KOO WAI LAU v. WONG KIN SUN

HCA 875/2021

[2022] HKCFI 434

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 875 OF 2021

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BETWEEN

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REASONS FOR DECISION

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1.  This is an application for summary judgment by Koo Wai Lau (“the plaintiff”) for the sum of $24,250,236 said to be due and owing by Wong Kin Sun (“the defendant”) under a Loan Agreement dated 6 March 2019 (“the Loan Agreement”). At the conclusion of the hearing, summary judgment was granted with written reasons to be handed down which I now give.

Background facts

2.  On 6 March 2019, Vinson Finance Limited (“Vinson”) and the defendant entered into the Loan Agreement whereby Vinson agreed to advance the sum of $25 million to the defendant for a period of 6 months from 7 March 2019 to 6 September 2019 at an interest rate of 30% per annum.

3.  The loan was not repaid on 6 September 2019. The repayment date was extended to 6 March 2020 by an extension letter dated 8 October 2019.

4.  When the loan was not repaid by the extended due date, on 30 March 2020 and 1 April 2020, Vinson’s solicitors (Messrs KC Ho & Fong) demanded repayment by letter (“the Letter”).

5.  On 4 August 2020, Vinson assigned the loan to the plaintiff, effective or deemed to be effective from 13 August 2020 (“the Assignment Agreement”).

6.  According to the plaintiff, on 13 August 2020, (i) completion of the Assignment Agreement took place (“the Assignment”); (ii) the plaintiff appointed Vinson to collect the debt on his behalf; and (iii) a Notice of Assignment (“the Notice”) was posted to the defendant by Vinson which was not returned to the Post Office.

The plaintiff’s case

7.  The plaintiff’s case is supported by 2 affirmations made by the plaintiff, respectively dated 16 August 2021 and 10 December 2021.

8.  §11 of amended statement of claim (“ASOC”) claims that as at 24 May 2021, the outstanding interest amounted to $1,187,983 after giving credit for 6 partial payments of interest totalling $8,959,240. The plaintiff also acknowledged partial payment of $3,427,160 in respect of principal.

9.  On 27 May 2021, the plaintiff’s solicitors demanded payment by the defendant of $22,760,823 being the total amount due and payable under the Loan Agreement and the loan extension remaining unpaid as of 24 May 2021. It also claimed daily interest thereafter of $17,731 per day until full settlement of the outstanding sums.

10.  Mr Sunny Chan, counsel for the plaintiff, submitted that summary judgment should be granted since it is clear from the defendant’s written submissions (at §§10 and 27) that the defendant does not dispute liability and has no issue over quantum. It was submitted that the defendant has failed to raise any triable issues.

Applicable legal principles

11.  A convenient summary is to be found in the Decision of DHCJ Wilson Chan (as he then was) in HCA 2376/2013 at §§11-13:

“11. As far as the plaintiff’s claim is concerned:

…

(2) The Statement of Claim must be good and complete in itself; any defect or omission in the Statement of Claim cannot be corrected or supplemented by the plaintiff’s affidavit. If the defect is one of substance, the application for summary judgment will be dismissed [see: Hong Kong Civil Procedure 2014 at Practice Note 14/1/5].

(3) This means that an Order 14 application has to proceed on the case as pleaded, and it is those facts (as pleaded) which have to be verified on affidavit.

(4) Where the assertions in the plaintiff’s affirmation constitute a material deviation from the plaintiff’s pleaded case, the plaintiff will have failed to verify his claim as pleaded, and summary judgment should not be granted [Lin Jan v Long Xiaobo, HCA 1516/2012 (Judgment dated 4/09/2013)].

(5) Equally, summary judgment will not be granted where the plaintiff’s affidavit evidence is materially different from and inherently inconsistent with his/her case in the Statement of Claim [see: Sin Yuk Hung v Sin Tung San, HCA 474/2013 (Judgment dated 18/12/2013)].

12. As far as the defendant’s defence is concerned:

(1) The defendant shoulders the burden to satisfy the court that he has a real or bona fide defence (ie that there are triable issues) ...

(2) … leave to defend ought to be given unless there is clearly no defence in law and no possibility of a real defence on the question of fact.

(3) Although the mere assertion in an affidavit does not, ipso facto, provide leave to defend, the court will not embark upon a mini-trial of the action on paper and leave to defend will be granted unless the defence raised is so incredible or so contradicted by contemporaneous documents or circumstances that it becomes clear that the defence is a sham.

(4) The test is not whether the defendant’s assertions are to be believed, rather it is whether those assertions are believable, ie capable of being believed. If so, the defendant must have leave to defend.

(5) …

13. Where there are unexplained features in both the claim and the defence, no tentative assessment of strengths should be made, but unconditional leave to defend should be given [see: Hong Kong Civil Procedure 2014 at Practice Note 14/4/9].”

The defence

12.  While the defendant does not dispute his liability to repay or the quantum of the Loan, his case is that in January 2021, Vinson led him into believing that the Loan (and hence the repayment date) would be extended provided interest under the Loan is repaid in March 2021. The defendant relies on the following events:

(a) on 6 March 2019, the defendant was introduced to Vinson by Mr Bai He (“BH”) and entered into the Loan Agreement in BH’s presence; on the same occasion, BH also signed some documents but whose nature is unknown to the defendant;

(b) since March 2020, on matters relating to the Loan the defendant has been contacting BH whom he perceived to be Vinson’s agent and did not deal with anyone else;

(c) sometime in January 2021, BH represented that if interest under the Loan is paid up in March 2021, Vinson would “further extend the Loan with a longer repayment period and lower interest rate[1]” (“the Representation”) and made no mention of the Assignment;

(d) in reliance on the Representation, the defendant paid up all interest due under the Loan: between 7 January 2020 and 19 March 2021 the defendant paid in total a sum of $12,386,400 in respect of the Loan, comprising $3,427,160 by way of the partial repayment of principal and the balance of $8,959,240 in respect of interest.

13.  §11 of ASOC itemises 6 partial payments of interest totalling $8,949,240 made in respect of the loan as follows:

“(a) On 22/05/2020      300,000

(b) On 12/06/2020      300,000

(c) On 02/11/2020      500,000

(d) On 18/11/2020      500,000

(e) On 09/02/2021      6,010,000

(f) On 19/03/2021      1,349,240”

14.  It will be seen that the aggregate amount of partial payments received tallies with the aggregate amount of interest the defendant alleges that he paid between 7 January 2020 and 19 March 2021.

15.  The defendant submitted that triable issues arise, namely, (a) whether BH is Vinson’s agent; and (b) whether BH made the Representation and that those triable issues should be resolved at trial.

16.  Mr Ho Ching Him, counsel for the defendant, submitted that the defendant and Vinson (acting through its agent BH) reached an oral agreement that the repayment date would be extended if interest on the Loan was paid up in March 2021.

17.  The defendant’s evidence is that in reliance on the Representation, he made 3 transfers of RMB 2 million each (one such transfer on 9 February 2021 and the remaining 2 on 19 March 2021) to Bai Lu (“BL”) whom he believed to be a relative of BH.

18.  The 3 transfers mentioned above differ significantly from the scheduled repayment dates and amounts specified in the Loan Agreement and the extension letter. In that sense they are out of character and lend support to the defendant’s case that they were made as a result of the Representation.

19.  For practical purposes RMB 6 million is largely equivalent to HKD 7,359,240 which is the aggregate value of the last 2 partial payments[2] pleaded in §11 of the ASOC. While the amounts of the partial payments made in February and March shown in the breakdown in ASOC §11 differ from that given by the defendant, the dates of the 2 relevant payments match.

20.  It was said that (unlike the defendant) the plaintiff has not adduced evidence to substantiate the payments received. It is not known how those payments were made, by whom and to whom.

No triable issues

21.  The defendant highlighted some features of the plaintiff’s case that were said to warrant further inquiry:

(a) In the Assignment, Vinson represented and warranted[3] that no money had been received from the defendant since 1 April 2020 (the date of the Letter as defined in recital (B)) and that the sums stated in the Letter were due and owing. However, that is demonstrably untrue. §11(a) and (b) of the ASOC set out 2 payments (of $300,000 each) made in May and June 2020, several months prior to the Assignment Agreement and so must have been paid to Vinson.

(b) Insofar as those payments are concerned, they render the plaintiff’s 1^st affirmation problematic in as much as the plaintiff stated categorically on oath that the defendant had paid a total sum of $12,386,400 “to me” (meaning the plaintiff) when (as explained above) the two sums considered in (a) above must have been paid to Vinson.

(c) Further, in his 2^nd affirmation, the plaintiff stated that on the day the Assignment became effective, he appointed Vinson to be his agent to collect payment of principal and interest. That is difficult to reconcile with what he states in his 1^st affirmation that the monies (totalling $12 million odd) had been paid directly to him.

22.  In his written submissions, the defendant also challenged the effectiveness of the Assignment given that no evidence had been adduced that the plaintiff provided consideration to Vinson for the Assignment. As Vinson is not a party to these proceedings, the defendant’s concern is possible prejudice in paying the wrong person.

23.  Further, the defendant denied receiving the Notice as he left Hong Kong for the Mainland in March 2020 whereas it is the plaintiff’s case that Vinson posted the Notice by registered post to the defendant at the address in Yuen Long provided by him on 31 March 2020. The Notice was not returned to the Post Office.

24.  Pausing there, in the absence of express notice, the Assignment would still take effect in equity. In a case where the assignor retains no interest in the chose in action and the assignment only fails to be statutory because no notice has been given, it is said that no useful purpose would be served by making the assignor a party to the proceedings: see Chitty on Contracts 34^th edition at §22-039.

25.  At the hearing, the defendant relied heavily on §21 (a) above. However, due credit has been given to those payments. It would have been different had those payments not been accounted for. The fact that the warranty is shown to be false does not of itself raise any triable issue.

26.  Neither the Representation nor the oral agreement mentioned any repayment date. As such, the extension would appear to be indefinite or at large.

27.  That aside, the Representation as defined by the defendant[4] comprised not only an extension of that Loan but also that the interest rate would be lower. The interest rate element did not feature as part of the oral agreement.

28.  In my view, those matters constitute the Achilles’ heel of the defence. The parties had extended the repayment period once: it was for a period of 6 months at the same rate of interest and the extension agreement was in writing. The loan was a commercial transaction and it is simply not credible that the parties could have contemplated or agreed an indefinite extension and an indeterminate ‘lower’ interest rate.

29.  For the reasons stated, summary judgment was granted. There is to be an order in terms of the plaintiff’s summons.