GLOBALINK MEDIA LTD v. 陳凱旭

HCA 1450/2018

[2019] HKCFI 2465

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1450 OF 2018

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DECISION

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The Master’s decision

1.  By an order dated 27 March 2019, Master S P Yip gave final judgment in favour of the plaintiff in these proceedings in the sum of HK$3,672,821, together with interest.  The defendant’s counterclaim in the proceedings was struck out and dismissed, and a third party notice filed on 24 September 2018 was similarly struck out and dismissed.  The Master ordered that the costs of the action including the costs of the third party proceedings were to the plaintiff and the third party with certificate for counsel, to be taxed if not agreed.    

2.  It is that decision that is the subject of these appeal proceedings, pursuant to the defendant’s Notice of Appeal dated 6 June 2019.  As adjuncts to the defendant’s appeal, the defendant seeks leave to defend the action and also a stay of execution of the order of Master S P Yip pending the determination of the appeal.

3.  The appeal was filed out of time.  The defendant, with the plaintiff’s agreement, proposed that I should hear the appeal on a de bene esse basis, relying upon the authorities of Weng Chi Cheong v Barclays Capital Asia Ltd HCA 741/2016 (unreported, 6 December 2016) and also Liu Ng Chai v 姚華泰[2018] HKCFI 2041.  I directed that we would proceed on this basis.

Statement of Claim

4.  In the plaintiff’s case, its claim against the defendant is straightforward.  By a written loan agreement dated 1 November 2015 (“Globalink Loan”), the sum of HK$5,376,000 was loaned by the plaintiff, Globalink Media Limited (“Globalink”), to the defendant.  The loan was for a period of five years at a interest rate of 3% per annum.  60 equal monthly instalments to repay principal and interest were set out in Schedule 1 to the agreement.

5.  The plaintiff asserts that the agreed sum was loaned to the defendant on 4 November 2015.  However, whilst some initial loan repayments were made, the last repayment occurred in July 2017 whereupon the defendant fell into payment default.  The plaintiff asserts that the sum of HK$3,672,821 remained owing, and that this sum was properly demanded through a demand letter dated 12 October 2017.

Defence

6.  The Defence paints a different picture.  The defendant asserts that at all material times, in securing a loan, he was dealing not with  Globalink but rather with the third party in this action,Mr Harry Cheung (“Mr Cheung”). From the Defence, there is a picture of a broad range of commercial dealings between the parties, of which the Globalink Loan was just one part. 

7.  Additional complexities asserted by the defendant include the following:

(a)  Despite the Globalink Loan being expressed to be an unsecured loan, the defendant had pledged the shares in a company known as Hong Kong Centre of Minimally Invasive Surgery Limited (“HKMIS”) as security for the said loan.

(b)  The defendant asserts that having obtained funding from a different source, he wished to repay the Globalink Loan in full and that a large loan repayment was in fact made on 28 May 2016, in the sum of HK$5,000,000.  The defendant maintains that this sum, together with sums paid previously, fully discharged the Globalink Loan, inclusive of interest payments.

(c)  It is asserted that, following the “repayment” of HK$5,000,000, the pledged HKMIS shares were transferred back to the defendant.

8.  The defendant goes further and asserts that following these transactions, ongoing interest payments as paid by him on the Globalink Loan were mistakenly paid, such that the sum of HK$1,442,400 was in fact overpaid.  This sum is counterclaimed by the defendant.

Third party proceedings

9.  Coincidental upon the timing of the Defence, the defendant filed third party proceedings to bring the third party, Mr. Cheung, into this action.  By these proceedings, the defendant claims the sum of $5,000,000 from Mr Cheung, relying upon the same factual matrix as pleaded in his Defence and Counterclaim.  The third party notice also includes short pleadings to recover the sum of $5,000,000 based upon conversion, unjust enrichment and misrepresentation.

Summary judgment application

10.  It was at this point that the plaintiff filed its summary judgment application, dated 18 December 2018.

Relevant legal principles

11.  I turn firstly to the principles concerning appeals against a master’s decision that are made out of time.  This is dealt with in Order 58 rule 1(3) of the RHC.  Unless otherwise ordered, such appeals must be issued within 14 days after the decision or order is made.  In effect, there is discretion to extend time. 

12.  As to the factors to be considered by the court in deciding whether to extend time, I have noted the case of Liu Ng Chai v 姚華泰(supra), as referred to by defendant’s Counsel, Mr. Joseph Wong.  In that decision, and after referring to the earlier decision of DHCJ Wong Yan Lung SC, in Postwell Ltd v Cheng Kap Sang [2004] 2 HKLRD 355, DHCJ Marlene Ng set out the relevant factors as follows:

“...the court has to consider all relevant factors, particularly (a) the length of the delay, (b) the reasons for the delay, (c) the merits of proposed appeal, and (d) the degree of prejudice to the other party”.

13.  I shall apply these four criteria to this appeal below.  I shall do so, mindful of the words of DHCJ Wong Yan Lung SC in the Postwell case (supra) that for applications to extend time to appeal “the court should be slow to accede to the delay in the absence of an acceptable reason for the delay.”  

14.  Turning now to relevant Order 14 principles, plaintiff’s Counsel referred me to the decision of DHCJ Lisa Wong SC (as she then was) in Menfond Electronic Art & Computer Design Co Ltd v Wong Wang Tat Victor HCA 293/2011, §61:

“ The principles governing the grant or refusal of summary judgment under Order 14 are well established. It is for the defendant to show that there is an arguable defence or triable issue. In doing so, the defendant must condescend to particulars. The mere assertion in an affidavit of a given situation by the defendant does not, ipso facto,ground leave to defend. The defendant must satisfy the court that his evidence is capable of being believed and that on the basis of such evidence, there is a fair or reasonable probability of the defendant having a real or bona fide defence. In deciding whether there is a fair or reasonable probability of the defendant having a real or bona fide defence, the court does not isolate each factual issue and consider whether it is possible that the defendant’s story on that issue is credible. Rather, the court must look at the whole situation. In assessing the credibility of the defendant’s factual case, while the court will not embark on a mini-trial on affidavit evidence, the court is not obliged to suspend its critical faculties and assume that the defendant’s evidence is accurate. If having regard to inherent plausibility, inconsistency with contemporaneous documents and other compelling evidence, the defence is not credible,the court must say so.”

15.  The defendant’s Counsel, Mr. Joseph Wong, for his part, referred me to the decision of Li Chuen Kwai v Po Lam Construction Development Ltd HCA 2376/2013 (unreported, 24 September 2014), which I have also considered.   

Submissions – out of time

16.  Plaintiff’s Counsel referred me to the defendant’s second affirmation dated 28 May 2019, in which the defendant relied upon the following matters in respect of his appeal being out of time (set out here in summary form):

(a)  As to the length and reasons for the delay (i) the defendant needed time to receive and consider legal advice (ii) he is a busy medical doctor, seeing patients and running a business, and (iii) he needed time to organise the costs necessary to pursue an appeal.

(b)  As to the merits, the defendant maintains that his appeal is a strong one.  This part of the defendant’s affirmation was amplified in the written submissions filed by defendant’s Counsel, which I address below.

(c)  As to the question of degree of prejudice, the defendant asserts that any prejudice to the plaintiff or third party would be minimal.

Submissions – Order 14

17.  At the hearing, defendant’s Counsel sought to emphasise an alleged breakdown of a longstanding business relationship between the defendant and Mr Cheung.  The defendant relied upon the following:

(a)  The defendant and Mr Cheung had reached an oral agreement in September 2015 that the loan made in November 2015 (ultimately by Globalink rather than Mr Cheung) was subject to a condition, namely that the defendant would pledge his shares in HKMIS as security for the loan.  This was said to be a precondition for what became the Globalink Loan. 

(b)  The defendant denies that there was any previous indebtedness as between the defendant and Mr Cheung.

(c)  The defendant maintains that pursuant to a second oral agreement, the cheque for HK$5 million was paid to Mr Cheung to settle the Globalink Loan.

(d)  The defendant maintains that the lump sum repayment of HK$5 million made on 25 May 2016 together with previous monthly payments of HK$96,000 through to May 2016 fully settled the Globalink Loan.

(e)  The defendant maintains that as part of this further oral agreement, Mr Cheung would transfer the HKMIS shares back to the defendant.

18.  The plaintiff, for its part, maintains that these assertions from the defendant are incorrect and that the defendant’s case is a hopeless one.

19.  The plaintiff asserts that the proposition that the pledging of the HKMIS shares in May 2016 could stand as security for the Globalink Loan is improbable for at least two reasons:

(a)  The HKMIS share pledge predated the Globalink Loan by several months.

(b)  The Globalink Loan states both in the recitals and in clause 2.1, that the Globalink Loan was made on an unsecured basis.  The plaintiff asserts that it flies in the face of any common sense that the defendant would sign a loan agreement said to be unsecured if he had previously (as he alleges) provided security for the loan in the sum of HK$3 million.  

20.  The plaintiff further asserts that the HK$5 million sum paid by the defendant to Mr Cheung in May 2016 was a payment completely unrelated to the Globalink Loan.  The plaintiff maintains that this payment was to purchase shares in a company known as Loyal Base Holdings Limited.  In the plaintiff’s submission, the rationale for the payment was clear; namely, that it was paid in relation to a completely unrelated share sale and purchase agreement, which was explained in an email from the defendant himself dated 5 April 2016. 

21.  The plaintiff maintains that there are several other clear pointers towards the HK$5 million payment not having been made to discharge the Globalink Loan namely:

(a)  The HK$5 million payment was made to Mr Cheung, not Globalink. How could the payment be considered to discharge an obligation to Globalink?  The plaintiff also notes in this regard that monthly interest payments were all being made to Globalink, not to Mr Cheung.

(b)  The amounts do not tally up.  As at May 2016, the defendant owed Globalink HK$4,876,860.  Why would the defendant pay HK$5 million if that were truly to discharge the Globalink Loan.  This would constitute an overpayment of HK$123,140.

(c)  If the HK$5 million payment made in May 2016 was truly to discharge the Globalink Loan, then why did the defendant continue to make loan repayments on the Globalink Loan for a further 14 months?

(d)  The defendant’s proposition that the 14 loan repayments made by him starting in May 2016 were a mistake or an oversight is incredible because the defendant was notified each month of thepayments being made.  In the plaintiff’s case, it cannot seriously be contended that the defendant had overlooked these emails, that were addressed to him and which rehearsed the details of the Globalink Loan repayments, for 14 months. 

(e)  There was also the issue of a correction of the amount of monthly repayments of the Globalink Loan from HK$96,000 to HK$96,600. There was a discussion between the defendant and Mr Cheung’s assistant (Ms Doris Fung) that the repayment sum needed to be adjusted to HK$96,600, which was again agreed and confirmed in writing with the knowledge of the defendant.

22.  But the plaintiff’s response to the defendant’s case does not end there. 

23.  Plaintiff’s Counsel says that the proposition that the HK$5 million payment made in May 2016 was directed towards settling the Globalink Loan is “an obvious concoction”.  The plaintiff points to two further contemporaneous documents namely: 

(a)  The defendant sent an email to Mr Cheung on 24 May 2017 saying that he was “nearly bankrupt” and pleading to Mr Cheung to waive or suspend the repayment of his loan (which I take to be a reference to the Globalink Loan).

(b)  In a WhatsApp exchange between the defendant and Doris Fung in September 2017, Ms Fung referred to the Globalink Loan and stated that for the loan, there were two consecutive repayments for August and September 2017 that were missing.  Ms Fung asked for clarification (in effect asking the defendant when the payments would be made).  The defendant’s response was a text message to say “exhausted in Elaine case, need to pay back a bit later.  Or make a loan from bank.”

24.  The plaintiff observed that despite having the opportunity to do so, the defendant had made no effort to explain these final two communications which, on the plaintiff’s case, provide irrefutable evidence that the defendantknew that the Globalink Loan had not been repaid as of both May and September 2017, and that interest payments on the Globalink Loan for at least two months remained overdue.

Decision

25.  Since one of the grounds for determining whether I should extend time to appeal in this case is the merits of the proposed appeal, I shall address the merits first. 

26.  Applying the principles set out in the Menfond case (supra), the defendant has not convinced me that there is an arguable case or a triable issue before this court.  To the contrary, there is a considerable body of contemporaneous documentation that shows unequivocally that the loan to the defendant was from Globalink and that while some loan repayments were made to Globalink, sums remained due, for which the learned master - properly in my view - gave final judgment.    

27.  I am not persuaded by the argument from the defendant that I should take account of other transactions, in the manner described in the Defence and in the defendant’s written submissions.  In particular, I am not convinced that there was prior and separate security for the Globalink Loan.  And although I do not need to determine whether the payment made to Mr Cheung on 24 May 2016 in the sum of HK$ 5 million was to settle the Loyal Base share purchase (as the plaintiff contends), it is clear that this payment was not to discharge the Globalink Loan.  I accept the Plaintiff’s submissions in this regard as summarised at §21 herein.  (I would simply add here that if the defendant maintains that there are separate and unresolved disputes as between himself and Mr Cheung, it is open to him to pursue such matters). 

28.  This is my assessment of the situation based on the plaintiff’s submissions (which I accept) as summarised in §21 herein.  These arguments are sufficient on the merits, without more.  However, the two additional documents relied upon by the plaintiff from May and September 2017 (see §23 herein) provide the final corroboration for the plaintiff’s case, were it needed.

29.  For these reasons, I consider (de bene esse) that the intended appeal against the order of Master SP Yip was unmeritorious.

30.  I have considered the remaining grounds relied upon by the defendant to support his application to appeal out of time.  I note in this regard that the delay in the filing of the defendant’s notice of appeal was substantial.  It was filed almost two months out of time.  As to the reasons for the delay, I have taken note of the written communications from the defendant himself in May and September 2017 acknowledging his debt to the plaintiff.  Against that backdrop, I do not believe this case to have been complex, so as to justify the delay in filing a notice of appeal.  It is one thing for the defendant to contend that as a busy man, he does not always have the time he needs to attend to his affairs.  But that does not explain his acknowledging explicitly on two occasions in 2017, that he had ongoing liabilities to the plaintiff.  With this in mind, the delay in appealing and the reasons tendered for the delay are not persuasive.   

31.  On this basis, I consider that there is no good reason to extend time.  Thus, I dismiss the defendant’s application for leave to appeal against the said order out of time.  That being so, there is no relief in respect of the defendant’s notice to appeal dated 6 June 2019.    

Costs

32.  There is no reason why costs should not follow the event.  I therefore grant a costs order nisi that the defendant shall pay the plaintiff and third party’s costs of the application for leave to appeal against the said order out of time, such costs to be taxed if not agreed.