NGAI LEUNG TOMMY v. SUNG NGAI YEUNG AND ANOTHER

HCA 35/2015

[2019] HKCFI 983

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 35 OF 2015

________________________

________________________

________________________________________

REASONS FOR JUDGMENT

________________________________________

Introduction

1.  The trial of this matter came before me on 8 April 2019.  At theend of the hearing, I gave judgment for the plaintiff against both defendants,and granted a Mareva injunction against the 1^st defendant until payment of the judgment sum or further order.  I now give my reasons.

The parties

2.  The plaintiff is Ngai Leung Tommy, a Hong Kong permanent resident (“P”).

3.  The 1^st defendant is Sung Ngai Yeung, a Hong Kong permanent resident (“D1”).  The 2^nd defendant is Tunderly Limited, a company incorporated in Hong Kong of which D1 is the sole director and shareholder (“D2”).

4.  P issued these proceedings in January 2015.  D1 and D2 filed a defence on 12 February 2015.  D1 unsuccessfully opposed P’s Mareva injunction application in February 2015.  D1 and D2 were participating in these proceedings at least until the case management hearing in April 2018.  Thereafter they have been absent from hearings.

5.  The affirmation of Kwan Hoi Wah dated 4 April 2019 on behalf of P deposes to the service of trial bundles and P’s opening submissions on D1 and D2.  The exhibited covering correspondence refers to the trial date of 8 April 2019.

6.  Neither D1 nor D2 attended the trial on 8 April 2019.

7.  Satisfied that D1 and D2 had proper notice of the trial date, I proceeded with the trial of the action in the absence of D1 and D2 pursuant to Order 35, rule 1(2) of the Rules of the High Court.  P, by his counsel Mr Bache Sit, invited me to adopt the approach set out in Jotz, Klaus-‌Bernhard Markus v Hamawy, Tarek Mahmoud HCA 1150/2013 (unreported, 30 June 2017), at para 4, namely that I require P to prove his case as pleaded, having due regard where appropriate to the pleaded case by way of defence of the defendants.  That was the approach I adopted.

The pleaded cases

8.  P’s pleaded case in his Statement of Claim dated 6 January 2015 is that:

(a)  He loaned RMB 5.5 million to his cousin, Wong Ma Fou (“Cousin Wong”), in May 2013 at a monthly interest rate of 3%, with the loan repayable on demand.

(b)  In June 2014, in order to discharge the outstanding principal of RMB 4.5 million on his loan from P, Cousin Wong assigned to P a RMB 4.5 million loan owed by D1 to Cousin Wong which attracted a 4.5% monthly interest rate.

(c)  D2 agreed to guarantee P’s loan to D1.

(d)  When D1 sought repayment in July 2014, D1 issued a handwritten note entitled “Repayment Promise” whereby D1 promised to sell a Chai Wan property owned by Wide View Development Limited (which was the company through which D1 conducted his colour printing business and is owned 70% by D1 and 30% by D1’s wife) (“Wide View”) and after discharging the mortgage D1 would pay the balance of sale proceeds to P; and that if there was any delay in selling the property, D1 would pay RMB 1 million to P by the end of September 2014.  

(e)  No repayment was received by P from D1 as at December 2014, when P discovered that D1 had secretly procured Wide View to enter into a sale and purchase agreement in respect of the Chai Wan property on 10 November 2014.

(f)  D1 has failed to repay any part of the loan debt owed to P.

9.  The Defence dated 12 February 2015:

(a)  admits that Cousin Wong assigned to P a RMB 4.5 million loan owed by D1 in about June 2014, but denies that the interest rate payable by D1 to P was 4.5% monthly;

(b)  asserts that D1 agreed with P’s father that the debt owed by D1 to P would be fully and finally settled by (1) D1 giving P a property in Shenyang, Liaoning and (2) D1 joining in a venturewith P’s father and Wang Libin (“Wang”) to develop properties in Hainan pursuant to which D1 would contribute a property in Haikou and a piece of land in Hainan to be obtained from the Hainan government to which D1 had an entitlement (“the Alleged Settlement Agreement”);

(c)  asserts D1 (1) gave P a power of attorney empowering him to sell the Shenyang property; and (2) signed a document entitled “Cooperation Agreement” with P’s father and Wang by which D1 agreed to contribute the Haikou property and Hainan land; and

(d)  asserts D1 has been fully discharged of his liability to P.

10.  By his Reply dated 12 March 2015, P responds:

(a)  When P was pressing for payment, at a time when D1 was trying to enter into business with P’s father, D1 voluntarily provided title documents for the Shenyang property to P’s father to give to P, and later provided a notarized power of attorney purportedly to enable P to conduct the sale of the Shenyang property, but P was unable to effect a sale without being provided with the notarization fee receipt, and D1 failed thereafter to cooperate to achieve a sale.

(b)  In July 2014, D1, P’s father and Wang did enter into a Cooperation Agreement for the purposes of developing Hainan properties, but the Cooperation Agreement was never implemented.  Further, the Cooperation Agreement was with P’s father, and irrelevant to the loan between D1 and P. The Cooperation Agreement required P’s father to inject RMB 3 million cash.

(c)  The Alleged Settlement Agreement is a complete fabrication.

Witnesses

11.  At trial, P called himself, his father Ngai Ching Piu, and Wang to give evidence.  Each of them confirmed the truth of the contents of their respective witness statements dated 12 February 2018, 13 February 2018 and 9 February 2018 respectively.  In addition, P identified in the hearing bundle the documents he had referred to in his witness statement.

12.  For completeness’ sake, I will mention that D1 and D2 had not even filed any witness statements.

Findings

13.  There is no dispute that a RMB 4.5 million loan was assigned by Wong to P.

14.  The loan is evidenced by a Chinese document[1] dated 14 June 2014 entitled “IOU”, whereby D1 stated that he needed to borrow RMB 4.5 million from P, and the loan had been provided through Cousin Wong in three tranches in August 2013:

(a)  The IOU states that interest will start to accrue on 1 July 2014, and the interest rate will be negotiated separately.

(b)  Further it states that D2 would “be held liable for the loan”, which I understand to mean D2 would guarantee the loan.

15.  As to the applicable interest rate, the only evidence before the Court is that of P who states that he accepted Cousin Wong’s offer to assign the D1 loan at 4.5% to him to discharge the Cousin Wong loan at 3%, because he could earn more interest.  There is no evidence contrary to this.  I therefore accept that P’s loan to D1 attracted a monthly rate of interest of 4.5%.

16.  I am not satisfied as to the existence of the Alleged Settlement Agreement:

(a)  Whilst the documentation used by Wong, P, D1 and D2 was informal[2], they did document their agreements and acknowledgments.  It would therefore be most surprising that they would not document a settlement agreement, if they had indeed made such agreement.

(b)  Given the close link made by the Defence between the Alleged Settlement Agreement and the Cooperation Agreement, one might expect to find reference to any settlement in the Cooperation Agreement[3]. However, the contrary is true:

(i)  The Cooperation Agreement is made between P’s father, D1 and Wang.  There is no suggestion that P’s father is making the agreement on behalf of P.

(ii)  The Cooperation Agreement contains no reference to the loan by P to D1.

(iii)  The Defence indicates that the consideration for D1’s contributions of land to the venture was the discharge ofD1’s liability to P.  However, the Cooperation Agreementexpressly provides for P’s father to inject RMB 3 million cash, in order to match the value of the properties to be injected by D1.  If the debt to P1 was also to be cancelled, then P and P’s father would be giving value of RMB 7.5 million.  The Alleged Settlement Agreement does not make commercial sense in those circumstances.

(c)  In any event, both P’s father and Wang deny the existence of theoral Alleged Settlement Agreement, and there are no witnesses to support any such agreement.

17.  Accordingly, I find that the loan by P to D1 remains outstanding.  D2 is also liable as a guarantor.  The principal is RMB 4.5 million.  The monthly interest rate from 1 July 2014 is 4.5%.  Judgment was entered on that basis on 8 April 2019.

Injunction application

18.  On 27 February 2015, Deputy High Court Judge Kent Yee granted P a Mareva order, restraining D1 from dealing with the proceeds of sale of the Chai Wan property held by Wide View, and to the extent that the sale proceeds fell short of the sum claimed by P as at that date, from dealing with any of his assets in Hong Kong up to the value of the shortfall.

19.  The duration of the order was until further order or conclusion of the trial.  The Statement of Claim includes interlocutory relief in its prayer.  At the conclusion of the trial, P sought a further Mareva injunction until satisfaction of the judgment or further order.

20.  The 2015 injunction was granted on the basis of five affirmations listed in its Schedule 1: two affirmations by P, one affirmation by P’s father, one affirmation by D1, and one affirmation by D1’s wife.

21.  Deputy High Court Judge Kent Yee gave reasons for his decision.  On the evidence, he was satisfied as to P having established a good arguable case; that there were assets in the jurisdiction which could be the subject matter of a Mareva injunction (namely the Chai Wan property owned by Wide View but represented by D1 as being his property); that there was a risk of dissipation of the proceeds of sale of the Chai Wan property upon completion of the sale if no injunction was granted; and that the balance of convenience favoured the making of an order.

22.  It transpires that after the completion of the sale of the Chai Wan property, there was no equity in the property so that there was no balance of proceeds after discharge of the mortgages on the property.

23.  However, pursuant to the disclosure order of Deputy High Court Judge Kent Yee dated 2 March 2015, D1 filed a 2^nd affirmation dated 9 March 2015, and a 4^th affirmation dated 10 August 2015.  This evidence disclosed D1’s assets in Hong Kong including 13 bank accounts of Wide View (without stating the amount therein), a MPF account with current value of approximately HK$520,000, shares in Wide View (which owns a company in Shanghai and a company in Xiamen, both of which operate printing businesses), and shares in D2 (which owns two plots of land in Shenyang).  I am satisfied on the evidence available that as at August 2015,D1 had assets in Hong Kong; and no evidence has been filed by D1 to suggest a change in circumstances.

24.  I note D1’s conduct to date which includes: the conduct relatingto the sale of the Chai Wan property addressed in the 2015 affirmations; D1’sdispute of P’s claim on the pleadings but the lack of participation in the trial;whilst not effectively contesting P’s claim, D1 has not admitted the claim and has taken no steps to satisfy the debt.  In the premises, I am satisfied for present purposes that there is a risk of dissipation of D1’s assets rather than payment of the judgment debt if D1 is not restrained.

25.  Although P has claimed interlocutory relief under Order 29 of the Rules of the High Court in his prayer, D1 has not attended to make representations as to why an injunction should not be granted.  I am unable to take account of any present circumstances of D1.

26.  I accordingly considered it appropriate to grant on 8 April 2019 a post-judgment Mareva injunction in respect of D1’s assets in Hong Kong up to the value of the judgment sum.  P’s legal team has calculated the total amount outstanding under the judgment (ie principal plus interest since 1 July 2014) as RMB 16,093,125 as at 8 April 2019.