XCHRX Kong Sok fan v. Wan Hoi ching

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 16077 OF 2000

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J U D G M E N T

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1. The plaintiff in this matter applies for summary judgment in the amount $200,000 based on a promissory note signed by the defendant, the note being dated 18 December 1997, by which he acknowledged receipt of the amount of $200,000 as a loan made to him by the plaintiff and on its face the note states that the $200,000 is repayable free of any interest upon written demand by the plaintiff or by her authorised person.

2. A demand was subsequently made on 24 July this year by the plaintiff's solicitors in a letter of that date. This matter is not entirely clear-cut and that becomes immediately apparent when I indicate that these parties had once been husband and wife. I do not know very much about the details of the marriage but from the evidence filed in this application, I know that they had a child and I can also tell from the title of the divorce proceedings that the parties must have separated certainly no later than 1995 and that on 1 December 1997, Deputy Judge Day, as he then was, pronounced a decree nisi of divorce and on that occasion the parties asked the learned judge to also make an order which concluded all outstanding matters in respect of ancillary relief arising out of their marriage. The terms of that order appear at page 18 of the exhibits bundle.

3. Central to that order was an undertaking by the respondent in the suit, that is to say the defendant in this action, to sell a property at Tai Po, subject to the approval of the Hong Kong Housing Authority. The selling price of the property was to be mutually agreed between the parties and the net proceeds of sale, which were defined as the proceeds of sale after deducting the necessary costs and disbursements and the redemption money, and I assume what was meant by that was the redemption money in respect of the mortgage on the property, the net proceeds were to be divided by the parties in equal shares and it was anticipated then, that all events, that the sale would be completed within 12 months from the date of the decree absolute or such longer time as the parties were to mutually agree.

4. There then followed the order itself which was by consent and I need not go into that in any great detail, but the court made orders as to custody and there was an order for nominal maintenance.

5. What then followed was the promissory note which, as I have already indicated, came into existence on 18 December and that was accompanied by a letter which referred to that promissory note and under cover of that letter some keys were sent to the plaintiff's solicitors. The letter is of course also dated 18 December and appears at page 22 of the bundle of exhibits. It is in these terms:

"We refer to the captioned matter...", that is to say the promissory note, "...and sent you herewith the original of the promissory note dated 18 December 1997, together with a bundle of keys for your further handling. Kindly acknowledge receipt. The above is sent to you against your undertaking to let the bearer of this letter have your cheque for $200,000 payable to our client, Mr Wan Hoi-ching."

6. The next thing that happened was an attempt to amend Judge Day's order by consent and that first attempt is dated 8 April 1998 which appears at page 28 of the bundle of exhibits and it is a fairly significant departure from the original order because the intention then was that the husband (that is to say the defendant in the action) was to transfer forthwith to the petitioner by way of gift all of his rights, interests and entitlements in the property but the wife, the plaintiff, was to pay the Defendant a lump sum of $100,000 within six months from the date of the amended order. That amendment made absolutely no reference to the promissory note. Unfortunately the parties' wishes to have the order amended failed because the court staff at the Family Court indicated that this was not in acceptable form and the matter had to be sent back for further attention by the parties' solicitors.

7. There was a second attempt on 27 July 1998 and that also met with no success and it was then sent back for yet further consideration, but thereafter the whole thing seems to have gone to sleep. Nothing further happened until the letters which start on 11 July this year, to be found at page 33 of the exhibits bundle, when the defendant's solicitors wrote to the effect that their client intended to sell the former matrimonial home pursuant to Judge Day's order of 1 December 1997 and the letter continued in these terms:

"We are given to understand that your client is now occupying the said property. Under such circumstances your client is requested to deliver vacant possession of the property to our client within the next 28 days from the date hereof to enable our client to sell the property, failing which we have instructions to apply to court for appropriate order without further notice."

8. The reply came back on 24 July from the plaintiff's solicitors - I say a reply, in fact it did not engage that letter at all. It is the letter of demand requiring payment of the promissory note and then on 26 July (page 35 of the exhibits bundle) we have the reply to the letter of 11 July.

9. What is said on behalf of the plaintiff is that this is a case to which there can be no possible defence. Here is a promissory note which is repayable on demand, a demand has been made and therefore the note is now payable and there must be summary judgment as there can be no defence. That, of course, is a very promising start.

10. The defence is to this effect: that the amount of $200,000, it is said, is an advance payment and would be deducted from the net proceeds of sale of the property pursuant to the order of Judge Day; secondly, that the plaintiff was allowed to take possession of the property upon payment of the $200,000 and thirdly, the promissory note is solely an acknowledgement of receipt and also security for the plaintiff and the plaintiff promised not to enforce it if the defendant kept his promise to repay it upon sale of the property.

11. That is a very ambitious way of putting the matter when one looks at all the contemporaneous documents when, it is right to say, that there is not a hint of these conditions being raised. But there are a number of unexplained matters which do give me some concern because this is an action between a former husband and wife, it is not an action between two unconnected parties or two commercial organisations, and so I am a little troubled by this.

12. I should indicate that the plaintiff has responded to all of this by saying that, in fact, following the divorce she and the parties' child had been living in what was, according to her, the former matrimonial home which were rented premises at Prat Avenue, Tsim Sha Tsui. She says that the property at Tai Po was not the former matrimonial home, so there is not even agreement about that, and that as a result of the divorce she required somewhere to live and she was allowed to go and live at the Tai Po property as from May of 1997 together with the parties' children.

13. The motive for the $200,000 loan which was evidenced by the promissory note was that the defendant had incurred debts which were pressing and he needed to pay those, not least of which was the mortgage on the property at Tai Po, and he also needed to find other accommodation for himself and so he required a loan of money from the plaintiff and that is what happened.

14. There is an issue as to whether the plaintiff went into possession of the property at Tai Po in May 1997 or in December 1997 and in that regard the defendant relies on the letter of 18 December which enclosed the keys, and I have seen a photocopy of those keys, and he says these keys related to that particular property. So there is an issue as to that.

15. But of course the difficulty is that there is so much that is unexplained. The first matter that has troubled me is that within months of Judge Day's order in December 1997, there was this first consent summons of 8 April whereby the defendant, who under the original order was entitled to half the net proceeds of sale, was now gifting the property in return for a mere $100,000 and there was a further attempt along the same lines on 27 July 1998. Then the matter, for some quite unexplained reasons, is allowed to go to sleep until 11 July of this year when there is the demand on the promissory note. I have seen no reason why the plaintiff should have waited all this time for the return of the money and these are matters that have troubled me.

16. It is not as simple as that. It would have been certainly far more helpful to the defendant if there was some explanation put forward as to the absence of any reference to these alleged conditions under which the promissory note and the loan were made and, in fact, those conditions are completely contradicted by the unequivocal terms of the note itself.

17. I have come to the view that although the defendant has raised a prospect of a defence and what he has said may be believable, the defence is nevertheless sufficiently shadowy in the circumstances that I have outlined in my review of the background to this matter to justify giving him only conditional leave to defend and I shall require him to bring into court the entire claim of $200,000 within 28 days, failing which there must be judgment to the plaintiff.

18. I shall also make another order. Mr Wong, within 28 days, you must also file a defence to the action. Conditional leave to defend upon the defendant bringing into court the entire amount of the claim. In the event that the defendant pays the said amount into court, he shall also file his defence at the same time. Failing the payment in of the amount of claim, the plaintiff do have leave to enter judgment.

19. Costs in the cause.