GOLDEN RICH FINANCE LTD v. LAM SAU FA

CACV 108/2018

[2018] HKCA 952

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 108 OF 2018

(ON APPEAL FROM HCMP NO. 84 OF 2017)

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REASONS  FOR  JUDGMENT

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Hon Cheung JA (giving the Reasons for Judgment of the Court) :

I. Mortgage action

1.1  In this mortgage action commenced under Order 88 of the Rules of the High Court, the plaintiff who is a registered money lender asked for payment of all monies due to it under a First Legal Charge dated 5 September 2016 (‘the Charge’) made between the defendant as the borrower and the plaintiff as the lender by which the defendant’s property situated at a development known as The Bellagio at No. 33, Castle Peak Road, New Territories, Hong Kong was charged by the defendant by way of legal charge to the plaintiff.  The Charge was to secure repayment of all monies together with interest payable by the defendant to the plaintiff under a Mortgage Loan Agreement dated 5 September 2016 (‘the Loan Agreement’) whereby the plaintiff lent $4.5 million to the defendant.  The interest rate of the loan was 30% per annum.  The loan together with interest was to be repaid by 12 monthly instalments of which $112,500 was to be repaid for each of the 1^st to 11^th instalments.  The 12^th and last instalment was for $4,612,500.  It is not disputed that the defendant had failed to pay the monthly instalments since 5 November 2016. 

1.2  Earlier, before the plaintiff commenced this mortgage action, the defendant commenced a High Court action in HCA 3248/2016 on 9 December 2016 in which she sought a declaration that the Charge be declared ‘null and void for illegality, fraudulent scam and fraudulent intention; and/or alternatively for mistake and fraudulent misrepresentation; and/or alternatively for unconscionable terms of contract.’

1.3  The defendant sought a consolidation of her action together with the mortgage action.  Deputy High Court Judge Kent Yee dismissed her application for consolidation and granted judgment to the plaintiff on its claim.  The defendant appealed.  We dismissed the appeal at the conclusion of the hearing.  I now give the reasons of judgment of the Court.

II.  Originating summons and summary judgment

2.  A mortgage action under Order 88 is commenced by originating summons and supported by affidavit evidence.  The procedure is prescribed under Order 28, rule 4(1) of the Rules of the High Court (Cap 4A).  At the hearing of the originating summons, the matter may be disposed of summarily where the Court is satisfied that there are no triable issues.  As pointed out by the authorities, this is akin to an application for summary judgment under Order 14, namely, once the plaintiff’s entitlement to summary judgment is demonstrated on the face of the evidence, the burden falls on the defendant to show that she has a credible defence to the claim.   This is to be tested against the evidence adduced in the case such as whether the defence is inconsistent with the contemporaneous documents or the defendant’s previous admissions and stand. The Court should also consider the inherent probability of the defence.  But what is not permitted is for the Court to conduct a mini‑trial of the case on the affidavit evidence.  If the Court does not deal with the originating summons summarily, it may order the proceedings to continue as if the matter had begun by writ (Order 28, rule 8) or gave further directions for the conduct of the case (Order 28, rule 4(2)).

III.  The defendant’s case

3.1  The Charge was executed by the defendant in front of a solicitor, Tse Kai Chung, Bobby of Bobby Tse & Co., Solicitors.  In it was an acknowledgement by the defendant that :

‘ I, the undersigned hereby acknowledge that Messrs. Bobby Tse & Co., Solicitors have advised me that they are the Solicitors acting for the Golden Rich Finance Limited. Although the contents of this First Legal Charge have been interpreted and explained to me by Messrs. Bobby Tse & Co. Solicitors, they have also invited me to seek independent legal advice on this transaction as well as on the said First Legal Charge, yet I confirm that I do not see the need to seek independent legal advice despite every chance having been offered to me so to do.’

3.2  In the first affirmation of the defendant, she boldly asserted that she did not sign the Charge in front of Bobby Tse.  She said she was brought by a fraud syndicate to Bobby Tse & Co. and met Bobby Tse there on 5 September 2016.  Bobby Tse did not tell her that she was going to sign a mortgage.  The defendant claimed that no one told her on or before 5 September 2016 that she would enter into a mortgage of her property.  She claimed that Bobby Tse lied when he said he had interpreted and explained the Charge to her and he had invited her to seek independent legal advice.

3.3  The defendant advanced a case of conspiracy which the Judge summarised as follows :

‘ the Loan Agreement and the First Legal Charge are void and unenforceable as the plaintiff had colluded, conspired with others to injure the interest of the defendant. The plaintiff was in breach of trust to allow the intermediaries including Bobby Tse to injure the defendant’s interest unduly influence her.’

3.4  The Judge then summarised the details of the defendant’s case on the conspiracy :

‘ 17. Central to the Conspiracy Issue is Madam Lam’s [the defendant] allegation of the existence of a syndicate (“the Syndicate”). The Syndicate consisted of a few persons with different backgrounds. First, the staff members of Wing Lung Bank (“the WL Bank”) called Madam Lam several times in August 2016 and urged her to apply for a card known as Free Advance Card (“the Card”). Madam Lam alleges that she was not in need of any loan but she eventually accepted the invitation of one of them known as Mr Kevin Ho who claimed to be a financial analyst of Wealth Creation Enterprise Planning Ltd (“Well Creation”) representing the WL Bank.

18. Subsequently, Madam Lam agreed to meet the solicitors of the WL Bank in the morning of 5 September 2016 in their Sheung Wan office. She was asked to bring along the Title Deeds only to verify her creditworthiness.

19. On that day, Mr Ho first took her to the office of Messrs. Cheung & Liu and met Mr Lam who was a solicitor there. Then he took Madam Lam to the office of BT where she met Mr Tse and Mr Tsang. Mr Tse left Mr Tsang and Madam Lam alone to transact their business.

20. Mr Tsang then proceeded to promote the Card to Madam Lam. She was persuaded and signed all the documents presented by Mr Tsang in the belief that they were for the purpose of her application for the Card only.  She claims to have no knowledge and understanding of the contents of those documents by reason of her ignorance of the English language. Presumably, such documents included the application form, the Loan Agreement and the First Legal Charge. She alleges that BT and Mr Tsang being privy to the Syndicate conspired to defraud her.

21. She nevertheless accepts that she received the Cheque from Mr Tsang. She claims to have been directed by Mr Tsang to give the Cheque to Mr Ho to arrange for the issuance of the Card. In the same afternoon, she met Mr Ho and he brought her to the office of Mr Lam of Messrs. Cheung & Liu again. She handed over the Cheque to Mr Lam in exchange of the Card. Mr Ho represented to her that she could withdraw cash out of the Sum with the Card.

22. On 13 September 2016, Mr Lam gave her a WhatsApp message telling her that a transfer had been made and she could use the Sum. In the evening of that day, Mr Setzo [Szeto] who was the branch manager of the WL Bank called her and asked her to withdraw the Sum form [from] her account on the following day.

23. On 14 September 2016, Madam Lam followed the instruction and withdrew the Sum in cash. She was picked up by a private car arranged by the Syndicate and was brought to the office of a solicitor known as Mr Cheng located in Tsim Sha Tsui. The name card of Mr Cheng shows that he worked for an organisation known as Hong Kong Universe Mortgage Centre & Solicitors (“the Organisation”). Madam Lam paid the Sum to Mr Cheng and he issued a receipt to Madam Lam bearing the name of the Organisation and its chop. The description of the payment was stated to be “Mortgage Insurance Fee”.

24. On 16 September 2016, Madam Lam phoned Mr Tse and asked for the return of the Title Deeds. Mr Tse refused to do so on the ground of lack of instruction. Madam Lam then went up to the office of the Organisation, only to find that it was closed. The management office of the office building told her that the office had been raided by the police a few times.

25. Feeling worried, Madam Lam visited the office of Mr Tsang on 20 October 2016 (“the Second Meeting”) and demanded for the return of the Title Deeds. Madam Lam alleges that it was not until then that she realised that the Mortgaged Property have been mortgaged to Golden Rich and that Mr Tsang explained to her that the First Legal Charge was executed.

26. Madam Lam reported this case to the police in October 2016 complaining about the Syndicate. Curiously enough, in the High Court Action commenced shortly afterwards, Madam Lam only targeted at Golden Rich.’

IV.   Our view

1)  The documents signed by the defendant

4.1  Mr Tsang of the plaintiff denied that there was any fraud syndicate to defraud the defendant and he did not know any of the parties of the syndicate.  He had never discussed any of the matters relating to the Free Advance Card as alleged by the defendant.  In relation to the defendant’s allegation that Mr Tsang had asked her ‘to sign some documents, mostly in English, one of which was very fake’ and that she had signed the documents ‘without reading and knowing the contents thereof’, one can readily see that apart from the Charge which is in English, the defendant had also signed an Application Form (貸款申請書) which is in both English and Chinese.  The loan type was described as 「樓宇按揭一按」(Translation: Property mortgage first mortgage).  The address of the defendant’s mortgaged property was stated in both English and Chinese. 

4.2  The Loan Agreement signed by the defendant was also in both English and Chinese.  The Chinese part expressly stated that it was a 「樓按貸款合約」(Translation: Mortgage loan agreement).  The mortgaged property was mentioned in Chinese in the Loan Agreement.  The clause in which the defendant warranted that she had the legal title to the property and that she had the right to mortgage the property was also in Chinese.  

4.3  Another document signed by the defendant was a Chinese document entitled 「法律意見聲明書」(Translation: Legal Advice Declaration) in which the defendant acknowledged and declared that :

(1)  She had been given the opportunity to seek independent legal advice and decided not to do so;

(2)  At her request, she had been explained the contents of the Loan Agreement;

(3)  She voluntarily entered into the mortgage transaction; and

(4)  The plaintiff shall not be responsible for any benefit which she had voluntarily agreed to provide to any third party or any commitment which she had agreed with any third party.

4.4  On the face of these documents, the defendant’s case that she did not know that she had signed a mortgage document by which she mortgaged her property to the plaintiff was clearly incredible.  The starting point is that she must be taken to have known the content of the documents she signed.  The defendant’s case on what Mr Tsang allegedly discussed with her about the Free Advance Card must also be tested against these documents. 

2)  The defendant’s explanation

4.5  Mr Tsang had tape-recorded the meeting he had with the defendant on 5 September 2016.  Mr Tsang referred to the material parts of the conversation as follows :

‘ 1) The defendant was explained the documents she was signing, namely, the Application Form, the Mortgage Loan Agreement and the「法律意見聲明書」(‘Application Documents’);

  2) The defendant was fully aware of the interest rate and able to query the same;

  3) The defendant did ask question about earlier redemption;

  4) The defendant was explained her right of redemption;

  5) The defendant did ask the role of the party who referred the defendant to the plaintiff and I did stress that the plaintiff would not be responsible for the obligation of that party and that the transaction between the plaintiff and the defendant is independent.  In fact, I did remind the defendant that she should not carelessly pay the proceeds of the Loan to any third party;

  6) She was aware that once she signed the Loan Agreement, she would be bound by it;

  7) The Loan was required by the defendant to finance purchase of property;

  8) She was an investor in 羽翔香港有限公司，羽翔薈盈and 興美利香港有限公司and through these companies, she was involved in seafood wholesales business and medical equipment business;

  9) She was also a Chinese medicine practitioner;

 10) She was owner of other properties, namely: one in the uncompleted development of the Bloomway (滿名山) and one in Tuen Mun, New Territories, which has been subsequently identified as Flat A, 11/F., Block 3, Kam Fai Garden, No. 6 Wah Fat Street, Tuen Mun, New Territories.  There is now produced and shown to me marked ‘TKL-10’ a copy of the land search record of the defendant’s property in Tuen Mun.’

4.6  Although the defendant said that it was not a complete recording of the meeting, it was not disputed by her that she did say to Mr Tsang that the loan was required by her to finance the purchase of property and that she had asked Mr Tsang questions on early redemption.  She, however, attempted to explain these admissions away in her affirmation :

‘ 9(b) In the early part of my conversation with Tsang on 5^th September 2016, he said that if I failed to pay back the bank after I was given the Free Advance Card, they would pledge my title deeds and I would have to pay them interest, but I could redeem the title deeds by repaying all the loans.

 (c) In item 26 of the transcript, I asked: ‘Can I redeem My Property before the 12^th Installment?’  This was the response to Tsang’s explanation towards a hypothetical question I asked in paragraph 9(b) herein, which is whether I could redeem The Property prematurely if I were to borrow money.  In fact I had not thought of borrowing money nor had I officially applied to borrow money at the time. I was therefore not aware that I would have to sign, nor did I intend to sign the mortgage documents.

 (d) My understanding at the time was that if I were to take the ‘Free Advance Card’, and borrowed a lot of money, they could take the Property as a charge.  Then, I only wanted to apply for the Advance Card in order to have some money in excess for me to invest if needs be.  I didn’t know about the mortgage. I did not need so much money on 5^th September 2016.  Tsang intentionally misled me by mentioning the redemption in our conversation afterwards.

....

12. In paragraph 8(7) of Tsang’s 2^nd Affirmation, Tsang stated that I borrowed the money to buy a flat.  In fact, I was told by Mr. Ho and Szeto Ka Yiu that if the bank asked for my purpose of obtaining the Free Advance Card, I should say that I might use the money to buy a flat.  That was why I said I borrowed the money to buy a flat.’

4.7  The credibility of these explanations must again be judged by the documents she had signed in Chinese which clearly mentioned the mortgage of her property.  Further, if Mr Tsang was indeed party to the conspiracy, one wonders why Kevin Ho and Szeto Ka Yiu should tell the defendant in advance that if the plaintiff asked her about the purpose of obtaining the card she should say that she might use the money to buy a flat?  This explanation would be totally unnecessary in such a situation.  The defendant’s explanation or her discussion on early redemption was also incredible when the provision for redemption was already mentioned in Chinese in the Loan Agreement.

4.8  The defendant was also economical with the full background of the case.  It was not disputed that on 5 September 2016, the plaintiff issued two cheques, namely, one for $4,487,000 to the defendant and another cheque of $13,000 to Bobby Tse & Co.  The latter cheque was for the legal fees of Bobby Tse & Co.  The defendant’s case was that Mr Tsang gave her the $4,487,000 cheque and told her to give it to Kevin Ho who was waiting downstairs to bring her to another firm of lawyers.  The defendant then deposed to the events that followed :

‘ 15. On or about 13 September 2016, Lam Chi Man WhatsApp me that he had deposited HK$4,467,000.00 being the Sum less the legal costs of his firm of HK$20,000.00 into my Bank of China account and I might use it. There is now produced and shown to me marked Exhibit “LSF‑2” being copy of the WhatsApp message from Lam Chi Man. I told Lam that I was not in need of such large sum of money then. The Syndicate members including Szeto Ka Yiu called me by 13 September evening, telling me that they would arrange me to withdraw HK$4,467,000.00 from Bank of China the next day by noon and the Bank of China would send a car to pick me up.’

4.9  This again highlights the incredible nature of the defendant’s case.  The cheque that was given to her was for $4,487,000.  The Bank of China’s account was her own account but she chose not to explain how someone else could deposit the lesser sum of $4,467,000 into her personal account after deducting the alleged legal costs of $20,000.  If the purpose of the loan was to obtain the card, the defendant never explained why the money was not paid to Wing Lung Bank in the first place which supposedly would issue the card to her.  She had never produced her Bank of China account statements to support her case that she later withdrew a large sum of $4,467,000 in cash from her account.

4.10  Ms Lai for the defendant repeatedly said in her submission that the plaintiff had knowledge of the claimed conspiracy but there really was no credible evidence linking the plaintiff to the conspiracy.  The defendant then referred to a document which she said was given to her by Mr Tsang when she later attended the plaintiff’s office on 20 October 2016.  The document reads :

‘ To: GOLDEN RICH FINANCE LIMITED

    Ref  : GWL/1508-309-330213

    Date期  : 14th September 2016

    Registered Owner/Borrower:Lam Sau Fai

    ___________________________________

    We Refer to the First Legal Charge and Loan Amount HK$4467000.00 In respect of the above premises made between me/us the Registered Owner and Borrower(s) and your company as the Lender of even date

    借貸雙方同意有關貸款合約及貸款金額港幣HK$4467000之有關協議。

    We hereby authorize your Company to issue cheques(s) for loan amount advance to me under the said First Legal Charge in the following manner

    現本人/吾等授權貴公司，將貸款的全部金額，扣除 / 分配下文所示，開出支票予受款人。

Payable to 受款人 GOLDEN RICH FINANCE LIMITED

Descriptions 內容 UPFRONT/OTHER CHARGE/SETUP FEE

Amount (hk$) 金額 $ 4,467,000.00

    ___________________________________________________________________________________________________________

本人吾等知道在辦理貸款手續中，由中介公司轉介至貴公司申請貸款，本人 / 吾等知道中介公司與貴公司是獨立個體，並無任何關係。中介公司向本人 / 吾等所收取之有關手續費或佣金，並不涉及代貴公司之任何費用。’

4.11  Mr Tsang denied giving this document to the defendant or that he had seen this document before.  The content of this document made no sense because it was purportedly an authorisation by the defendant to the plaintiff to issue a cheque to itself for the amount of $4,467,000 lent by the plaintiff to the defendant, when the defendant admitted that the amount she had received from the plaintiff by way of a cheque was $4,487,000.  It was for the defendant to identify the particulars of the conspiracy and specifically explain the relevance of this document in relation to the role of the plaintiff in the conspiracy.  None was given.  This cannot be the basis for the Court to direct that somehow further inquiry should be carried out in the light of this document.  Ms Lai’s reliance on the authority of Miles v. Bull [1969] 1 QB 258 which held that the Court should not give summary judgment if there are matters which required further investigation even though the defendant may not be able to pinpoint any precise triable issue cannot assist the defendant because the issue in each case is fact‑specific and as Megarry V.‑C. said in Lady Anne Tennant v Associated Newspapers Group Ltd [1979] F.S.R. 298 :

‘ A desire to investigate alleged obscurities and a hope that something will turn up on the investigation cannot, separately or together, amount to sufficient reason for refusing to enter judgment for the plaintiff. You do not get leave to defend by putting forward a case that is all surmise and Micawberism.’

4.12  The modern practice in civil litigation shows that Miles v Bull is invoked more as an exception and the Court will usually impose conditions when leave to defend is given on that basis.

4.13  Mr Tsang had produced messages from the defendant to him for the period 17 October 2016 to 24 October 2016.  Mr Tsang said :

‘ 8. As can be seen from the said Whatsapp messages:

(1) The Defendant originally asked me for help, expressing her fear that she would be unable to repay the Plaintiff (message sent at 19: 14 on 17 October 2016);

(2) She later explained that the Loan proceeds of HK$4 million odd were stolen by a syndicate of lawyers (律師集團) and pleaded with me for the Plaintiff to seek repayment from those lawyers (message sent at 12:56 on 18 October 2016);

(3) We then scheduled to meet at the Plaintiff’s office at 2 pm on 20 October 2016 (message sent at 15:06 on 19 October 2016);

(4) The day after the 20 October 2016 Meeting, the Defendant pleaded with me to sympathize with her situation and appreciate that she would be unable to repay the Loan (message sent at 8:06 on 21 October 2016);

(5) On 24 October 2016, the Defendant alleged for the first time, without any explanation, that I was defrauding her (message sent at 12:37 on 24 October 2016).’

4.14  The conduct of the defendant as revealed by her messages was inconsistent with someone who knew Mr Tsang was involved in the conspiracy because of what he had allegedly said on 5 September 2016.  She also had never put forward an alternative case that she only realised that Mr Tsang was involved when she later received the document dated 14 September 2016.  Either way, one would expect her to produce this document in her first affirmation filed in opposition to the plaintiff’s claim. Yet the defendant only chose to produce this document belatedly after Mr Tsang filed his affirmation refuting her allegations.

4.15  There was also an allegation by the defendant that the plaintiff was in breach of trust and had assisted in the breach of trust.  The relationship between the plaintiff and defendant was governed by contract.  How a trust can arise in such a situation was never elaborated.

4.16  Ms Lai also referred to the written instructions given by the plaintiff to Bobby Tse & Co. which stated the interest for the loan was 24%, and the 30% rate set out in the Loan Agreement.  We just do not see how this could assist the defendant in showing that the plaintiff had knowledge of the fraud and was part of the conspiracy. 

4.17  In our view, the Judge was clearly right in rejecting the defendant’s case as being incredible and giving judgment to the plaintiff.  

4.18  The Judge had also dealt with the defendant’s allegation of the plaintiff’s breach of the Money Lenders Ordinance.  However, the notice of appeal did not challenge this aspect of the Judge’s decision.  In our view, there must be discipline on the part of the party presenting the appeal by fully identifying the grounds of appeal in the notice of appeal.  We held the defendant was not entitled to rely on this point without identifying how the Judge’s discretion had been wrongly exercised.

4.19  For these reasons, the appeal was dismissed together with costs to be taxed on an indemnity basis pursuant to the terms of the Loan Agreement.