ORIENTAL FA LTD v. TO YUEN FANG LOUISE AND ANOTHER

HCA 919/2024

[2025] HKCFI 2689

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 919 OF 2024

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D E C I S I O N

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INTRODUCTION

1.  By a summons dated 8 October 2024 (“the Summons”), the plaintiff (“P”) seeks:

(a)  summary judgment for the recovery of the principal and interest under a mortgage loan against the 1^st defendant (“D1”); and

(b)  striking out the respective defences and counterclaims of D1 and the 2^nd defendant (“D2”).

2.  At the hearing before me, P was represented by Mr Danny Tang of counsel (“Mr Tang”) while D1 was represented by counsel Mr Christopher To (who appeared together with Ms Minyoung Jung) (“Mr To”).

3.  D2 originally was represented by a firm of solicitors Messrs Hau, Lau, Li & Yeung (“D2’s Solicitors”). However, just about one week before the hearing, on 6 February 2025, D2’s Solicitors applied to cease to act for D2 before Master Matthew Leung. An order was granted by the master on that day to the effect. D2’s Solicitors sent a letter to the Court on the day before the hearing, ie on 10 February 2025, asking to be excused at the hearing. However, as D2’s Solicitors had not fulfilled all the requirements specified under Order 67, rule 6(1) of the Rules of the High Court (“RHC”) by the date of the hearing of the Summons, they were still the solicitors on record. Hence, the Court directed them to attend the hearing.

4.  On the day of the hearing itself, Ms Rowena Tse of D2’s Solicitors turned up in court and informed the Court that her firm does not have any further instructions to act for D2 in this action. However, since they had only obtained the order from Master Matthew Leung on 6 February 2025, they did not have sufficient time to fulfill all the requirements specified under Order 67, rule 6(1) yet. They were however aware that they still have the duty to attend the hearing as they are still the solicitors on record. Ms Tse quite properly did not (and could not) make any submissions on behalf of D2 as they have no instructions to do so.

5.  Also, just prior to the commencement of the hearing before me on 11 February 2025, a 2^nd affirmation of Guy Kwok-Hung Lam (“Lam”) was passed to my clerk where Lam in his capacity as the director of D2, wished to replace D2’s Solicitors and applied to act in person.

6.  As I have explained to the parties, Order 5, rule 6 of the RHC provides that a body corporate may not carry on any proceedings in the High Court otherwise than by a solicitor unless leave is granted by the Court for it to be represented by one of the directors. The rationale behind is that it will be unfair to the other parties if a limited company is allowed to pursue legal representation, at no financial risk to its shareholders and directors: (See §5/6/1 of Hong Kong Civil Procedure 2025 (“HKCP”) at p87). Thus, such leave is rarely granted by the Court: See for example Brite Advisory Group Limited [2024] HKCFI 2574 §§1-2 DHCJ Le Pichon at §2.

7.  I note that Lam not only had not taken out a proper application before the Court by way of summons (as only an affirmation was provided to the Court just prior to the hearing), no reason was given by him in the affirmation as to why he wished to replace D2’s Solicitors and tried to act in person so close to the substantive hearing itself.

8.  Incidentally, I noticed that a 15-page skeleton submissions together with a list of authorities consisted of 11 cases have been lodged with the Court in the name of “the 2^nd Defendant, acting in person”. They are clearly prepared by lawyers and not Lam himself as they contained some complicated legal principles and technical arguments.

9.  As D2 has not obtained any order from the Court to substitute D2’s Solicitors and to act in person, for all intents and purposes, I shall treat them as being unrepresented at the hearing. For the record, I would like to add that, even if a proper application had been made, it is extremely unlikely that this Court will grant an order to allow Lam to act on behalf of D2. Thus, I shall ignore any written submissions lodged by D2 for the present application.

BACKGROUND

Factual Background

10.  The background facts in this case are largely undisputed and can be briefly summarised as follows.

11.  P is a licensed moneylender and the lender. D1 is the borrower of a loan from P. Lam is the husband of D1. Mr Benjamin Tao Lam (“Ben”) is the son of the D1 and Lam. Cindy Fung (“Cindy”) is D1’s assistant.

12.  D2 is the mortgagor mortgaging the properties known as (i) Units A and B on 27^th Floor, Century Tower 1, Nos. 1 and 1A Tregunter Path, Hong Kong; and (ii) Car Parking Spaces Nos. 62 and 75 on Level 3, Century Tower 1, Nos. 1 and 1A Tregunter Path, Hong Kong (“the Mortgaged Properties”) to secure the loan.

13.  At all material times, D2 is owned by the D1 and Pacrim Realty (HK) Limited (“Pacrim”), which is in turn wholly owned by D1.

14.  The directorship and the shareholding of D2 and Pacrim are set out in Lui Yuet Ting’s 1^st Affirmation (“Lui 1^st”) §11. P’s counsel has helpfully summarized them in table form for the relevant time periods (starting from the parties’ entering of the Loan Agreement on 6 July 2021) as follows:

Period	Director(s) of the D2
7.7.2021 – 25.9.2023	•  D1 •  Ben (from 18.2.2022 to 24.2.2022)
26.9.2023 – present	•  D1 •  Lam •  Ben

Period	Shareholder(s) of the D2
1.6.2021 – present	•  D1 (100 ordinary shares) •  Pacrim (22,201,196 preference shares)

Period	Director(s) of Pacrim
Until 17.2.2022	•  D1
18.2.2022 – 24.2.2022	•  D1 •  Ben
25.2.2022 – present	•  D1

Period	Shareholder(s) of Pacrim
At all material times	•  D1

15.  D1 is also allegedly the beneficial owner of Wah Sang Paper Products (Shenzhen) Co., Ltd（深圳华生創新包裝有限責任公司）(“WSPPSZ”) through her 100% stake in Hong Kong Wah Sang Limited (“HKWS”)[1]:

16.  The agreements between P and D1 and/or D2 include the following:

(a)  A loan agreement dated 6 July 2021(“Original Agreement”) where P agreed to lend D1 a principal sum of HK$194,000,000 (“the Loan”) whereby:

(i)  D1 shall pay monthly interest at 11.52% per annum of HK$1,862,400 to P: See Cl. 3.1.

(ii)  D1 shall pay P a lump sum payment of HK$194,000,000 on the Final Maturity Date, ie 7 July 2022: See Cl. 4.1.

(iii)  The Loan is payable on demand upon service of notice in writing by P: See Cl. 4.3.

(iv)  As a condition precedent to the advancement of the Loan, D1 undertook to procure Pacrim and D2 to execute the Mortgage over the Mortgaged Properties in favour of P: See Cll. 2.2(b), 7.2.

(v)  D1 represented and warranted that she has full legal capacity to enter, fulfill her obligations, and carry out the transactions contemplated under the Original Agreement: See Cl. 6.1(a).

(b)  A mortgage executed by deed between P, D1, D2, and Pacrim on 7 July 2022 (“the Mortgage”), whereby D2 and Pacrim respectively mortgaged the Mortgaged Properties and Rooms 3202 and 3203 of 32^nd Floor of Tower Two of Lippo Centre (“Lippo Properties”) to P.

(c)  A supplemental agreement dated 6 July 2022 (“First Supplemental Agreement”) between P and D1 whereby P agreed to grant an extension of the tenure of the Loan by modifying the Final Maturity Date to 7 July 2023: See Cl. 2.

(d)  A partial release between P, Ds, and Pacrim (“Partial Release”), in which P discharged and released the Lippo Properties in favour of Pacrim upon repayment of HK$64,000,000 of the Loan from Pacrim.

(e)  A second supplemental agreement dated 6 July 2023 (“Second Supplemental Agreement”) between P and D1 whereby P agreed to grant an extension of the tenure of the Loan by modifying the Final Maturity Date to 7 July 2024: See Cl. 2.

(f)  The Original Agreement, the First Supplemental Agreement and the Second Supplemental Agreement are collectively referred to as the “Loan Agreement”.

17.  There is no dispute that (i) Ds entered into the Loan Agreement and Mortgage, and (ii) Ds have defaulted in the repayment of the same by failing to pay the monthly interest payment of HK$1,248,000 since 7 April 2024, which constitutes an event of default under Original Agreement: See Cl. 8.1(a).

18.  By demand letters to Ds dated 15 April 2024, P’s solicitors (i) indicated that legal proceedings would be commenced by P within 15 days unless the sums were repaid by Ds; and (ii) indicated that pursuant to s.51 Conveyance and Property Ordinance (Cap. 219), if interest was not repaid within one calendar month, P will have the right to exercise its power of sale under the Mortgage.

19.  Ds never provided any response to P’s demands. This is important in the context of this case as one would expect that they would raise any defence they might have at this juncture, if they had any.

20.  Despite P’s demands, Ds have failed to settle the outstanding balance of the Loan and the accrued interest. P accordingly claims for the following under the prayer of the statement of claim (“SOC”):

(a)  HK$130,000,000.00 as the outstanding principal sum of the Loan;

(b)  Unpaid interest up to and inclusive of 6 April 2024 (prior to Ds’ default): HK$1,248,000.00; and

(c)  Further interest on the sum of HK$130,000,000.00 at the rate of 11.52% per annum from 7 April 2024 until the date of full repayment of the Loan: See also Original Agreement Cl.3.

21.  Ds have not disputed the above figures.

Procedural Background

22.  As Mr Tang has explained in P’s Submissions, P has to, at first instance, seek a striking out of Ds’ defence (though strictly speaking only the striking out of D2 defence is required) because of the quirk in Order 14 rule 1(3) which provides that “This Order shall not apply to an action to which Order 86 or Order 88 applies.”

23.  Order 88 applies to an action by a mortgagee seeking “delivery of possession… to the mortgagee by the mortgagor”: Order 88 rule 1(1)(d).

24.  Therefore, insofar as an action is begun by writ, rather than seeking a summary judgment for a possession order against the mortgagor, the mortgagee would have to apply to strike out the defence of the mortgagor, and consequently judgment in default of defence within the same summons.

25.  Mr Tang says that the same procedural route was taken and acceded to in Easy Fortune Property Ltd v Yung Chun Him (unreported, HCA 1484/2014, 12.8.2016) §§8-9, 51 (Recorder Pow SC).[2] It also received support in the decision of ETC Finance Ltd v Wealth Paramount International Ltd & Another (unreported, HCA 2027/2014, 18.11.2015) §§5-13 (DHCJ Kent Yee).

26.  Outside the mortgage action context, when a defence is struck out, judgment can be entered accordingly as long as it is specifically sought in the application: HKCP §18/19/3(3): See for example Wan Po Jun Mary Pauline v Au Yeung Yee Man, representative of the estate of Au-Yeung Wing Hong [2017] 1 HKLRD 94 §1 (Lam VP).

27.  Hence, the Summons was prepared on the above basis. However, at the call-over hearing on 28 October 2024, Master Maurice Lam took the view that the application for default judgment should take place as a further and separate step after the striking out of D2 Defence is successful. Therefore, he made no order as to §§2 (insofar as D2 is concerned), 3 and 5 of the Summons (but without prejudice to P’s ability to make a fresh application for default judgment)[3]. P did query why the default judgment application has to be taken as a separate step.

28.  Mr Tang submits that not only is this contrary to the above authorities, but it is also contrary to the underlying objectives of Order 1A rule 1 which provides that the Court should endeavour to deal with “as many aspects of the case as practicable on the same occasion”: Order 1A rule 4(2)(i).

29.  In any event, P has taken the view that it would have been disproportionate to appeal against Master Maurice Lam’s decision[4]. Therefore, instead of the usual procedural route, P proposed the way forward that upon the Court’s striking out of D2 defence, robust directions should be given for the taking out and determination of P’s default judgment application.

30.  I agree with the practical approach taken by P as suggested above and shall deal with this matter at the end of this decision accordingly.

DISCUSSION

(A)  THE ISSUES

31.  In my view, the issues that this Court has to determine in the Summons are quite simple.

32.  Since there is no challenge by D1 as to (i) the validity of the loan and mortgage documents; (ii) the fact that there had been default in repayment; and (iii) the quantum / calculations of the sums due from Ds, the only issues which I have to decide are related to the two lines of defence raised by Ds:

(a)  First, at a meeting on 29 February 2024, it is alleged that P had agreed not to bring proceedings before July 2024, and is hence barred by suing on the mortgage loan now by virtue of promissory estoppel (“Estoppel Defence”); and

(b)  Second, the loan and mortgage documents are unenforceable against D2 because it was entered into by D1 (qua director) without authority and in breach of fiduciary duties (“Unenforceability Defence”).

33.  Given the fact that D2 was not represented by solicitors at the hearing and therefore did not (and could not) make any submissions, and in any event Ds have now abandoned such argument based on the Unenforceability Defence, this issue has become academic[5]. I therefore will not need to deal with this issue anymore in this decision. This has been confirmed by counsel on both sides at the beginning of the hearing.

(B)  LEGAL PRINCIPLES

(i)   Summary judgment and striking out

34.  As highlighted by Mr Tang, the principles on summary judgment have been recently summarised in Guanghua SS Holdings Limited v Lim Yew Cheng & Another [2022] HKCFI 1052 §§11-13 by Ng J as follows:

(a)  Once P’s application is properly constituted, it is prima facie entitled to judgment unless Ds show cause to the contrary by demonstrating a real or bona fide defence, or that there are some other reason for a trial. Ds must satisfy the Court that their evidence is capable of being believed and there is a fair or reasonable probability of a real or bona fide defence on the basis of such evidence: See §§13(1), (3).

(b)  The mere assertion in an affidavit of a given situation by Ds in response to an application for summary judgment does not, ipso facto, ground leave to defend as this would create a debt-dodger's charter. Thus:

(i)  While the Court does not embark upon a mini-trial on affidavit evidence, the Court is not obliged to suspend its critical faculties and assume that Ds’ evidence is accurate: See §13(5).

(ii)  The Court also does not view each factual issue in isolation and consider whether Ds’ story on that issue is credible. Rather, the Court must holistically review the whole situation in the round: See §§12, 13(2), 13(4).

(c)  If the defence is incredible with regard to inherent plausibility, inconsistency with contemporaneous documents and other compelling evidence, the Court must say so: See §13(6).

(d)  If Ds’ evidence is incredible in any material respect, it cannot be said that there is a fair or reasonable probability that there exists a real or bona fide defence: See §13(7).

35.  Mr Tang submits that similar principles apply to striking out. He cited the following passages of Chu Yue Bun v Lai Shiu Woon [2021] HKCA 1929 §§35(1) & 41 by Kwan VP to illustrate this:

“(1) A pleading can be struck out if it is plain and obvious that the case pleaded has no factual basis, or has no solid basis capable of proof and is a myth with no substantial foundation, or presents a tissue of improbabilities which ought not to be sent to proof. The court is not bound to accept an allegation as true and proceed on a fictional basis if it is something which can clearly be shown to be incontrovertibly false….”

“41. We agree with the judge that although the court does not conduct a mini-trial on affirmation in a striking out application, the court does not adopt a blinkered approach to the evidence and it is not bound to accept an allegation as true in light of obvious inconsistencies on a matter of significance for which no explanation for the inconsistencies was given. In our judgment, the judge was fully entitled to find that on the totality of the evidence before the court, and in light of the inconsistencies with the previous proceedings and the lack of any or any plausible explanation for the same, there was an absence of sufficient factual basis to sustain the claim in this action. This is not merely a weak case that is not likely to succeed but it is plain and obvious it is bound to fail.” (emphasis added)

36.  Mr Tang further submits that the same principles apply when a plaintiff seeks to strike out a defence, as opposed to a statement of claim: See Wan Po Jun Mary Pauline.

37.  There are some quarrels on Ds’ part about the admissibility of evidence for the striking out application in this case[6]: As Mr Tang has submitted, the position on this is well-established and these objections only seek to confuse matters.

38.  In this regard, P relies on both Order 18 rule 19(1)(a) and Order 18 rule19(1)(b)-(d) to make the following propositions:

(a)  As to the former, the Court will consider any evidence, but will only look at the pleadings to see if there is a viable claim (in this case defence) on its face. This ground is particularly apt in respect of some of the arguments against the Unenforceability Defence – that defence is simply unsustainable even by looking at Ds Defence themselves.

(b)  As to the latter, it is plainly permissible for P to rely on evidence.

39.  Finally, Mr Tang submits that where a defendant has already filed a defence, it cannot, in opposition to a summary judgment application, rely on a case not pleaded in the defence: Wang Shuai v Zhang Qiaohui [2024] HKCA 304 §46 (Anthony Chan J), citing Kaefer AG v Winfield Marine Services Co Ltd [2022] HKCA 807 §§30-32 (Chu JA (as she then was)).

(ii)  Promissory Estoppel

40.  The following principles on promissory estoppel has been summed up by Mr Tang of which Mr To for D1 does not dispute.

41.  Promissory estoppel arises where:

(a)  The parties are in a relationship involving enforceable or exercisable rights, duties or powers.

(b)  One party (the promisor) by words or conduct conveys a clear and unequivocal promise to the other (the promisee) that the promisor will not enforce or exercise some of those rights, duties or powers.

(c)  The promisee reasonably relies upon that promise and is induced to alter his or her position on the faith of it, so that it would be inequitable or unconscionable for the promisor to act inconsistently with the promise.

See: Luo Xing Juan v Estate of Hui Shui See (2008) 12 HKCFAR 1 §55 (Ribeiro PJ).

42.  As to detriment:

(a)  Any detriment relied upon must be material and must be suffered as a result of a change of position in reliance of the promise: See United Overseas Bank Ltd v Gracewood International Ltd and Others [2021] HKCFI 2950 §30 (DHCJ Leung).

(b)  The time of assessment of detriment is when the promise is withdrawn. Therefore, it is “essential to show that the promisee will suffer some prejudice or detriment as and when the promise is purportedly withdrawn”: See Wilken and Ghaly, The Law of Waiver, Variation and Estoppel (3^rd edn, 2012) §8.46.

(c)  Further, whilst the promisee would always suffer harm as a result of being deprived of the promised advantage, this type of detriment is insufficient. It is necessary that the promisee's change of position will leave it in a worse position than it would have been in, had the promise never been made: See Wilken §8.46.

43.  Further, the effect of promissory estoppel is only suspensory and not irrevocable:

(a)  A promisor may retract the estoppel by giving reasonable notice: See Great Pacific Investments Ltd v 张华荣 [2024] HKCA 1147 §§9(5), 28 (Kwan VP); Cheng Hung Kit v Tsoi Chik Sang Lawrence [2017] 4 HKLRD 579 §§47-48 (DHCJ Yee).

(b)  Should a promisee seek to raise an objection as to reasonable notice, they are required to “state their case with supporting materials” as to what would have been reasonable notice in this situation, as “[i]t does not suffice by asserting that reasonable time has yet to expire”: See United Overseas Bank Ltd §§38, 43-47.

(C)  ESTOPPEL DEFENCE

(i)  The Alleged O-Bank Deal

44.  As Ds have laid a lot of emphasis on their meeting with O-Bank and the claimed consequences flow from that, perhaps it is only right for me to recite how Mr To has described those events in his submissions on behalf of D1.

45.  On 25 February 2024, D1 and Lam had a meeting with Mr Harrison Leung, Assistant Vice President of O-Bank for refinancing, during which Mr Leung informed D1 and D2 that O-Bank was willing to lend to D1 and D2 HK$150 million in or about July 2024 at a lower interest rate as compared with the Original Loan Agreement with P provided that there is no adverse legal action against D2 and WSPPSZ, a company of which D1 is the beneficial owner, as WSPPSZ would provide the source of repayment from its manufacturing operation (“the Alleged O-Bank Deal”)[7].

46.  Mr To also tries to tie the following events to the Alleged O-Bank Deal and make good his arguments that somehow the “deal” was credible and would create a promissory estoppel.

47.  D1 says that shortly after the Alleged O-Bank Deal, on 28 February 2024, the Government announced a new stamp duty measure under which the government abolished all demand-side management measures for residential properties. As a result, the price of residential premises was expected to increase. D1 says that this event is closely relevant to the present case, as the list of core events disputed all arise within 2 months before/after such announcement. Also, it is D1’s position that the aftermath of this policy might have influenced P’s motive to issue the Writ.

48.  Then on 29 February 2024, Ms Diana Lui and Ms Joey Yeung on behalf of P, and, D1, Lam and Cindy on behalf of D2 attended a meeting to discuss D2’s repayment schedule. In this meeting, D1 claims that the following contents were discussed:

(a)  Initially, P demanded the immediate settlement of the principal amount and outstanding interest.

(b)  Then, Ds informed P of the Alleged O-Bank Deal.

(c)  Subsequently, Ms Lui agreed to suspend the accrual of P’s cause of action (if any) until at least July 2024 (“the Alleged Promise”) [8].

(d)  Lastly, D2’s representative also informed that D2 expects to sell the Mortgaged Properties at HK$200 million and that someone has already offered HK$190 million[9].

49.  A meeting minute allegedly consistent with the above event was sent by Cindy to D1 on 4 March 2024.

50.  In April 2024, soon after the Alleged Promise was given, D1 claims that the Centa-City Leading Index (“CCL”), an index for the Hong Kong property market, which has been constantly increasing since the Announcement, started to drop[10].

51.  On 26 April 2024, Samuel, the middleperson from Info Kapital, sent an email to Cindy that the loan application process with O-Bank has started[11].

52.  Subsequently, based on the Alleged Promise and the Alleged O-Bank Deal, D2 allegedly paid off judgment debt of WSPPSZ to prevent any adverse legal proceedings with HK$3.1 million which would have been otherwise paid for the payment of interest for the Loan Agreement[12].

53.  On 17 May 2024, D1 claims that, in breach of the Alleged Promise, P took out the Writ unreasonably with only 15-day notice for a claim of about HK$130 million[13].

54.  As a result, in opposition to P’s SOC, D1 raised various grounds of defence including promissory estoppel and waiver.

(D)  FINDINGS

55.  In my judgment, the Estoppel Defence based on the Alleged O-Bank Deal as claimed by Ds can be soundly rejected for the following reasons.

(i)  On the Alleged O-Bank Deal

56.  First, I agree with P that the Alleged O-Bank Deal is incredible.

57.  As Mr Tang has pointed out, the Alleged O-Bank Deal is entirely unsupported by contemporaneous documents. The only “objective” document produced by Ds is an email from Samuel[14] (allegedly a middleperson from Info Kapital[15]), noting that the “loan application process has started [with O-Bank]”. Samuel’s own subjective opinion is that “[w]e believe this deal should be closed in a couple of months”.

58.  I agree with the observations made by Mr Tang in his submissions regarding this document:

(a)  This is only correspondence with an alleged middleperson and not even with an employee of O-Bank. Its probative value as to any deal with O-Bank therefore is limited.

(b)  It is at best an indication of early-stage discussions which may or may not have proceeded. There was certainly no agreement reached between Ds and O-Bank.

(c)  In referencing the beginning of the loan application process, the email is flatly contradictory to Ds’ own case.

(d)  The email was sent on 26 April 2024, 2 months after the Alleged O-Bank Deal was conveyed in a meeting “on or about 25 February 2024”[16]:.

59.  I further agree with Mr Tang that if indeed there was a “deal” reached between Ds and O-Bank, one would have expected Ds to adduce documents ranging from email or correspondence exchanges over negotiations of the terms, term sheets, loan application form, draft agreements (if not the finalised agreements). Ds’ failure to do this is inexplicable and readily supports the drawing of an adverse inference that the Alleged O-Bank Deal did not exist in the first place.

60.  Further, I find the Alleged O-Bank Deal is inherently implausible and lacking in commercial sense. As Mr Tang submits, if, as alleged by Ds, the loan from the Alleged O-Bank Deal would be used to re-finance the Loan Agreement, there is no reason why O-Bank would be concerned about whether there is pre-existing litigation by P against D2, since the very purpose of the refinancing loan was to discharge the outstanding liabilities owed to P and consequently the Mortgage, after which the litigation would come to an end. It simply does not make sense.

61.  Similarly, the fact that O-Bank was willing to accept a valuation report as dated 7 June 2021 (“Valuation Report”)[17] which is nearly three years by the time of the O-Bank Deal on 25 February 2024, as the basis of making the alleged offer of the loan amount of HK$150 million[18] in light of the recent “economic and market conditions” (see the Press Release by the Inland Revenue Department cited[19]) simply does not make any commercial sense in my view.

62.  Mr To in D1’s skeleton submissions (“D1’s Submissions”) as well as in his oral submissions in Court stated that the above are only P’s subjective views on the matter and does not contradict with D1’s defence.

63.  With respect to Mr To, I cannot agree with his submissions on this at all. In my judgment, the objective reading of Samuel’s email makes it clear beyond any shadow of doubt that Ds were merely exploring the possibility of applying for a loan with O-Bank. It was as Samuel stated on the email the “start” of the application process. Nothing concrete has been agreed on. Nothing further than making initial enquiry and starting the application have been done on the part of Ds. There was nothing in that document which goes to support D1’s case in her defence at all.

(ii)  On the Alleged Promise made by P

64.  I consider that the Alleged Promise is likewise incredible.

65.  The only contemporaneous evidence produced by Ds is a self-serving internal email from Cindy to D1 on 4 March 2024, several days after the meeting with P’s representatives[20]. In my view, this certainly would not be sufficient to constitute to “P’s meeting notes evidencing the Alleged Promise” as alleged by D1 in her affirmation[21].

66.  Further, Ds’ claim that P had “routinely allowed late payment of interest by oral consent” is not here nor there as there is the clear authority to say that any past indulgence of a lender is not suggestive of any promise or representation not to enforce the lender’s contractual rights at all: United Overseas Bank §§24, 26 & 46.

67.  In my judgment, Ds’ evidence falls far short of proving a clear and unequivocal promise or assurance which is required to invoke estoppel. In Cheng Hung Kit §46, a plea of equitable estoppel premised upon bare assertions and dubious evidence (an unsigned document) was found liable to be struck out.

68.  Mr To in D1’s Submissions disputes this by saying that even if P’s assertion that the Alleged Promise is incredible because it lacks commercial sense is true, the Court still has to examine the various disputed facts to determine which version is valid. In particular, Mr To pointed out that there are two directly contradicting internal documents from each party (one from Diana Lui / Joey Yeung of P and the other one from Cindy of D2), which have not been communicated with each other until this action was initiated which required the Court to resolve.

69.  With respect, I do not agree with Mr To’s submissions. Just because there are two different documents from two different parties reporting about the same meeting does not mean that they are contradictory to each other. The Court’s task is to look at the substance of those documents and decide whether they are in support of Ds’ defence.

70.  Having looked at both documents, I find Cindy’s email reporting to her own boss, ie D1 clearly is self-serving and was written with the view to bolster Ds’ own claim. It is not a credible document. Further, P’s internal meeting note[22] does not in any way go to support Ds’ case that P had made any promise to D1 at all. In my view, these two documents are not contradictory to each other.

71.  Further, I agree with P that the Alleged Promise is lacking in commercial sense. There was no plausible reason for P to make that promise, for no fresh consideration, when the Mortgaged Properties exceeded Ds’ outstanding liabilities, such that P could have simply exercised its power of sale to satisfy the outstanding debt. Ds’ Valuation Report which was allegedly relied upon by O-Bank[23] indicated that the Mortgaged Properties were valued at HK$200,000,000[24] – more than sufficient to repay the Loan[25].

72.  Ds’ response to this is that P had expected the property market to flourish due to the upcoming stamp duty measures[26]. I agree with Mr Tang that not only is this pure conjecture, but it is also based on a wrong legal premise. As Mr Tang submits a mortgage is only security for the repayment of a debt, and thus P can only recover to the extent of the outstanding debt. If the value of the Mortgaged Properties at the relevant time was sufficient to cover the debt, it would not matter to P that their value might increase further in the future, because P has no claim to any of the surplus.

73.  Mr To in his submissions states that even if P’s assertion under this head is true (which D1 does not admit), the Court still have to examine the various disputed facts to determine whose version is valid. In particular, he says whether there is a commercial interest for P to allow D1 to refinance is not a matter to be decided by legal argument only but will require financial expert’s opinion to ascertain.

74.  I totally disagree with such submissions. If it is true, then it means each time when a party in a summary judgment or striking out application comes up with some fanciful or ambivalent facts, the Court will have to suspend its “critical faculties” and to allow the case to go to trial in order to resolve the factual disputes. This certainly is not how the Court functions and how it decides cases. It applies its common sense, life experience and general knowledge to decide whether certain asserted facts made by a party make sense or not. If they do not, the Court can and will decide the legal consequences that flow from them.

75.  Last but not least on this matter, I noticed that despite the demand letters from P, Ds have not for once refuted P’s claims until Ds’ defence were filed. In my view, this shows that any defence based on the Alleged Promise was an afterthought and not genuine at all.

(iii)  On Cl.10.10 of the Original Agreement

76.  P submits that even if the Alleged Promise had been made (which is denied), any alleged estoppel is precluded by Cl.10.10 of the Original Agreement, which is commonly known as a non-oral modification (“NOM”) clause.

77.  Cl 10.10 provides as follows:

“This Agreement (together with any documents referred to herein or executed contemporaneously by the parties hereto in connection herewith) constitutes the whole agreement between the parties hereto and supersedes any previous agreements or arrangements between them relating to the subject matter hereof; it is expressly declared that no variations hereof shall be effective unless made in writing and signed by the parties or their duly authorised representatives.” (emphasis added)

78.  As Mr Tang has submitted, the rationale of a clause requiring specific formalities to be observed for a variation is to “prevent attempts to undermine written agreements by informal means, a possibility which is open to abuse, for example in raising defences to summary judgment”: MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2019] AC 119 §12 (Lord Sumption).

79.  Although such a provision would not always preclude an estoppel defence, to support an estoppel defence, it will be necessary to show (1) some words or conduct which “unequivocally representing that the variation was valid notwithstanding its informality”, and (2) something more would be required for this purpose than the informal promise itself: See Rock Advertising §16.

80.  Therefore, as Mr Tang submits, for the estoppel to arise, “it requires the parties to acknowledge in some way the formality requirement but nonetheless choose to go ahead to vary the contract in an informal manner”: Chinachem Financial Services Ltd v Century Venture Holdings Ltd [2023] HKCFI 457 at §467 (DHCJ Winnie Tsui (as she then was)).

81.  I agree with Mr Tang that there is simply no evidence, or even an allegation, that the Alleged Promise was made despite an acknowledgment of the parties of the requirement in Cl.10.10 of the Original Agreement.

82.  On this issue, Mr To in his submissions tries to argue that (i) the entire agreement clause which was entered at the time of contract cannot preclude a subsequent promissory estoppel: Fortis Insurance Company (Asia) Ltd v Lam Hau Wah Inneo, unreported, (CACV 86/2010; 28 October 2010); and (ii) the English Court of Appeal has held that “no oral modification terms” can be orally modified: Globe Motors Inc & Others v TRW Lucas Varity Electric Steering Ltd & Another [2017] 1 ALL ER (Comm) 601. Mr To further relies on the fact that in Rock Advertising, even the UK Supreme Court did not set aside the judgment in that case, he says that it only sets up a guideline for parties to follow for oral modification of clauses in the presence of “no oral modification term”. Hence, he submits that if the Court finds that (1) “no-oral modification clause” in the Original Agreement cannot prevent the oral modification, and (2) the Promise was given by P to Ds, P can no longer rely on Cl 7.1(b) of the Original Agreement as well. In any event, he says that the Court should decide the question of law summarily only if the facts are not disputed.

83.  Mr Tang’s reply to the above submissions of D1 is that Fortis Insurance Company (Asia) Ltd actually deals with an “entire agreement clause” situation and not a “no-oral modification clause” situation as §§69-71 of that judgment has made it clear. Kwan JA (as the VP then was) concluded under that heading of discussion in which she agreed with Cheung JA that “there is room for debate on the applicability and effectiveness of the entire agreement clause in situations where waiver and estoppel might be invoked. The defendant’s case, if believed, may found a factual basis for waiver and estoppel.”: §74 (emphasis added).

84.  In my view, what Mr To submits is applying in an “entire agreement clause” situation, and not a “no-oral modification clause” situation. Even if one assumes that the same approach to the “no-oral modification clause”, as Mr Tang has submitted, if one follows the reasoning of DHCJ Winnie Tsui (as she then was) in Chinachem Financial Services Limited, where the learned judge held the following view at §467, D1’s case in my view still does not take off the ground as it lacks of a proper factual foundation:

467. In any event, it seems plain that where a contract contains a written only modification provision, Rock Advertising seems to impose a higher threshold on the party alleging estoppel than in the conventional analysis of estoppel. For the estoppel to arise, it requires the parties to acknowledge in some way the formality requirement but nonetheless choose to go ahead to vary the contract in an informal manner. In the present case, I do not find it necessary to decide whether the higher threshold contemplated in Rock Advertising applies and if so whether the threshold is met. This is because even applying the conventional analysis, the estoppel is not made out on the facts as found.

(iv)  No detriment or reliance shown

85.  On top of the above, I also find that Ds have failed to satisfy the elements of detriment or reliance in this case.

86.  Ds’ pleaded detriment/reliance is that two months’ interest payment of around HK$2.6 million[27] was spent to repay「蓉坤包裝製品有限公司」 for a judgment debt of WSPPSZ. Thus, Ds did not pay any instalments to P[28]. In other words, Ds’ alleged change of position is that they have used a sum of money for one purpose (the fulfilment of WSPPSZ’s judgement debt) instead of another (the payment of P), which has resulted in P’s commencement of these proceedings.

87.  Mr To supplemented that by stating in his submissions that if P did not make the Alleged Promise, D1 would not have settled the judgment debt. It is because there was a possibility for D1 to appeal the China Court Decision. Further, Mr To says that D1 could pay the interest for P’s loan and utilize the time D1 spent to settle the judgment debt in China and negotiate with O-Bank to find another source for refinancing.

88.  With greatest respect, I find Ds’ claims for the detriment and reliance is completely devoid of merits.

89.  First, as Mr Tang submits, Ds had to pay the judgment debt of WSPPSZ, not as a result of the Alleged Promise, but pursuant to the Alleged O-Bank Deal, where “the refinancing was based on the pre-condition that [D2] and [WSPPSZ] had no adversary legal proceedings against them, as the [D2] would provide the collateral and mortgage properties to secure the loan and WSPPSZ would provide the source of repayment from its manufacturing operation”[29].

90.  Second, in any case, like what Mr Tang says, the satisfaction of judgment debt of WSPPSZ could not have been induced by the Alleged Promise because, as a matter of common and commercial sense, Ds had every incentive to ensure the success of WSPPSZ: see analogously Great Pacific Investments Ltd §§26-27. On Ds’ own case, WSPPSZ “would provide the source of repayment [of the Alleged O-Bank Deal] from its manufacturing operation”[30].

91.  Third, Ds were not left in a worse position than they would have been in had the Alleged Promise not been made. Ds’ detriment is simply that P will commence proceedings against them for their failure to pay the interest payments (as the funds are now used to pay WSPPSZ’s judgment debt), which is simply the detriment of being deprived of the promised advantage.

92.  Fourth, in any event, the HK$2.6 million is clearly insufficient for the 4 months’ worth of interest payments (at HK$1,862,400 per month: Cl.3.1) from the Meeting to July 2024.

93.  I therefore find that there was no detriments or reliance shown by Ds at all based on the facts of this case.

(v)  Reasonable Notice Given by P

94.  As an ancillary point, P submits that any promissory estoppel arising from the Alleged Promise would only be suspensory in effect. P can revive its rights by giving reasonable notice, and it has done so by its demand letters dated 15 April 2024. P only commenced proceedings on 17 May 2024, which was more than two weeks after the 15-day deadline set in the demand letter.

95.  P says that Ds have failed to state their objection with supporting materials as to what would have been reasonable notice in this situation. Their objections amount to bare assertions when they alleged that “A 15-day notice for a claim of about HK$130 million could not be reasonable notice”[31].

96.  Mr To submits that the length of reasonable notice period should depend on the circumstances of each case. It is one which would give the promise a reasonable opportunity of resuming his position: Emmanuel Ayodeji Ajayi v RT Briscoe (Nigeria) Ltd [1964] 1 WLR 1326 (PC) at 1330.

97.  Mr To cited the case of United Overseas Bank as an example where the bank facilities fell due was around US$20 million (around HK$170 million), in consideration of the facts and circumstances in that particular case, the court found that around 3-month notice by way of the 2^nd demand notice was considered to be reasonable.

98.  In my judgment, this issue does not even arise in this case as I have found Ds has failed to establish the Alleged Promise ever arose in the first place. Even assuming that if the Alleged Promise was made out, my view is that 15-day notice is a reasonable one given the history and particular circumstances of this case.

(vi)  Ds Can Only Receive Their Original Positions

99.  On this matter, Ds’ position is that P cannot seek recovery of the Loan (and interest) even in February 2025 now, when the Alleged Promise involved only a promise that P would not sue them before July 2024.

100.  I agree with P that this is an absurd position. The minimum equity required to restore Ds to their original position cannot be that P cannot recover the Loan forever. Ds cannot be better off than had the Alleged Promise been complied with.

101.  This is consistent with the fact that Ds’ change of position must have left them in a worse position than they would have been, had the promise never been made: See Wilken §8.46.

102.  Further, where equity is raised by promissory estoppel (which is denied), the remedy must not be disproportionate to the detriment which its purpose is to avoid; “the court does not grant relief beyond the minimum necessary to do justice”: See Luo Xing Juan at §70.

103.  Thus, I find there is no substance in D1’s submissions on this issue also.

CONCLUSION

104.  In conclusion, based on the aforesaid discussions, I find there is no substance in Ds’ defence at all.

DIPOSITION AND ORDER

105.  I will make the following orders accordingly:

(a)  D1 & D2’s respective defence & counterclaim be struck out.

(b)  Summary judgment be entered against D1 for:

(i)  HK$130,000,000.00 as the outstanding principal sum;

(ii)  unpaid accrued interest of HK$1,248,000 up to and inclusive of 6 April 2024; and

(iii)  interest on the principal sum of HK$130,000,000.00 at the rate of 11.52% per annum from 7 April 2024 until date of payment.

(c)  Consequential directions for P to seek default judgment as against D2 as follows:

(i)  P do take out a summons for default judgment (“Default Judgment Summons”) and file an affirmation in compliance with Order 88 rule 5[32] within 21 days from the date of the order hereof.

(ii)  No further evidence shall be filed for the Default Judgment Summons.

(iii)  The Default Judgment Summons shall be determined on paper by Deputy High Court Judge Andrew Li.

(iv)  P shall file and serve its written submissions in support of the Default Judgment Summons within 7 days thereafter, such submissions shall be limited to 3 pages.

(v)  D2 shall file and serve its written submissions in opposition to the Default Judgment Summons 7 days thereafter, such submissions shall be limited to 3 pages.

(vi)  P shall file and serve its written submissions in reply 7 days thereafter, such submissions shall be limited to 1 page.

(d)  Costs of the action as against D1 and costs of the Summons be to P on an indemnity basis, in light of the clauses in Mortgage Clauses 2.01(j) & 20.01; Original Agreement Clauses 9.1-9.2: Bank of China (Hong Kong) Ltd v Twin Profit Ltd & Others (unreported, CACV 94/2010, 18.3.2011) §§3-8 (Yuen JA).

(e)  The costs order above will be made on a nisi basis with liberty for the parties to apply to vary the same within 14 days.