LING DAI HONG v. 汪裕祖

HCA 1007/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1007 OF 2011

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J U D G M E N T

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I. Introduction

1.  The plaintiff was/is a businessman.  The defendant was/is the owner or operator of a museum known as The Hong Kong Museum of Stone Sculpture (“Museum”).

2.  On 17 June 2011, the plaintiff commenced the present action against the defendant to claim for the sum of HK$1,050,000.00 with interest and costs.  The defendant was without legal representation until 5 December 2011 when his solicitors filed Notice to Act.

II.  UNDISPUTED MATTERS

3.  By the defendant’s home-made Defence and Counterclaim filed on 6 July 2011 (“D&C”), he admits the matters pleaded in the Statement of Claim (“SOC”) set out in paragraphs 4, 6(a), (b), (c) and (d)(i) and 7 below “[subject] to [his] averments” pleaded in the D&C set out in Part IV below (see paragraph 2 of the D&C).

4.  By an agreement made between the plaintiff and the defendant on or before 11 September 2009, the Plaintiff as lender agreed to lend the defendant a sum of HK$1,000,000.00 (“Sum”) and the defendant as borrower agreed to repay the Sum by 14 September 2010 with interest thereon at the rate of 5%pa (“Agreement”). The Agreement is evidenced by a written agreement dated 15 September 2009 (“Written Agreement”).

5.  The Written Agreement made between the plaintiff and the defendant is as follows:

“香港石雕文物博物館

THE HONG KONG MUSEUM OF STONE SCULPTURE

借款協議

6.  The Written Agreement expressly provides inter alia that:

(a)  the plaintiff agrees to lend the Sum to the defendant, and to pay the Sum to him before 15 September 2009 (“Clause 1”);

(b)  interest on the loan is 5%pa (“Clause 2”);

(c)   the loan period is 1 year (“Clause 3”);

(d)  the defendant can elect between two options for repayment of the loan, ie either (i) the defendant is to repay to the plaintiff on or before 14 September 2009 the principal sum (ie the Sum) with interest thereon in the total sum of HK$1,050,000.00 (“Clause 4(1)”), or (ii) the plaintiff is to select collection item(s) not exceeding HK$1,050,000.00 in value from the defendant’s collection of stone sculptures in lieu of cash repayment (“Clause 4(2)”).

7.  Pursuant to the Agreement, the plaintiff paid the Sum to the defendant by depositing it into his bank account (“Account”) on 11 September 2009.

III.  PLAINTIFF’S CLAIM

8.  The plaintiff claims that in breach of the Agreement and/or the Written Agreement, the defendant fails and/or refuses to repay the loan in the amount of the Sum (“Loan”) or any interest thereon by 14 September 2010 or at all. On 13 May 2011, the plaintiff’s solicitors issued a demand letter to the defendant demanding repayment of the Sum with all accrued interest (“Demand Letter”), but there was still no repayment.  In his Reply and Defence to Counterclaim filed on 3 August 2011 (“R&DC”), the plaintiff denies the allegations pleaded in the D&C set out in Part IV below.

IV.  DEFENDANT’S DEFENCE AND COUNTERCLAIM

9.  In the D&C, the defendant refers to the “Agreement” without defining the same.  He avers that it is an express term of the “Agreement” that “[the] Plaintiff, instead of demanding the repayment of loan and interest, may also be at liberty to elect to chose and select one or some collection of the antiques which belong to [the Museum] of equal value”.

10.  In the D&C, the defendant further pleads in the D&C that pursuant to the aforesaid express term of the “Agreement” the plaintiff made a selection by picking/selecting a very rare and important large Ming Dynasty grey stone Buddha (“Ming Buddha”) from the Museum’s collection of antiques for the agreed price of HK$8,000,000.00 (“Price”).  At the plaintiff’s specific request, the defendant agreed to accept a deposit of HK$1,000,000.00 (being the exact amount of the Loan that he was required to repay the plaintiff pursuant to the “Agreement”) in exchange for his agreeing to give the plaintiff a year’s time to make full payment of the Price and to complete the sale and purchase of the Ming Buddha.  The defendant claims he has duly performed/discharged his obligation under the “Agreement” to repay the Loan amount and interest thereon to the plaintiff.

11.  Under the D&C, the defendant also counterclaims for (a) compensation as a result of the plaintiff making an unreasonable claim for repayment of the Sum with interest in the sum of HK$50,000.00, (b) “[interest] of unpaid balance of HK$7,000,000.00”, (c) “[unreasonable] legal cost”, (d) damages, and (e) costs.

V.  SUMMONSES

12.  On 10 October 2011, the plaintiff issued a summons for summary judgment (“O14 Summons”).  On 10 October 2011 he filed his affirmation in support (“Ling 1^st Affirmation”), and on 6 February 2012 he filed his further affirmation in support and the affirmation of Master Yuan Zheng (“Master”) (“Ling 2^nd and Master Affirmations”).  On 13 December 2011, the defendant filed his affirmation in opposition (“Wong Affirmation”).

13.  According to the Ling 2^nd and Master Affirmations, the Master (whose passport name is Zhang Zhanhao) was/is the master and person-in-charge of of Yao Wang (or Wing) Temple in Hunan, Mainland China (“Temple”) and is the same person as Master Ying Hong referred to in the Wong Affirmation.  For easy reference, I shall adopt the abbreviation of “Master” interchangeably for Masters Yuan Zheng and Ying Hong.

14.  On 28 December 2011, the defendant issued a summons for leave to amend the D&C as per the draft Amended Defence and Counterclaim (“Draft AD&C”) annexed thereto (“Amendment Summons”). On 5 January 2012, Master R Lai adjourned the Amendment Summons to be heard at the same hearing but after the disposal of the O14 Summons.  The O14 and Amendment Summonses came before me on 13 March 2012 (“Hearing”).

15.  Mr Hui, counsel for the plaintiff, confirms that if I am to grant leave to defend under the O14 Summons, the plaintiff will not oppose the Amendment Summons.  I now turn to the O14 Summons.

VI.  LEGAL PRINCIPLES ON SUMMARY JUDGMENT

16.  Both Mr Hui and Mr Lam, counsel for the defendant, have no essential quarrel over the legal principles on summary judgment.  A plaintiff may invoke the procedure under Order 14 of the Rules of the High Court (“RHC”) where there is no valid defence to his claim or otherwise a triable issue.  The rationale is set out in Hong Kong Civil Procedure 2012 Vol.1, para.14/4/1 at p.244:

“……The underlying policy of the summary procedure is to prevent a defendant from delaying the plaintiff from obtaining judgment in case in which the defendant clearly has no defence to the plaintiff's claim: Man Earn Ltd v. Wing Ting Fong [1996] 1 H.K.C. 225.“Order 14 proceedings for summary judgment when there is no defence to a claim are an important feature of the legal process.  It enables plaintiffs in cases where there is no defence to obtain expeditious summary judgment to avoid unnecessary delay.  When applied for, it is for the defendant to show that there is a triable issue or an arguable defence if he is to be allowed his day in court.  To deny him his day in court, if he shows a triable issue or an arguable defence, is indeed a fearful injustice.  On the other hand, if he has no defence and he obtains leave to defence, equally, there is injustice to the plaintiff” (per Mortimer J.A. in Manciple Ltd. v Chan On Man [1995] 3 H.K.C. 459 at 466).  The machinery of O.14 works on the basis that if the plaintiff's application is properly constituted, he is prima facie entitled to judgment unless the defendant shows cause to the contrary or the application is dismissed.”

17.  In Ng Shou Chun v Hung Chun San [1994] 1 HKC 155, Godfrey J noted it was not appropriate to embark on a mini-trial of the action on affidavit evidence.  The court should ask itself the question whether what the defendant says is credible or believable.  If so, he must have leave to defend; if not, the plaintiff is entitled to summary judgment.

18.  Hong Kong Civil Procedure 2012 Vol.1, para.14/4/9 at pp.247-248 goes on to say that:

“ “In considering whether there are triable issues the Court will, of course, not take the alleged defence on its face value but test it against the evidence disclosed in the affidavit including matters such as contemporaneous documents, whether the alleged defence is inconsistent with the defence previously put forward or whether the defence is only recently raised despite opportunity being given to the defendant to respond earlier. The Court will also consider the inherent probability of the defence. But what the Court should not do is to conduct a mini-trial on complicated factual issues.” per Cheung J.A. in Paul Y. Management Ltd. V. Eternal Unity Development Ltd. [2008] H.K.E.C. 1359 at para.19.

……

It is trite law that the mere assertion in an affidavit of a given situation does not, ipso facto, provide leave to defend, since the defendant must satisfy the court that he has a fair or reasonable probability of showing a real or bona fide defence, i.e. that his evidence is reasonably capable of belief ……  “There is a difficulty because the court cannot resolve issues of fact on affidavits.  However, there are some cases in which the defendant’s own case, although apparently it raises issues which, if found in his favour, would provide him with a defence, are so incredible or so contradicted by contemporaneous documents or circumstances that it becomes clear that his defence is a sham”: per Mortimer J.A. in Manciple Ltd. v. Chan On Man [1995] 2 H.K.C. 459 at 466.  Two tests are appropriate, namely “Is what the defendant says credible?” and “Is there a fair or reasonable probability of the defendant having a real or bona fide defence?”  Where an issue of fact is raised, the first question must be answered in the affirmative before considering the second.

……

On the other hand, a complete defence need not be shown.  The defence set up need only show that there is a triable issue or question or that for other reason there ought to be a trial; and leave to defend ought to be given unless there is clearly no defence in law such as could have been raised on the former demurrer to the plea and no possibility of a real defence on the question of fact (Jacobs v. Booth’s Distillery Co. (1901) 85 L.T. 262, HL; Runnacles v. Mesquita (1876) 1 Q.B.D. 416).  Where there are unexplained features of both the claim and the defence which are disturbing because they bear the appearance of falsity and disreputable business dealings and questionable conduct, the court should not make tentative assessments of the respective chances of success of the parties or the relative strengths of their good and bad faith, and should not on such an examination grant the defendant conditional leave to defend, but should give unconditional leave to defend (Extraktionstechnik Gesellschaft für Anlagenbau Gmbh v Oskar (1984) 128 S.J. 417; (1984) L.S. Gaz. 1362, CA applied in Billion Silver Development Ltd v. All Wide Investments Ltd [2000] 2 H.K.C. 262).”

VII.  DEFENDANT’S AFFIRMATION EVIDENCE AND DRAFT AD&C

19.  The defendant, who owns the Museum in Tai Po, claims to be a collector of arts, cultural heritage and stone sculpture, and an event-organiser for Buddhist culture/exhibition for the past 30 years.  From time to time, monks and masters would visit the Museum for cultural exchange to study his collections.

20.  The defendant was introduced to the plaintiff (but the Draft AD&C pleads that the plaintiff was introduced to the defendant) by Mr Sunny Leung Wing Sun (梁榮新, “Mr Leung”) and Mr Wong (or Wang) See Yuen (王思源, “Mr Wong”), who were representatives of the Museum in Mainland China and whose responsibilities were (a) to look for buyers and collectors (including temples and masters) for purchase of the defendant’s Buddha and art collections and (b) to make arrangements for organisations or companies to exhibit the defendant’s family collections.

21.  On/about 19 August 2009, Mr Leung telephoned to tell the defendant he would introduce the Master and the plaintiff (a businessman and potential buyer of Buddha statues for sub-sale or donation to temples) to him.

22.  On/about 5 September 2009, the plaintiff and the Master visited the Museum, and for the first time the defendant (together with Mr Leung) showed them his family’s stone sculpture and Buddha collections.  They showed great interest in the Buddha collection, and enquired as to the age, origin and selling price of some Buddha statues and other collection items.  They chose a few Buddha statues which they thought would be suitable for their temple (“Selected Statues”).

23.  On that occasion, the defendant told the plaintiff and the Master he was thinking of opening a Buddhism meditation cultural centre in Shatin (“Planned Centre”).  They were interested and wanted to know more about the Planned Centre.  On the same day, upon their request (according to the Draft AD&C), the defendant took them to the site of the Planned Centre which used to be the clubhouse of World-wide Gardens (“Site”).  After inspecting the surrounding area, they commented that the Site was ideal for operating the Planned Centre, and expressed interest in knowing more about such project.

24.  According to the Wong Affirmation, on/about 6 September 2009, Mr Leung, the plaintiff and the Master visited the Museum for a second time to view the Selected Statues.  Thereafter they went to the Site.  The plaintiff and the Master again indicated to the defendant their interest in operating the Planned Centre with him.  During discussions they “told [the defendant] they would pay for the rent of the [Planned Centre] and also pay for part of [the defendant’s] collections for display.  [The defendant] replied them that [he] could sell some of [his] collections to invest in this project.  The plaintiff agreed and believed that it would be a lucrative business as they expect charging admission fees to the public. [The defendant] asked the plaintiff whether he would start off this business with HK$1,000,000 as the initial investment for this project.  The plaintiff agreed so”.

25.  Paragraph 2E of the Draft AD&C pleads as follows:

“After discussions and a second visit on the following day [ie on or about 6 September 2009], the Plaintiff and the Master suggested to the Defendant that they would like to take up the [Site] and asked the Defendant to operate the [Planned Centre] together with them. The Plaintiff decided to start off this project with HK$1,000,000 as the initial investment.”

26.  On 11 September 2009, the plaintiff deposited the Sum into the Account.

27.  According to the Wong Affirmation, the plaintiff and the defendant signed the Written Agreement on 15 September 2009.  The plaintiff told the defendant “the [Sum] was for the initial deposit for the business of the Planned Centre and he stated that the deposit could be used to offset any purchase sum if he were to purchase [the defendant’s] collection or Buddha statues”.

28.  Paragraph 2G of the Draft AD&C pleads as follows:

“On 15 September 2009, the Plaintiff told the Defendant that the money HK$1,000,000 was for the initial deposit (as a loan for the start-up costs) for the business of the [Planned Centre] and/or alternatively the said deposit or any part thereof could also be used to offset any payment of Buddha statues he was going to purchase from the Defendant in the future. The Plaintiff and the Defendant signed the Written Agreement to record the transaction.”

29.  On/about 10 October 2009, the plaintiff and the Master visited the Museum for a third time.  They checked the Selected Statues and decided to purchase the Ming Buddha for the Price of HK$8,000,000.00.  According to the D&C and the Draft AD&C, the defendant avers that pursuant to the “Agreement”, the plaintiff duly made the election to pick/select the Ming Buddha from the Museum’s collections.

30.  Paragraph 5(a) of the Draft AD&C pleads as follows:

“By an oral agreement on or about 10 October 2009 and made at the Museum, the Defendant agreed to sell and the Plaintiff agreed to buy [the Ming Buddha] for a HK$8,000,000.00 (“the Sale and Purchase Agreement”) ……”

31.  In the Wong Affirmation, the defendant asserts that instead of making a deposit payment for the Ming Buddha, the parties agreed to take “the initial payment previously made on 15 September 2009 as the deposit for the [Ming Buddha]”. The plaintiff promised to pay the balance of the Price (HK$7,000,000.00) as soon as possible and before he would take delivery of the Ming Buddha.  Later on the same day, the plaintiff and the defendant went to the Site to carefully check the place again, and they further discussed project planning and design of the Planned Centre.

32.  Paragraphs 5(b) and 5A of the Draft AD&C plead as follows:

“5(b) The following were inter alia the express terms of the Sale and Purchase Agreement:

(i) At the Plaintiff’s specific request, I the Defendant agreed to accept a Deposit of HK$1,000,000 (i.e. deducting The the exact amount of loan which I the Defendant would need to repay the Plaintiff in pursuant to the Agreement) from the Plaintiff as Deposit for the purchase of the [Ming Buddha] in exchange for my the Defendant’s agreement to give a year’s time to allow the Plaintiff to make full payment and complete the sale and purchase of the said collection of Antiques picked and selected by the Plaintiff as pleaded above same as soon as possible and within reasonable time.

(ii) The Plaintiff would arrange for the pick-up of the [Ming Buddha] or inform the Defendant to where it should be delivered at the Plaintiff’s own costs as soon after the Plaintiff paid the remaining balance of HK$7,000,000.

5A.     At all material times, the Defendant was ready and willing to deliver the [Ming Buddha] pending the Plaintiff’s payment of the remaining balance.”

33.  On 20 October 2009, the plaintiff and the defendant had an appointment to meet at the lobby lounge of JW Marriott Hotel in Futian, Shenzhen, Mainland China (“Hotel”).  The plaintiff had called to tell the defendant “to bring the receipt of HK$8,000,000.00” and to remind him that “he had deducted the deposit of HK$1,000,000 from the initial payment of the [Written Agreement] leaving an unpaid balance of HK$7,000,000”.  At the Hotel, the defendant gave the plaintiff an unsigned receipt (“Receipt”) which provides as follows:

“香港石雕文物博物館

THE HONG KONG MUSEUM OF STONE SCULPTURE

售貨協議單據

34.  At the meeting, the parties discussed about the Planned Centre project and the Ming Buddha purchased by the plaintiff.  The plaintiff reminded the defendant not to sell the Ming Buddha to others.  He also told the defendant about his friend’s interest in the defendant’s collections, and requested the defendant to send some of his collections to his friend in Beijing for exhibition, which he believed would be profitable from the admission fees that would be collected from the many visitors interested in this kind of exhibition.

35.  In/about mid-2010, the defendant asked the plaintiff whether he would take delivery of the Ming Buddha.  The plaintiff said he believed he should be able to take delivery by the end of 2010, and he would buy a few more statues from the defendant at that time.

36.  On/about 13 January 2011, the plaintiff had a meeting with the defendant to discuss about the Ming Buddha he had purchased.  The plaintiff claimed he would let the defendant know whether the Ming Buddha would be delivered to the Master or to any other destination to be confirmed.

37.  After that, the plaintiff brought many friends/clients to visit the Museum to view the Defendant’s collections and the Ming Buddha.  The plaintiff tried to sub-sell to them the Ming Buddha and some of the defendant’s other collections at marked-up prices to earn commission profit.

38.  The defendant waited and asked the plaintiff when he would take delivery of the Ming Buddha and settle the balance of the Price.  But the plaintiff told the defendant to keep it for the time being, and he would ask other people to buy it from him or alternatively he would donate it to the Master.  The plaintiff also told the defendant not to disclose the Price for the Ming Buddha as he would tell interested sub-buyers his selling price himself.  He also reminded the defendant not to sell the Ming Buddha to others as he had already paid the Sum as deposit.  He reassured the defendant that he would pay the balance of the Price (HK$7,000,000.00) before he took delivery of the Ming Buddha.

39.  The defendant further avers in the Draft AD&C that the defendant paid HK$100,000.00 to each of Mr Leung and Mr Wong “for commissions after the sale of the [Ming Buddha] to the Plaintiff”.

40.  The defendant claims he waited until receipt of the Demand Letter which took him by surprise.  On 17 May 2011, he replied to the plaintiff’s solicitors by letter (“Reply Letter”) enclosing the Receipt and stating as follows:

“On 20 October 2009, [the plaintiff] had an appointment with [the defendant] for the Buddha statute he purchased. [The plaintiff] purchased a Buddha statute of value HK$8,000,000. He agreed to offset HK$1,000,000 from the agreement on 15 September 2009 as the deposit of the purchase of the MING Dynasty stone Buddha statute. And he further agreed to pay the balance of HK$7,000,000 before the delivery.”

41.  In the Draft AD&C, the defendant avers that the plaintiff is not entitled to any relief as claimed or at all, but if (which is denied) the plaintiff is so entitled, he seeks to set off against such liability such sums as may be awarded by way of counterclaim.  The defendant claims that in breach of the sale and purchase agreement in respect of the Ming Buddha and despite repeated requests from mid-2010 to early 2011, the plaintiff has failed and/or refused to pay the balance of the Price (HK$7,000,000.00) or any part thereof, and he thereby suffers damages.  The defendant therefore counterclaims for the following reliefs:

(a)  payment of the sum of HK$1,000,000.00 being the deposit or part payment for the Ming Buddha sold to the plaintiff, or alternatively a declaration that on/about 10 October 2009 such sum has been set off against the Loan by way of the agreement for the sale and purchase of the Ming Buddha;

(b)  payment of the unpaid balance of the Price (HK$7,000,000.00);

(c)   alternatively, damages;

(d)  interest, costs and further/other relief.

42.  By the Wong Affirmation, the defendant verifies the contents of the Draft AD&C, and claims that the O14 Summons should be dismissed.

VIII.  PLAINTIFF’S AFFIRMATION EVIDENCE

43.  The plaintiff by the Ling 1^st Affirmation verifies the particulars in the SOC and claims the defendant has no defence.  The Master Affirmation essentially corroborates the Ling 2^nd Affirmation insofar as the contents of the latter affirmation refer to the Master.

44.  The plaintiff is a disciple of the Master (a Buddhist preacher who at the material time was in charge of the Temple) and regards the Master as his master and good friend.

45.  Sometime in August 2009, Mr Wong (another disciple of the Master) wanted to introduce the defendant to the Master.  The Master called to invite the Plaintiff to join him in meeting Mr Wong.  In the Master Affirmation, the Master explains that both the plaintiff and Mr Wong were his disciples, and as such they were close to one another.

46.  Mr Wong told the plaintiff that his job was to protect cultural heritage. Indeed, the plaintiff in the Ling 2^nd Affirmation says that Mr Wong has never claimed to be an agent whose job is to look for buyers and collectors for the Museum.  Further, the plaintiff claims he was/is a businessman in the field of information technology who knows nothing about Buddha statues and who has never ventured into trading in Buddha statues.  Despite being a religious disciple, the plaintiff has never donated any statute to temples.

47.  During the meeting in August 2009 amongst Mr Wong, the Master and the plaintiff, Mr Wong showed the plaintiff and the Master certain photographs of Buddha statues belonging to the defendant.  The Master was impressed and assumed the defendant was also a Buddhist follower.  The Master felt a sense of compassion towards the Buddha statues which he felt should not be left unprotected outdoors.  He agreed for Mr Wong to arrange a meeting with the defendant.

48.  Sometime in late August 2009, the defendant, Mr Leung, Mr Wong, the Master and the plaintiff decided to meet at a French restaurant known as 香舍法國餐廳 at 萬象城, Shenzhen, Mainland China.  At that meeting, the defendant showed the plaintiff and the Master many photographs of his collection of Buddha statues.

49.  On that occasion, the defendant gave a brief account of his personal history. He said he used to be a wealthy man, and together with his business partner in the United States was involved in mergers and acquisitions.  His business partner tragically died in the 911 incident, and a lot of his assets were also destroyed due to such incident.  He criticised the Hong Kong government for increasing the rent for the Museum.  He explained that due to his financial troubles his wife was planning to divorce him and he would lose custody of his child.  He feared he would not have enough money to protect the Buddha statues.  He asked the plaintiff for a loan of money to solve his then short-term financial problems.  The plaintiff says that the defendant never invited him or the Master to invest in any exhibition.

50.  After this meeting, the Master told the plaintiff the Buddha statues should be properly protected and not left unprotected outdoors.  The Master was deeply religious and devoted, and the defendant aroused his sympathies.  As a preacher of Buddhism the Master felt sorry for the defendant, and asked his disciple (ie the plaintiff) to try and help the defendant as much as possible “because we are all Buddhist believers”.  The plaintiff accepts that with hindsight the defendant’s account appears improbable, but at that time the Master reminded the plaintiff that as followers of Buddha it was their duty to lend a helping hand to others in need.

51.  The plaintiff said (and the Master agreed) they should pay a visit to the Museum before agreeing to help the defendant.  Originally they intended to visit the Museum together, but due to the Master’s visa problems only the plaintiff was able to go.  Sometime in late August or early September 2009, the plaintiff (but not the Master) visited the Museum and saw many Buddha statues.  He took some photographs.

52.  A few days later, Mr Wong, the Master and the plaintiff met again in Shenzhen.  Mr Wong suddenly warned the plaintiff and the Master that the defendant was a sly person, that they should be careful with him, and that they should take some of his property as security for any loan granted to him.  However, the Master criticised such attitude.  He felt that as Buddhist believers they should only offer help, and taking security could not be regarded as giving help.  The Master also said they should not judge a person without evidence.  The Plaintiff respected the Master very much and agreed with his stance.

53.  Sometime after his return from an overseas business trip but before 10 September 2009, the plaintiff called to inform the Master that he was prepared to lend the Sum to the defendant.  The Master was pleased that the plaintiff abided by the values of Buddhism and was willing to help.  The plaintiff called to inform the defendant of the same.

54.  On/about 10 September 2009, the defendant and the plaintiff met at the Hotel, but the Master was not present as he was not in Shenzhen that day.  In the Ling 2^nd Affirmation, the plaintiff goes on to say as follows:

“ 18. …… The Defendant brought [the Written Agreement] to be signed by the Defendant and [the plaintiff] ……

19. [The plaintiff] must emphasize that the [Written Agreement] was voluntarily drafted by the Defendant himself. Originally [the plaintiff] wanted to delete Clause 4(2) which allows [the plaintiff] to elect to choose a Buddha statue of an equivalent value of the [Loan in the amount of the Sum] plus interest. In any event, [the plaintiff] only wanted to help him and so [the plaintiff] did not make a fuss over [Clause 4(2)]. Also, [the plaintiff] did not suggest the insertion of Clause 2 relating to interest. The Defendant put it in.

20. [The plaintiff] must point out that I had made no alteration to the [Written Agreement] and it was drafted entirely according to the wishes of the Defendant. [The plaintiff] did not ask for any security for the [Loan in the amount of the Sum].

21. [The plaintiff recalls] that the [Written Agreement] dated 15 September 2009 was in fact signed on 10 September 2009 because it was only after the signing of the [Written Agreement] that [the plaintiff] transferred the [Loan in the amount of the Sum] to the Defendant.  This is the only signed document between the Defendant and [the plaintiff]. [The plaintiff has] never signed any other documents with the Defendant thereafter.”

55.  After the third meeting with the defendant, there was no further contact between the parties for around 2-3 months.  The defendant later telephoned the plaintiff on a few occasions, and each time the defendant enquired when the Master could visit the Museum.  He also asked the plaintiff to bring friends who might be potential buyers of his collection of Buddha statues at the Museum.  The defendant also mentioned that the Loan was insufficient for solving his financial problems.

56.  Sometime in May/June 2010, the defendant telephoned to tell the plaintiff that he wished to borrow a further sum of HK$2,000,000.00.  The plaintiff was upset because it appeared the defendant was taking advantage of his goodwill.  He refused the defendant’s request.

57.  The Master Affirmation also confirms that the Master did not hear anything further about the Loan until May/June 2010 when the plaintiff told him about the defendant’s request for a further loan.  The Master too was upset and disappointed with the defendant as it appeared that he was starting to take advantage of the plaintiff’s kindness.

58.  The Master advised the plaintiff that a further loan to the defendant would be inappropriate.  But the plaintiff still wanted to help the defendant if possible.  In June/July 2010 he brought two friends to visit the Museum, but they did not purchase anything from the defendant.

59.  Sometime in late September or early October 2010 (ie about a year after the signing of the Written Agreement), the plaintiff and the Master visited the Museum.  This was the only time the Master visited the Museum.  The defendant picked them up from the MTR East Rail Line University Station and drove them to the Museum.  The plaintiff and the Master merely visited the Museum, and did not make enquiries regarding Buddha statues or choose any Buddha statue as alleged by the defendant.  Despite their strong religious beliefs, the plaintiff and the Master did not intend to purchase any Buddha statue from the defendant.

60.  After the visit, they drove by a location in Shatin where, according to the defendant, he would open an exhibition.  It was during such car journey that the defendant pointed out the location of the Planned Centre.  But the plaintiff and the Master did not express any interest in investing in the project, and the defendant never invited them to do so.  In fact, the defendant told them he had already reached an agreement with his friends to invest in the project.  The plaintiff claims it is inconceivable that as a businessman in the field of information technology he would invest in a field outside his expertise.  The plaintiff and the Master only had some vegetarian food with the defendant before returning to Mainland China.

61.  Towards the end of 2010 or the beginning of 2011, the defendant went to Shenzhen and asked the plaintiff to introduce more friends to him to buy the Buddha statues.  This was their last meeting. By that time, the Plaintiff realised that the defendant was all along taking advantage of him and the Master.  The plaintiff told the defendant he had already introduced many friends to him, and requested the defendant to repay the Loan which should have been repaid by 14 September 2010.  But due to the defendant’s repeated requests, the plaintiff did bring a friend to visit the Museum, but such friend did not purchase anything from the defendant.

62.  At all material times, the Master only offered to help the defendant.  He did not ask and was not invited to buy any Buddha statute.  The Master said he spent a lot of time meditating and preaching Buddhism in Mainland China, so he did not have time to visit the Museum as often as alleged by the defendant.  In fact, he only visited the Museum once in about September or October 2010.

63.  The plaintiff said there was never any agreement to purchase the Ming Bhudda for the Price of HK$8,000,000.00 or for any price whatsoever.  In fact, he never expressed any interest in any statue and never intended to buy and never bought the Ming Buddha or any statue from the defendant.  Although the plaintiff brought his friends to the Museum, he only wished to do the defendant a favour by introducing friends who were interested in statues.  He would never take advantage of his friends in the manner as alleged by the defendant.  Further, he has never seen the Receipt, which is a self-serving unsigned document.

64.  All along on a number of occasions (eg the Demand Letter), the plaintiff clearly indicated to the defendant that he elected for cash repayment of the Loan and not choosing statue(s) in lieu thereof, but the defendant unreasonably refused to repay him.  Neither the plaintiff nor his solicitors have seen the Reply Letter.

65.  The plaintiff claims there is no reference to any sort of business project in the Written Agreement, and it is wholly untrue that he would start off any such business project with HK$1,000,000.00 as initial investment.  The plaintiff says there is no defence to the O14 Summons.

IX.  DISCUSSION

66.  The plaintiff contends this is a clear case for summary judgment and the defendant’s case perfectly exemplifies a defence which is “frivolous and practically moonshine”.  But the defendant argues that this is a “classic case” for granting unconditional leave to defend given there are triable issues on disputed facts that ought to go for trial and the defendant has raised a defence of set-off and counterclaim.

(a)  Agreement and Written Agreement

67.  Mr Hui submits that since the defendant admits (a) the existence of the Agreement and the Written Agreement in the D&C and/or the Draft AD&C (see Part II above), (b) the plaintiff has advanced him the Loan (see Part II above), and (c) he has not repaid the Loan and/or interest thereon to the plaintiff by way of cash repayment (see paragraph 10 above), all necessary elements of the plaintiff’s cause of action are therefore undisputed and the only issue left is whether the defence raised in Parts IV and VII above is credible or believable.  Mr Hui argues that in light of the contemporaneous documents the defence put forward is frivolous and inherently implausible.

68.  On the other hand, Mr Lam suggests that I should first turn to the plaintiff’s pleaded case because it demonstrates that this action ought to go for trial.  Mr Lam submits that even on the plaintiff’s pleaded case there is a question of law as to whether the Written Agreement (albeit signed by both parties) has contractual effect and/or is enforceable against the defendant.  He says that according to the SOC the Written Agreement is a mere record of what has been agreed orally between the parties (ie the Agreement), and hence it does not have contractual force or alternatively it is not effective or binding due to past consideration.  Mr Lam submits this also accords with the defendant’s pleaded case that relies on the “Agreement” which is an oral agreement between the parties, and not on the Written Agreement which the parties signed merely “to record the transaction” (see paragraph 28 above).  Mr Lam therefore argues that the plaintiff is not entitled to sue the defendant in this action on the basis of the Written Agreement, and this amounts to an arguable or triable issue that ought to go for trial.

69.  Mr Lam further submits that on the plaintiff’s pleaded case in the SOC (a) the terms of the Agreement and the Written Agreement are discrepant and (b) they do not sit well with the chronology of events in the Ling 2^nd Affirmation, and that these are matters which ought to be tried:

(a)  Even though the Ling 2^nd Affirmation says that Clause 4(2) was originally not a term of the Agreement, the plaintiff has been purposely silent in the SOC as to how it came to be included in the Written Agreement.  Save for a bare denial no explanation has been pleaded in the R&DC, and without any plea of non est factum in the R&DC the assertion in the Ling 2^nd Affirmation that the Plaintiff did not want to make a fuss over such clause “is simply no answer to the defendant’s case”. After all, no defect or omission in the SOC can be made good by affidavit evidence (see The Gold Ores Reduction Company, Limited v Parr [1892] 2 QB 14).

(b)  It is unclear whether Clause 2 is a term of the Agreement because the Ling 2^nd Affirmation states that “[the plaintiff] did not suggest the insertion of Clause 2 relating to interest” and it was “[the] Defendant [who] put it in”.

(c)   In “complete contradiction” to the pleas in the SOC, the plaintiff has changed his case by asserting in the Ling 2^nd Affirmation that in fact (i) the Written Agreement has been post-dated and (ii) it was signed on 10 September 2009 before the Sum was deposited into the Account.

70.  In my view, to put such submissions in their proper context, it is necessary to return to the basic principles of pleadings.

71.  To take the last point first, I am not persuaded there is any “complete contradiction” in the plaintiff’s case.  The SOC pleads that the Agreement “is evidenced by [the Written Agreement] dated 15 September 2009”, which plea is in fact true and correct because the Written Agreement is on its face “dated” 15 September 2009.  There is no plea in the SOC that the parties actually signed the Written Agreement on 15 September 2009.  In my view, the date when the parties actually signed the Written Agreement is neither a material fact nor a necessary element of the plaintiff’s cause of action. It does not have to be pleaded (see Order 18 rule 7 of the RHC and paragraphs 72 and 74 below), and hence the plaintiff’s pleadings do not contradict the Ling 2^nd Affirmation which states that the Written Agreement dated 15 September 2009 was in fact signed on 10 September 2009.

72.  It is a trite principle of pleading that a plaintiff should not anticipate any defence by pleading facts which are not yet material (see Jacob & Goldrein, Pleadings: Principles and Practice (1990) p.107).  In an action for breach of contract, the pleader only needs to set out the relevant terms relied on, the precise breach of contract, and the nature/extent of the debt/loss occasioned thereby.  More importantly, it is inappropriate and/or unnecessary to plead all other terms of the contract that are not pertinent to or relied upon for the relevant cause of action.

73.  In the SOC, the plaintiff’s cause of action is premised on the defendant’s failure to repay the Loan by way of cash repayment.  It is not any part of his case that (a) he has elected to select/purchase any statue from the defendant’s collection, (b) he has purchased the Ming Buddha for the Price and/or (c) he has agreed to set off the defendant’s obligation to repay the Loan and interest thereon against payment of the deposit for the Ming Buddha.  As such, Clause 4(2) or the substance of such provision is simply not engaged on the plaintiff’s cause of action, and it is not any material fact required to be pleaded.  I do not accept that the plaintiff has been purposely vague and/or silent in the SOC.  Quite properly, the plaintiff has pleaded Clause 4(2) in the R&DC upon the defendant raising the matters in (a)-(c) above in the D&C.

74.  It is also trite that only material facts and not evidence are required to be pleaded (see Order 18 rule 7(1) of the RHC).  In response to the D&C, the plaintiff in the RD&C has pleaded his denial of the allegations in Part IV above.  This is not merely a bare denial but the true substance of his case in response to the pleaded defence, ie there has not been any sale and purchase of the Ming Buddha at all.  As explained above, the plaintiff has pleaded the existence and his construction of Clause 4(2) in response to the allegations in the D&C, but in my view there is no need for him to descend into the evidence by pleading the parties’ dealings to explain how Clause 4(2) came to be included in the Written Agreement.

75.  There is also no merit to the submission that the Written Agreement is unenforceable because it merely records the Agreement that has been made orally.  In my view, a careful review of the Agreement and the Written Agreement in their proper context shows there is essentially no material disagreement between the parties as to the agreed terms of the Loan transaction.

76.  First, the plaintiff in the SOC pleads the existence of both the Agreement and the Written Agreement.  Instead of casting doubt on either agreement, the defendant in the D&C (and also in the Draft AD&C) admits their existence.  Plainly, the parties have entered into an agreement, ie the Agreement pleaded in the SOC (see paragraph 4 above) and the “Agreement” pleaded in the D&C and the Draft AD&C (see Part IV above). According to Mr Lam’s submissions, such agreement is an oral one on either party’s case. There is also no dispute that both parties refer to the very same Written Agreement dated 15 September 2009 that is signed by both parties and that contains inter alia Clauses 1, 2, 3, 4(1) and 4(2) (see paragraph 5 above). Such Written Agreement has been exhibited to both the Wong Affirmation and the Ling 1^st Affirmation.

77.  Secondly, the Written Agreement was prepared on the Museum’s letterhead, which in my view accords nicely with the plaintiff’s assertion in the Ling 2^nd Affirmation that it was drafted and prepared by the defendant.  Indeed, the format and the wording in the preamble of the Written Agreement are substantially similar to those found in the Receipt, which the defendant acknowledges was prepared by him.  

78.  Thirdly, the wording and tenor of the Written Agreement suggest it has contractual force and effect.  The Written Agreement is described on its face as “借款協議” and not as a mere record (eg “協議紀錄”) (see paragraph 5 above).  It is clearly stated in the Written Agreement that Party A as borrower (ie the defendant) and Party B as lender (ie the plaintiff) “就下列事宜達成一致意見，簽訂本協議” (my emphasis) (ie reached agreement on the terms in Clauses 1, 2, 3 4(1) and 4(2) and Clause 5 of the Written Agreement (“Clause 5”) below and signed this agreement” (see paragraph 5 above).  Clause 5 provides that “本協議自2009年9月15日生效。本協議一式兩份，雙方各執一份” (my emphasis). The references to “本協議” (ie this agreement) in Clause 5 echo the reference to “簽訂本協議” (ie sign this agreement), which must be the Written Agreement. The provision in Clause 5 for “本協議” (ie this agreement) to become effective can only mean that the Written Agreement has contractual force and effect. It is specious for the defendant to now contend that the Written Agreement has no contractual force and effect.

79.  In fact, the defendant himself has relied on the contractual right conferred by Clause 4(2) of the Written Agreement to justify the set-off between his obligation to repay the Loan and the alleged deposit payable by the plaintiff for the purchase of the Ming Buddha.  In the Receipt admittedly prepared by the defendant himself, he refers to using the Sum under the loan agreement signed by both parties on 15 September 2009, which necessarily refers to the Written Agreement and not to any oral “Agreement”, as deposit for the purchase of the Ming Buddha (ie “扣除雙方於2009年9月15日簽訂的借款協議港幣壹百萬圓正作為訂金之用” (my emphasis)) (see paragraph 33 above).  Further, in the Reply Letter prepared by the defendant in response to the Demand Letter, he refers to the plaintiff’s agreement to offset the Loan “from the agreement on 15 September 2009” (and, according to the defendant, the Written Agreement was dated and signed on that day whilst the plaintiff agreed to make an “initial investment” in the amount of the Sum on 6 September 2011 – see paragraphs 24-27 above) against the deposit for the purchase of the Ming Buddha.  In my view, the defendant cannot be heard now to say that the Written Agreement has no contractual force and effect.

80.  In any event, Mr Lam in his oral submissions acknowledges that even on the defendant’s own case the express terms of the oral “Agreement” referred to in the D&C and the Draft AD&C are the same as those set out in the Written Agreement (which, according to Mr Lam, records the transaction being the oral “Agreement”).  This means that the defendant acknowledges that the express terms of the “Agreement” mirror those of the Written Agreement.  In my view, it sits well with the plaintiff’s case as verified in the Ling 2^nd Affirmation (see paragraphs 54 above and 81 below).

81.  According to the Ling 2^nd Affirmation, the defendant asked for loan of money at the meeting in late August 2009.  Some time before 10 September 2009, the plaintiff acceded to the Master’s persuasion and agreed to lend the Sum to the defendant, and he so informed the defendant. They arranged to meet at the Hotel on 10 September 2009.  There is no suggestion in the Ling 2^nd Affirmation of any discussion as to the detailed terms of the Loan prior to such meeting.  At the meeting, the defendant produced the Written Agreement (already dated 15 September 2009) that contained Clauses 1, 2, 3, 4(1), 4(2) and 5.  The plaintiff did consider the terms for granting the Loan as proposed by the defendant in the Written Agreement he produced, ie the plaintiff (a) initially thought about deleting Clause 4(2) and (b) took note of Clause 2 which provides for interest payable on the Loan.  In the end, the plaintiff did not make a fuss over Clause 4(2) and “made no alteration to the [Written Agreement]”, which necessarily means he agreed to the terms of the Loan as proposed by the defendant (ie the Agreement) and both parties then signed the Written Agreement that set out those terms.  According to the Ling 2^nd Affirmation, it was all done on the same occasion on 10 September 2009 even though the Written Agreement as prepared by the defendant was post-dated to 15 September 2009.

82.  In such context, the plea in the SOC that Agreement is evidenced by the Written Agreement does not necessarily mean the latter has no binding contractual force.  In principle, there is no logical or legal difficulty for a written agreement to evidence what has been agreed orally and also to have contractual effect.  Indeed, this often is the case.  A buyer and a seller of goods may negotiate and reach agreement orally on the essential terms of the sale and purchase which is binding and then record the same in a formal purchase order signed by both parties.  A landlord and a tenant may also negotiate and reach agreement on the essential terms of the tenancy which is binding and then record the same in a formal tenancy agreement signed by both parties.  Such contracting parties would be very much surprised if they were told the purchase order and/or the tenancy agreement duly signed by them do not have any contractual force or effect.  I do not see the plaintiff’s case as set out in the Ling 2^nd Affirmation (see paragraphs 54 and 81 above) to be any different from the above examples.  In any event, the contractual intent is clear on the face of the Written Agreement signed by both parties (see paragraph 78 above), and the defendant has acknowledged so in the Receipt and the Reply Letter (see paragraph 79 above).

83.  Even if one ignores for the time being the plaintiff’s assertion that the Written Agreement was signed on 10 September 2009 and post-dated to 15 September 2009, bearing in mind (a) the temporal closeness between the Agreement and the Written Agreement both of which concern the very same loan transaction, (b) the mutual obligations set out in the Written Agreement, (c) the signature by both parties thereto, and (d) the lack of material dispute between the parties as to the substance of the agreed terms for the Loan transaction, it is clear that the Agreement and the Written Agreement are part and parcel of the same Loan transaction.

84.  In my view, the Written Agreement plainly has contractual force and is binding on both parties.  But Mr Lam goes further to raise concerns about Clauses 2 and 4(2) to bolster his arguments otherwise. 

85.  In respect of Clause 2, Mr Lam submits it is unclear whether it is a term of the Agreement even though it has been expressly pleaded in paragraph 1 of the SOC that by the Agreement the defendant has agreed to repay the Loan “with interest thereon at the rate of 5% per annum”, which averment has been verified by the Ling 1^st Affirmation.  Mr Lam says there is doubt because the Ling 2^nd Affirmation states that Clause 2 was inserted in the Written Agreement by the defendant and not suggested by the plaintiff.  But even if it is the defendant and not the plaintiff who offered to pay interest for the Loan at 5%pa, it does not mean the plaintiff did not agree with such proposal.  As explained in paragraphs 54 and 81 above, the plaintiff eventually accepted the defendant’s proposed terms for the Loan without any alteration.  This fact rather than which party first raised the matter of interest is the relevant material matter to be pleaded. Hence, the SOC pleads that payment of interest for the Loan at 5%pa is an express term of both the Agreement and the Written Agreement.  In any event, there is no dispute between the parties that interest is payable on the Loan at 5%pa (see paragraphs 10 and 80 above).  In his oral submissions, Mr Lam raises fears of uncertainty that may arise from potential future attempts by the plaintiff to amend the SOC to plead that the provision for payment of interest on the Loan is not a term of the Agreement, but such hopeless speculation, in my view, cannot amount to any triable issue or arguable defence.

86.  I also do not agree with Mr Lam’s submissions that it is evident from the plaintiff’s pleaded case Clause 4(2) is not a term of the Agreement, and that the plaintiff has failed to sufficiently explain why it has been included in the Written Agreement.  As explained above, the provision in Clause 4(2) only gives the plaintiff an option to elect an alternative method for repayment of the Loan and interest thereon in lieu of cash repayment, but such provision not being engaged for the plaintiff’s cause of action does not have to be specifically pleaded in the SOC.  It does not follow that because the substance of the provision in Clause 4(2) has not been expressly pleaded in the SOC it is therefore not part of the Agreement.  In any event, such alternative method of repayment of the Loan does not contradict or conflict with the terms of the Agreement and/or the Written Agreement as pleaded in the SOC since it does not remove the defendant’s fundamental obligation to repay the Loan with interest.  Further, the plaintiff’s pleadings also do not contradict his explanation in the Ling 2^nd Affirmation (see paragraphs 54 and 81 above), and there is no reason for the plaintiff to contemplate any plea of non est factum in the RD&C as suggested by Mr Lam. 

87.  Quite simply, the terms of the Agreement pleaded in paragraph 1 of the SOC (see paragraph 4 above) are the same as those in Clauses 1, 2, 3 and 4(1) of the Written Agreement pleaded in paragraph 2 of the SOC (see paragraph 6(a), (b), (c) and (d)(i) above).  The plaintiff also acknowledges the existence of Clause 4(2) in paragraph 4 of the RD&C. Mr Hui in his oral submissions frankly confirm that the plaintiff accepts that all of Clauses 1, 2, 3, 4(1) and 4(2) of the Written Agreement are binding on him.  Likewise, Mr Lam agrees that Clauses 1, 2, 3, 4(1) and 4(2) of the Written Agreement faithfully reflect what has been orally agreed between the parties (see paragraph 80 above).  In my view, quite irrespective of whether the contract binding on both parties was made orally or in writing or both, they both concede and accept that the substance of the provisions in Clauses 1, 2, 3, 4(1) and 4(2) are contractually binding on them.

88.  The arguments raised by the defendant in paragraphs 68-69 above do not raise any triable issue or arguable defence. Hong Kong Civil Procedure 2012 Vol.1 para.14/4/3 at p.245 states that ““[a] desire to investigate alleged obscurities and a hope that something will turn up on the investigation cannot, separately or together, amount to a 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” (per Megarry V.-C. in Lady Anne Tennant v. Associated Newspapers Group Ltd [1979] F.S.R. 298)”.

89.  Mr Lam next argues that even if the Written Agreement is contractual in nature, it is not binding or enforceable due to past consideration.  I am not persuaded that such argument is maintainable.

90.  Such contention has not been alluded to in the Wong Affirmation or pleaded in the D&C at all, and more importantly, it is not so pleaded even in the Draft AD&C as verified by the Wong Affirmation.   But even if the defendant can so argue (which I disagree), I am not persuaded that the Written Agreement is merely supported by past consideration.  

91.  I assume that Mr Lam’s submissions are premised on the pleas in the SOC that the Written Agreement was dated 15 September 2009 by which time the plaintiff had already promised to grant the Loan under the oral Agreement and had also advanced the Loan to the defendant.  

92.  However, the Written Agreement was signed by both parties and on its face they acknowledge “甲乙方就下列事宜達成一致意見，簽訂本協議” and made mutual promises in, say, Clauses 1 and 4.  “It is trite that mutual promises are consideration for each other” (see Chitty on Contracts 13^th ed Vol.1 para.3-009 at pp.258-259).  Further, it is evident from the Ling 2^nd Affirmation (or even from the Wong Affirmation) that the Loan, the Agreement (or even the “Agreement” referred to in the D&C and/or the Draft AD&C) and the Written Agreement are part and parcel of the same Loan transaction, and it has been so regarded by the defendant in the Receipt and the Reply Letter (see paragraph 79 above).

93.  In such circumstances, even if one puts aside the plaintiff’s assertion concerning post-dating of the Written Agreement and simply refers to the pleas in the SOC, there is still no merit to Mr Lam’s argument.  “In determining whether consideration is past, the courts are not, it is submitted, bound to apply a strictly chronological test.  If the giving of the consideration and the making of the promise are substantially one transaction, the exact order in which these events occur is not decisive” (see Chitty on Contracts 13^th ed Vol.1 para.3-027 at p.271).  Here, Clause 1 specifically refers to the plaintiff’s payment of the Loan to the defendant “before 15 September 2009”.  There can be no doubt that the deposit of the Sum (being the Loan) into the Account on 11 September 2009 is part and parcel of the same Loan transaction between the parties as referred to in the Written Agreement.

94.  In my view, the defendant’s attacks on the plaintiff’s pleadings are red-herring and illusory arguments that do not withstand scrutiny.  They do not raise any arguable defence or triable issue, and further do not give rise to any other reason for trial.

95.  Next, Mr Lam criticises the plaintiff for taking out the O14 Summons even though it is evident from the D&C that the plaintiff’s claim is seriously disputed.  He complains against what he describes as the plaintiff’s “deliberate tactical approach” by (a) filing the Ling 1^st Affirmation which merely verifies the plaintiff’s claim and his belief that there is no defence but does not address the averments in the D&C, and (b) reserving the plaintiff’s full response until the Ling 2^nd Affirmation after having sight of the Wong Affirmation, which approach deprives the defendant of the opportunity to respond to the many new matters raised in the Ling 2^nd Affirmation.

96.  I disagree.  According to the D&C, the defendant essentially admits the whole of the plaintiff’s pleaded case save and except that he denies any breach of the Agreement and/or the Written Agreement by reason of the matters pleaded in Part IV above.  In light of such admissions, there is no need for the plaintiff to condescend upon all the particulars of the parties’ course of dealings in the Ling 1^st Affirmation to verify his claim as pleaded in the SOC.  It is sufficient for him to confirm in the Ling 1^st Affirmation that the defendant has failed to repay the Loan or any part thereof and that he believes there is no defence to the action.

97.  Since the plaintiff denies having ever purchased the Ming Buddha for the Price or having ever agreed to set off the obligation to repay the Loan against any deposit for the Price (which denial goes not to the necessary elements of the plaintiff’s cause of action but to the elements of the defence raised in the D&C), there is no need for the plaintiff in the Ling 1^st Affirmation to speculate on the circumstances that the defendant may rely upon for the alleged sale and purchase of the Ming Buddha and then respond thereto.  In my view, especially given the defendant’s admissions in the D&C, it is reasonable to let the defendant condescend upon the particulars of his defence contentions in the Wong Affirmation first before the plaintiff responds thereto in the Ling 2^nd Affirmation.  I do not accept there is any “deliberate tactical approach” on the part of the plaintiff.

98.  In any event, I do not agree the defendant has been “deprived” of the opportunity to respond to the matters raised in the Ling 2^nd Affirmation filed more than a month before the Hearing on 6 February 2012.  By the order of Master J Wong dated 31 October 2011, no further affirmation is to be filed and served “without leave from the Court”.  But it is not an absolute bar against granting leave for further affirmation to be filed in response to the Ling 2^nd Affirmation if there are good reasons.  But even up to the Hearing before me, there is no application for leave to file/serve any such further affirmation, and Mr Lam in his written and/or oral submissions has not alluded to any important fact/matter that the defendant has been thwarted from presenting to the court for the purpose of the O14 Summons.  

99.  Finally, Mr Lam points out paragraph 3 of the SOC pleads that the plaintiff paid the defendant the Sum on 11 September 2009 “[pursuant] to the Agreement”. He submits that since the dispute turns on the oral Agreement, “the Defendant is entitled to cross-examine the Plaintiff in any regard of [the Agreement], especially in relation to Clause 4(2)”, and such dispute cannot be resolved without oral testimony.  

100.  I disagree. Bearing in mind (a) there is no dispute between the parties over the advancement of the Loan on 11 September 2009, (b) the defendant admits the existence of both the Agreement and the Written Agreement and (c) both parties agree that the substance of the provisions in Clauses 1, 2, 3, 4(1) and 4(2) have contractual force irrespective whether such provisions are made orally or in writing or both, there is no justifiable reason for proceeding to trial to cross-examine witness(es) on these matters.  Anyway, the plaintiff’s cause of action as pleaded in the SOC relies on breach of the Agreement and/or the Written Agreement, hence he does not necessarily have to rely on breach of the Written Agreement if he can make out his claim premised on breach of the Agreement.

101.  Further, if it is suggested that the defendant is entitled to cross-examine the plaintiff and/or his witness(es) simply because the Agreement was made orally between the parties, such contention is flawed.  Hong Kong Civil Procedure 2012 Vol.1 para.14/4/11 at p.250 provides inter alia that:

“Where an oral contract is sued upon and its terms are in dispute, summary judgment must be refused …… unless the plaintiff can satisfy the court either that on the defendant’s version he is entitled to judgment or that the defendant’s version is not truthful or capable of belief (see para.14/4/9).” (my emphasis)

Ultimately, whether the defendant is able to survive the O14 Summons turns on whether his defence contentions are credible or believable. I now turn to his defence allegations.

(b)  Sale and purchase of the Ming Buddha

102.  In respect of the alleged sale and purchase of the Ming Buddha, the parties adopt diametrically opposite positions.  The defendant claims that the plaintiff purchased the Ming Buddha from him for the Price, and the deposit in the amount of the Sum in part payment of the Price has been offset against the Loan repayable by him under the “Agreement” with the remaining balance of the Price in the sum of HK$7,000,000.00 still outstanding and payable by the plaintiff.  The plaintiff denies any alleged sale and purchase of the Ming Buddha and/or any alleged arrangement for extinguishing the Loan.  In my view, the key question is whether the defendant has raised any triable issue or arguable defence by his contentions or, to put it in another way, whether the defence he raised is credible or believable.

103.  Mr Lam submits there are contemporaneous documents (ie Clause 4(2), the Receipt and a photograph of the Ming Buddha) that support the defendant’s case and there is “[no] evidence to the contrary”.  He argues there are genuine disputes of fact, and it will be grossly unfair to the defendant if summary judgment is granted without testing the credibility of the plaintiff’s witness(es) by cross-examination at trial.  I therefore first turn to the alleged “contemporaneous” documents to see whether they raise any arguable defence and/or justify any need to interrogate the plaintiff and/or his witness(es) at trial.

104.  Mr Hui submits that Clause 4(2) or the substance of the provision therein merely provides the plaintiff with an alternative method for repayment of the Loan and interest thereon by selecting stone sculpture(s) worth not more than HK$1,050,000.00 from the defendant’s collection in lieu of cash repayment. In my view, such provision is permissive and of itself does not show or prove that subsequently the plaintiff actually elected to select/purchase the Ming Buddha from the defendant’s collection.

105.  Likewise, the photograph of a Buddha statue (which the defendant claims to be the Ming Buddha) of itself does not show or prove there was actually a sale and purchase of such statue.  Such photograph is not dated or marked.  There is no identification on the Buddha statue shown in the photograph that marks it as the Ming Buddha allegedly sold to the plaintiff. There are also insufficient particulars in the Receipt to correlate the photographed Buddha statue as the “明朝坐佛像一尊” referred therein, especially when the defendant has a large collection of Buddha statues and has taken similar photographs of some of them (see exhibit “WYC-2” of the Wong Affirmation).  In my view, the alleged photograph of the Ming Buddha is at best neutral if not self-serving. I will return to the issue of the Receipt below.

106.  Mr Hui disagrees with Mr Lam’s submission that there is “[no] evidence …… contrary” to the defence contentions, and submits that in light of the contemporaneous documents such defence contentions are “frivolous and practically moonshine”.

107.  I start with the Written Agreement signed by both parties and exhibited to their respective affirmations.  Both of them admit the substance of the provisions therein as having been agreed between them.  The Written Agreement clearly and unequivocally refers to the Loan, eg the Loan amount, the Loan interest, the Loan period and the Loan repayment, with no other purpose specified therein.

108.  However, it is an essential part of the defence set out in the Wong Affirmation and the Draft AD&C that the defendant told the plaintiff and the Master upon their first visit to the Museum on/about 5 September 2009 that he was thinking of opening a Buddhism meditation cultural centre. The defendant further claims he took the plaintiff and the Master to the Site, and they were interested to know more about the project.  They visited the Site again on the following day, and the defendant “asked the Plaintiff whether he would start off this business with HK$1,000,000 as the initial investment for this project”. “The Plaintiff agreed so” and deposited the Sum into the Account on 11 September 2009, and together with the defendant he signed the Written Agreement on 15 September 2009 (see paragraphs 22-28 above).

109.  Two matters are of note:

(a)  The Wong Affirmation claims that on/about 6 September 2009, the plaintiff and the Master expressed interest in operating the Planned Centre with the defendant and said they would pay for the rent of the Planned Centre and for part of the defendant’s collections for display.  The Wong Affirmation further claims the defendant replied that he could sell some of his collections to invest in this project (see paragraph 24 above).

But the Draft AD&C pleads that the plaintiff and the Master told the defendant they would like to take up the Site and asked him to operate the Planned Centre together with them.  It also pleads that the plaintiff decided to start off this project with HK$1,000,000.00 as the initial investment.  But there is no mention in the Draft AD&C about the defendant saying he could sell some of his collections in order to invest in this project (see paragraph 25 above).

(b)  The Wong Affirmation claims that on 15 September 2009 the plaintiff told the defendant the Sum was for “the initial deposit for the business of the Planned Centre” which “could be used to offset any purchase if [the plaintiff] were to purchase [the defendant’s] collection of Buddha statues” (see paragraph 27 above).

But the Draft AD&C pleads that the plaintiff told the defendant the Sum was for “the initial deposit (as a loan for the start-up costs) for the business of the [Planned Centre] and/or alternatively the said deposit or any part thereof could also be used to offset any payment of Buddha statues he was going to purchase from the Defendant in the future” (my emphasis) (see paragraphs 28 above).

110.  According to the Wong Affirmation and the Draft AD&C, the defendant’s case is that the plaintiff’s deposit of the Sum into the Account on 11 September 2009 was for his “initial investment” or “initial deposit” in the business of the Planned Centre. That being the case, it is inexplicably strange that the Written Agreement dated 15 September 2009 made no mention of such fact at all when, according to the defendant, the purpose of the Written Agreement was to record the transaction.  Indeed, there is no reference to the Planned Centre in the Written Agreement let alone any reference to any collaboration between the parties on such project and/or any “initial investment” or “initial deposit”. Instead, the Written Agreement prepared on the Museum’s letterhead only refers to the plaintiff’s Loan to the defendant with no explanation as to its purpose. More significantly, there is no explanation as to why despite the defence contentions the Receipt prepared by the defendant still refers to the “loan agreement” (ie 借款協議), and why the defendant in the D&C still refers to “the …… loan which [he] would need to repay the Plaintiff in pursuant to the Agreement” and further avers he has “fully performed and discharged his obligation to pay the Loan Amount and Interest to the Plaintiff pursuant to the Agreement”.  Interestingly, such pleas are still maintained in paragraphs 5(b)(i) and 6 of the Draft AD&C.

111.  The defendant tries to overcome this difficulty by equating the plaintiff’s “initial investment” or “initial deposit” in the business of the Planned Centre with what has been referred to in the Draft AD&C as the plaintiff’s “loan for the start-up costs”, but I am not persuaded this raises any arguable or triable issue.

112.  As pointed out by Mr Hui, if the plaintiff and the Master have agreed to operate the Planned Centre with the defendant (see paragraphs 24 and 109(a) above) or, as the Draft AD&C puts it, the plaintiff and the Master asked the defendant to operate the Planned Centre with them (see paragraphs 25 and 109(b) above), and the plaintiff has further agreed to make an “initial investment” or “initial deposit” of HK$1,000,000.00 for such business project with a view to “take up [the Site]”, pay the rent of the Planned Centre and/or pay for part of the defendant’s collections for display , it appears implausible that the parties would then have agreed to the following:

(a)  the plaintiff’s payment of the Sum to the defendant on 11 September 2009 is a mere loan without any earmarking of such funds for investment in the Planned Centre business project;

(b)  the Loan is to be repaid by the defendant and not out of the eventual revenue/profits of the business of the Planned Centre;

(c)   the Loan is to bear interest at 5%pa even though it is to be used for investment in or for starting up the Planned Centre;

(d)  the interest on the Loan is to be paid by the defendant and not out of the eventual revenue/profits of the business of the Planned Centre;

(e)   the Loan is be repaid with interest in a year’s time (ie on or before 14 September 2010) although the intended purpose of the plaintiff’s payment of the Sum to the defendant is for the business of the Planned Centre, ie taking up the Site, paying the rent for the Planned Centre, starting up the Planned Centre and/or paying for some of the defendant’s collections for display at the Planned Centre.

113.  Not a shred of explanation is forthcoming from the defendant.  It is of particular concern when the Wong Affirmation claims that although it was originally the defendant’s idea to open the Planned Centre, discussions on 5-6 September 2009 between the parties concluded with (a) the plaintiff and the Master indicating their interest in operating the Planned Centre with him and (b) the defendant inviting the plaintiff (who agreed) to “start off this business” with an initial investment in the amount of the Sum (see paragraphs 22-25 above).  The defendant further claims he could sell some of his collections to invest in the project himself.  In such circumstances, why should the Agreement and/or the Written Agreement require the defendant to personally repay the Loan with interest at 5%pa?  Why should the defendant as a co-partner in the joint venture business of the Planned Centre be liable to repay the whole of the initial investment made by his other co-partner (ie the plaintiff) with interest by a specified deadline that does not turn on progress of the Planned Centre business project?  Again, the Defendant has not offered any or any credible explanation.

114.  In a feeble attempt to overcome this, it has been suggested that the words “loan” and “investment” are mere labels that can be and have been used interchangeably in the defendant’s pleadings and in the Wong Affirmation. Mr Lam submits that, for example, bonds are loans as well as investments. But in his oral submissions, Mr Lam also accepts that a loan is different in nature from an investment. Nevertheless, he argues that it is reasonable for the defendant to repay the “initial investment” or “initial deposit” to the plaintiff if the company that is to operate the Planned Centre has not been set up or established in a year’s time.

115.  I agree with Mr Lam that a loan is different in nature from an investment.  Here, the defendant claims that the Planned Centre business project would be a lucrative business “as they expected charging admission fees to the public” (see paragraph 24 above), and that he himself could invest in such project by selling some of his collections.  What the defendant is saying is that they are co-partners in the joint venture business of the Planned Centre for profit, and the return for the investment is revenue from the admission fees. There is no suggestion of any guaranteed return for the plaintiff’s “initial investment” or “initial deposit”.  Consequently, I am unable to appreciate in the context of the present case how a loan (ie an amount that a lender pays to a borrower to be repaid by the borrower by a specified deadline) is equivalent to an investment (ie an amount invested for the business purpose of starting up the Planned Centre for profit).  Mr Lam’s reference to bonds cannot assist in the present context.  Further, neither the Wong Affirmation nor the defendant’s pleadings say the parties intended to form a company for the Planned Centre joint venture and/or the plaintiff’s “initial investment” or “initial deposit” will be returned upon failure to set up such company.

116.  It is not the defendant’s case that he borrowed the Loan from the plaintiff for starting up his own business being the Planned Centre.  As explained above, he contends that the Planned Centre is a joint venture with the plaintiff.  In my view, whilst the Loan may arguably be consistent with the former scenario (which is not what the defendant contends), in the absence of any credible or believable explanation the latter scenario (which is what the defendant contends) does not accord with the plea in the Draft AD&C that the plaintiff’s “initial investment” or “initial deposit” for the business of the Planned Centre is a loan to the defendant for the start-up costs.

117.  The defendant goes on to claim that on/about 10 October 2009 the plaintiff decided to purchase the Ming Buddha and the parties agreed to take the “initial deposit” made on 11 September 2009 as the deposit in part payment of the Price (see paragraphs 10 and 31 above).

118.  Clause 4(2) provides that in lieu of cash repayment of the Loan and interest thereon the plaintiff can select stone sculpture(s) from the defendant’s collection not exceeding HK$1,050,000.00 in value.  Mr Lam accepts that such provision records what has been orally agreed between the parties.  I note that the cap in value of the stone sculpture(s) that the plaintiff may select is exactly the same as the Loan (HK$1,000,000.00) and interest thereon at 5%pa over the loan period of 1 year (HK$50,000.00).  However, the Wong Affirmation states that the plaintiff told the defendant the Sum was for the initial deposit for the business of the Planned Centre and such deposit could be used to offset any purchase sum if he were to purchase the defendant’s stone sculpture(s) (see paragraph 27 above).  Such assertion is conspicuously silent on the cap in value in respect of the stone sculpture(s) that the plaintiff may select.  Mr Lam submits that Clause 4(2) or the substance of the provision therein does not restrict the value of the stone sculpture(s) that may be selected by the plaintiff to HK$1,050,000.00. He says the value of the selected stone sculpture(s) can exceed such amount, but any set-off is limited to HK$1,050,000.00.  But in my view, such construction goes against the plain meaning of Clause 4(2) which provides that the plaintiff can “選取不超過港幣壹百零五萬圓正的收藏品” (my emphasis) in lieu of cash repayment. This, of course, undermines the defendant’s allegation that the plaintiff selected and purchased the Ming Buddha for the Price which is 8 times the amount of the Loan.

119.  In my view, Clause 4(2) or the substance of the provision therein sits well the plaintiff’s case that the Loan is truly a loan that has to be repaid with interest by 14 September 2010 whether by way of cash repayment or by set-off against the value of stone sculpture(s) capped at HK$1,050,000.00 that he may elect to select from the defendant’s collection.  

120.  Next, Mr Hui submits that apart from some design plans of the Planned Centre dated 13 October 2009 exhibited to the Wong Affirmation, there is sparsity of detail in respect of any project planning of the Planned Centre.

121.  In the Wong Affirmation, the defendant says that on 10 October 2009 the parties visited the Site and further discussed project planning and design of the Planned Centre, and on 20 October 2009 the parties further discussed about the Planned Centre project.  No details are given in the Wong Affirmation about such project planning.  More importantly, the defendant has not explained (a) how the plaintiff is to give effect to his agreement to invest in the Planned Centre project or to operate the Planned Centre with the defendant and/or (b) what is there to left to discuss with the plaintiff in respect of project planning for the Planned Centre on 10 and 20 October 2009 when on 10 October 2009 (ie less than a month after the Loan was advanced) the plaintiff’s “initial investment” or “initial deposit” for the business of the Planned Centre was already extinguished by set-off against the deposit payment for his purchase of the Ming Buddha.  

122.  In my view, the express contractual provisions (which the defendant admits are recorded in the Written Agreement) are plainly consistent with the plaintiff’s case of a pure money-lending agreement with repayment of the Loan to be made by the defendant in cash on or before 14 September 2010 or by set-off against stone sculpture(s) of value not exceeding HK$1,050,000.00 which the plaintiff may select from the defendant’s collection.

123.  Further, the alleged sale and purchase of the Ming Buddha is riddled with discrepancies that have not been credibly explained.  In the D&C verified by the defendant’s statement of truth filed on 30 September 2011, the defendant avers that he agreed to accept as deposit the exact amount of the Loan in part payment of the plaintiff’s purchase of the Ming Buddha in exchange for his “agreement to give a year’s time to the plaintiff to make full payment” of the Price and to complete the sale and purchase of the Ming Buddha.  But in the Wong Affirmation the defendant no longer refers to the specific plea of a year’s time for the plaintiff to pay the remaining balance of the Price, but rather states that the plaintiff would make full payment “as soon as possible and before he would take delivery of the [Ming Buddha]” (see paragraph 32 above). Further, in the Draft AD&C, it is averred that he would make full payment “as soon as possible and within a reasonable time (see paragraph 33 above). Still further, the Receipt merely provides that the Price is to be paid to the defendant prior to delivery of the Ming Buddha (see paragraph 34 above).  

124.  It is also interesting to note that the further express term of the sale and purchase of the Ming Buddha as pleaded in paragraph 5(b)(ii) of the Draft AD&C (see paragraph 33 above) does not appear in the narrative concerning what passed between the parties on 10 October 2009 in the Wong Affirmation (see paragraph 31 above).  Further, the Receipt presented by the defendant on 20 October 2009 (ie only some 10 days after the parties allegedly agreed on the sale and purchase of the Ming Buddha) does not refer to any such provision even though it states on its face that “甲乙方就下列事宜達成一致意見” (see paragraph 33 above).  In my view, the above matters cast serious doubt on the defence allegations.

125.  As for the Receipt, in my view it is not just a receipt of the deposit of HK$1,000,000.00 in part payment of the Price.  On its face, it is described as “售貨協議單據” with the plaintiff and the defendant as the alleged contracting parties, and it further stated that the parties have reached consensus on the matters stated therein (“甲乙方就下列事宜達成一致意見”).  Plainly, it purports to set out the terms of the agreement for the sale and purchase of the Ming Buddha, including the Price for such sale and purchase (“乙方購買甲方明朝坐佛像一尊港幣捌百萬圓正”), the time for payment of the Price (“於送貨前交付甲方”), the deduction of the Loan under the Written Agreement as the deposit for the Price (“扣除雙方於2009年9月15日簽訂的借款協議港幣壹百萬圓正作為訂金之用後”), and the arrangement for payment of the sum of HK$7,000,000.00 being the balance of the Price (“乙方將交付餘款港幣柒百萬圓正於下列甲方的匯豐銀行(HSBC)戶口”).

126.  Like the Written Agreement, the Receipt was prepared by the defendant under the Museum’s letterhead.  But the defendant has not offered any explanation as to why, unlike the Written Agreement, the Receipt was not signed by either the plaintiff or the defendant, especially when (a) the defendant allegedly handed the Receipt to the plaintiff at the Hotel on 20 October 2009, (b) the Receipt is the sole document that purports to evidence the agreed terms of the sale and purchase of the Ming Buddha, (c) the Ming Buddha is allegedly very rare/precious and cost 8 times the amount of the Loan, and (d) the alleged selection/purchase of the Ming Buddha has caused a drastic change to the parties’ respective roles, ie the plaintiff has allegedly changed from a HK$1,000,000.00 creditor to a HK$7,000.000.00 debtor of the defendant.

127.  Even if the Receipt is merely the defendant’s receipt of the deposit in the sum of HK$1,000,000.00 for the sale and purchase of the Ming Buddha by extinguishing his obligation to repay the Loan, the defendant has not explained why he has not signed such receipt or why the plaintiff has not insisted that he does so when, according to the Wong Affirmation, the plaintiff was anxious enough to remind the defendant to bring a receipt for the meeting on 20 October 2009, and to time and again remind the defendant not to sell the Ming Buddha to others because he has already paid the deposit in part payment of the Price.

128.  In light of the inherent doubts as to the sale and purchase of the Ming Buddha, the unsigned Receipt prepared and presented by the defendant is plainly a self-serving document that does not lend credibility to his case.  Likewise, the lobby lounge card of the Hotel exhibited to the Wong Affirmation is neither here and there, and does not credibly establish any agreement for the sale and purchase of the Ming Buddha.

129.  As regards the Reply Letter, the plaintiff denies receipt of such letter.  Mr Hui says that there are suspicious features, eg there is no record/confirmation by the Post-Office that such letter was indeed sent by the defendant on/about 17 March 2011 and it appears extraordinary that the defendant having received the Demand Letter addressed to the defendant’s known addresses in Hong Kong would have used his Shenzhen address as a sender’s address.  In my view, it is neither here nor there since the Reply Letter is long after the material events in 2009 and 2010, and by that time the Demand Letter has already been sent on behalf of the plaintiff.  The true question is whether the defence allegations as to the material events in 2009 and 2010 discussed above amount to any credible or believable defence or raise any triable issue.

130.  In light of the above analysis, the defendant’s case is plainly unbelievable. It amounts to nothing more than bare assertions bolstered by self-serving documents that have been shown to be inherently implausible or not credible. The plaintiff’s case (supported by the Master Affirmation) is not shaken in any material respect.

(c)  Defence of set-off and counterclaim

131.  Mr Lam submits that since the defendant has raised the defence of set-off and counterclaim in the D&C and has given further particulars of such in the Wong Affirmation and the Draft AD&C (ie the defendant claims he has repaid the Loan by crediting it as deposit for his purchase of the Ming Buddha and is therefore entitled to the sum of HK$7,000,000.00 being the remaining balance of the Price), he should have unconditional leave to defend.

132.  Hong Kong Civil Procedure 2012 Vol.1 provides as follows:

“If the defence of set-off be raised, save in the special situation of a claim of a bill of exchange or a cheque ……, the defendant is entitled to unconditional leave to defend up to the amount of the set-off claimed. ……

The defence of set-off may be raised in respect of debt or damages, whether the amount is ascertained or not and whether it is also added as a counterclaim, see O.18 r.17. The principle is that the plaintiff should give credit for the amount of the set-off in his action against the defendant and ought not to insist upon his claim without taking the set-off into account. “If there is a set-off at all, each claim goes against the other and either extinguishes it or reduces it” (per Seller L.J. in Hanak v. Green [1958] 2 Q.B. 9 at 29).

……

Moreover, where the defendant sets up a bona fide counterclaim arising out of the same subject-matter of the action, and connected with the grounds of defence, the order should not be for judgment on the claim subject to a stay of execution pending the trial of the counterclaim, but should be for unconditional leave to defend, even if the defendant admits the whole or part of the claim (Morgan & Son Ltd. V. S. Martin Johnson & Co. [1949] 1 K.B. 107, CA (whole claim admitted). Where the amount of the defendant’s cross-claim is known and is capable of being set off at law against the plaintiff’s claim, the defendants are entitled to unconditional leave to defend: Axel Johnson Petroleum A.B. v. Mineral Group A.G. [1992] 1 W.L.R. 270, [1992] 2 All E.R. 163, CA) (whole claim admitted, but see further below); …… see also Hanak v. Green [1958] 2 Q.B. 9, CA; Bankes v, Jarvis [1903] 1 K.B. 549). ……”(my emphasis) (para.14/4/14 at p.251)

“ Although, as with a claim, the court cannot under O.14 try a counterclaim …… yet if the counterclaim is frivolous or untenable, it will be disregarded ……” (my emphasis) (para.14/4/14 at p.252)

“ An analysis of the authorities as to what orders should be made where the defendant raises a set-off or counterclaim shows that there are four different classes or groups of such orders, namely:

1. where the defendant can show an arguable set-off, whether equitable or otherwise, he is entitled to leave to defend to the extent of the set-off and the court had no discretion;

2. where the defendant sets up a bona fide counterclaim arising out of the same subject-matter as the action and connected with the grounds of defence, the order should not be for judgment on the claim, subject to a stay pending trial of the counterclaim, but should be for unconditional leave to defend, even if the defendant admits the whole or part of the claim; ……” (my emphasis) (para.14/4/14 at p.252)

133.  I do not accept that simply because the defendant has pleaded a counterclaim and a defence of set-off based on such counterclaim, the court must necessarily grant unconditional leave to defend.  If the defendant’s argument is right, then any defendant can avoid summary judgment by raising an unwarranted or frivolous counterclaim.  In my view, the true test remains whether the defence of set-off premised on the counterclaim is credible or believable.  Here, the counterclaim is founded on the very same factual premise (ie the alleged sale and purchase of the Ming Buddha) that underlies the defence raised by the defendant, ie that the obligation to repay the Loan has been extinguished by set-off against the deposit in the amount of the Sum in part payment of the Price.  However, for reasons explained above, such defence allegations are found to be wanting and untenable.  In such circumstances, I am not persuaded that there is any bona fide counterclaim that supports any arguable set-off.

(d)  Summary

134.  I find that in all the circumstances the defence contentions are inherently implausible.  They are bare assertions and the documents presented by the defendant (eg the Receipt and the Reply Letter) are either self-serving or do not support his case.  In my view, the defendant’s case is highly unbelievable and does not raise any arguable defence or triable issue.

135.  For completeness, in case of any appeal against this decision, I should mention that when I invited counsel to address on the discretionary power of the court to order conditional leave to defend, Mr Lam expressly declined to make any addresses on any condition that may be imposed, and there is no mention in the Wong Affirmation of any impecuniosities on the part of the defendant.

X.  CONCLUSION

136.  In respect of the O14 Summons, I grant judgment in the sum of HK$1,050,000.00 in favour of the plaintiff against the defendant and interest on the principal sum of HK$1,000,000.00 from the date of the Writ of Summons to the date of judgment herein at 8%pa and thereafter at judgment rate until full paymemt.  In light of such conclusion, I dismiss the Amendment Summons.

137.  There is no reason why costs should not follow event.  I further grant a costs order nisi that the defendant do pay costs of the action including costs of the O14 Summons and of the Amendment Summons to the plaintiff (including all costs reserved if any) with certificate for counsel to be taxed if not agreed.