WAI CHUN HOLDINGS GROUP LTD v. YIP KAM KUEN

DCCJ 5523/2019

[2023] HKDC 1241

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5523 OF 2019

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DECISION

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1.  This is an appeal against the decision made by Master Doris Li on 24 March 2023 in a summary judgment application, entering final judgment of HK$1,000,000 with interest in favour of the plaintiff and ordering the defendant’s summons for adducing further evidence be dismissed.

2.  The owner of the plaintiff, Mr Lam Ching Kui (“Lam”)[1], has two companies which bear closely similar names:-

(1)  The listed company - Wai Chun Group Holdings Limited (偉俊集團控股有限公司) (Stock code: 1013); and

(2)  The private company - Wai Chun Holdings Group Limited (偉俊控股集團有限公司) (ie the plaintiff herein).

3.  The plaintiff sued on a written loan agreement dated 28 December 2018 (“the Loan Agreement”) allegedly made between the plaintiff as the lender and the defendant as the borrower for HK$1,000,000, which the defendant had failed to repay.

4.  The defendant denied the Loan Agreement. The defendant said that the payment of HK$1,000,000 was the remuneration for the financial consultancy services he provided to the plaintiff and its related companies. He said that it was orally agreed between Lam and him that the plaintiff would pay the defendant HK$200,000 per month for the said consultancy services starting from August 2018 (“the Consultancy Agreement”). The HK$1,000,000 he received covered the consultancy fees for the period from August to December 2018. He counterclaimed against the plaintiff for an outstanding sum of HK$1,800,000 of consultancy fees for the period from January 2019 to the time he ceased to provide the services in September 2019.

5.  The plaintiff denied the Consultancy Agreement.

Summons for summary judgment (O 14)

6.  It was the plaintiff’s summons dated 15 November 2022 for summary judgment against the defendant for HK$1,000,000 pursuant to the Loan Agreement.

7.  It may be convenient for me to set out the Loan Agreement, which is a one-page document typed in Chinese:-

“貸款人 [The Lender] (甲方): 偉俊集團控股有限公司
地址: 香港金鐘夏愨道18號海富中心2期13樓
 

借款人 [The Borrower] (乙方): Yip Kam Kuen (身份證號碼: XXXXXXX)
地址:
 

甲方借給乙方港幣一百萬元正 (HK$1,000,000.00)。甲方已於2018年12月28日開具港幣一百萬元正 (HK$1,000,000.00) 之恆生銀行支票 (號碼#543139) 予乙方。
 

甲方: 偉俊集團控股有限公司
代表人: [Stamped with P’s company round chop]
 

日期: 28-12-2018
 

乙方: [Signed]
 

日期: 28-12-2018”

8.  It is not disputed between the parties that the defendant had received the payment of HK$1 million by way of a cheque drawn by the plaintiff though the defendant disputed the nature of such payment.

9.  In the defendant’s affirmation in opposition (Yip 1^st Aff), the defendant said that he had been demanding Lam to pay his consultancy fees, which had been outstanding for five months in mid-December 2018. The defendant said, “Mr Lam told me that to facilitate the issue of a cheque rapidly and that would expedite the process by the accounts department of the Plaintiff to issue the cheque, the payment would be designated as a ‘loan’ for the internal purposes and requested me to acknowledge it by signing a simple loan acknowledgment so he could present it to the accounts department for funds.”

10.  In Lam’s 2^nd affirmation in reply (Lam 2^nd Aff), Lam said the loan was made at the defendant’s request for urgent assistance. However, Lam went on to say, “In passing, I note that the ‘lender’ in the loan agreement was stated to be the 1013 Company. This was due to a clerical mistake. It was clear that the cheque was drawn by the Plaintiff. The company chop on the agreement was also the Plaintiff’s chop and not the 1013 Company’s chop.” By reading the pleadings and the affirmations, I believe it was the first time the parties’ attention was drawn to the discrepancy in the name of the lender.

11.  The issue of discrepancy in the lender’s name on the Loan Agreement was considered by the learned Master. After hearing the parties’ submissions, the Master accepted that the mistake of the name of the lender was a “typographical error” and, amongst other reasons, entered judgment against the defendant. The defendant appeals.

12.  In the hearing of this appeal, I will consider the applications afresh by way of a hearing de novo.

13.  Mr Yau, counsel for the defendant, submits that the plaintiff’s summons should be dismissed or, alternatively, the defendant should be given unconditional leave to defend on the ground the defendant has real and bona fide defence:-

(1)  The HK$1 million paid by the plaintiff to the defendant was in the nature of remuneration rather than a loan;

(2)  The plaintiff is suing on a written agreement to which it is not stated as a party, and there was no rectification on the name of the party;

(3)  No demand was made by the plaintiff before the commencement of this action when the loan is allegedly repayable on demand; therefore, no cause of action has accrued; and

(4)  There is an equitable set-off or counterclaim for a remuneration of HK$1.8 million, which exceeds the plaintiff’s claim.

14.  I will first deal with submissions (2).

15.  Mr Lau, counsel for the plaintiff, fairly accepted that the name stated on the Loan Agreement as the lender was the listed company and not the plaintiff. However, he submitted that it was a mere typo, which was supported by the fact that the company chop stamped thereon belonged to the plaintiff, not the listed company. He further submitted that the content of the Loan Agreement clearly stated that a cheque had been issued by Party A (ie the lender), so if the cheque was indeed issued by the plaintiff, then Party A (the lender) must be the plaintiff.

16.  In my view, I think that the defendant’s submission is more convincing. As the name of the lender on the Loan Agreement was not the plaintiff, judgment cannot be entered under O 14. Affidavit evidence cannot make it good (Gold Ores Reduction Co Ltd v Parr [1892] 2 QB 14; Hong Kong Civil Procedure 2023, note 14/2/5).

17.  I find that there was no basis for the court to have found that it was a typographical error. My observations are as follows.

18.  First, it stated clearly in the Loan Agreement that the lender was the listed company. If it were a typo, it was no ordinary kind of typo in misspelling or missing words or letters. Rather, it clearly stated and matched with the name of another entity, namely the listed company. Such discrepancy was consistent with the defendant’s defence that the defendant was asked by Lam to sign a loan acknowledgment for the plaintiff’s internal purposes and convenience in obtaining the funds, and such document was not intended to be enforced as a loan. In fact, the name of the listed company was mentioned twice in the Loan Agreement, both in the party clause and in the signature clause. It lessened or precluded the chance of any “typographical error” in the name of the party.

19.  Second, and in addition, the Loan Agreement was only stamped with the plaintiff’s company round chop. It was not signed by Lam, nor did he sign with the company long chop with “For and behalf of (company name) … Authorized Signature(s).” As the signature clause for Party A contained the words “The representative”, the combined effect of the plaintiff’s mere stamping of the round chop there would be, that the plaintiff was signing as the representative of Party A, the listed company. There could be no suggestion that the plaintiff itself was Party A (the lender). Conversely, it is indisputable that the listed company was named as the lender in the Loan Agreement, and such a written agreement was signed (by stamping the company chop) by the plaintiff company as the representative of the listed company/the lender.

20.  Third, I disagree with Mr Lau’s submission that the lender's identity should be inferred from the agreement's content. On a plain reading of the terms of the Loan Agreement, there was no restriction that when Party A issued the cheque to the defendant, Party A had to be the drawer of the cheque. In other words, there can be no decisive view on whether there was an error in the party clause or an error in the body of the agreement in failing to describe the cheque as having actually been drawn by a related company (the plaintiff).

21.  Fourth, given Lam’s position in both the plaintiff and the listed company, it would have been a day-to-day exercise for him to decide which company, the listed company or the private company, should enter into certain transactions. Both companies are active. It would be a great hurdle for the plaintiff to overcome to convince the court that it was not the intention or arrangement of Lam to book the loan to the listed company as stated in the Loan Agreement. In my view, given the background of this case, the matter of rectification (if appropriate) can only be adequately resolved after hearing evidence at trial. There is no basis for the court to rule on the “typographical error” at this stage.

22.  The guiding principles for granting summary judgment are well-known. All that the defendant needs to show is that there is a triable issue. But before the court looks at the defence, one must look at the plaintiff’s case first: see Li Mingren v Questex Development Inc and another (unreported, CACV 141/2014, 18 November 2015) per Yuen JA, citing Billion Silver Development Ltd v All Wide Investment Ltd [2000] 2 HKC 262, per Rebeiro JA (as Rebeiro PJ then was) at 268:-

“The importance of there being doubts or suspicion as to the plaintiff’s case is that such doubts detract from the plaintiff’s right to summary judgment. It is not to the point to dismiss them on the basis that they did not improve the quality of the defence and ‘raise it’ beyond the category of ‘shadowy’. If possibly genuine weaknesses were exposed in the plaintiff’s case, this casts doubt on the plaintiff’s right to invoke the summary procedure in the first place.”

23.  The plaintiff must first raise a prima facie sustainable case: Ju Yan Di Emperory Genesisy v. Yau Wai Han [2015] 1 HKLRD 822; Ng Hung Ngan v. Yeung Fook Mui [2014] 4 HKLRD 805.

24.  As the name of the lender stated in the Loan Agreement was not the plaintiff (but the listed company) and the plaintiff sued on the very document of the Loan Agreement, I find that the plaintiff has failed to raise a prima facie case. There was no basis for the court to enter a final judgment against the defendant.

25.  I believe that is dispositive. I would allow the appeal and dismiss the application for summary judgment.

26.  I do not consider it necessary for me to give a detailed analysis in respect of the defendant’s submissions (1), (3) and (4). For the sake of completeness, I would say that I agree with the defendant that those submissions on the defence had raised credible defence. In particular, as to submission (3) regarding “demand”, the question would be one of the construction of the terms of the agreement and it had been complicated by the plaintiff when he inserted two oral terms that the loan was “repayable on demand” (SOC, para 1; Lam 2^nd Aff, para 20) and “I would not demand repayment until one month later” (Lam 2^nd Aff, para 20). This reinforced my view that this case is not an appropriate case for summary judgment.

27.  Lastly, I would add that the oral agreement, ie the Consultancy Agreement, referred to by the defendant, was not too remote and was believable. I am not saying that it should be believed, but it is just enough to cross the threshold (had it been necessary to do so) and was able to prevent the plaintiff from obtaining summary judgment. The existence of the Consultancy Agreement (together with the existence of the Loan Agreement on the flip side) would remain a triable issue and to be tested at trial.

Summons for adducing further evidence (O 32 r 16A(4))

28.  On 6 January 2023, Madam Registrar Soong, in giving directions for the summary judgment application, made an order, inter alia, that:-

(1)  Leave is granted to the defendant to file and serve affidavit in opposition within 21 days (ie on or before 27 January 2023);

(2)  Leave is granted to the plaintiff to file and serve affidavit in reply (if any) within 28 days thereafter (ie on or before 24 February 2023); and

(3)  No further affidavit to be filed by any party without leave of the Court.

29.  The substantive hearing of the summons for summary judgment was heard on 24 March 2023.

30.  On 17 March 2023 (about one week before the scheduled hearing), the defendant took out a summons for leave to file his 2^nd affirmation (Yip 2^nd Aff) together with some WeChat messages exchanged between Lam and the defendant for the period between 4 September 2018 and 7 January 2019 as an exhibit.

31.  It is not disputed that the Yip 2^nd Aff was made in response to what Lam said in Lam 2^nd Aff (ie the plaintiff’s affirmation in reply) that “there was no business relationship between us until June 2019.” The purpose of Yip 2^nd Aff was to produce and exhibit the WeChat messages to rebut the said statement.

32.  The defendant’s stance was that the statement made by Lam raised a new allegation, to which the defendant was entitled to respond.

33.  The plaintiff opposed the application on the ground that such WeChat messages could have been produced with the defendant’s 1^st affirmation, and the defendant’s summons taken out one week before the hearing would be prejudicial to the plaintiff.

34.  Master Doris Li dismissed the defendant’s application at the hearing on the basis that there were no exceptional circumstances making it desirable to admit the defendant’s further evidence under O 32 r 16A(4). She did not accept that the statement made by Lam was a new allegation, nor the delay caused by the defendant was justified. She took the view that the WeChat messages had no relevance to the core issues of the summary judgment application because, at best, the messages only showed there was a business relationship, but there was no mention of the HK$1 million loan or any consultancy fees payable for the alleged consultancy service provided by the defendant.

35.  The defendant appeals against the Master’s decision.

36.  In this hearing, the parties asked the court to read Yip 2^nd Aff on a de bene esse basis and I agreed to do so.

37.  I deal first with the applicable principles.

38.  RDC O 32 r 16A(4) is equivalent to RHC O 32 r 11A(4), and provides as follows:-

“(4) Where the determination of the application is adjourned for the hearing of the summons, no further evidence may be adduced unless it appears to the Court that there are exceptional circumstances making it desirable that further evidence should be adduced.”

39.  Mr Yau submitted that no exceptional circumstances need to be shown because this is an appeal from a summons, and as it is a rehearing of the summons, on a strict construction of the rule, this application now falls outside of O 32 r 16A(4). He said that this application is, in effect, a fresh application before this court for the first time, and it was not a case which had been adjourned by a master after giving directions.

40.  Mr Lau submitted in reply that even if this was a rehearing, it did not mean a lower test would apply. He referred to O 58 r 1(4) that no further evidence may be received at the hearing of an appeal under this rule except on special grounds.

41.  With respect, I do not entirely agree with counsel’s submissions in this regard. My view on the applicable principles is as follows:-

(1)  Order 32 r 11A(4) (RDC O 32 r 16A(4)) applies to proceedings commenced before a master who had given directions for the exchange of evidence and adjourned the case for substantive hearing before a master or a judge in chambers. The reference to “the Court” in the rule is clear.

(2)  Order 32 r 11A(4) would also apply in an appeal from a master’s decision to a judge in chambers as the appeal is a re-hearing de novo, ie the appeal would be dealt with by way of an actual rehearing of the substantive hearing of the summons.

(3)  Where the appeal is against the master’s refusal to admit further evidence, the proper procedure is to lodge an appeal against the master’s decision rather than making a fresh application for leave to file further evidence before a judge in chambers hearing the substantive appeal from an O 14 decision (see: Jindal Exports v Waco Trading Co [2000] 2 HKC 46). Therefore, O 58 r 1(5) (RDC O 58 r 1(4)) is not applicable.

(4)  There is no doubt that the rule in Ladd v Marshall is a relevant factor in the court’s consideration as to whether exceptional circumstances envisaged under O 32 r 11A(4) exist, and the court is bound to have regard to the objectives of the CJR as set out in O 1A r1 (see: Jose Miranda Da Costa Junior v Lorenzo Yih (unreported, HCA 156/2010, 28 April 2014); Yifung Properties Ltd v James Nicholas Barrie Smith (unreported, HCA 2539/2015, 22 May 2017).

(5)  However, the conditions under the rule in Ladd v Marshall will require some modification in the context of O 14 proceedings. The standard of diligence required of a defendant preparing his case in opposition to a summons for summary judgment, especially if under pressure of time, will not be so high as that required in preparing for trial (Langdale v. Danby [1982] 1 W.L.R. 1123).

42.  I now turn to the question of whether the statement made by Lam was a new allegation to which the defendant was entitled to respond.

43.  Having read the pleadings and the parties’ affirmation before the court, and having heard counsel’s submissions, I am of the view that the statement made by Lam was a new allegation. My reasons are as follows.

44.  First, in the pleadings, the plaintiff only made a bare denial to the defendant’s pleaded case of the Consultancy Agreement in the Defence without giving any account of events during the period from August 2018 to June 2019 in the Reply. As to any other encounters or dealings between the defendant and Lam during that period, as pleaded by the defendant in his Defence, the plaintiff simply answered: “without admitting the correctness or accuracy of the facts and matters pleaded in paragraph … [of the Defence], the Plaintiff avers that the facts and matters pleaded in paragraph … of the Defence are irrelevant to the Plaintiff’s claim in the present action.” In fact, the plaintiff has repeated such response to almost every paragraph of the defendant’s Defence, and such repetitive responses have formed almost the entire Reply.

45.  Second, having had the benefit of reading all the pleadings before it, the plaintiff has still not addressed any issues raised by the defendant’s Defence in its first affirmation filed in support of the O 14 application (Lam 1^st Aff), notwithstanding that he was required to state his belief that there was no defence to his claim on the part of the defendant. In fact, in Lam 1^st Aff, the plaintiff dealt with the defendant’s Defence by merely stating, once again, “without admitting the correctness or accuracy of the facts and matters put forward by the Defendant in relation to the alleged financial consultancy services rendered by the Defendant, those facts and matters are neither here nor there” (para 7 of Lam 1^st Aff).

46.  It was only in Lam 2^nd Aff filed in reply to the defendant’s affirmation in opposition (Yip 1^st Aff) that the plaintiff began to address the defendant’s alleged consultancy agreement. For the first time, the plaintiff made some positive averments about his relationship with the defendant for the disputed period. He said, “Despite my reservations about the Defendant, we met several times during social occasions. To the best of my memory, during such social gatherings, we chit-chatted about our mutual friends or topical issues such as luxury goods and the economy. However, there were no business dealings between us until June 2019. Before June 2019, the Plaintiff, 1013 Company, 603 Company and I had not sought any formal or informal advice from the Defendant” (full para 17 of Lam 2^nd Aff).

47.  I find that the matters raised in paragraph 17 of Lam 2^nd Aff are new allegations. I also find that the way in which the plaintiff did not raise these new allegations until the last affirmation was wholly unacceptable. I am satisfied that the defendant should be given leave to file his 2^nd affirmation in response on the ground that exceptional circumstances existed in the present case in that it would be a denial of natural justice if such leave was not granted (see: Dutfield International Group Co Ltd v Nine Dragon Investment Ltd [2013] 4 HKLRD 283). It is also my view that Yip 2^nd Aff and the WeChat messages are relevant to the issues of this case.

48.  As to the question of whether the defendant should have produced these WeChat messages as exhibits to his 1^st affirmation, I am of the view that the defendant could undoubtedly have done so to strengthen his case when he filed his 1^st affirmation in opposing the plaintiff’s summary judgment application, but that does not mean that he should be deprived of his right to file or submit the same for the purpose of rebutting the plaintiff’s belated new allegations.

49.  Had it been necessary, I would have found that the present case to be one in which the court should modify the conditions under the rule in Ladd v Marshall by adjusting the standard of diligence required of the defendant in opposing the summons for summary judgment.

50.  Accordingly, I would allow the appeal and set aside the Order made by the Master. I would grant leave for the defendant to file his 2^nd Affirmation pursuant to the defendant’s summons dated 17 March 2023.

51.  At the end of the hearing, Mr Lau submitted that he was instructed to seek leave to file further affirmation in reply if the court granted leave for the defendant to file the affirmation.

52.  I do not consider this to be appropriate as I have found that the plaintiff had made new allegations to which the defendant was entitled to respond. The court would not conduct a mini-trial on affidavit evidence.

53.  Further, I have made my decision to allow the appeal against the summary judgment without relying on any further evidence. I do not consider it necessary for the plaintiff to file any affirmation in reply.

Conclusion

54.  For the above reasons, the defendant’s appeal is allowed. I order that the Judgment and the Order made by Master Doris Li on 24 March 2023 be set aside.

55.  I order that the plaintiff’s summons dated 15 November 2022 for summary judgment be dismissed. I allow the defendant’s summons dated 17 March 2023 and I grant leave to the defendant to file the 2^nd Affirmation of Yip Kam Kuen dated the same together with the exhibits therein.

56.  There be a costs order nisi that the plaintiff do pay to the defendant the costs of the present appeal and the costs for the hearing below (ie the plaintiff’s summons for summary judgment and the defendant’s summons for adducing further evidence), and such costs to be taxed if not agreed, with certificate for one counsel.

57.  The costs order nisi shall become absolute in 14 days from the handing down of this Decision.

58.  Lastly, it remains for me to thank counsel for their assistance.