HENNABUN CAPITAL LTD. v. WONG CHUN HUNG VINCENT

HCA 340/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 340 OF 2001

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J U D G M E N T

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1. This is an appeal from an order of Master Martin Rogers given on 15 November 2000 giving unconditional leave to the defendant to defend this action.

2. The plaintiff's claim is a simple one. It claims against the defendant as the grantor of a deed of promissory note dated 27 April 2000 for HK$15 m. payable to the plaintiff on demand. Despite demands, the defendant has failed to pay the said sum or any part thereof under the deed of promissory note to the plaintiff. The plaintiff claims the said sum of HK$15 m. with interest.

3. The plaintiff applied to the master by summons dated 18 July 2001 for orders under O.14A and O.14, RHC. By para. 1(a) of its summons the plaintiff sought an order that :

" upon the true construction of the Deed of Promissory Note executed by the Defendant in favour of the Plaintiff on 27 April 2000 (the "Deed") and the Deed of Settlement entered into between the Defendant and Capital Union Inc (the "Deed of Settlement"), a determination under Order 14A of the Rules of the High Court and as a question of law that :

(i) the Deed was executed as a deed;

(ii) the Deed is valid and enforceable even without consideration;

(iii) the Deed of settlement was not by its terms a discharge of the Deed."

By para. 2, the plaintiff also sought summary judgment under O.14.

4. The master found in favour of the plaintiff in the terms of paras. 1(a)(i) and (ii) of the summons but he declined to make an order in the terms of para. 1(a)(iii) and on the application for summary judgment he gave the defendant unconditional leave to defend. The master gave reasons for his decision.

5. Mr. Thomson, counsel for the plaintiff, submitted that the master was correct to find in favour of the plaintiff in the terms of paras. 1(a)(i) and (ii) of the summons but that he was wrong in refusing to give summary judgment to the plaintiff. There has been no cross-appeal by the defendant from the master's decision in respect of paras. 1(a)(i) and (ii) of the summons.

6. The defendant served a defence raising a number of defences. These are :

(i) a denial that by signing the deed of promissory note he incurred any liability to the plaintiff;

(ii) a denial that the deed of promissory note was a deed;

(iii) that at the time the deed of promissory note was signed there was no antecedent liability owed by the defendant to the plaintiff and hence the deed of promissory note was void for want of consideration;

(iv) that on or about 9 November 2000, at the express request of the plaintiff and/or Mr. Chuang on behalf of the plaintiff, the defendant paid the sum of HK$18.5 m. to another company namely, Capital Union Inc in full satisfaction of the amounts claimed under the deed of promissory note.

7. As was pointed out by the master neither non est factum nor undue influence has been pleaded in the defence and in the light of the evidence before the court it will be impossible for the defendant to raise such defences as was found by the master. The master found in favour of the plaintiff in respect of the paras. 1(a)(i) and (ii) of the summons and determined that the deed of promissory note was executed as a deed and that it was valid and enforceable even without consideration.

8. It is clear to me on the evidence before the court that the master correctly found in favour of the plaintiff in respect of paras. 1(a)(i) and (ii) of the summons. As I have said there has been no cross-appeal by the defendant on this. The defendant has failed to raise a triable issue on these matters.

9. I turn to the remaining defence raised in the defendant's pleading namely, that on or about 9 November 2000 at the express request of the plaintiff and/or Mr. Chuang on behalf of the plaintiff the defendant paid the sum of HK$18.5 m. to another company namely, Capital Union Inc in full satisfaction of the amounts claimed under the deed of promissory note. As the master said, the substance of this defence is that the defendant's liability under the deed of promissory note has been discharged by agreement by payment to another company, Capital Union Inc of the sum of HK$18.5 m. pursuant to a document called a deed of settlement.

10. It is the defendant's evidence that he had a business relationship with Mr. Chuang who controlled a number of companies including the plaintiff and Capital Union Inc. He says that by the end of 1997 or early 1998 the nature of his business relationship with Mr. Chuang involved asking each other for help when they encountered cash flow problems. The defendant himself was an experienced businessman and the chairman of B-Tech Holdings Limited, a company listed in the Stock Exchange of Hong Kong. He says that from late October 1997 onwards he did ask Mr. Chuang for personal loans and he became aware that Mr. Chuang controlled a number of companies. This was because each time Mr. Chuang lent him money he used a different company as a vehicle for the loan. The defendant himself used a company to receive some of the loans namely, St. Denis Limited and he has produced some of the loan documentation. These show clearly, as the defendant must have known, that the loans were indeed granted not by Mr. Chuang personally but by the various companies. In the case of the loan borrowed by St. Denis Limited from one such company, China United Finance Limited, the defendant himself had to and did provide a guarantee. It is plain and beyond argument in my view that the commercial documentation shows clearly that the loans taken by the defendant or his company were not personal loans from Mr. Chuang.

11. The defendant says further that when he was asked to sign the deed of promissory note in April 2000 the purpose was to consolidate all his existing debts to Mr. Chuang. That was the reason for signing the promissory note. He says that there was no loan made to him by the plaintiff. It seems to me that this is an attempt by the defendant to contradict the deed of promissory note by parol evidence. In the deed of promissory note the defendant, by recital 1, unequivocally stated that he was indebted to the plaintiff in the sum of HK$15 m. The deed of promissory note is clear. There is not a word in the deed of promissory note to the effect that the indebtedness was to Mr. Chuang instead of to the plaintiff. The oral evidence of the defendant which seeks to contradict the deed of promissory note is in my judgment inadmissible (Societe Provencale de Constructions Metalliques Navales et Ferroviaires and Tao-Yih Woo trading as T.Y. Woo & Company [1961] HKLR 394).

12. The defendant's evidence was also that between April 2000 and November 2000 he borrowed further money from Mr. Chuang on three occasions and on each such occasion Mr. Chuang gave him cheques drawn on Capital Union Inc signed by Mr. Chuang totalling HK$2.9 m. He says therefore that in November 2000 he owed Mr. Chuang the total sum of HK$17.9 m. being the sum of HK$15 m. in respect of the deed of promissory note and HK$2.9 m. in respect of the three cheques from Capital Union Inc plus interest. He says that on or about 6 November 2000 Mr. Chuang asked him to sign a deed of settlement to "wrap things up" between him and Mr. Chuang and that if he paid HK$18.5 m. to a company called Capital Union Inc pursuant to the deed of settlement all his personal indebtedness to Mr. Chuang including interest would be extinguished. He agreed and signed the deed of settlement and made payment pursuant to the deed of settlement on 9 November 2000. The defendant, however, fails to condescend to particulars as to how the sum of HK$18.5 m. was arrived at. The defendant says that the recital in the deed of settlement that he owed Capital Union Inc HK$18.5 m was not accurate and that he did raise this with Mr. Chuang but was told to pay that sum to solicitors, Richards Butler, and that the repayment would extinguish all his previous debts to him.

13. The deed of settlement was a deed made on 6 November 2000 between the defendant and Capital Union Inc. The deed of settlement is clear. By recital A, the plaintiff stated that he was indebted to Capital Union Inc in a sum of not less than HK$18.5 m. and which was repayable on demand. By recital B Capital Union Inc agreed to accept the payment of the sum of HK$18.5 m. as full and final settlement of the indebtedness. On the deed of settlement this was clearly and unarguably an indebtedness to Capital Union Inc and not to Mr. Chuang personally or to anyone else.

14. I was referred to Bank of India v. Surtani Murlidhar Parmanand t/a Ajanta Trading Corp.[1994] 1 HKC 7 where it was held, inter alia, that where the defendant seeks to vary a deed by relying on the existence of a collateral contract this must be strictly proved. The threshold onus placed on the defendant by O.14 r.3 was compounded by the onus to strictly prove the agreement.

15. Here, the defendant does not seek to vary the deed but he seeks to go further by contradicting the recitals in the deed of settlement by his mere assertions. The defendant's oral evidence seeks to contradict the recitals in the deed of settlement. Quite apart from the fact that parol evidence is inadmissible to contradict the recitals in the deed, it seems to me that the defendant's bare assertions are in any event unbelievable. His assertions are contradicted by the written provisions of the deed of settlement. He is an experienced businessman, and as I have said, the chairman of a publicly listed company. As a commercial man and as chairman of a publicly listed company, he has clearly been used to signing commercial documents including loan documentation, some of which he himself has produced.

16. An important matter to bear in mind is that the defendant himself has relied on matters contained in the deed of settlement. He has himself relied on and made use of the deed of settlement against Capital Union Inc when Capital Union Inc served a statutory demand on him in February 2001 seeking payment of the sum of HK$2.9 m. His solicitors wrote to the solicitors of Capital Union Inc relying on the deed of settlement and the payment by the defendant of HK$18.5 m. to Capital Union Inc whereupon the statutory demand was withdrawn. Thus, the defendant himself relied on the deed of settlement as representing a full and final settlement of the defendant's indebtedness to Capital Union Inc thereby defeating the statutory demand of Capital Union Inc. As I have said, in my judgment the defendant's bare assertions in an attempt to contradict the recitals in the deed of settlement are unbelievable.

17. The defendant has in my judgment failed to raise a triable issue on the remaining defence that the payment by the defendant of the sum of HK$18.5 m. to another company Capital Union Inc discharged his liability to the plaintiff under the deed of promissory note. The plaintiff's claim, as I have said, is a simple one. No triable issue is shown.

18. The appeal is allowed. That part of the master's order giving unconditional leave to the defendant to defend is set aside. There will be judgment for the plaintiff in the sum of HK$15 m. with interest from 19 January 2001 until judgment at 1% above prime rate and thereafter at judgment rate until payment. Costs of the hearing before the master and costs of the appeal together with costs of the action to be costs to the plaintiff.