PAN GLOBAL LTD v. LAM WAI KEUNG AND OTHERS

  DCCJ 3433/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3433 OF 2008

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J U D G M E N T

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Background

1.    The Plaintiff (“Pan") seeks summary judgment against the 1^st Defendant ("Mr. Lam") for the sum of HK$669,125 due under a written Guarantee dated 28 May 2002 signed by Mr. Lam.  Pan claims that the amount is due and owing from a company known as Sino Team Holdings Ltd. ("Company"), of which Mr. Lam was at all material times a shareholder and director. 

2.  The Company had entered into a Loan Agreement on 28 May 2002 with Pan, under which Pan agreed to lend a total sum of $2,800,000 to the Company, to finance the Company's purchase of a property in Kowloon ("Property").  The sum of $350,000 ("Loan") was to be advanced by Pan to the Company for payment of the deposit for the purchase of the Property upon the signing of the Loan Agreement.  The balance of $2,450,000 was to be advanced when a first legal charge or mortgage is executed on the Property in favor of Pan.

3.  In consideration of Pan's agreement to advance the Loan of $350,000 to the Company, Mr. Lam, together with 2 other directors and shareholders of the Company, jointly and severally agreed under a Guarantee in writing made on 28 May 2002 ("Guarantee") to make good any default on the part of the Company in the repayment of the Loan, or any part thereof, with interest at the rate of 30% per annum.

4.    In these proceedings which were instituted by Pan against the guarantors, Pan claims that the Company had failed to pay to Pan the outstanding principal of the Loan, in the sum of $252,500, and accrued interest in the sum of $416,625, and that demand for payment had been made on each of the guarantors, including Mr. Lam. 

5.  On 8 September 2008, judgment in default of defence was entered in these proceedings against Mr. Ling and Mr. Chung, Mr. Lam's co-directors who had signed the Guarantee. 

6.  Mr. Lam filed a Defence on 10 September 2008.  He denies knowledge of the Loan Agreement and the Guarantee.  He claims that he had delegated all affairs of the Company to his co-director, Mr. Ling, the 2^nd Defendant in these proceedings who was responsible for preparing all documentation in connection with the Company.  Mr. Lam admits that the Loan Agreement and the Guarantee contain his signatures, but alleges that he had never intended to sign these documents, and was not aware that he was signing on the Loan Agreement and the Guarantee.  He alleges that he only came to know of the Loan Agreement and the Guarantee on 14 June 2008. Mr. Lam's evidence is that he does not know precisely when he signed these documents, or the precise circumstances in which he had signed them. He claims that to the best of his recollection, Mr. Ling had procured his signature to these documents by fraudulently representing to him that the documents were a tenancy agreement for office premises rented by the Company.  According to Mr. Lam, since discovering Mr. Ling's improprieties, he had made a report to the police against Mr. Ling for fraud and theft. 

7.  The Defence initially raised other issues as well which, by the time of the hearing before me on 19 February, were no longer relied upon by Counsel.

8.  Pan seeks summary judgment against Mr. Lam on the basis that he has no defence to Pan's claim under the Guarantee.

The issue

9.  In essence, the issue for determination in this case is whether Pan is entitled to summary judgment for the sum due under the Guarantee, or whether Mr. Lam has an arguable defence to Pan's claim.

Legal principles for Order 14

10.    The principles applicable to applications for summary judgment are clear and not in dispute.  To resist an Order 14 application, the defendant must show that there are triable issues.  A concise statement of the standard approach in an application for summary judgment is to be found in the dicta of Ma J, as he then was, in Schindler Lifts (Hong Kong) Ltd. v. Ocean Joy Investments Ltd. [2003] 1 HKC 438.  The court has to determine two questions: firstly, whether what the defendant says is believable as opposed to whether its version of events is to be believed; and secondly, if it is, whether what the defendant says amounts to an arguable defence in law. In determining the first question, the court should not embark on a mini trial of the action on affidavit evidence.  The burden of proof is not a heavy one.  It is not the function of the court at this stage to assess if a defence will succeed at trial.  Insofar as the second question is concerned, summary judgment will not be granted if there are arguable defences or serious disputes of law.

Whether there are triable issues

11.  By way of summary of Mr. Lam’s evidence as contained in his 3 affirmations filed in opposition to the Order 14 application, Mr. Lam says that : (1) there were suspicious circumstances as to when and how Pan had made demands for payment of the Loan and supplied copies of the supporting documents; (2) Mr. Lam had no precise knowledge of when and how he had signed the Loan Agreement and the Guarantee, but to the best of his recollection, his signature to these documents were procured by the fraudulent representations of Mr. Ling that they were a tenancy agreement; (3) Mr. Lam had no knowledge of the advance under the Loan Agreement, nor the underlying purchase of the Property, and had no knowledge as to what had happened to the Loan; and (4) neither the Company nor Mr. Lam had made any repayment under the Loan Agreement or the Guarantee.

12.  It is trite law that in opposing an application for summary judgment, a defendant must condescend to particulars.  This is clear from the judgment of Megarry V.C. in Lady Anne Tennant v. Associated Newspapers Group Ltd. [1979] F.S.R. 298 :

"A desire to investigate alleged obscurities and a hope that something will turn up on the investigation cannot, separately or together, amount to sufficient reason for refusing to enter judgment for the plaintiff.  You do not get leave to defend by putting forward a case that is all surmise and Micawberism."

13.  Hence, the mere fact of delay in Pan's making or enforcing a demand for payment under the Guarantee, and/or the mere existence of allegedly suspicious circumstances in Pan's provision of documents to Mr. Lam, do not constitute a reason for trial or give rise to an arguable defence, unless Mr. Lam can at the same time identify some triable issues or arguable defence as a result of such delay or suspicious circumstances. I see no merit whatsoever in Mr. Lam’s argument that there were alleged differences in the copies of the Loan Agreement and the Guarantee provided, from the handwritten dates inserted, as I fail to see how any such differences can be material.  In any event, Pan has in its evidence explained that the Loan Agreement and the Guarantee were signed in duplicate, which gave rise to the alleged and immaterial differences.

14.   As for Mr. Lam's assertions that to the best of his recollection, he may have put his signature to the Loan Agreement and the Guarantee as a result of the fraudulent representation made by Mr. Ling, I fail to see how his assertions, even if they can be made out at trial, can afford him a defence to the claims made by Pan under the Guarantee.  Mr. Lam has not suggested in any way in his evidence or in his Defence that Pan is a party to or otherwise implicated in any fraud that may have been committed by Mr. Ling.  Nor has Mr. Lam claimed that the Guarantee is tainted by reason of any such fraud or any other alleged illegality.  Importantly, Mr. Lam has not, in his Defence, sought to rescind the Guarantee on the basis that it is void as against Pan.  If Mr. Lam has any claim in respect of Mr. Ling's alleged misrepresentations, then his remedies, if any, will have to be pursued against Mr. Ling.

15.  From the evidence, Mr. Lam is an educated man, a businessman, a District Board Councillor and a former Legislative Councillor.  I cannot find any evidence that Mr. Lam was at any time suffering from any disability which rendered him permanently or temporarily being unable to understand what documents he was signing.  He is simply suggesting that if it was true that, as he can now recall to the best of his ability, he had signed the Loan Agreement and the Guarantee thinking that they were tenancy agreements, it was because he had not bothered to read or look at what he was signing.  Even if all that Mr. Lam has said so far in relation to the circumstances of the execution of the Loan Agreement and the Guarantee are established at trial, I cannot see how he can show that he has an arguable defence on the basis of non est factum.

16.  Mr. Lam alleges that he had no knowledge of the Loan Agreement, nor of what had become of the Loan proceeds.  Counsel for Mr. Lam also submits that Pan had failed to prove that the Loan had actually been made to and received by the Company.

17.  As Counsel for Pan correctly pointed out, Mr. Lam dos not dispute that he had, as one of the directors of the Company, put his signature to the Loan Agreement.  It is the evidence of Mr. Tang, the solicitor acting for Pan at the material time, that the Loan Agreement and the Guarantee were signed by the 3 directors of the Company in his presence, and in the office of the solicitors acting for Pan.  A Facility Letter and an Undertaking were signed on the same day and in his presence by Mr. Lam and Mr. Ling, on behalf of the Company.  The Facility Letter was issued by Pan, setting out the terms of the Loan to be made by Pan to the Company.  It was signed by Mr. Ling and Mr. Lam on behalf of the Company.  The Undertaking provides that, in consideration of Pan agreeing to advance the Loan to the Company for purchasing the Property, the Company shall on Pan's demand execute a first legal charge/mortgage on the Property, and that it shall not use the Loan except for payment of the deposit towards the purchase of the Property.  The Company further agreed, under paragraph 2 of the Undertaking, that in the event (inter alia) of the purchase of the Property falling through, the Company will forthwith return the Loan with interest to Pan.  Mr. Lam has denied that the signatures appearing in the Facility Letter and the Undertaking were his, claiming that they were forgeries.

18.  Bearing in mind that Pan's claim against Mr. Lam in these proceedings is by virtue of the Guarantee signed by Mr. Lam, the real issue is whether on the construction of the Guarantee, Mr. Lam is liable for the amount claimed against him.  The Guarantee simply provides that in consideration of Pan agreeing to advance the Loan to the Company, Mr. Lam agrees to make good any default on the part of the Company in the repayment of the Loan or any part thereof with interest, and that no time or other indulgence granted by Pan to the Company in the repayment of the Loan shall exonerate Mr. Lam from any liability under the Guarantee. 

19.  Save for his bare denial of the loan and the purchase of the Property, and save for the allegation concerning Mr. Ling's fraud, Mr. Lam has not given any other particulars nor adduced any other evidence from the records of the Company, of which he is a shareholder and director, to suggest that the Loan had never been received by or for the benefit of the Company for making payment of the deposit for the purchase of the Property.

20.  On the other hand, as evidence of the Loan advanced to the Company, Counsel for Pan has referred to the following.  First, Mr. Lam admits that 2 directors of the Company can authorize the Company's payments and transactions, and 2 directors have signed the Loan Agreement.  Secondly, the Company had acknowledged receipt of the Loan when the Loan Agreement was signed, as evidenced by the signature of Mr. Lam and Mr. Ling in the acknowledgment of receipt clause on page 6 of the Loan Agreement.  Third, Pan relies on an exchange of correspondence between Pan's solicitors and the solicitors for the Company on 28 May 2002.  On that day, the Company's solicitors, Messrs. Chan & Tsu ("C&T") requested Pan's solicitors to send a cheque for the Loan in favor of the solicitors for the vendor of the Property.  Pursuant to such request, Pan's solicitors sent to C&T a cheque issued in favor of the solicitors for the vendor of the Property, for the sum of $316,600 which represented the Loan less the handling fees and professional charges of Pan's solicitors.  A copy of the cheque dated 28 May 2002 for the said sum of $316,600 issued by Pan 's solicitors to the vendor's solicitors is attached to the letter, which bears the receipt chop of C&T.

21.  Even leaving aside the Loan Agreement and the receipt clause, by reason of Mr. Lam's alleged defence that his signature to the Loan Agreement (and the receipt clause) may have been induced by fraud such that he had not intended to sign the Loan Agreement, I consider that there is sufficient evidence of the advance of the Loan by Pan to the Company, by virtue of the correspondence of 28 May 2002 between the solicitors for Pan and the solicitors for the Company. 

22.   On the evidence of Pan, the Company did not proceed with the purchase of the Property after the advance of the Loan.  It is Pan's pleaded case that the Company defaulted and failed to make repayment of the outstanding balance of the Loan in the sum of $252,500.  As such, Mr. Lam as guarantor is liable under the terms of the Guarantee, and upon Pan’s demand, to make good the Company's default in payment of the outstanding balance of the Loan with interest.

23.  Despite Mr. Lam's denials, it is clear from the evidence that the Company had made payment of interest on the Loan, and Mr. Lam himself had made a payment of $150,000 in January 2003 as repayment under the Guarantee.  This is borne out by the letter dated 1 June 2004 from Pan's solicitors.  Mr. Lam's denial of the Company's payment of interest on the Loan on the ground only that he had no knowledge of the letter accompanying the payment of interest, and did not know the Mr. Shuen who issued the Company's letter, is not credible.  Nor does it afford a credible basis for any defence, when Mr. Lam himself has admitted that he had delegated all affairs of the Company to Mr. Ling.

24.  It is clear from the foregoing that I do not find the assertions made in Mr. Lam's affirmations to be believable, nor to constitute an arguable defence to Pan's claims in these proceedings.  I therefore grant summary judgment to Pan for the sum of $669,125, together with interest on the principal sum of $252,500 at the rate of 30% per annum from 28 July 2008 until payment, as claimed.  I will make an order nisi, to be made absolute in 14 days, that the costs of the action and of the Order 14 Summons (including costs reserved on 21 November 2008) are to be paid by Mr. Lam to Pan, to be taxed if not agreed, with certificate for counsel.