FUBON BANK (HONG KONG) LTD v. UNION SHARP HONG KONG INVESTMENT LTD AND OTHERS

HCMP 618/2021

[2022] HKCFI 1509

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 618 OF 2021

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J U D G M E N T

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A.  INTRODUCTION

1.  This is a mortgage action commenced by the plaintiff against the defendants under Order 88 of the Rules of the High Court (“RHC”), for repayment of moneys owed and vacant possession of a property under various legal documents (the “Mortgage Action”).  Before this court are (i) the plaintiff’s application for summary disposal of the Originating Summons (“OS”)  as against the 1^st to 3^rd and the 5^th defendants (“Ds”)  and (ii) Ds’ application for the proceedings to continue as if commenced by writ.

2.  The plaintiff’s claims in this case are straightforward.  They are based on loan and security agreements, in respect of which Ds do not dispute having personally signed or executed.  Ds also do not dispute that relevant events of default have occurred with respect to the subject facilities.  The plaintiff submits Ds plainly have no defence to the claims raised by the plaintiff.

3.  On the other hand, Ds submit that there are issues raised in their affidavit evidence that amount to not just arguable but credible defences, namely:

(1)  Want of Authority (in relation to the 1^st defendant);

(2)  Estoppel/Misrepresentation (in relation to the 1^st to 3^rd defendants);

(3)  Forgery (in relation to the 5^th defendant); and

(4)  Undue Influence (in relation to the 5^th defendant).

B.  MATERIAL FACTS

4.  The material facts of the case are set out in the affirmations filed by the plaintiff, which are summarised in this section below.

B1.  The parties

5.  The 1^st to 3^rd defendants are companies involved in the frozen food import and export business.

6.  At all material times, the 5^th defendant (“Ms Lin”)  is the Chairman and sole director of the 1^st defendant. Ms Lin is the daughter of the 4^th defendant (“Bill Lin”), who is the sole director of the 2^nd and 3^rd defendants.

7.  Ms Lin is now 27 years of age.  In August 2019, Ms Lin completed her university degree in Bachelor of Business (Economics and Finance)  at the Royal Melbourne Institute of Technology.  After her graduation, Ms Lin was employed in Singapore and worked in that country until June 2020.

8.  From as early as 2016, Ms Lin has been involved in credit facilities applications, either as personal guarantor or as the authorised signatory of at least 10 different companies (including the 1^st defendant)  as mortgagors.

B2.  The 2014 Guarantees and events prior to transaction in 2019

9.  On 29 May 2014, the 2^nd defendant and the 3^rd defendant respectively executed Deeds of Guarantees in favour of the plaintiff - (i) the 2^nd defendant’s Deed of Guarantee was with respect to all present and future liabilities and indebtedness of the 3^rd defendant, and (ii) the 3^rd defendant’s Deed of Guarantee was with respect to all present and future liabilities and indebtedness of the 2^nd defendant (the “2014 Guarantees”).

10.  On the same day, Bill Lin executed a Deed of Guarantee in favour of the plaintiff, with respect to all present and future liabilities and indebtedness of the 2^nd and 3^rd defendants.

11.  On 26 May 2016, the plaintiff and the 2^nd defendant entered into the Bank Facilities Agreement, by which the plaintiff inter alia agreed to grant temporary advances to the 2^nd defendant or allow the 2^nd defendant to overdraw its current account with the plaintiff, subject to the 2^nd defendant’s agreement with the terms and conditions therein.

12.  On 21 November 2017, the 1^st defendant purchased the subject property at Kings Wing Plaza 2 (the “Mortgaged Property”), which was wholly financed by a loan from Lei Shing Hong Credit Limited in the amount of HK$56 million (“LSH”;the “LSH Loan”), which was then secured by an all monies legal charge over the Mortgaged Property (the “LSH Legal Charge”).

13.  On 6 September 2018, the 1^st defendant further executed an all moneys Second Legal Charge in favour of Kwan Seng Finance Limited (the “Kwan Seng Legal Charge”)  for a loan of around HK$20 million (the “Kwan Seng Loan”).

B3.  The Facility Letter

14.  By a Facility Letter from the plaintiff to the 1^st to 3^rd defendants dated 4 September 2019, upon the request of the 1^st to 3^rd defendants, the plaintiff agreed to grant, renew, increase and amend the following facilities subject to the terms and conditions thereof:

(1)  Fixed Instalment Loan of up to HK$30,000,000.00 to the 1^st defendant (the “Instalment Loan”);

(2)  Trade Facility of up to HK$40,000,000.00 to the 2^nd defendant and the 3^rd defendant (the “Trade Facility”); and

(3)  Revolving Short Term Advance Facility of up to HK$16,000,000.00 to the 2^nd defendant and the 3^rd defendant (the “Revolving Facility”).

(collectively, the “Facilities”)

15.  Under the Facility Letter, the Facilities are granted against certain securities and guarantees, including:

(1)  An all monies first Legal Charge to be executed by the 1^st defendant (as Mortgagor/Borrower);

(2)  An all monies second Legal Charge to be executed by the 1^st defendant (as Mortgagor)  and the 2^nd and 3^rd defendants (as Borrowers), in favour of the plaintiff over the Mortgaged Property.

(3)  Corporate guarantees to be executed by the 2^nd and 3^rd defendants, and personal guarantees to be executed by Ms Lin and Bill Lin, in favour of the plaintiff for the 1^st defendant, the 2^nd defendant, and/or the 3^rd defendant.

16.  It is not in dispute that Ms Lin personally signed on the signing page of the Facility Letter.  Both Ms Lin and Bill Lin (including on behalf of the 1^st to 3^rd defendants)  signed on the Facility Letter, for confirmation and acceptance of the above terms and conditions.

B4.  The 2019 Guarantees and the Warning Notice

17.  In consideration of the plaintiff making or continuing to make advances or giving credit to the 1^st defendant:

(1)  the 2^nd defendant and the 3^rd defendant respectively executed Deeds of Guarantee in favour of the plaintiff with respect to all present and future indebtedness of the 1^st defendant (the “Corporate Guarantees”); and

(2)  Ms Lin and Bill Lin jointly and severally executed a Deed of Guarantee in favour of the plaintiff with respect to the present and future indebtedness of the 1^st defendant, subject to a cap for the total amount recoverable in the sum of HK$30 million (the “Personal Guarantee”).

18.  It is not in dispute that Ms Lin personally signed on the signing page of the Personal Guarantee.  It is also not in dispute that Ms Lin personally signed a one-page document entitled “In-House Warning Notice to Non-Commercial Surety” with respect to the Personal Guarantee dated 23 September 2019 (the “Warning Notice”).  By Ms Lin’s signature on the Warning Notice, she acknowledged to the plaintiff her receipt of the same, and confirmed that she “fully understands the contents thereof”.

19.  The Warning Notice signed by Ms Lin stated, inter alia, the following:

“1. The Borrower(s)  [ie the 1^st defendant] have applied to us, Fubon Bank (Hong Kong)  Limited for General Banking Facilities to the extent stated above to be granted to the Mortgagor(s)  and/or the Borrower(s)  on the security of a mortgage, to be taken out on the Property/Asset and/or on the security of the Deed of Guarantee (the “Guarantee”)  to be executed by the Guarantor(s)  (as the case may be).

2.  Before you sign the mortgage and/or the other security documents including the Guarantee (if applicable) which you have to sign if you go on with the transaction you should instruct a solicitor to protect your interests and to ensure that your rights and liabilities under the security documents are properly protected.

3.  YOU ARE RECOMMENDED TO INSTRUCT YOUR OWN SOLICITOR who will be able at every stage of the transaction to protect your interest and to give you independent legal advice.

4.  If you do not instruct your own solicitor, you may be required to attend the office of the solicitors acting for us (if so instructed by us)  solely to sign and execute the security documents and the solicitors will only be instructed by us to explain and to witness your signing and execution of the security documents.  They do not act as your solicitor and will not be giving you any legal advice regarding the security documents.

5.  You are now provided with the Principal Financial Information of Borrower(s)  as attached (a copy of which you hereby acknowledge receipt).  Please let us know if you need information of and relating to the Mortgagor(s), the Guarantor(s)  and any co-Borrower(s), co-Mortgagor(s)  and co-Guarantor(s), but we may or may not be able to do so, YOU ARE STRONGLY ADVISED to engage your own financial adviser to give you advice on such financial information before signing and executing the security documents.

6.  Your liability under the Guarantee will be limited to an amount of HKD30,000,000.00 (together with accrued interest thereon) if you decide to go on with the transaction and sign and execute the Guarantee(s).

7.  You also have the choice not to proceed with the transaction in connection with the General Banking Facilities to be granted to the Borrower(s).

8.  Please think carefully before deciding whether to proceed with the transaction.  You are free to choose whichever option you prefer.” (emphasis in bold supplied)

B5.  The Legal Charges

20.  On 25 September 2019, Ms Lin and Bill Lin attended the office of Messrs Ho & Wong (“H&W”), and executed the following Legal Charges (on behalf of the 1^st to 3^rd defendants):

(1)  “Legal Charge”: in favour of the plaintiff as Mortgagee (Lender), the 1^st defendant as Mortgagor (Borrower)  executed the all monies Legal Charge dated 10 October 2019 over the Mortgaged Property; and

(2)  “Second Legal Charge”: in favour of the plaintiff as Mortgagee (Lender), the 1^st defendant as Mortgagor and the 2^nd and 3^rd defendants as Borrowers executed the all monies Second Legal Charge dated 10 October 2019 over the Mortgaged Property.

21.  It is not in dispute that Ms Lin personally signed the Legal Charge on behalf of the 1^st defendant as Mortgagor (Borrower).  Clause 32 of the Legal Charge contains the following confirmations:

“32. INDEPENDENT LEGAL ADVICE

32.01 The Borrower [ie the 1^st defendant] hereby acknowledge being advised by the Lender and/or the Lender’s solicitors that separate and independent legal advice relating to the contents and the legal implications of this Charge, the Facility Letter and other related security documentation (as referred to in the Facility Letter)  should be obtained but acknowledges that there is no need for such independent legal advice despite having the chance to obtain same.

32.02 The Borrower further acknowledges having read through and fully understood the contents and the legal implications of this Charge, the Facility Letter and other related security documentation (as referred to in the Facility Letter)”.

22.  It is also not in dispute that Ms Lin personally signed the Second Legal Charge on behalf of the 1^st defendant as Mortgagor.  Clause 33 of the Second Legal Charge contains materially similar express confirmations for independent legal advice as aforesaid (given by the 1^st to 3^rd defendants).

23.  The Legal Charges contain standard provisions for all monies mortgages, including provisions for (i) the definition of “Secured Indebtedness” to include all sums from time to time advanced by the plaintiff, (ii) the repayment of Secured Indebtedness, (iii) the charging clause on the Mortgaged Property, (iv) Events of Default, and (v) continuing security.

24.  Following the above loan and security transaction with the plaintiff in 2019, the 1^st defendant was able to pay off the then existing LSH Loan and the Kwan Seng Loan, and to discharge the LSH Legal Charge and the Kwan Seng Legal Charge on 10 October 2019.

B6.  Events of default and commencement of present proceedings

25.  It is not in dispute that the 1^st defendant, the 2^nd defendant, and the 3^rd defendant have defaulted with respect to repayments of the Instalment Loan, the Trade Facility, and the Revolving Facility:

(1)  The 1^st defendant defaulted in repayment of the monthly installment of the Instalment Loan due since 10 December 2020;

(2)  The 2^nd and 3^rd defendants defaulted in making repayment of the outstanding balance of trust receipt loans under the Trade Facility, due and payable on various due dates from 16 November 2020 up to 4 January 2021;

(3)  The 2^nd and 3^rd defendants also defaulted in making repayment of the outstanding balance under their respective accounts under the Revolving Facility, that were due and payable to the plaintiff on the respective due dates on 9 December 2020 and 19 November 2020.

26.  It is also not in dispute that the above default and/or breaches constituted Events of Default occurred under the Legal Charges, such that the plaintiff was entitled to demand for repayment of the whole outstanding balance under the Facilities, and to take steps to enforce its security.

27.  By 12 letters all dated 22 January 2021 sent to the respective Ds by the plaintiff’s solicitors, the plaintiff demanded payment of the outstanding balance together with interest and costs.  Despite the plaintiff’s demand, Ds failed and/or refused to make repayment of the outstanding indebtedness.

28.  On 4 May 2021, the plaintiff commenced the present OS proceedings against Ds.

C.  RELEVANT LEGAL PRINCIPLES

29.  For proceedings commenced by originating summons (including a mortgage action under RHC Order 88), it is trite that the court would summarily determine the case if the nature of the case requires, including where the issues do not need to be resolved by way of a trial: Bank of China (Hong Kong)  Ltd v Keen Lloyd Resources Ltd, CACV 1787/2001 (unrep, 26/02/2002), §§18 to 22; Wing Hang Credit Ltd v Chan Kit Ha, HCMP 2586/2005 (unrep, 4/12/2008), §23.

30.  Under RHC Order 28, rule 8, the court may make an order that an originating summons be continued as if begun by writ, where “there can be shown on the available evidence genuine and/or substantial issues of fact”. For such inquiry, it is “necessary to consider whether there were significant factual issues requiring determination”: Li Fung Kai v Fung Sau Lin, HCMP 919/2013 (unrep, 9/09/2013), §41.

31.  In this regard, “[w]hen faced with conflicting affidavits from both parties, the court will be failing in its duty if it should take the assertions in the affidavits on their face value in isolation and jump to the conclusion that there is a triable issue without first considering whether the assertions in the affidavits are believable…[T]he test…whether the assertions are believable is a question to be answered not by taking the assertions in isolation but by taking them in the context of so much of the background as was either undisputed or beyond reasonable dispute”: Li Fung Kai (ibid), §44.

32.  “In an originating summons procedure, it is only when the court is satisfied after having undertaken that exercise that factual disputes could not be resolved on affidavit evidence that oral evidence or trial should be considered”: Li Fung Kai (ibid), §44.

33.  On application of the above principles, the plaintiff submits that on the available evidence, there are no genuine or substantial issues of facts which would require this court’s adjudication.

D.  PURPORTED DEFENCE 1: WANT OF AUTHORITY

34.  Ms Lin’s purported defence based on “want of authority” for the Facility Letter can be quickly disposed of.  In short, it is disingenuous for Ms Lin to try to take issue with Bill Lin’s authority to execute the Facility Letter on 24 September 2019, by pointing to a certain written resolution of the 1^st defendant dated 25 September 2019. I agree there is no merit in this argument, and it is indisputable that Ms Lin (as sole director of the 1^st defendant)  had intended to authorise Bill Lin to enter into the Facility Letter on the 1^st defendant’s behalf.

35.  As a full answer to this unmeritorious point, the plaintiff has referred to the 1^st defendant’s board resolution signed personally by Ms Lin on 24 September 2019 (which is annexed to the Facility Letter).  The said resolution of the 1^st defendant clearly and unequivocally authorised Bill Lin to execute the Facility Letter on behalf of the 1^st defendant.  This put to rest Ms Lin’s incorrect argument.

E.  PURPORTED DEFENCE 2: THE ALLEGED “UNDERTAKING” AND ESTOPPEL/MISREPRESENTATION

36.  Ds’ primary defence is based on an alleged “Undertaking” said to be given by Mr Tommy So of the plaintiff, to the effect that “the Plaintiff would not take legal action of enforcement unless the [1^st to 3^rd defendants] have become insolvent or at risk of total collapse of the Business of the [1^st to 3^rd defendants] known to the Plaintiff” (the “Alleged Undertaking”).

37.  In this regard, Ds’ purported “defence” is that the plaintiff “would now be estopped from issuing the present proceedings in the absence of evidence of insolvency or total collapse of the Business of the 1^st, 2^nd and 3^rd Defendants”.  As submitted by the plaintiff, this is misconceived on multiple levels.

38.  First, the Alleged Undertaking - which is not supported by any contemporaneous evidence - flies against the express terms of the Facility Letter, which provides as follows at Clause 9:

“Notwithstanding anything contained herein, the Bank reserves its customary overriding right of repayment on demand in writing to the effect that it can at its sole discretion and at any time (a)  suspend or terminate the Facilities and if the latter occurs, all amounts then outstanding (including accrued interest thereon)  under the Facilities and all other sums payable hereunder (if any)  shall become immediately due and payable; and/or (b)  demand additional security from the Borrower; and/or (c)  demand immediate repayment of all outstanding sums due.” (Emphasis added)

39.  The Facility Letter was agreed by and is binding on the 1^st to 3^rd defendants, having been executed by Bill Lin on their behalf, and was personally signed by both Bill Lin and Ms Lin.  The parties’ common agreement in Clause 9 is that the plaintiff has sole discretion at any time to demand immediate repayment of all outstanding sums due.  This Clause 9 completely contradicts Ds’ inherently incredible account in relation to the Alleged Undertaking.

40.  Second, in stark contrast with the clear terms of Clause 9, Ds’ own factual account of the Alleged Undertaking is both vague, evasive, and inconsistent:

(1)  Ds’ evidence on the Alleged Undertaking is provided by Mr Ng, the former accounting manager of the 1^st to 3^rd defendants. On the other hand, Ms Lin confirmed that she was not personally privy of the Alleged Undertaking.

(2)  However, rather than to specify and particularise how and when the Alleged Undertaking was allegedly made by the plaintiff, Mr Ng could only give the following evasive utterances on oath:

“I understand myself and from Mr Lin that Mr Tommy So of the plaintiff has undertaken to him that Clause (9)  at page 5 of the Facility Letter dated 4 September 2019 is a routine clause in banking loan documents and the plaintiff would not take action of enforcement unless the 3 Companies [ie the 1^st to 3^rd defendants] have become insolvent or at risk of total collapse of the Business of the 3 Companies known to the Plaintiff.” (Emphasis added)

(3)  But Mr Ng’s above account is revealing, in that it is essentially an admission that Mr Bill Lin was perfectly aware from the plaintiff the existence of Clause 9 in the Facility Letter, before the execution of the Facility Letter.  Whether or not it is a “routine clause” is irrelevant - the 1^st to 3^rd defendants are still bound by the terms of the Facility Letter which they had signed and entered into.

(4)  Ds have no doubt belatedly realised this problem, and hence Mr Ng is now awkwardly seeking to retract from his earlier position.  In Ng’s further affirmation, Mr Ng belatedly “clarifies” that “Mr So never specifically mentioned Clause (9)  to us in any of those meetings.  But I understood that since Mr So promised that the Plaintiff would not enforce against the 3 Companies unless they have become insolvent or at the brink of total collapse, my understanding is that Clause (9)  must be a routine clause”.  Mr Ng’s “clarification” is not only illogical, it also contradicts his earlier statement that the reference to Clause 9 was part of Mr So’s alleged “undertaking”.

41.  Third, the Alleged Undertaking is also inherently incredible in that it defies all commercial sense:

(1)  There is no reason for the plaintiff (or any established bank or creditor)  to “undertake” not to take legal action or enforcement, unless a borrower becomes insolvent or at risk of total collapse.  This is particularly since on the clear terms of the Facility Letter, the plaintiff retains full discretion to claim against the 1^st to 3^rd defendants and to enforce its security.

(2)  On the other hand, Mr Ng’s bold assertions that (i) there was “never any need” for the 1^st defendant to switch to the plaintiff and (ii) there was “absolutely no commercial benefit” for the 2^nd and 3^rd defendants to enter into the Facility Letter are plainly false and indeed absurd.

(3)  Not only are those assertions irrelevant to whether the Alleged Undertaking was in fact made by the plaintiff, it is indisputable that Ds stood to benefit from the loan and security transaction, which was a refinancing exercise which enabled the repayment of the 1^st defendant’s outstanding loans and to discharge its prior charges (and also providing a lower interest rate, extended tenor, and increased banking facilities limit for Ds).

42.  Fourth, even if the Alleged Undertaking was given by the plaintiff (which is not accepted by the plaintiff), this would not give rise to any defence of “estoppel” to the 1^st to 3^rd defendants.  On Mr Ng’s new case, he vaguely asserts that the Alleged Undertaking was made at “various meetings”, “[i]n the months near the conclusion of the Securities Documents in September 2019”.  Significantly, the Alleged Undertaking is said to predate the signing of the express Facility Letter.

43.  As a matter of law, there can be no arguable case for estoppel.  As observed by Lam VP (as he then was)  in Lau Sun Kiu v Chan Suk Gay, CAMP 47/2017 (unrep, 17/11/2017)  at §25:

“Hence, at the highest, even if a case of estoppel could be run on the basis of the oral promises, it could only be promissory estoppel. The suspensory effect of such promissory estoppel could not survive the express agreements of the parties in the written term in the tenancy agreements signed and agreed by the respondent …”.

See also Re Lau Tsz Ming, ex p Orient Securities (Hong Kong)  Ltd [2019] HKCFI 170, at §§21 to 25.

44.  As to Ds’ reliance on “misrepresentation” as a defence in their Skeleton Argument, I agree with the plaintiff that this is a non-starter.  Clearly, the Alleged Undertaking is not a representation of fact.  In this regard, To J had this to say at §24 of Top One International (China)  Property Group Co Ltd v Top One Property Group Ltd, HCA 1244/2009 (unrep, 7/09/2011):

“24. [The plaintiff]’s more substantial objection is that it is trite that only misrepresentation of fact is actionable and not misrepresentation of opinion or future intention, unless such statement of opinion is published as a statement of fact or such statement of future intention is not honestly held. In order to turn a statement of opinion or future intention into a statement of fact, so that such misrepresentation is actionable, a lot more has to be pleaded including dishonesty: see Chitty on Contracts 30th edition at paragraphs 6-006 to 6-017. Allegations of dishonesty must be pleaded with sufficient particularity and clarity. On the pleadings and proposed amendments as they now stand, there is no way that I could read the expression “as a matter of formality” as anything other than a statement of opinion of the legal effect of the Share Charge and the expression “would never be enforced” as a statement of future intention. The amendments sought to be introduced contained no misrepresentation of fact.” (Emphasis added)

45.  In any event, Ds have not made a claim for rescission of the Facility Letter based on the alleged misrepresentation.

46.  Accordingly, Ds’ “defence” based on the Alleged Undertaking is completely unmeritorious, and it does not give rise to any genuine or substantial issues for trial.

F.  PURPORTED DEFENCE 3: FORGERY OF THE WARNING NOTICE

47.  Ms Lin’s attempted forensic points about the precise date that she signed the Warning Notice are a complete red herring.  It does not in any way affect Ms Lin’s “informed consent” to sign the Warning Notice or the Personal Guarantee.  For the avoidance of any doubt, it is not in dispute that the plaintiff provided the Warning Notice to Bill Lin (for Ms Lin’s signature)  at the meeting on 17 September 2019 (which Ms Lin unexpectedly failed to attend).  Regardless of whether the Warning Notice was signed on 23 or 24 September 2019, Ms Lin would have had full and ample time to consider the documents, and to confirm their contents before signing and returning them to the plaintiff.

G.  PURPORTED DEFENCE 4: UNDUE INFLUENCE

48.  Ms Lin has sought to raise a “new” defence of undue influence.  However, on closer analysis, the alleged “undue influence” can give rise to no genuine or substantial issues of fact at all.

49.  The applicable principles for undue influence have been summarised by the plaintiff as follows:

(1)  One must first bear in mind the Court of Final Appeal’s observations in the leading authority of Li Sau Ying v Bank of China (2004)  7 HKCFAR 579.  In Li Sau Ying, it was made clear that the court should not concentrate on any “artificial legal presumptions” of undue influence, which are “likely to detract from the real issue, namely, whether the evidence justifies a conclusion that the impugned transaction was procured by undue influence” (at §§28-30); cited in Re Leung Lai Hing Cindy, HCB 6777/2015 (unrep, 3/04/2017), §22.

(2)  Moreover, the court is “not required to follow the principles derived from authorities, as though they were set formulas”.  Rather, the law must be applied with a “large degree of common sense”: Bank of China (Hong Kong) Limited v Wong King Sing & Ors [2002] 1 HKLRD 358, per Mr Recorder Ma SC (as Ma CJ then was), §§34, 56.

(3)  After all, “the defence of undue influence is ultimately a simple concept.  It has all to do with informed consent.  Once a court forms the view that consent was freely given with full knowledge of the consequences of entering into the relevant transaction, that is the end of the matter, however improvident the transaction may objectively appear”: Wong King Sing (ibid), §34, cited in Re Leung Lai Hing Cindy (supra), §22.

(4)  “[T]he most critical element of the defence” of undue influence would be satisfied where the subservient party is shown to have been “victimised” by the dominant party, namely that she was the “victim of [his] treachery” or that she had been “forced, tricked or misled” by him: Re Leung Lai Hing Cindy (supra), §26; DBS Bank (Hong Kong)  Limited v Cheng Mei Ling, HCMP 1825/2016 (unrep, 21/09/2017), §52.

(5)  The impugned transaction would be tainted by undue influence if it were procured “by an abuse by the allegedly dominant party of the trust and confidence reposed in him by the allegedly subservient party”: Li Sau Ying (supra), at §34.

50.  First, at the height of Ms Lin’s case, it falls woefully short of suggesting that she was “victimized” or “forced, tricked or misled” by Bill Lin.  Nor does Ms Lin’s further evidence suggest that it was by reason of any “abuse” from Bill Lin which procured her to sign the documents, whether for the Personal Guarantee, the Facility Letter, or the Legal Charge.

51.  Quite the contrary, even on the new evidence now adduced by Ms Lin, she described her relationship with Bill Lin as “fair”, and that it was “not marked with conflicts or fights”.  Far from claiming to be “victimized” or “abused” by Bill Lin, Ms Lin accepts that she has “always appreciated all that [Bill Lin] had done for [her] and the family in terms of providing for the family”.

52.  On this basis alone, Ms Lin’s purported defence of undue influence cannot get off the ground.

53.  Second, it is undisputable that Ms Lin had free and informed consent before signing the relevant documents:

(1)  Ms Lin is an adult who holds a Bachelor of Business (Economics and Finance)  degree.  She is well in a position to make her own decisions freely and on a fully informed basis.  As noted above, Ms Lin also has significant experience with loan and security transactions, and she also holds the office of sole director in the 1^st defendant. It is inherently unbelievable to suggest that Ms Lin did not act with her free and informed consent.

(2)  Moreover, it is not in dispute that Ms Lin personally signed the Warning Notice, which is a one-page document that would have properly informed her as to the nature of the Personal Guarantee and her potential liabilities thereunder.  The Warning Notice also contained the plaintiff’s recommendation for her to instruct her own solicitor and financial advisor.  Ms Lin personally signed the Warning Notice to acknowledge that she “fully understands” the contents thereof.

(3)  Insofar as Ms Lin is suggesting that the Legal Charges are signed under undue influence (which is unclear from the evidence), this is completely unarguable.  In the first place, Ms Lin is not personally a party to the Legal Charges, which were signed by her in the capacity of sole director of the 1^st defendant (and owing the usual director’s and fiduciary duties to the 1^st defendant). There is and can be no suggestion of “undue influence” by Bill Lin on the 1^st defendant as a corporate entity.

(4)  Moreover, Ms Lin and Bill Lin signed the Legal Charges at the office of H&W on 25 September 2019. The plaintiff refers to Clause 32 of the Legal Charge and Clause 33 of the Second Legal Charge, which are express confirmations that the 1^st to 3^rd defendants have read through and fully understood the contents and legal implications of the Legal Charges, the Facility Letter and related security documentation.

(5)  Still further, each of Ms Lin and Bill Lin (in their capacity for the 1^st to 3^rd defendants)  signed the Advices to Seek Independent Advice regarding the Legal Charges dated 25 September 2019, which inter alia confirm the following:

“Although the contents of the [Second] Legal Charge of the Property have been interpreted and explained to us by Messrs Ho and Wong who have also invited us to seek independent legal advice and representation on this transaction as well as on the said [Second] Legal Charge, yet we confirm that we do not wish to seek independent legal advice and representation despite every chance having been offered to us to do so.”

54.  As submitted by the plaintiff, Ms Lin had indisputably signed on the documents on her own free and informed consent.  As far as Ms Lin’s “undue influence” defence is concerned, this would be “the end of the matter”: Wong King Sing (supra), §34, Re Leung Lai Hing Cindy (supra), §22.  Hence, any further issues as to whether the plaintiff should be put on inquiry, or had taken reasonable steps to dispel constructive notice, “simply do not arise”: Bank of China (Hong Kong)  Ltd v Tsang Sheung Bun [2013] 5 HKLRD 62, §38.

55.  On the basis of the above, it is plain that Ms Lin cannot raise any viable defence of “undue influence” at all.  Without prejudice to that position, the plaintiff has the following submissions, which further put beyond doubt that the purported “undue influence” defence has no merit and raises no triable issues.

56.  Third, it is plainly wrong and disingenuous for Ms Lin to argue that the Personal Guarantee would be manifestly to her financial disadvantage:

(1)  As a start, there was clear commercial motivation for Ms Lin (who was a sole director of the 1^st defendant)  to enter into the Personal Guarantee, which is the security transaction that is part of the quid pro quo for obtaining financing from the plaintiff: Standard Chartered Bank (Hong Kong)  Ltd v Pak Kwan Ho [2018] HKCFI 523, at §38.

(2)  Moreover, prior to the Personal Guarantee, Ms Lin was already acting as guarantor for the LSH Loan up to an unlimited amount.  Hence, from Ms Lin’s perspective, the refinancing exercise meant that her own personal exposure was reduced from an unlimited amount to a limited amount subject to a cap of HK$30,000,000.

(3)  Still further, it is wrong for Ms Lin to take an unrealistic and narrow view assessing “financial advantage”, since her interests are “bound up” with that of the other defendants (including her father, Bill Lin).  The observations of Mr Recorder Ambrose Ho SC in Wing Hang Credit Ltd (supra)  are equally apposite to Ms Lin position:

“… In considering the effect of the transaction, one should not lose sight of the reality of the situation. Madam Chan’s own interest was so bound up with Mr Yuen’s that any alleviation of his financial predicament must clearly be beneficial also to the family, and to each of them individually. This applies also in relation to the cash sum released from the equity of the Property. It cannot be said that just because the sum was applied to Mr Yuen’s business (even assuming that to be the case)  Madam Chan derived no benefit from it. When one considers the effect and purpose of the transaction, it is wholly artificial to regard Madam Chan as having an interest distinct and separate from that of her husband, or that the transaction was only beneficial to Mr Yuen and not Madam Chan. I am not persuaded that the transaction was financially disadvantageous to Madam Chan in any real sense.” (at §32)

57.  Fourth, there was nothing from the features of the transaction known to the plaintiff that would raise any concern that it was anything other than a normal refinancing arrangement. As such, the plaintiff would not be “put on inquiry” at all: Wing Hang Credit Ltd at §33.  In particular:

(1)  The plaintiff was not aware of the so-called “nominee arrangement” between Ms Lin and Bill Lin, which was raised only for the first time in Ms Lin’s further affirmation.  Indeed, even Mr Ng himself was “never explicitly told by [Bill Lin] that [Ms Lin] was his nominee”.  In any case, even if the so-called “nominee arrangement” existed, it is irrelevant since it does not indicate that “the transaction might have been procured by means of improper pressure or undue influence” by Bill Lin on Ms Lin: Wing Hang Credit Ltd at §34.

(2)  Moreover, from the position of the third-party bank, it is “certainly not necessary” for it to make inquiries as to the relationship between the principal debtor and the proposed mortgagor, and it is recognised that “for a bank/mortgagee to make inquiries of that character would in most cases be an unwarrantable impertinence”: Li Sau Ying (supra), at §41.  A fortiori, it is certainly not necessary for the plaintiff to inquire into any “nominee” arrangement between Bill Lin and Ms Lin at all.

(3)  Still further, the plaintiff has also received confirmation from H&W on 3 October 2019 that they have “complied in all aspects…with [the plaintiff’s] Instruction Letter”.  The plaintiff’s Instruction Letter in turn included the plaintiff’s express instructions to H&W to “provide the necessary information and advice to the Mortgagor(s)/Guarantor(s)  and to follow the relevant procedures as per Hong Kong Law Society Guidance Note to ensure that the security provided by the Mortgagor(s)/Guarantor(s)  is not liable to be set aside on the grounds of undue influence”.  The plaintiff is entitled to rely on H&W’s confirmation that all aspects in its Instruction Letter have been complied with.

58.  Fifth, even if there may be any suggestion that the Personal Guarantees and/or the Legal Charge could arguably be set aside on the ground of undue influence (which is strenuously disputed by the plaintiff), given that Ms Lin/Ds have not sought to rescind the same prior to these proceedings, and that Ds have indisputably taken the advantage of the secured loans, “[a]ny right of rescission would have been lost”: Wing Hang Credit Ltd (supra), §46.

59.  For the above reasons, I agree there is no genuine or substantial issue to be tried on Ms Lin’s purported undue influence defence.

H.  ALLEGED PROCEDURAL IRREGULARITY IN NOT SERVING PROCEEDINGS ON THE 4^th DEFENDANT

60.  In Ms Lin’s further affirmation, she raised a further point as to alleged “procedural irregularity”, on the purported basis that the plaintiff has not served these proceedings on Bill Lin.  I agree that this is fundamentally misconceived.

61.  First, under the general law, the plaintiff is fully entitled to decide how to recover its outstanding indebtedness and/or to enforce its security interests.  As explained by this court in Standard Chartered Bank (Hong Kong)  Limited v Pak Kwan Ho, HCA 1269/2015 (unrep, 26/08/2016)  at §13: “[t]he creditor has a completely unfettered choice as to how, and against whom, he should proceed to recover the debt or damages to which he is entitled”.

62.  Second, the loan and security agreements themselves contain standard provisions to the effect that the securities are cumulative and may be enforced without having recourse to other rights: see Legal Charges, clauses 26.03, 28.03; Corporate Guarantees, clauses 8, 16; Personal Guarantee clause 16.  In any case, Bill Lin’s obligation to the plaintiff is one of guarantor’s liability - none of Ds’ obligations to the plaintiff can be said to be “contingent” upon his liability at all.

63.  Third, Ds have jointly agreed with the plaintiff for the summary disposal and conversion applications to be determined by the court.  Moreover, Ms Lin has accepted in her further affirmation that as she is named as a defendant, her right to contest these proceedings would not be hampered “even in the absence of [Bill Lin’s] affirmation evidence”.  It is hence not open to Ms Lin or Ds to suggest that there is any “procedural irregularity” in the present case.

64.  For the above reasons, I agree the plaintiff is fully entitled to pursue these proceedings against Ds, without being necessarily compelled to proceed its claim against Bill Lin at the same time. The argument on “procedural irregularity” has no merit at all.

I.  CONCLUSION AND DISPOSITION

65.  For the reasons set out above, I accept that Ds have no defence to the plaintiff’s claims, and accordingly I would summarily enter judgment against Ds in terms of the Draft Order lodged by the plaintiff, which can be found at pages 240 to 252 of Hearing Bundle A.

66.  As the security agreements provide that the plaintiff is entitled to a full indemnity for costs and expenses, I order that the costs of these proceedings (including all costs reserved)  be paid by the 1^st, 2^nd, 3^rd and 5^th defendants to the plaintiff, such costs are to be taxed if not agreed on the indemnity basis.

67.  The above order as to costs is nisi and shall become absolute in the absence of any application within 14 days to vary the same.

68.  Lastly, I express my gratitude to counsel on both sides for their helpful assistance in this matter.