff’s statement of costs, and taking a broad-brush approach, we will summarily assess the plaintiff’s costs at $70,000.