CHOI SAN SAN v. HUI YAN SUI WILLIAM

HCA 2243/2019

[2021] HKCFI 2907

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2243 OF 2019

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DECISION

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1.  This is the plaintiff’s appeal against Master Anthony Chan’s decision made on 23 May 2021 which dismissed the plaintiff’s summary judgment application.

2.  At the start of the substantive hearing, in view of the non-opposition by the defendant, I gave leave to the plaintiff to amend her Statement of Claim to reflect the plaintiff’s evidence adduced in the summary judgment application and to correct certain typographical errors as to the date of default.  I was given to understand that the discrepancies between the plaintiff’s original Statement of Claim and her evidence, and the errors as to the default date, were the reasons why the learned Master dismissed the plaintiff’s summary judgment application without considering the merits of the plaintiff’s claim.  In this appeal, the plaintiff has not suggested that the learned Master was wrong in dismissing her summary judgment application on the basis of the materials then before the court.  Rather, the plaintiff seeks summary judgment against the defendant on the basis of the newly amended Statement of Claim and the evidence before the Court.

A.      THE BACKGROUND

3.  According to the plaintiff, she is a Macau resident and resides in Macau with her spouse and family.  It is not disputed that Mr Tsoi Chun Lok (“Mr Tsoi”) is a cousin of the plaintiff and a friend of the defendant.

4.  According to the defendant, he is a resident of Hong Kong and a businessman who invests in worldwide projects.  His evidence is that he enquired with Mr Tsoi in early 2014 whether Mr Tsoi knew of any person who would be able to lend the defendant HK$10,000,000 for certain investment.

5.  The plaintiff’s evidence is that (1) on or about 9 January 2014, Mr Tsoi told her that he had a good friend (namely the defendant) who urgently required HK$10,000,000 for his business, but the defendant could not put up any security or guarantee for the loan, (2) upon being told by Mr Tsoi that the defendant was trustworthy, the plaintiff proposed that she would charge interest on the loan at the rate of 2.5% per month until repayment in full, (3) Mr Tsoi later said that the defendant agreed to the plaintiff’s proposal, and (4) the plaintiff thereafter approached her family members for the contribution of the HK$10 million loan.

6.  As confirmed by Mr Yung, counsel for the defendant, at the hearing, there is no dispute that the plaintiff has never communicated directly with the defendant.

7.  It is common ground that the defendant received the HK$10 million loan (“the Loan”) from the plaintiff through Mr Tsoi on 9 January 2014.

8.  By a memorandum written in Chinese headed “Loan Agreement” dated 5 July 2014 and signed by both the plaintiff and the defendant (“the Memorandum”), it was recorded that (1) the defendant had borrowed the Loan from the plaintiff, (2) the defendant had received the Loan on 9 January 2014, (3) the monthly interest on the loan was 2.5% (i.e. HK250,000) and (4) the defendant agreed to pay interest to the plaintiff on the ninth day of each month until full repayment of the loan.

9.  According to the plaintiff, the defendant from 9 March 2014 to 8 August 2017 paid to the plaintiff a total amount of HK$10,250,000 (representing 41 months of interest at HK$250,000 per month), and defaulted by failing to pay any further interest from 9 August 2017.

10.  By a letter dated 10 May 2018, the plaintiff through her solicitors demanded the defendant to repay the Loan with outstanding interest.  On 4 December 2019, the plaintiff issued her Writ with a Statement of Claim herein against the defendant.  The defendant filed his Defence on 26 May 2020 and the plaintiff filed her Reply on 28 September 2020. On 13 November 2020 the plaintiff issued an inter partes summons under RHC Order 14 for summary judgment against the defendant.

B.      THE DEFENDANT’S DEFENCE

11.  In his Defence, the defendant accepted that “on or about 9 January 2014, the Plaintiff as lender agreed to advance [the Loan] to the Defendant as borrower at an interest rate of 2.5% per month … until full repayment” (“the Loan Agreement”). 

12.  However, the defendant asserted in the Defence that there was a collateral agreement between the plaintiff and the defendant.  It is alleged that “the Loan Agreement was entered into on the basis of a mutual oral agreement contemporaneous with the Loan Agreement that interests on the Loan was only payable by the Defendant to the Plaintiff if the Investment generates a rate of return equal to or exceeds the Interest Rate” (“the Alleged Collateral Agreement”).

13.  The defendant’s case is that in around October 2014, the defendant informed the plaintiff of the failure of his investment and no interest on the Loan was therefore payable by the defendant to the plaintiff.  He further alleges that the Loan has been fully repaid by him to the plaintiff.

14.  At the hearing, Mr Yung on behalf of the defendant stated to the Court that the issue that should go to trial is whether the Alleged Collateral Agreement was made between the plaintiff and the defendant. 

C.      DISCUSSION

15.  The applicable principles on summary judgment are trite and have not been subject to any dispute between the parties.  Given that the defendant only relies on the Alleged Collateral Agreement to defend the plaintiff’s claim for HK$10 million and outstanding interest, and that the defendant has confirmed that the only triable issue is whether or not there was the Alleged Collateral Agreement between the parties, it seems to me that the sole issue in this appeal is whether the defendant has shown an arguable or believable defence based on the Alleged Collateral Agreement.  It is right to mention that the defects in the original Statement of Claim as identified by the defendant before the learned Master appear to have been rectified by the amendments and I note that the defendant has not in this appeal identified any further defects in the plaintiff’s documents.

16.  Having considered the evidence adduced and the submissions made by the parties, I have come to the view that the defendant has not shown an arguable or believable defence on the Alleged Collateral Agreement. 

17.  First, the defendant has adduced remarkably little evidence on the provenance of the Alleged Collateral Agreement.  In his affirmation, the defendant only included one sentence regarding the making of the Alleged Collateral Agreement.  He stated that “[p]rior to entering into the Loan Agreement, I had informed the Plaintiff that the Loan was borrowed for the purpose of the Investment and that the Loan Agreement was entered into on the basis of a contemporaneous mutual oral agreement that made between the Plaintiff and I that interests of the Loan were only payable to the Plaintiff if the Investment generated a rate of return equal to or exceeds the interest Rate…”.  According to the defendant’s evidence, the Alleged Collateral Agreement was directly made between him and the plaintiff.  However, this is contradicted by the defendant’s own acceptance that he had never communicated directly with the plaintiff.  In other words, the defendant’s evidence on the Alleged Collateral Agreement appears to be internally inconsistent.  In this context, I have borne in mind the need for a party to strictly prove a collateral agreement: Universal Dockyard Ltd v Trinity General Insurance Co Ltd [1989] 2 HKLR 160 at 164H-165B (Lord Goff); Bank of India v Surtani Murlidhar Parmanand t/a Ajanta Trading Corp [1994] 1 HKC 7 at 11I (Nazareth JA).

18.  Secondly, the defendant’s case of Alleged Collateral Agreement is inconsistent with contemporaneous documentary evidence. As acknowledged by the defendant, the Alleged Collateral Agreement was not mentioned in the Memorandum which was signed by both parties.  The defendant’s submission that the Memorandum was signed 7 months after the making of the loan and is therefore not a piece of contemporaneous documentary evidence simply misses the point.  It is not the defendant’s case that there was any commercial reason for not evidencing the Alleged Collateral Agreement in writing.  Nonetheless, when the parties had the opportunity to record their dealings in writing 7 months after the defendant had received the Loan from the plaintiff, the defendant did not seek to mention the Alleged Collateral Agreement in the Memorandum.  This was not explained by the defendant in his affirmation evidence. 

19.  Thirdly, the defendant’s conduct subsequent to January 2014 appears to be inconsistent with the existence of the Alleged Collateral Agreement.  There is no dispute that various sums of money were paid by the defendant to the plaintiff after the principal sum of the Loan was received by the defendant on 9 January 2014.  As mentioned above, the defendant’s case is that he informed the plaintiff of the failure of his investment in around October 2014[1] and that no interest on the Loan was therefore payable by him.    However, the defendant has not adduced any evidence to explain why the Loan was not immediately repaid to the plaintiff.  Indeed, Mr Tsoi has filed an affirmation on behalf of the plaintiff to exhibit several cheques from the defendant showing the amount paid pursuant to most of the cheques was either HK$250,000 or a sum which was a multiple of HK$250,000.   These cheques are entirely consistent with the plaintiff’s case that she was entitled to monthly interest payment of HK$250,000 from the defendant, and inconsistent with the defendant’s case that there was the Alleged Collateral Agreement.  I note that no explanation has been given by the defendant as to why he issued these cheques in such a manner. 

20.  Moreover, as mentioned above, the plaintiff’s evidence is that she has received a total sum of HK$10,250,000 from the defendant representing 41 months of interest at HK$250,000 per month.  This is not disputed by the defendant.  On his case of the Alleged Collateral Agreement, there was no reason why the defendant would give the plaintiff more than HK$10 million (being the principal sum of the Loan).  Nonetheless, no explanation has been given by the defendant as to why there is a discrepancy between his conduct and the Alleged Collateral Agreement.

D.      DISPOSITION

21.  For all of these reasons, I have come to the view that the defendant has not put forward any real or bona fide defence, and that the defence that the parties had entered into the Alleged Collateral Agreement is unbelievable.  The plaintiff’s appeal should be allowed.  I order that judgment be entered for the plaintiff against the defendant for HK$10,000,000, with interest thereon in the amount of HK$250,000 per month payable from 9 August 2017 to the date of judgment, and thereafter at judgment rate until payment.

22.  I also make an order nisi that the costs of this action (including any reserved costs) and those of this appeal be paid by the defendant to the plaintiff to be taxed if not agreed.

23.  Given that the plaintiff’s summary judgment application is successful, it is unnecessary to consider her alternative interim payment application.  I make no order on the plaintiff’s interim payment summons dated 7 May 2021.