NEW CENTURY CREDIT SERVICES CO LTD v. YEUNG HUNG

HCA 3033/2015

[2020] HKCFI 2651

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3033 OF 2015

________________________

(by original action)
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(by counterclaim)
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J U D G M E N T

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1.  By the original claim in these proceedings, the plaintiff (“NC”) claims against the defendant (“YH”) for money due and owed by YH to NC under a loan agreement. YH denies that she is liable to repay the sum to NC. YH also counterclaims against NC, the 2^nd defendant in the counterclaim (“GA”), and the 3^rd defendant in the counterclaim (“KOC”). I would first introduce the respective cases of the parties.

THE PARTIES’ RESPECTIVE CASES AS PLEADED

2.  The parties’ respective cases as pleaded are as follows.

NC

3.  NC’s case is simple and straightforward.

4.  NC was a licensed money lender under the Money Lenders Ordinance (“MLO”) at the material times.  Pursuant to a letter of offer (“the Letter”) signed by YH on 28 May 2015, NC provided a revolving loan (“the Loan”) in the sum of HK$13,000,000 to YH subject to the terms and conditions set out in the Letter.

5.  The Loan was drawn down on 28 May 2015, and the amount of which was applied to settle the principal of previous loan amounts which were owed by YH to NC.

6.  NC made partial repayment of the Loan.  As at 30 June 2015, the outstanding balance of the Loan under the Letter was HK$3,088,000.

7.  A second legal charge dated 30 June 2015 (“the Second Mortgage”) was executed by YH as mortgagor in favour of NC as mortgagee for all monies.

8.  Under the Letter, YH covenanted with NC to repay the Loan by monthly instalments of HK$286,000 each with interest at the rate of 26.4% per annum on the 28^th day of each calendar month for 12 consecutive months or until full payment thereof.

9.  In breach of the repayment obligation as set out in the Letter, YH failed to repay the monthly instalments and interest after 30 June 2015.

10.  NC claims against YH for the outstanding principal and interest pursuant to the Letter and the Second Charge.

11.  NC denies the allegations made by YH in her pleadings.

12.  Mr Lam To Man (“Lam”), a director of NC, has given evidence in support of NC’s case.  Lam was also a director of another licensed money lender, Pins Credit Management Company (“Pins Credit”), at the material times.

YH

13.  In her Amended Defence and Counterclaim, YH raises the following:

(1)  She and her husband (“the Husband”) owned the following properties (“the 4 Properties”) at the material times:

(a)  Flat A, 25/F, Block 5, No 31 Laguna Street, Laguna City, Kowloon (“Laguna City”), jointly owned by YH and the Husband;

(b)  Flat A, 11/F, Block 3, King’s Park Villa, No 1 King’s Park Rise, Kowloon (“King’s Park”), jointly owned by YH and the Husband;

(c)  Unit 39, 12/F, Pacific Trade Centre, No 2 Kai Hing Road, Kowloon (“Pacific Centre”), solely owned by YH; and

(d)  Flat B, 18/F, Tower 8, Larvotto, 8 Ap Lei Chau Praya Road, Hong Kong (“Larvotto Tower 8”), solely owned by YH.

(2)  Before the occurrence of the incidents in these proceedings, the Properties were mortgaged to different financial institutions.

(3)  In late 2014, YH received a telephone call from a Mr Au (Au Chak Hang, “Au”), in which Au suggested to YH to carry out a restructuring of her existing mortgages, ie to group all the existing mortgages under one single bank to enjoy a much lower interest rate.  Upon YH’s enquiry, Au specifically expressed that no service fee or consulting fee would be charged.

(4)  On the next day, Au met YH at a restaurant in Central.  Au came together with a Mr Li (“Li”), who introduced himself as a financial manager of the Industrial and Commercial Bank of China (“ICBC”).  Upon Au and Li’s request, YH provided all the documents concerning her existing mortgages to Li.

(5)  After about one week, Au met YH in a restaurant in Mongkok.  Au came together with a Mr Dickson Wong (“Wong”), who introduced himself as a senior manager of the China Citic Bank International (“CCB”).  Wong told YH that she could enjoy a much lower interest rate if she would “transfer” the existing mortgages to CCB.  Au and Wong further explained their proposal to YH, and YH replied that she would consider the same.

(6)  In early 2015, Au, Wong and Lam visited YH at the clubhouse of YH’s residence (“the Clubhouse”).  Lam introduced himself as the senior sales manager of NC.  The mortgage arrangements were discussed in this meeting.  In this meeting, Au, Wong, and Lam (on behalf of NC) represented to YH that they would help YH to arrange and to “transfer” the existing mortgages of her properties to CCB, and YH could enjoy an annual interest rate of 2.15%.  Au, Wong and Lam also promised that no service fee or consulting fee would be charged (“the 1^st Representation”).

(7)  Au, Wong and Lam (on behalf of NC) further represented to YH that it was CCB’s policy that any property with an existing mortgage could not be directly transferred to CCB.  The mortgage would have to be transferred to an intermediary company first.  Thereafter, the mortgage could be transferred to CCB.  YH did not understand the arrangement and made enquiries with Au, Wong and Lam.  Au, Wong and Lam explained that it was the policy of CCB, and YH had to comply with this in order to enjoy a lower interest rate.  YH further asked about the legality of the said arrangement, and Au, Wong and Lam assured that it was legal (“the 2^nd Representation”).

(8)  GA’s name was not mentioned in this meeting.

(9)  Induced by the 1^st Representation and the 2^nd Representation, YH agreed to the said arrangement.

(10)  In January 2015, Au, Lam and a Ms Amy Ho (“Ho”) visited YH at the Clubhouse.  Ho introduced herself as the staff of KOC.  Au told YH that Ho was a lawyer.  In that meeting, Au, Lam (on behalf of NC) and Ho (on behalf of KOC) requested YH to sign a large number of documents.  Before signing the documents, YH made enquiries as to the nature and contents thereof.  Au, Lam (on behalf of NC) and Ho (on behalf of KOC) replied and said that all the documents were prepared for the transfer of the mortgages to CCB.  Au, Lam and Ho further promised YH that the whole process would only take a few days (“the 3^rd Representation”).  Most of the documents were in English and YH did not understand the meaning and contents therein.  YH made enquiries as to the contents of the documents.  Au, Lam and Ho did not explain the documents to YH.  Ho further told YH that there was nothing to worry because YH should trust a lawyer.

(11)  Induced by the 1^st, the 2^nd and the 3^rd Representations and under the influence of Ho, YH signed the documents without knowing the contents therein and without understanding the meaning thereof.  YH was not allowed to look at the details of each of the documents but was forced to sign them very quickly without having a chance to look at the contents or be explained the meaning of the documents.  Further, Au, Lam and Ho had never provided a copy of the signed documents to YH upon her repeated requests.

(12)  After that meeting, YH signed further documents on 4 or 5 different meetings (“the Subsequent Meetings”).  There was a meeting once every month.

(13)  In all the Subsequent Meetings, YH was forced to sign the documents very quickly without having a chance to read the contents or to have someone to explain the documents to her.  Au, Wong and Ho only told YH that all the documents were prepared for transferring the mortgages to CCB.

(14)  On or about 3 March 2015, YH was informed by Ho that the transfer of mortgage procedure was completed.

(15)  In about July 2015, YH discovered that KOC had issued a cheque in the sum of HK$3,000,000 to GA for consultation service provided by GA without YH’s consent or instruction.  The HK$3m was money held by KOC on behalf of YH.

(16)  At all the material times, YH did not have any knowledge of GA, and the name of GA had not been mentioned in the aforesaid meetings.

(17)  YH had to pay interest at the interest rate of about 22% per annum, instead of 2.15% per annum, to NC from April to July 2015.

(18)  YH’s execution of the Letter and the Second Mortgage was procured by the undue influence of Ho on behalf of KOC.  As a result of the relationship between YH and KOC, namely that of client and solicitor, it is presumed that KOC has influence over YH and YH has reposed trust and confidence in KOC.

(19)  NC has actual or constructive notice of the fact that the execution of the Letter and the Second Mortgage by YH was procured by the said undue influence.

(20)  YH also relies upon non est factum as a defence to NC’s claim.

(21)  YH also claims that the 1^st, the 2^nd and the 3^rd Representations are false.  By reason of the misrepresentations, she is entitled to rescinded the Letter and the Second Mortgage.

(22)  Relying upon the said misrepresentations, YH counterclaims against NC for rescission of the Letter and the Second Mortgage, and for damages.  YH says that the damages should be the interest calculated at 22% per annum and paid to NC from April to July 2015, being HK$1,366,000.

(23)  YH counterclaims against KOC, saying that KOC has breached the fiduciary duties owed by them to YH in relation to the HK$3m paid to GA.  YH also counterclaims that KOC has committed a breach of trust in relation to the said HK$3m.

(24)  YH counterclaims against GA in relation to the said HK$3m.  The cause of action relied upon by YH is money had and received.

14.  In her further and better particulars dated 30 August 2017, YH states the following:

(1)  Ho exerted influence on YH by telling her that there was nothing to worry about because YH should trust a lawyer, and as a result YH signed the documents based upon the belief that the documents were prepared for the purpose of transferring the mortgages to CCB.

(2)  YH was not allowed to look at the documents in the sense that most part/area of the page that she had signed on was being covered by the previous page(s) on top of it while she was signing the same.

(3)  YH was not physically forced to sign the documents.  She was forced to sign them very quickly without having a chance to look at the contents or be explained the meaning thereof.

(4)  YH made oral requests for a copy of the signed documents shortly after she had signed the documents.

15.  In relation to the HK$3m paid by KOC to GA, KOC relies upon, inter alia, an authorization letter signed by YH on 26 June 2015 (“the HK$3m Authorization Letter”) as evidence showing YH’s consent to releasing HK$3m by KOC to GA.  As to the HK$3m Authorization Letter, YH alleges that Ho exerted influence on her and thereby causing YH to sign the HK$3m Authorization Letter, among other documents which were purported to be the documents prepared for the purpose of transferring the existing mortgages to CCB, by telling YH that there was nothing to worry about because YH should trust a lawyer.  The HK$3m Authorization Letter was signed by YH without her own authority or consent in the sense that YH did not even know that she had signed the same.

16.  In accordance with the established principle[1], in respect of YH’s Counterclaim against NC, GA and KOC, YH may only rely upon the causes of action pleaded in YH’s Counterclaim. 

17.  YH has given evidence in support of her case.

GA

18.  GA’s case is simple.

19.  In late 2014, Au, sales manager of GA at the material times, made a telephone call to YH, in which Au introduced himself as an employee of GA.  Au mentioned restructuring of YH’s existing mortgages.  Au did not tell YH that no service fee or consulting fee would be charged by GA.

20.  YH was a serious and experienced properties investor.

21.  On 29 January 2015, Au explained the terms of a consultation agreement (“the Consultation Agreement”) to YH, including the consultation fee charged by GA.  YH was satisfied and signed the Consultation Agreement on that date.

22.  In performance of the Consultation Agreement, GA provided consultation and referral services to YH from late 2014 to June 2015. As a result, GA should be entitled to have the consultation fee of HK$3m as stipulated in the Consultation Agreement.

23.  GA denies the allegations made by YH.

24.  GA has called Au to give evidence in the trial.

KOC

25.  KOC denies that there was a solicitor-client relationship between KOC an YH in respect of (1) receiving HK$3m from YH and paying the same to GA; and (2) the Letter and the Second Mortgage.

26.  KOC also denies that Ho has ever forced or induced YH to sign any document.

27.  In relation to YH’s counterclaim concerning the HK$3m released by KOC to GA, KOC relies upon the oral authorization given by YH on 29 June 2015, and the HK$3m Authorization Letter signed by YH on the same date.

28.  Ms Ho Suk Ting Amy (“Ho”) has given evidence in the trial.  Ho was and is a conveyancing clerk of KOC.  KOC has also called Mr Wong Chak Lam Clifton (“Clifton”), a partner of KOC, to give evidence in the trial.

THE AGREED LIST OF ISSUES

29.  Before the commencement of the trial, the parties have filed an Agreed List of Issues.  The agreed issues to be determined in the trial are as follows:

Between NC and YH

(1)  Whether NC is entitled to the outstanding loan and interest under the Letter;

(2)  Non est factum

(a)  Whether YH was under any inability to understand the Letter and the Second Mortgage;

(b)  If so, whether the Letter and the Second Mortgage were fundamentally, radically or totally different from what YH thought they were;

(c)  If so, whether YH was not being careless;

(d)  If so, whether the Letter and the Second Mortgage are void on the ground of non est factum;

(3)  Undue influence

(a)  Whether Ho had unduly influenced YH into executing the Letter and the Second Mortgage;

(b)  If so, whether NC was put on inquiry as to such undue influence;

(c)  If so, whether NC had not taken reasonable steps to dispel actual/constructive notice;

(d)  If so, whether the Letter and the Second Mortgage are rescinded on the ground of undue influence;

(4)  Fraudulent misrepresentation

(a)  Whether Lam (Au and/or Ho) made the 1^st, the 2^nd and the 3^rd Representations to YH as pleaded in YH’s Amended Defence and Counterclaim;

(b)  If so, whether the 1^st, the 2^nd and the 3^rd Representations were false;

(c)  If so, whether Lam made the said representations fraudulently;

(d)  If so, whether YH was induced by and relied on the said representations in entering into the Letter and the Second Mortgage;

(e)  If so, whether the Letter and the Second Mortgage are rescinded;

(f)   If so, whether YH is entitled to damages in the sum of HK$1,366,000;

(g)  If the said representations was/were not made fraudulently, whether YH can rely upon the Misrepresentation Ordinance to claim the relief of rescission and/or damages.

Between YH and GA

(5)  Whether the sum of HK$3m was money had and received by GA, or whether GA was entitled to this sum in accordance with the Consultation Agreement;

Between YH and KOC

(6)  Whether KOC owed fiduciary duties to YH (a) to act bona fide and in the best interests of YH; (b) to act under the instructions of YH; and (c) to manage and deal with the assets of YH in a manner analogous to and/or consistent with the duties of a trustee.

(7)  If so, whether KOC acted in breach of those fiduciary duties by paying HK$3m to GA;

(8)  If so, whether YH suffered any loss or damage by reason of KOC’s breach of fiduciary duties;

(9)  Whether KOC held HK$3m received from YH on trust for YH;

(10)  If so, whether KOC acted in breach of trust by paying HK$3m to GA;

(11)  Whether GA had given oral and/or written instructions to KOC to pay HK$3m to GA;

(12)  If YH had given written instructions to KOC to pay HK$3m to GA, whether the written instructions were:

(a)  Signed and procured by the undue influence of KOC;

(b)  Signed without the authority and consent of YH; and/or

(c)  Signed and induced by the misrepresentations of NC, GA and/or KOC, namely the 1^st, the 2^nd and the 3^rd Representations.

INTERLOCUTORY APPLICATIONS MADE BY YH DURING THE TRIAL

New allegation against KOC

30.  At the beginning of the trial, Mr Christopher Law, counsel for YH, raised an allegation that KOC has destroyed some documents to cover up the truth.  Mr Law sought leave that YH might pursue this allegation in the trial.  Ms Sara Tong (together with Ms Karen Tsang), counsel for KOC, opposed the application.  After hearing submissions, I dismissed the application and made a ruling the YH could not pursue the allegation in the trial.  I awarded costs of that application to KOC in any event and on an indemnity basis, with a certificate for 2 counsel.

31.  The new allegation raised by KOC is a very serious allegation.  YH is alleging a law firm, the partners of which are officers of the court, has destroyed some documents to cover up the truth.  The allegation is completely unparticularized.  It is not known when and what documents were allegedly destroyed by KOC.  It is also not known what truth has been allegedly covered by KOC by destroying those documents.  The allegation has not been raised in YH’s pleadings.  No application for specific discovery concerning the documents allegedly having been destroyed by KOC has ever been made.  No prior notice of this allegation has ever been given to KOC before the commencement of the trial.  Raising such a serious allegation against KOC in these circumstances is oppressive and extremely unreasonable.  YH’s application for leave to pursue the allegation in the trial must be dismissed.  To show the court’s disapproval of conducting litigation in this oppressive and unreasonable manner, I am of the view that indemnity costs should be ordered against YH.  KOC is entitled to have 2 counsel to resist YH’s attempt to introduce this allegation in the trial.  The allegation is serious, and has been raised at the beginning of the trial without any prior notice to KOC.  I would allow KOC to have the costs of 2 counsel to resist YH’s application.

Relying on s.27(3) of the MLO without pleading the same

32.  In Mr Law’s written opening submissions, Mr Law submitted that YH might rely upon s.27(3) of the MLO in support of YH’s claim in relation to the HK$3m paid to GA as consultation fee, notwithstanding the fact that the point had not been raised in YH’s pleadings.  This proposition was opposed by Ms Shannon Leung (counsel for NC), Ms Sheena Wong (counsel for GA) and Ms Tong. After hearing submissions, I made a ruling that YH could not rely upon s.27(3) of the MLO in this trial.  I awarded costs of these arguments to NC, GA, and KOC in any event, and those costs would be taxed on an indemnity basis, with a certificate for 2 counsel.

33.  S.27(3) of the MLO reads as follows:

“…… it shall not be lawful for any money lender or his partner, employer, employee, principal or agent or any person acting for or in collusion with any money lender to charge, recover or receive any sum as for or on account of any such costs, charges or expenses (other than stamp duties or similar charges) or to demand or receive any remuneration or reward whatsoever from a borrower or intending borrower for or in connection with or preliminary to procuring, negotiating or obtaining any loan made or guaranteeing or securing the repayment thereof.” (Emphasis added)

34.  In my view, s.27(3) of the MLO is not a pure question of law.  If that issue is introduced in these proceedings, it would be necessary to resolve in the trial (a) whether GA and/or KOC were acting for or in collusion with NC in relation to the HK$3m; and (b) whether the sum is for or in connection with or preliminary to procuring, negotiating or obtaining any loan made by NC.  Since s.27(3) of the MLO has not been raised by YH in her pleadings, there has been no discovery on the matters relating to these issues, and NC, GA and KOC has not prepared evidence to meet these new issues. I also observe that s.27(3) of the MLO is not an issue in the Agreed List of Issues. In the circumstances, it would not be fair if YH is allowed to run a case based upon s.27(3) of the MLO in the trial.

35.  The case relied upon by Mr Law, ie Igal Dafni v CMA CGM SA[2], in fact does not support YH’s position but supports the objections raised by NC, GA and KOC.  In that case, Recorder H Wong SC said:

“34. …… in our adversarial system the Court is not on an ‘independent truth-finding mission’ (to use the words of Mr Bartlett in his submissions) but is there to resolve the dispute between the parties in accordance with justice and procedural fairness. Our rules of pleadings provide an important means for safeguarding procedural fairness. I accept Mr Bartlett’s submission that it cannot be the case that merely because a party has raised an allegation of illegality the Court’s function is thereby radically altered to that of an inquisitorial tribunal as opposed to one that resolve disputes following the normal adversarial procedure. Where the contract concerned is ex facie illegal, the illegality concerned, as Lord Moulton pointed out in the Electrolytic Alkaline Company case (see p.475 of the judgment of Lord Moulton), is a question of law and the Court may safely conclude on the face of the contract that it is unenforceable for being illegal or in contravention of public policy. Where the contract is not ex facie illegal, and the Court is not satisfied that it has all the relevant facts bearing on an allegation of illegality before it, it is highly dangerous for the Court to make findings of illegality; and in my judgment it is equally dangerous for it to abdicate its function as a Court of adjudication working within an adversarial system and take on the role of an independent investigator by embarking on an investigation based on unpleaded facts. Illegality and breach of public policy are (except in cases where the contract concerned is ex facie illegal) issues that are often facts-sensitive, and the relevant facts have to be pleaded to enable proper findings of facts to be made (cf Chao San San v Worldport Industrial Limited (unrep) CACV 158/2002, 21 March 2003, at §9 per Yuen JA).”

36.  The Consultation Agreement is not ex facie illegal.  If YH intends to challenge the legality of the Consultation Agreement by relying upon s.27(3) of the MLO, YH has to follow the rules in our adversarial system, ie raising the issue in her pleadings first, and NC, GA and KOC should be given reasonable time to prepare evidence to meet YH’s case.  YH cannot challenge the legality of the Consultation Agreement without any pleading.

37.  The proposition that YH may rely upon s.27(3) of the MLO to defeat the Consultation Agreement without any pleading is unarguable and has no merit at all.  Much time has been wasted by YH putting forward this unmeritorious, unarguable and unreasonable proposition.  I am of the view that costs of the arguments concerning this proposition should be paid by YH to the other parties on an indemnity basis.  This proposition was raised for the first time in Mr Law’s written opening submissions.  KOC did not have much time in preparing submissions in response to this.  I am of the view that a certificate for 2 counsel is justified in these circumstances.

YH’s application for leave to amend pleadings

38.  Before Mr Law making his oral opening submissions, I asked Mr Law whether YH would seek leave to amend her pleadings. Mr Law confirmed with the court that he would not apply for leave to amend pleadings.  With this assurance, I began to hear Mr Law’s oral opening submissions.  Thereafter, the court started to hear YH’s evidence.

39.  Ms Wong for GA said the following in her written opening submissions:

“35.  [GA]’s defence is straightforward, and can be summarised as follows.

36.  First, …… [the Consultation Agreement] is a binding contract between [YH] and [GA]. In accordance with the terms therein, and in the absence of any vitiating factors, [GA] was entitled to receive the HK$3,000,000 as consultancy service fee.

37.  Second, in respect of the claim for money had and received, [YH] has wholly failed to plead (or prove) the material facts required to establish unjust enrichment. In particular, there is no unjust factor pleaded or supported by the evidence. In any event, [GA] has duly performed its consultancy services under the agreement, nor has Yeung not contended otherwise.

38.  [YH]’s counterclaim against [GA] is fundamentally defective, wholly devoid of merit, and ought to be dismissed.”

40.  On Day 4 of the trial, while Ms Wong was cross-examining YH on the Consultation Agreement, I asked Mr Law what was YH’s case concerning the Consultation Agreement.  After some exchanges between the court and Mr Law, Mr Law told me that he would seek leave to amend YH’s pleadings.  I thereafter adjourned the matter to the following day to enable Mr Law to prepare the papers and to give some time to the other parties to prepare submissions in response to this application.  Since YH was in the witness box and was being cross-examined on an important topic, ie the Consultation Agreement, I refused to give leave to YH to speak to her legal representatives.  I asked Mr Law whether he would have any difficulties since YH was in the witness box and YH would not be able to speak to her legal representatives.  Mr Law did not say that he would have any difficulty.

41.  On Day 5, Mr Law produced a summons for leave to amend pleadings and a draft Re-Amended Defence and Counterclaim.  After hearing submissions from the parties, I dismissed the summons and ordered that costs of the summons be paid by YH to NC, GA and KOC in any event and on an indemnity basis, with a certificate for 2 counsel.

42.  My reasons for dismissing the summons are as follows:

(1)  The amendments sought to be introduced by the draft Re-Amended Defence and Counterclaim are numerous and extensive.  If these amendments are allowed, there would be no doubt that the trial would have to be adjourned to allow all the other parties to prepare evidence to meet the new case advanced by YH by these amendments.  This would seriously disrupt the trial and cause substantial delay in these proceedings.  The disruption and the substantial delay are great prejudice to NC, GA and KOC.

(2)  No explanation has been offered by YH as to why leave to introduce these new amendments has not been sought at an earlier time. That being the case, there is no reason why the court should exercise the discretion in favour of YH.

(3)  In response to the question from the court, Mr Law confirmed with me that he had obtained instructions to make this application before YH entering the witness box.  That being the case, there is simply no reason why the application was not made before YH giving evidence. In her written opening filed and served before the commencement of the trial, Ms Wong has made it clear that GA is relying upon the Consultation Agreement as a defence to YH’s claim.  In fact, GA has pleaded the Consultation Agreement as a defence to YH’s claim in GA’s Defence.  Any plea concerning the Consultation Agreement should be raised by YH at a time reasonably before the commencement of the trial, but this has not been done.  Further, when the summons was taken out, Ms Leung for NC has already finished cross-examining YH.  Ms Wong was in the middle of her cross-examination.  If the application as per the summons is allowed, that may affect all the cross-examination which has already been conducted by counsel for the other parties.  This is a serious prejudice to the other parties.

(4)  Before the commencement of the trial, the parties spent time on discussing the issues to be resolved in the trial and jointly prepared the Agreed List of Issues.  It is extremely unreasonable that YH did not reveal the matters sought to be introduced by the draft Re-Amended Defence and Counterclaim while the parties were preparing the Agreed List of Issues, and suddenly raised all these matters in the middle of the trial.

(5)  YH’s application for leave to amend her pleadings made in the middle of the trial is unmeritorious, unreasonable and improper.  The application must be dismissed.  To show the court’s disapproval of conducting litigation in this extremely unreasonable way, I am of the view that indemnity costs should be awarded.  The application, if allowed, would have an extensive impact on these proceedings.  I am of the view that a certificate for 2 counsel is justified in these circumstances.

Indemnity costs

43.  In each of the aforesaid interlocutory applications, I required YH to pay indemnity costs to NC, GA and KOC.

44.  The rules concerning indemnity costs have been summarized by HH Judge Winnie Tsui in Wong Yung Tai v Top Eagle Security Management Ltd & Another [3], which are as follows:

(1)  The court has a broad discretion to determine the taxation basis.  In order to obtain an order for costs on an indemnity basis, it is necessary to have some “special or unusual feature” in the case[4].

(2)  Indemnity costs are not confined to cases where the paying party’s conduct lacks moral probity or deserves moral condemnation for which the court wishes to express disapproval.  Conduct which falls short of that can be so unreasonable as to justify an order for indemnity costs.  But such conduct would need to be unreasonable to a high degree. Unreasonable in this context does not mean merely wrong or misguided in hindsight [5].

(3)  Usually, merely pursuing a weak claim would not justify indemnity costs.  On the other hand, to maintain a claim that one knows, or ought to know, is doomed to fail on the facts and on the law, is conduct that is so unreasonable as to justify indemnity costs [6].

(4)  Ultimately what the receiving party must demonstrate is something in the conduct of the action or other circumstances of the case that “takes it out of the norm” which warrants an order for indemnity costs [7].

45.  In my view, each of the aforesaid interlocutory applications is extremely unreasonable and is bound to fail.  Having being legally represented, YH ought to know the unreasonableness of these applications.  Nonetheless, YH still decided to pursue these unmeritorious and unreasonable applications.  In these circumstances, indemnity costs are justified.

THE PRINCIPLES

46.  As said by the Court of Final Appeal in Ming Shiu Chung & Others v Ming Shiu Sum & Others[8], a person of full age and understanding is bound by the document signed by him, unless a recognized legal basis for concluding that his apparent consent has been in some way vitiated or that reliance on the document by some other person falls into some category of unconscionable conduct justifying relief in equity.  Choosing to sign a document without knowing its contents cannot be a sufficient reason for not being bound by the document.  In Ming Shiu Chung, Ribeiro PJ said:

“84. … Reliance is universally placed on signatures appended to documents by persons of full age and understanding as signifying the signatory’s assent or adherence to what that document states. Where such a person has signed a document which purports to have legal effect, the law has never regarded it as enough to show that he signed without knowing its contents for the document to be disavowed. It is an everyday occurrence that people sign documents without reading the small (or even the large) print and therefore sign without actually knowing the terms (or all the terms) of the document signed. But they are held to the documents which they have chosen to sign unless there is shown to be a recognized legal basis for concluding that their apparent consent has been in some way vitiated or that reliance on that document by some other person falls into some category of unconscionable conduct justifying relief in equity.

85. Thus, in Saunders v Anglia Building Society [1971] AC 1004 at 1016, Lord Reid warned against an approach, like that of the Court of Appeal, which inverts the general rule:

‘We find in many of the authorities statements that a man’s deed is not his deed if his mind does not go with his pen. But that is far too wide. It would cover cases where the man had taken no precautions at all, and there was no ground for his belief that he was signing something different from that which in fact he signed. I think that it is the wrong approach to start from that wide statement and then whittle it down by excluding cases where the remedy will not be granted. It is for the person who seeks the remedy to show that he should have it.’

86. And in Bank of China (Hong Kong) Ltd v Fung Chin Kan & Another (2002) 5 HKCFAR 515 at p.533, Litton NPJ acknowledged:

‘… the fundamental principle that, generally speaking, when a person signs a legal document, he or she is bound by the act of signature: As a matter of general law, it is no defence to say that he or she did not understand the contents of a legal document; that person takes the chance of being bound by its terms, as he or she can take the simple precaution of not signing until its contents have been fully explained and understood.’ ” (Emphasis added)

47.  It is well established that the issues in a trial are defined by pleadings, not by evidence.  One cannot slip in an unpleaded issue by saying that there is evidence on the issue.  As said by Ma CJ in Kwok Chin Wing v 21 Holdings Ltd[9]:-

“21. It should by now really be quite unnecessary to issue yet another reminder on the rationale behind pleadings. The basic objective is fairly and precisely to inform the other party or parties in the litigation of the stance of the pleading party (in other words, that party’s case) so that proper preparation is made possible, and to ensure that time and effort are not expended unnecessarily on other issues:- Wing Hang Bank Limited v Crystal Jet International Limited [2005] 2 HKLRD 795, 799 [6(1)]. It is the pleadings that will define the issues in a trial and dictate the course of proceedings both before and at trial. Where witnesses are involved, it will be the pleaded issues that define the scope of the evidence, and not the other way round. In other words, it will not be acceptable for unpleaded issues to be raised out of the evidence which is to be or has been adduced. As the Court of Appeal remarked in Wing Hang Bank Limited v Crystal Jet International Limited:-

‘(2) In a trial, particularly where evidence is given by witnesses, it becomes extremely important that each side knows exactly what are the live issues. Where issues are sought to be introduced that have not been adequately or properly pleaded, amendments must be sought unless the consent of the other party or parties has been obtained. It will simply not do for unpleaded issues to be “slipped in” when evidence is being given in the hope that the other side is not sufficiently alert to object.’

22. …… one does not sift through the evidence adduced in a trial in the hope that something was said that can conceivably found a cause of action. Issues, I would reiterate, must be properly pleaded unless for some reason the pleadings have assumed a less significant role in the proceedings.” (Emphasis added)

48.  The purpose of pleadings is to define the real issues in dispute and to ensure that the litigation is conducted in a fair way.  It is pertinent to note what has been said by Yuen JA in Chan Kong v Chan Li Chai Medical Factory (Hong Kong) Ltd[10]:

“15. …… It is well established that pleadings need to be clear - because pleadings are the foundations on which the rest of the action stand. The reason why parties to litigation must ensure that the real issues in dispute are defined in advance in the pleadings is so that there is an unambiguous framework for the many interlocutory steps that follow in an action, such as discovery of documents, interrogatories and witness statements, as well as for the conduct of the trial itself. A statement of claim should make it clear to the reader what the plaintiff's cause of action is, and it should set out the material facts which provide the basis for him to pursue that cause of action. It is not adequate for a plaintiff just to set out his story extensively and then to allege a number of breaches of rights for which he claims relief. Put another way, it should not be left to the reader to guess how the dots should be connected.

16. The more complex the facts and the more complicated the claim, the more important it is for the pleader to get it right. That is because the more obtuse the pleading, the more capacity there is for genuine misunderstanding or specious opportunism. And the more blind alleys are left in a pleading, the more expensive and time-consuming the litigation will be.” (Emphasis added)

49.  All the causes of action relied upon by a claimant must be pleaded in the statement of claim.  A new cause of action cannot be raised in the reply.  A claimant may only raise a new claim by amending his statement of claim.  As said by Lam J (as he then was) in Magic Score Limited v. The Hong Kong and Shanghai Banking Corporation Limited and Another[11]:-

“20. Thus, it is not appropriate to raise in the reply a new cause of action (see Hong Kong Civil Procedure 2006 Paragraph 18/3/2).  A plaintiff who wishes to pursue an additional or alternative cause of action should do so by amending the statement of claim.

21. This is not simply a technical rule. A defendant to an action is entitled to know from the writ and statement of claim what are the precise limits of claims he is faced with.  He should focus on the same and then put forward his case in his defence and prepare for the evidence accordingly.  He should be able to conduct the litigation and arrange his affairs on the basis that all the relief and remedies claimed against him have been set out in the statement of claim, subject to any amendments that might be made to that document.  He could, for example, consider whether to make any payment into court or any offer for settlement based on this.  He could also decide what is the proportionate time and costs that he should spend on the litigation by reference to those claims.  A reply (or any subsequent pleadings) is not the right place for new claims to be put forward as it does not contain any prayers and a defendant does not have any automatic right to file any pleadings subsequent to reply (see Order 18 rule 4).  It would also be confusing for new claims to be buried amongst other positive allegations made in genuine reply to a defence.”  (Emphasis added)

50.  In respect of evaluating the evidence given by witnesses, a valuable guidance can be found in Hui Cheung Fai and another v Daiwa Development Limited[12], in which DHCJ Eugene Fung SC said:

“77. Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility: Onassis v Vergottis [1968] 2 Lloyd’s Rep 403 at 431 (Lord Pearce) ……

78. In deciding whether to accept a witness’ account, importance should also be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events: e.g. Lam Rogerio Sou Fung v Tan Soon Gin George (unreported, HCA 2576/2005, 5 May 2011) §39 (Chu J).

79. In determining a witness’ credibility, I have also attached importance to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement.

80. I have cautioned myself against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses (Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336 at §§36-37 (Bokhary PJ)), or from the assessment of the witnesses’ character (Esquire (Electronics) Ltd v HSBC [2007] 3 HKLRD 439 at §135 (Stock JA)).”

51.  Similar guidelines can also be found in Lee Fu Wing v Yau Po Ting Paul[13], in which DHCJ Au (as he then was) said:

“53. In assessing the credibility of a party’s case on a particular issue, I accept the submissions of [counsel] that the Court should take into considerations the following: -

(1) Whether the party’s case is inherently plausible or implausible.

(2) Whether the party’s case is, in a material way, contradicted by other evidence (documentary or otherwise) which is undisputed or indisputable.

(3) Where it is shown that a witness has been discredited over one or more matters to which he has given evidence using the above tests. This is relevant to the assessment of his overall credibility.

(4) The demeanour of the witnesses.”

52.  The principles set out in Northampton Borough Council v Cardoza and others are also helpful[14]:

“36. As to the considerations applicable to evaluating evidence, a useful starting point is Goff J’s (as he then was) observation as to resolving conflicts of evidence in Armagas Ltd v Mundogas SA (The Ocean Frost) [1985] 1 LL Rep 1 at p.57

‘… Where there is a conflict of evidence … reference to the objective facts and documents, to the witnesses’ motives, and to the overall probabilities, can be of very great assistance to a judge in ascertaining the truth’.

37. Factors relevant to the evaluation of a witness’s evidence were identified by Lewison J (as he then was) in Painter v Hutchinson [2007] EWHC 758 (Ch) at [3] when addressing the unsatisfactory nature of the defendant’s approach to giving evidence. These included : evasive and argumentative answers, tangential speeches avoiding the question, blaming legal advisers for pleading, disclosure and evidence shortcomings, self-contradiction, internal inconsistency, shifting case, new evidence, and selective disclosure. This was not intended to be an exhaustive list, but it is important and very helpful.

38. A useful recent reminder or guidance on the approach to the evidence of factual witnesses, and expanding on the guidance given by Goff J in The Ocean Frost, was given by Leggatt J (as he then was) in Gestmin SGPS SA v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm). After noting that human memory is fallible and that the process of litigation and preparing for trial tends to interfere further with the reliability of human memory, particularly where a lawyer has had a hand in drafting a witness’s evidence and the witness’s memory has been refreshed by reading documents, Leggatt J concluded that the best approach for a judge to adopt at the trial of a commercial case is to base factual findings on documentary evidence and known or probable facts and the inferences to be drawn therefrom. Witness evidence, written and oral, is not without purpose; but, its principal uses are to subject the documentary record to scrutiny and to evaluate the witness’s motivations, personality and working practices.

39. In similar vein, in the recent case of Freemont (Denbigh) Ltd v Knight Frank LLP [2014] EWHC 3347 (Ch) reference was made to an article written by Bingham J (as he then was) entitled “The Judge as Juror: The Judicial Determination of Factual Issues” published in Current Legal Problems 38 in 1985. Bingham J considered the approach to deciding upon the reliability of a witness’s evidence and regarded the following to be helpful indicators of where the truth lies: the consistency of the witness’s evidence with what is agreed, or clearly shown by other evidence, to have occurred; the internal consistency of a witness’s evidence; and, the consistency of a witness’s evidence with what (s) he has said or deposed on other occasions. Bingham J considered that the credit of a witness in matters not germane to the litigation was of less assistance, and that the demeanour of a witness was on the whole not a reliable pointer to a witness’s honesty.”

53.  In respect of lies told by a factual witness on a central issue, the reminder given by Sir John Dyson in MA (Somalia) v Secretary of State for the Home Department[15] has to be borne in mind:

“31. ....... where a claimant tells lies on a central issue, his or her case will not be saved by general evidence unless that evidence is extremely strong. It is only evidence of that kind which will be sufficient to counteract the negative pull of the lie. But much depends on the bearing that the lie has on the case……

32. Where the appellant has given a totally incredible account of the relevant facts, the tribunal must decide what weight to give to the lie, as well as to all the other evidence in the case, including the general evidence……

33. ...... where the appellant tells lies on a central issue in the case, the [tribunal] may conclude that they are of great significance……It will be a matter for the [tribunal] to decide whether the general evidence is sufficiently strong to counteract what we have called the negative pull of the appellant’s lies.”

54.  When a party without a proper explanation fails to call a witness whom the party might reasonably be expected to call, or to disclose documents in respect of which the party is obliged to disclose, the court may draw an adverse inference against the party that the evidence of the witness or the document may not help the party’s case.

(1)  In Telings International Hong Kong Ltd v John Ho and Others[16], Le Pichon JA said:

“78. I turn now to consider the question of the effect of the plaintiff failing to call any witnesses. In his written submissions, [counsel] took the bold stance that

‘[n]o adverse inference could be drawn from the fact that the witnesses were not called. If the witness is not called, these statements are simply disregarded.’

79. I cannot accept [counsel’s] submission. It is contrary to the well-established maxim, omnia praesumunter contra spoliatorem, sometimes referred to as the principle in Armory v Delamirie (1722) 1 Str 505. In Hong Kong and Shanghai Banking Corporation v Chan Yiu Wah [1988] 1 HKLR 457, Fuad JA expounded that principle (at 467). That passage is quoted in full in my judgment in Tullett & Tokyo International Securities Ltd v APC Securities Co Ltd [2001] 2 HKC 713 at 723B-E:

‘285. Failure to produce evidence, as indicating unfavorable tenor of evidence: (1) In general. … The failure to bring before the tribunal some circumstance, document, or witness, when either the party himself or his opponent claims that the facts would thereby be elucidated, serves to indicate, as the most natural inference, that the party fears to do so; and this fear is some evidence that the circumstance or document or witness, if brought, would have exposed facts unfavorable to the party. These inferences, to be sure, cannot fairly be made except upon certain conditions; and they are also open always to explanation by circumstances which make some other hypothesis a more natural one than the party’s fear of exposure. But the propriety of such an inference in general is not doubted.

The non-production of evidence that would naturally have been produced by an honest and therefore fearless claimant permits the inference that its tenor is unfavorable to the party’s cause. Ever since the case of the Chimney Sweeper’s Jewel [Armory v. Delamirie] this has been a recognised principle.’

See also Li Sau Keung v Maxcredit Engineering Ltd [2004] 1 HKC 434 at 443I-444B.

80. While the judge referred (at §73) to

‘the practice that where a litigant chooses not to call evidence, the court is entitled to be bold and can draw from the facts or reasonable inferences as to what facts may have been withheld’

and professed to have borne that in mind, it would appear that he did not find it necessary to apply the maxim by reason of his rejection of the testimony of the defence witnesses.

81. However, in thus rejecting the testimony of the defendants, the judge appears to have evaluated their evidence in isolation, without weighing it against any reasonable adverse inference to be drawn from the failure of the plaintiff to call any oral evidence on any particular matter or issue.  Using what appears to be a broad brush approach, the judge simply rejected the defendants’ evidence in its entirety.  In a case such as this, where the plaintiff has failed to call relevant witnesses to give evidence notwithstanding the highly complex and at times wholly unexplained factual backdrop, such an approach serves to emasculate the evidential maxim and cannot be correct.  In my view, every reasonable inference adverse to the plaintiff and in favour of the defendants should be drawn in determining each and every disputed fact.”

(2)  See also South China Securities Ltd v Lam Kwen Yuen[17], in which DHCJ Lisa Wong SC (as she then was) said:-

“7 I was reminded by Mr Leung, and I take note, of the principle that where a person without explanation fails to call as a witness a person who he might reasonably be expected to call, it is open to the Court to infer that that person’s evidence would not have helped that party’s case. See, eg Li Sau Keung v Maxcredit Engineering Ltd [2004] 1 HKC 434, 443E–444C, per Le Pichon JA citing O'Donnell v Reichard [1975] VR 916, 929, per Newton and Norris JJ. The same principle would apply to a failure without proper explanation to produce a document or other real evidence that a party might reasonably be expected to disclose.”

55.  With these principles in mind, I turn to analyse the issues and the evidence in this case.

THE KEY EVENTS

56.  I would set out the key events and the evidence given by the witnesses in respect of these events.

Late 2014

57.  There is no dispute that in 2014, Au made a cold call to YH.  GA’s case is that in this telephone conversation, Au introduced himself as “Mr Au from Global Asia”.  Au spoke to YH in Cantonese, but he mentioned the name “Global Asia” in English.  YH’s case is that Au claimed that he was a staff member of ICBC.

58.  At the time, YH had taken out a large number of mortgage loans with a number of banks and money lenders at varying interest rates.  The existing mortgage loans included, but were not limited to, the following 10 loans, secured by 6 mortgages in respect of the 4 Properties taken out with various money lenders. 

59.  In respect of these 10 loans, the total loan amount was HK$16.15m. YH was paying annual interest in the sum of HK$3,402,840.  The average monthly interest was in the sum of HK$283,570.

60.  The 10 loans were not YH’s only existing loans at the time.  Apart from the 10 loans, YH had also taken out the following mortgage loans at the time:

(1)  In respect of Laguna City, a HK$2m mortgage loan with Citic Ka Wah Bank (discharged on 7 August 2017);

(2)  In respect of King’s Park, a mortgage loan with Nanyang Commercial Bank at interest rate of 3% p.a. (discharged on 28 April 2015); and

(3)  In respect of Larvotto (Tower 8), a HK$15.5m mortgage loan with Lei Shing Hong at interest rate of 11% p.a.  The relevant interest payment per year therefore is HK$1,705,000 (average of HK$142,083 per month).

61.  There was also outstanding mortgage loans in respect of Flat B, 31/F, Tower 9, Larvotto (“Larvotto Tower 9”)[18].

62.  It is YH’s evidence that before receiving the cold call from Au’s cold call at the end of 2014, she was already contemplating or preparing to transfer some of her pre-existing mortgage loans from the relevant money lenders to a bank, in order to save interest payment.

63.  Au claimed that in this telephone conversation, he introduced GA to YH. YH told Au that she was an experienced property investor and an active trader in stock index futures.  Upon enquiring about YH’s financial needs and learning about her investment background, Au promoted the consultancy services of GA.  In particular, Au saw that YH might require some restructuring of her existing mortgage loan arrangements.  Au did not tell YH that no service charge or consulting fee would be charged.

64.  YH claimed that Au represented himself as someone from ICBC.  Au suggested to her that YH might transfer her existing mortgages to a bank to enjoy a lower interest rate.  Au clearly told her that no handling fee would be charged.

The IFC Meeting

65.  On the following day, Au called YH again to arrange a face-to-face meeting.  This meeting was held inside a restaurant at International Finance Centre in Central, and was attended by Au and Mr Li Cheuk Him.  Li was both a director of GA, and a manager at ICBC at the time.

66.  Au’s evidence is that in this meeting, Au gave his name card to YH and introduced himself as “環亞嘅歐生”.  YH said that she did not want the Husband to know that she had suffered financial loss in her stock index futures investment.  YH provided some of her mortgage loan and bank documents to them, as well as a photocopy of YH’s HKID card.  However, since the documents provided were not complete, Au arranged to meet with YH again the following day after she had some time to tidy up her documents.  Au did not tell YH that no service fee or consulting fee would be charged.

67.  YH said that in this meeting, Au and Li told her that she might transfer her existing mortgages to ICBC to save interest, and the interest rate would be 2.15%. They further said that there would be no handling fee.

The Park Meeting

68.  Shortly after the IFC Meeting, Au met with YH at a park near her residence at King’s Park. Au explained that the purpose of this meeting was to collect the rest of the documents which had not been provided by YH at the IFC Meeting.  YH claimed that Au came together with Li.

69.  There is no dispute that the purpose of this meeting is to collect some documents from YH.

Au calling YH

70.  GA’s case is that after receiving the documents from YH, Au was instructed by Li to review YH’s existing mortgage arrangements and make a preliminary assessment of her financial needs. With a view to helping YH to save substantial interest payments, GA was of the view that YH could restructure her existing mortgage loans and transfer them to a bank.

71.  Au then rang YH and informed YH this recommendation, and asked for YH’s consent to pass on the documents he had received from YH to Mr Dickson Wong of CCB for review.

The Langham Meeting

72.  Thereafter, Au arranged a meeting with YH and Wong to discuss the preliminary proposal for the potential transfer of Madam Yeung’s mortgages to CCB.  This was the first time that YH met Wong, who gave her a name card.

73.  In the Langham Meeting, Au and Wong explained to YH the potential transfer of YH’s existing mortgages to CCB, and Wong provided the preliminary proposal for YH’s consideration.

74.  In his evidence, Au said that at this meeting, Wong explained to YH how she might be able to save substantial interest payments, by reference to some written notes or calculations which are in substance similar to the contents of a document produced by GA (“the GA Document”)[19]. According to Au, the GA Document is an internal document produced by GA after the Langham Meeting, which was prepared based on YH’s financial information and Wong’s explanations to YH at the meeting.  The contents of that document only represent the preliminary proposal, and do not reflect Wong’s final proposal to YH.

75.  As shown in the GA Document, under the preliminary proposal, it was contemplated at the time that YH could save substantial interest payments every year, by transferring:

(1)  her pre-existing mortgage loans in the total amount of HK$29.15 million, which were calculated to be attracting annual interest payment of HK$4,097,272 at the time;

(2)  to two mortgage loans with CCB, for the total sum of HK$20 million, consisting of:

(a)  a HK$7 million loan, attracting annual interest payment of HK$420,000 (ie 6% p.a.); and

(b)  a HK$13 million loan, attracting annual interest payment of HK$682,500 (ie 5.25% p.a.).

76.  In that proposal, the total annual interest payment would be HK$1,102,500, which is substantially lower than HK$4,087,272 under the original mortgage arrangements.

77.  In the Langham Meeting, Wong also explained to YH that because she had a lot of 2^nd, 3^rd and 4^th mortgages on her properties at the time, it would be preferable for some of her old mortgage loans to first be repaid and discharged, so as to improve her credit rating, before transferring to CCB.

78.  At the end of the meeting, YH treated Au and Wong to a meal at a restaurant in Langham Hotel.

79.  YH claimed that in the Langham Meeting, Wong promised that there would be no handling fee.

80.  According to the interview record produced by GA (“the Interview Record”), YH’s file with GA was formally opened on 27 December 2014.  The Interview Record was signed by YH on 29 January 2015.

YH’s stroke in December 2014

81.  In late December 2014, YH had a stroke.  YH stayed in a hospital for about 2 weeks to receive treatment, and then was discharged.  YH and Au kept having contacts during this period.

The Mid-Jan Meeting

82.  GA’s case is that in order to transfer her existing mortgages to CCB, it would be necessary for YH to obtain a short-term loan to repay some of her existing mortgages to improve her credit rating.  For the purpose of helping YH to obtain a short term loan, in about early January 2015, Au contacted Lam of NC and Pins Credit, in respect of a short-term loan for YH.

83.  In about mid-January 2015, a meeting was held at YH’s residential clubhouse at King’s Park (“the Clubhouse”).  This meeting was attended by Lam, Wong, Au and YH.  This was the first time YH met Lam.  According to Lam, Lam gave his name card to YH, and introduced NC as a business partner of GA.

84.  According to Lam and Au, this meeting fell into two parts.  The first part was participated by Au, Wong and YH.  The second part was held between Lam and YH.

85.  It is Au’s evidence that in the first part of this meeting, Wong submitted CCB’s revised proposal for YH’s consideration in respect of her mortgage transfer to CCB.

86.  In respect of the second part of the meeting, Lam said the following in his evidence:

(1)  YH told Lam that she was a serious and active stock index investor and she had several valuable properties in Hong Kong under with her own name or jointly owned with her husband.  She wanted to have some short-term loans with the magnitude of about HK$10m to HK$20m for her to manage her cash flow and enhance her stock index speculations.  She emphasized that the principal of the loan should be capable of being repaid or increased at any time, similar to the revolving loans from banks.  She knew that interest rates charged by money lenders would be higher.  She asked Lam whether the loan could be repaid within 1 month, and Lam so confirmed with her.

(2)  YH told Lam that the Husband did not know about her stock index speculations.  YH did not want the Husband to know that the jointly owned properties were used to secure any loans for her stock index speculations.  So, YH would only offer her half share interest of the jointly owned properties as security for her loans.  Lam explained to YH that the total value of her interest in the properties to be mortgaged would affect the amount of loan that could be granted.

(3)  YH said she would like to have a HK$15m revolving loan before February 2015 and she planned to repay it in full within a month, even though she might need some further loans a few months later.  Lam suggested to YH that the loan period could be fixed as 12 months, and YH and Lam could meet up on a monthly basis to review YH’s financial needs.  YH agreed to this proposal.

(4)  YH requested that the mortgage deeds should not be registered in the Land Registry for she did not want the Husband to know about her stock index investments.  Lam refused and said that NC would need to preserve its priorities in those mortgaged properties.  Lam only agreed that NC could withhold the registration of the mortgage deeds up to the last date of the one-month priority period prescribed by law.  YH agreed and committed to repaying the loan or renewing the mortgage deeds within the one-month period.

(5)  Having reached an oral agreement in principle, YH promised to revert within a few days.

87.  According to YH, it was Wong introduced Lam in the mid-January Meeting.  Wong said that Lam was a staff member of NC.  Au, Wong and Lam told her that in order to transfer her mortgages to CCB, it would be necessary to transfer those mortgages to a subsidiary of CCB first. Thereafter, she might transfer the mortgages to CCB.  Lam told YH that he had co-operation with CCB, and the mortgages would stay in the intermediate company for only a few days.  As an experienced investor in properties, YH had never heard the requirement of having an intermediate company in order to transfer some mortgages to a bank.  YH asked whether this arrangement was normal and legal.  Au, Wong and Lam answered that the arrangement was legal, and they had handled many similar cases.  YH did not really understand the arrangement suggested by them.  All of them confirmed that there would be no handling fee. They said that the intermediate company would charge interest at the rate of 2.45%, and CCB would charge interest at the rate of 2.15%[20].  The mortgages would stay in the intermediate company for just a few days.  CCB would also rebate 1% of the loan amount to YH as a gift.

88.  YH claimed that at all times, she was under the impression that both Au and Lam were from NC.

The 29 Jan Meeting

89.  On 29 January 2015, a further meeting was held at the Clubhouse.  This meeting was attended by YH, Lam, Au, and Ho.  This was the first time that Ho met YH.

90.  According to the Agreed Chronology jointly submitted by the parties, YH signed the following documents in this meeting:

(1)  NC’s letter of offer to YH as borrower for a HK$15m revolving loan at the interest rate of 2.2% per month;

(2)  Pins Credit’s letter of offer to YH as borrower for a HK$4m loan at the interest rate of 2.2% per month;

(3)  Second mortgage over the 4 Properties in favour of NC to secure the HK$15m loan;

(4)  a confirmation letter, in which YH confirmed that she executed the mortgage to NC out of her free will without duress or undue influence, and she understood KOC acted for NC and not for her;

(5)  YH’s letter to NC for KOC for the drawdown of the HK$15m loan;

(6)  the Consultation Agreement between GA and YH (“the Consultation Agreement”), under which YH agreed to pay GA a consultation fee of HK$3m in return for the consultation service provided by GA;

(7)  Declaration to GA that GA had fully explained to YH GA’s fee and that YH freely consented to GA to manage the relevant transactions; and

(8)  The Interview Record.

91.  YH’s evidence in relation to the 29 Jan Meeting is as follows:

(1)  In her witness statement, before the meeting, Au called YH and told her that “何律師” from a law firm would be present. At the meeting, Au introduced Ho as “律師樓的律師”.   However, in a statement made by YH in a police station on 13 August 2015 (“the police statement”), YH said that Au referred to Ho as 職員.  In YH’s pleadings and in the police statement, YH stated that Ho had introduced herself as staff of KOC. Under cross-examination, YH said she could no longer remember whether Ho had said anything to introduce herself.  Ho gave YH her name card in English, but YH could not understand it.  YH did not ask anyone to translate the Ho’s title on the name card to her.

(2)  Lam, Au and Ho asked YH to sign some documents in a hurry.  Lam, Au and Ho covered the top half of the documents and very quickly flipped through the bottom parts, directing YH to sign on the necessary places. YH asked about the contents of the documents, but Au and Ho said that those documents were the documents relating to transferring the mortgages to CCB, and YH should have no reason not to trust a lawyer.  No one explained the contents of those documents to her.  After signing, YH requested but Au, Lam and Ho did not provide any copies of the documents.

(3)  The meeting only lasted 5 minutes.

92.  According to Au, Lam and Ho, Ho left the meeting before Lam and Au, as soon as she finished explaining her part of the documents and obtained YH’s signatures on the same.  Au was the last person who discussed GA’s documents with YH.

93.  Lam said the following concerning the 29 Jan Meeting in his evidence:

(1)  The meeting was the first time Ho met YH.  It was also the first time Lam introduced Au to Ho, as Ho did not know Au before then.

(2)  Ho introduced herself to YH as 職員 of KOC. At no point in that meeting did Ho tell YH that she was a lawyer.

(3)  When Lam explained the loan documents and the relating documents to YH, Ho had not yet provided her documents for YH to sign. Lam explained the letters of offer, the repayment schedule, the terms and conditions, and the copies of the MLO to YH.

(4)  Ho then explained the contents of the second mortgage in front of Lam. Ho told YH that KOC was only representing NC. She gave YH time to read the mortgage documents before she signed them, and YH did not indicate at any time that she did not understand the contents.

(5)  Neither Lam nor Ho told YH the documents were required for the transfer of mortgages to CCB, and Au, Ho and he did not tell YH that she had no reason not to trust a lawyer.

(6)  After Ho obtained signatures on the mortgage documents, she left the meeting. Ho was not present when Au asked YH to sign documents.

(7)  In this meeting, YH told Lam that she would like to reduce the loan amount in order to save interest.  As a matter of goodwill, Lam agreed to YH’s proposal and reduced the NC’s loan amount to HK$13m.

94.  Ho said the following concerning this meeting in her evidence:

(1)  On 29 January 2015, KOC received instructions from NC to prepare the second mortgage and the relating documents.  Ho therefore prepared the documents.  Ho was then invited to the Clubhouse that day by Lam to obtain YH’s signatures on these documents.

(2)  In the Clubhouse, Ho met YH and Au for the first time. Au did not introduce Ho as 何律師 or as a lawyer. Ho did not introduce herself to YH as a lawyer, but as a clerk of KOC and handed YH’s a name card which stated that she was a Senior Conveyancing Executive in English.

(3)  Ho did not know and did not enquire as to what role GA played in the transaction or whose interests they were representing, as GA was not a party to the second mortgage.

(4)  Ho then spent about half an hour to explain to YH the following documents:

(a)  the confirmation letter;

(b)  the second mortgage; and

(c)  authorization letters for arranging discharge of her previous mortgages.

(5)  Ho first explained the confirmation letter to YH. Using the Chinese version, she would point out the mortgaged properties, the amount of the loan to be advanced by the lender and the effect of the mortgage (ie the lender may take and sell the properties if YH does not repay on time).  Ho emphasized that KOC represented the lender and YH could seek independent legal advice.  She did not have to sign, but she could sign if she was all right with the documents.

(6)  Ho then explained the second mortgages to YH.  Ho also pointed out to YH that there was a Chinese version of the mortgage document behind the English version.

(7)  After explaining all the documents, Ho asked YH if she understood the contents of the documents, and YH confirmed she did.  YH did not raise any queries on the documents and signed them.

(8)  Ho did not cover or hide any parts of the documents.  She did not say that the documents were for transferring mortgages to CCB.  She also did not say that YH should have no reason not to trust a lawyer. Ho did not say all these, whether at that meeting or at any other time. She also did not tell YH the mortgage documents would only be in English.  In fact, the confirmation letter and second mortgage were both in English and Chinese. 

(9)  Ho counter-signed the confirmation letter and the second mortgage as witness to YH’s signature.  Ho then gave YH blank copies of the signed documents.

(10)  After Ho obtained YH’s signatures on the documents, Ho left the meeting by herself.  She did not stay as KOC was only instructed to deal with the second mortgage and was never asked to deal with or explain any loan agreement or consultation agreement.  Ho confirmed that at the meeting, she did not hear or see anything relating to any consultation agreement or the HK$3m consultation fee.

(11)  Ho also sent copies of the signed documents to YH after the meeting.

95.  According to Au, 4 documents relating to GA were signed by YH in the latter part of the meeting:

(1)  the Consultation Agreement;

(2)  a Declaration (“the Declaration”), in which YH declared that GA’s representative had fully explained to her in respect of GA’s fees, and she had freely consented to GA to manage the relevant transactions, and she had no intention of making any similar loan applications within 6 months of the Declaration;

(3)  an Interview Record, which reflected the broad types of work rendered by Global Asia in the engagement; and

(4)  an Invoice dated 30 January 2015 in respect of the “Mortgage consultation fee for Approved Loan” in the sum of HK$3m (“the Invoice”). 

96.  Au said that before YH signed these documents, he explained the documents to her and let her read the same.

Between February to May 2015

97.  YH claimed that after the 29 Jan Meeting, Au, Lam and Ho came to the Clubhouse to meet YH every month.  They asked YH to signed various documents in each meeting.  They told Ho that those documents were mortgage documents.  All the matters occurred in the 29 Jan Meeting repeated in these meetings.  Every meeting lasted 5 minutes.

98.  Lam said that at the end of each month in February, March, April and May 2015, he gave oral instructions to Ho to prepare new mortgages for YH to sign.  At every meeting from February to May 2015 in the Clubhouse, Ho explained the mortgages to YH in front of Lam.  Ho gave YH time to read the mortgage documents before signing them, and YH did not indicate at any time that she did not understand the contents.  Lam also explained each letter of offer, including the Letter signed in May, to YH.

99.  It was only until early March 2015, KOC was finally able to obtain all the figures of the sums required for discharging the previous mortgages from the previous mortgagees of the 4 Properties.  On 3 March 2015, NC deposited HK$15m and Pins Credit deposited HK$4m into KOC’s account.  Using these loan proceeds, KOC discharged the mortgages concerning the 4 Properties.  After deducting all the amounts paid to the previous mortgagees, the set-up fee mentioned in the below, and KOC’s professional fees and disbursements, the remaining sum of HK$184,043 was paid to YH on 12 March 2015. 

100.  Since NC had agreed to reduce the loan amount from HK$15m to HK$13m, on 12 March 2015, KOC returned HK$2m to KOC.

101.  Ho said the following in her evidence:

(1)  After the 29 Jan Meeting, Ho liaised with YH’s prior mortgagees to ask for the amounts of loans outstanding.  Ho kept in continuous contact with YH to notify her of the outstanding sums when KOC was informed of the same by the prior mortgagees.  As of the date of KOC’s invoice on 3 March 2015, all the prior mortgagees had reverted save for one, ie SHK Finance Limited.  It was 9 March 2015 when SHK Finance Limited finally reverted, and so YH received the fax of a completion statement from KOC on the same day.  KOC then used the funds advanced by NC and Pins Credit, in early March 2015, repaid the 10 Loans.

(2)  On or before 3 March 2015, Ho was informed that YH had to pay NC a set-up fee of HK$190,000.  Ho also received an authorization letter signed by YH authorizing New Century Corporate Strategy Limited to receive the set-up fee.  Ho therefore arranged for payment of HK$190,000 to New Century Corporate Strategy Limited.

(3)  After the discharge of the previous mortgages, Ho was provided with a letter from NC dated 10 March 2015 instructing KOC that the loan to YH was to be reduced by HK$2m. Ho therefore arranged for payment of HK$2m to NC and the balance of the loan proceeds of HK$184,043 to YH.

(4)  Ho met YH at the end of every month from February to May 2015 for the purpose of the execution of renewed second mortgages in favour of NC as security for the NC/Pins Credit loans.

(5)  At each meeting, Ho would provide (a) the confirmation letters[21]; and (b) second mortgages[22] for YH to sign first, and then she would leave after the documents were signed.  She was not present when Lam asked YH to sign any documents.

(6)  Ho explained the contents of the confirmation letters and each second mortgage to YH before she signed them.  Ho allowed YH time to review the documents, and YH confirmed that she understood them before she signed on each occasion.  YH did not indicate at any time she did not understand the contents nor raised any questions on the documents.  Each of the confirmation letters and second mortgages were in both English and Chinese.

(7)  Ho would point out the identities of the borrower and the lender, the relevant properties, the signature page, and explain that the terms of the mortgage contained the procedure for the lender to collect the properties if YH did not repay.  She would then show YH the Chinese version of the mortgage terms and give it to YH to read, but YH did not appear to read it.  Ho also explained that the details of the mortgage were filled out in the English version of the mortgage only, because it was provided in the mortgage that in case of a discrepancy, the English version of the mortgage would prevail.

(8)  YH did not ask for copies of the documents she signed on each occasion.  Nevertheless, after every meeting, Ho arranged to post true copies of each renewed second mortgage, each set of confirmation letters, and all relevant receipts to YH, in accordance with KOC’s usual practice.

102.  It is Au’s evidence that, in the few months after the 29 Jan Meeting, he saw YH around two times to collect her cheques for payment of interest to NC.  However, Au did not attend any subsequent meetings held with Ho and/or Lam at the end of each month.  Lam and Ho in their evidence also confirmed that Au did not attend the subsequent meetings.

103.  As per the Agreed Chronology, on 28 May 2015, YH signed (a) the Letter, and (b) a letter of offer from Pins Credit for the HK$4m loan.

June 2015

104.  As per the Agreed Chronology,

(1)  On 3 June 2015, CCB issued facility letters to YH in respect of a loan of HK$13m at the prime rate, and to Fortone in respect of a loan of HK$7m at the higher of 0.75% per annum over prime or 2.75% per annum over HIBOR.

(2)  On 17 June 2015, CCB gave instructions to KOC to prepare mortgages and rental assignments to be granted over Laguna City and carpark, King’s Park Villa and carpark, and Pacific Trade Centre, relating to a loan of HK$13m and a loan of HK$7m from CCB to YH and Fortone respectively.

(3)  A few days before 26 June 2015, NC instructed KOC to prepare documents to renew the second mortgage, but only in relation to Larvotto (Tower 8).

105.  In his evidence, Lam said that a few days before 30 June 2015, YH informed him that she would repay about HK$10m to NC by the end of June 2015.  Taking into account this intended repayment, NC agreed to modify the second mortgage to be executed by YH in late June 2015 to make it only cover Lavotto (Tower 8).

The 26 Jun Meeting

106.  There is no dispute that there was a meeting in KOC on 26 June 2015, attended by YH, the Husband, Au, and Ho.

107.  YH said the following in respect of this meeting:

(1)  YH and the Husband did not go to the meeting with Au as she was afraid that the Husband might find out that she was being cheated.

(2)  The meeting was held in a small meeting room in KOC with Ho and Au.  Au would walk in and out of the meeting room, move documents around, and indicate where she and the Husband needed to sign.  YH therefore thought Au was a staff member of the law firm, or KOC was established by Au or Lam’s companies.

(3)  YH did not have a chance to read the contents of the documents in detail.  Despite YH’s requests, Ho did not explain the contents to YH.  When signing, as with the previous meetings, the page would be quickly flipped to the signature page and the place for the signature would be pointed to and YH would be asked to sign.

(4)  After signing the documents, Ho told YH to leave cheques of HK$17m with KOC as the payee, as this was CCB’s request, otherwise CCB would not release the loan to YH.

(5)  Ho made threats to YH saying something would happen to her if she did not write the cheques to KOC and there were people waiting for her outside KOC’s office.  Further, Ho threatened that “they” (without defining who) stood outside the office and said YH had to stay, and that “they” would not release her title deeds, which were being kept by KOC, if she did not follow through with the CCB mortgage.

(6)  Under cross-examination, YH claimed that she had never seen the Second Mortgage before Day 7 of the Trial, and she was not sure whether the signature on was hers[23]: the 楊 may have been signed by her but the 紅 definitely was not.

108.  According to Ho, matters concerning this meeting are as follows:

(1)  On 17 June 2015, CCB issued written instructions to KOC to prepare mortgages and rental assignments over Laguna City and carpark, King’s Park Villa and carpark, and Pacific Trade Centre. 

(2)  A few days before the 26 June 2015 Meeting, NC contacted Ho with verbal instructions to KOC to prepare documents for the renewal of the second mortgage, but only over Larvotto (Tower 8). Ho therefore prepared the mortgage documents for YH to sign “in escrow” at the 26 Jun 2015 Meeting.

(3)  On 26 June 2015, YH, the Husband, and Au attended a meeting at KOC’s office.  Ho did not introduce Au as a member of staff of KOC.

(4)  Ho explained to YH, and obtained YH’s signature on, the Second Mortgage in favour of NC.  According to Ho, the Second Mortgage was signed in the 26 Jun Meeting in escrow.

(5)  Ho also explained to YH, and obtained YH’s signature on, (a) standard form warning notices, (b) surety confirmation letters, (c) Guarantor / Security Provider Acknowledgments, (d) the CCB mortgages, and (e) rental assignment.

(6)  YH gave Ho copies of the Consultation Agreement, the Declaration and the Invoice.  This was the first time Ho learnt about the consultation fee payable to by YH to GA and the existence of these three documents.  YH also orally told Ho to pay HK$3m to Au.  

(7)  Ho then went to Clifton’s office and told him that YH had signed an agreement to pay a consultation fee to GA, and YH wanted KOC to pay out this fee from the loan proceeds granted by CCB.  Clifton said he was not prepared to approve such payment unless YH gave written authorization to KOC to do so, and asked Ho to prepare a written authorization letter for YH to sign.

(8)  Ho then went back to her desk and drafted an authorization letter (ie, the HK$3m Authorization Letter) based on the copy of the Invoice given to her by YH.  Ho showed the draft authorization letter to Clifton for his review and approval. Clifton reviewed and approved the same, then Ho went back to the meeting room to explain to YH and to obtain her signature on the HK$3m Authorization Letter.

(9)  At the meeting, Ho explained the contents of each of the documents to YH before she signed them.  At no point did YH indicate she did not understand the contents, nor did she raise any questions as regards the nature of the documents she was signing.  Ho also did not tell YH that YH should have no reason not to trust a lawyer.

(10)  YH gave Ho 2 post-dated cheques (both dated 3 July 2015) of HK$13m and HK$4m and asked Ho to put KOC’s name as the payee.  YH then asked Ho to pay the HK$17m as follows: (a) HK$4,088,000 to Pins Credit; (b) HK$3m to GA, and (c) the remainder (ie HK$9,912,000) to NC. YH did not say that the entire HK$17m was to be used for repayment of NC and Pins Credit.

109.  Clifton’s evidence only concerns the 29 Jun Meeting.  His evidence is in line with Ho’s evidence.

110.  Au said the following in his evidence in respect of the 26 Jun Meeting:

(1)  Before the meeting, YH had already agreed with Au to pay GA HK$3m out of the CCB loan proceeds. Au knew YH had also agreed to repay the NC loan in the sum of HK$10m, and to repay the Pins Credit loan in the sum of HK$4m.

(2)  Au met YH downstairs at KOC’s law firm, not in the office.

(3)  The 26 Jun 2015 Meeting was the second time Au meeting Ho. At the meeting, Au witnessed Ho explaining the CCB and NC mortgage documents to YH, and Ho gave YH time to read them before YH signed them. YH did not indicate at any time that she did not understand the contents of the documents.  At the time, YH wished to finish signing quickly because the Husband was there and she did not want him to know about these matters.  YH did not have many questions.

(4)  Au had brought copies of the Consultation Agreement, the Declaration and the Invoice to KOC’s offices.  When the Husband left the meeting room and went downstairs to make an oath, Au handed the documents to YH, who later handed them to Ho.

(5)  YH asked Ho to pay the HK$3m consultation fee to GA out of the cheques she had given to KOC that day.  When YH told Ho about the Consultation Agreement, this was the first time Ho came to know of the agreement and the HK$3m consultation fee.

(6)  Ho then left the meeting room to prepare a written authorization letter for YH to sign to confirm her instruction to pay HK$3m to GA.  When Ho returned, Ho explained the contents of the authorization letter to YH before YH signed it. Au confirmed that Ho did not do anything or say anything to force or pressurize YH to sign the document.  Au then saw Ms Yeung signed the HK$3m Authorization Letter.

(7)  Au explained that he wanted YH to pay the HK$3m through KOC because his impression of YH from January to June 2015 was that she might not keep her promises, and Au felt that paying through a law firm would reduce any chance of misunderstandings.

Matters after the 26 Jun Meeting

111.  The drawdown of the CCB loans took place on 3 July 2015.

112.  According to YH, the following events occurred:

(1)  From 6 July 2015 onwards, YH called and whatsapped Ho many times requesting receipts for the HK$17m, but Ho never picked up her calls.  After many repeated chasers, YH “強硬的對何小姐説: ‘你不給我收據我今天就親自上你律師樓追收據’ ”.  YH had used “whatsapp 去追她, 我説已經過了二十天”. 

(2)  YH emphasized that she only entered into the CCB mortgage because Wong from CCB had told her she had to do so to “free” herself from the triad money lenders, and assured her that she only needed to stay with CCB for 2 months before she could transfer her mortgage away.  When cross-examined as to why she maintained her mortgage loan with CCB for more than 2 years, YH said that because of this litigation, she could not obtain a mortgage anywhere else (notwithstanding that the documentary evidence showing that she had obtained numerous mortgage loans immediately after the CCB mortgage).  She then said that she left CCB after 2 years because she “討厭” them.

(3)  On 23 July 2015, Lam called YH, telling her that she still owed them HK$3m.  YH called Ho asking about the whereabouts of her HK$3m, and Ho told her it was paid to Au as a consultation fee and could not be returned.  YH told Ho that she could call the police, evoking a strong reaction from Ho, who told her that calling the police would not be of use, and that she could try discuss with Lam and Au for a discount.  After various calls to Au and Wong, YH called the police on the same day.  The police made some notes and YH signed against them[24].  On 24 July 2015, YH engaged ONC Lawyers (“ONC”).  On 13 August 2015, YH made a police statement (“the police statement”).  According to YH, she was accompanied by 2 solicitors from ONC while she was making the police statement.  The police statement was read by the 2 solicitors.  After the 2 solicitors reading the police statement, YH signed the same.

113.  Ho said that after the 29 Jun Meeting, she arranged to post copies of the signed documents and receipts to YH as per her usual practice.  She also arranged to fax receipts and relevant documents to YH on 21 July 2015 after YH whatsapped her on 20 July 2015 to ask for such receipts.  YH did not call or whatsapp Ho repeatedly to chase for receipts.  Ho recalled that YH called her once to ask where the HK$3m had been paid to, and Ho reminded YH that KOC had paid this sum to GA pursuant to her written instructions. 

114.  Au said that in early July 2015, Ho helped YH settling the mortgage consultation fee by depositing HK$3m into GA’s account.

ANALYSIS

Documents signed by YH

115.  There are various documents bearing YH’s signatures in these proceedings.  There is no allegation in YH’s pleadings that any document purportedly bearing her signature in fact is not a document signed by her.  YH has not filed and served any notice disputing the authenticity of the documents disclosed by all the other parties in these proceedings.  While YH was giving evidence in the witness box, she alluded that some documents purportedly bearing her signatures might not be signed by her.  However, during the final submissions stage, I asked Mr Law, and Mr Law confirmed that he was not running a case involving forgery.  I would proceed on the basis that all the documents bearing YH’s signatures are documents signed by YH.

116.  Whether YH is bound by the documents signed by her, including the Letter, the Second Mortgage and the HK$3m Authorization Letter, would have a significant impact on the outcome of these proceedings. The answer to this question depends upon whether YH can prove any vitiating factor as pleaded in her pleadings.  It is important to bear in mind that any vitiating factor which has not been pleaded but has only been raised by YH in her oral evidence or in Mr Law’s submissions is not relevant.  As said by Ma CJ in Kwok Chin Wing, one cannot slip in an unpleaded issue by saying that there is evidence on the issue.   

Benefit to YH in the mortgage restructuring exercise

117.  Having reviewed the documentary evidence, I am of the view that the mortgage restructuring exercise is in fact beneficial to YH.

118.  With the funds from NC and Pins Credit (in the total sum of HK$17 million), in early March 2015, YH fully repaid the 10 Loans, in the total principal amount of HK$16.15m, together with interest, costs and disbursements.

119.  From April to July 2015, YH paid four instalments of interest to NC and Pins Credit, in the total sum of HK$1,366,000, comprising:

(1)  HK$374,000 (paid on 9 April 2015);

(2)  HK$374,000 (paid on 4 May 2015);

(3)  HK$309,000 (paid on 3 June 2015); and

(4)  HK$309,000 (paid on 7 July 2015).

120.  Although the interest rate charged by NC (ie 26.4% p.a.) is higher than the average interest rate charged by the various money lenders under the 10 Loans (ie 21.1% p.a.), the following should be taken into account:

(1)  Under the original mortgage arrangements in respect of the 10 Loans, YH would have had to pay:

(a)  HK$283,570 by way of interest per month (HK$3,402,840 / 12); and

(b)  a total of HK$1,134,280 (HK$283,570 x 4) for the months from April to July 2015.

(2)  While YH has paid HK$374,000 of monthly interest to NC for all the four months:

(a)  the extra amount of interest payable per month would have been HK$90,430 per month (HK$374,000 – HK$283,570); and

(b)  the total amount of extra interest payable from April to July 2015 would have been HK$361,720 (HK$1,366,000 – HK$1,134,280).

(3)  By letters of offer dated 3 June 2015, CCB extended two mortgage loans to YH, in the sums of:

(a)  HK$13 million, with interest at prime rate per annum (ie 5.25% p.a.), and

(b)  HK$7 million by way of overdraft facility, with interest at 0.75% p.a. over prime (ie 6% p.a.).

(4)  The drawdown of the loans took place on 3 July 2015.

121.  In other words, after the transfer of mortgage loans to CCB for a total loan amount of HK$20m (which is higher than HK$16.15m under the original 10 Loans):

(1)  The total amount of annual interest payments under the CCB Loans is HK$1,102,500.

HK$13,000,000 x 5.25% p.a.	HK$682,500 p.a.
HK$7,000,000 x 6% p.a.	HK$420,000 p.a.
Total	HK$1,102,500 p.a.

(2)  The original amount of annual interest payments under the 10 Loans is HK$3,402,840 p.a.  Accordingly, after transferring the mortgages to CCB, YH could save interest payments in the sum of HK$2,300,340 p.a. (HK$3,402,840 p.a. – HK$1,102,500 p.a.).

122.  This is obviously a substantial reduction in YH’s annual interest expenses.  Further, YH would be able to utilise a higher loan amount from CCB (HK$20m) compared with the 10 Loans (HK$16.15m).

123.  Even after taking into account the cost of this restructuring arrangement, YH have still obtained a substantial benefit from this transfer.

124.  The total cost of the restructuring is as follows:

Consultation fee to Global Asia	HK$3,000,000
Extra interest paid to New Century & Pins Credit from April to July 2015 •   Interest payable to New Century and Pins Credit for those months: HK$17,000,000 x 2.2% p.m. x 4 months = HK$1,496,000[25] •   Interest which would have been payable to previous money lenders under the original 10 Loans for those months: HK$3,402,840 p.a. / 12 months x 4 months = HK$1,134,280 •   Amount of extra interest payable for those months: HK$1,496,000 – HK$1,134,280 = HK$361,720	HK$361,720
Total cost of mortgage restructuring	HK$3,361,720

125.  After around 1.5 years for the total cost of restructuring (HK$3,361,720) to be set off against the total sum of interest payments saved per year (HK$2,300,340), YH would be able to benefit from substantial reductions in interest payments whilst enjoying a higher loan amount from CCB.

126.  This benefit to YH in the restructuring exercise has to be borne in mind in assessing the evidence.

Witnesses’ evidence - Overview

127.  Having seen and heard the evidence from the witnesses, in my judgment, it is clear that YH is a dishonest witness.  She is evasive and always avoids answering questions by arguing with counsel and by repeating only what she wanted to say.  The evidence given by her in the witness box is materially different from her pleadings and contradicted by contemporaneous documents.  I refuse to accept her evidence and reject her evidence in its entirety.

128.  On the other hand, Lam, Au, Ho and Clifton are honest and reliable witnesses.  They are forthcoming and straightforward. Their evidence is inherently probable and is consistent with the contemporaneous documents.  I accept their evidence.

YH

129.  It is plain and obvious that YH has given untruthful evidence on various material issues.

130.  YH spent a lot of time in her evidence emphasizing that she did not know or could not understand what she had signed, and portraying herself as someone who was easily influenced by others.  These assertions are untrue.

(1)  YH came to Hong Kong from the Mainland in 1983.  Although she has been living in Hong Kong for several decades, on Day 1 of the trial, YH claimed that she had difficulties in reading traditional Chinese characters and could only read 20%.  However, as a matter of fact, she could read out the oath in traditional Chinese characters without the necessity of having any assistance.  She could also read her witness statement and the police statement (both statements are in traditional Chinese characters).  YH also communicated with Ho through whatsapp by using traditional Chinese characters.  Her own signature is also written in traditional Chinese characters.  After further questioning, YH changed her evidence and eventually accepted that she could in fact understand most traditional Chinese and had no difficulty reading traditional Chinese characters.

(2)  YH alleged that she had never seen the Letter, the Second Mortgage or the Consultation Agreement (which were in Chinese or had Chinese versions) before the commencement of the trial.  However, these are documents mentioned in the pleadings, and YH must have given instructions to her lawyers to plead her case in relation to all these documents.  It cannot be believed that YH only saw these documents for the first time when she was in the witness box.  She continuously alleged that the signature on the documents was not hers or that she was unsure whether it was hers or not.  However, YH has not pleaded any forgery case in her pleadings and has not filed and served any notice disputing authenticity.  YH has been legally represented in these proceedings at all times.  Her evidence that the signatures on these documents are not hers or may not be hers is incapable of being believed.

(3)  As shown in the documentary evidence, YH was the company secretary to Fuk Luen Clothing Trading Limited (“Fuk Luen”)[26] at least until May 2020.  She was also the director of Fuk Luen and Fortone at all material times.  Since the 1990s to January 2015, in respect of the 4 Properties in these proceedings, she had executed no fewer than 30 mortgages.  Further, even after the CCB loans were granted in June 2015, YH continued to enter into at least 21 mortgage loans with various money lenders in respect of the 4 Properties.  In my view, YH is a commercially astute person, who is capable of understanding commercial agreements, including loan agreements, mortgage agreements, and consultation agreements.

(4)  YH claimed that she had never seen money lender loan documents that were in English only.  However, when various English-only mortgage loan documents she had previously entered into were put to her, YH then alleged that she trusted the money lenders whom she had known for about 10 years, and that the mortgagees had lawyers who explained the documents clause by clause to her.

(5)  YH repeatedly insisted that if no lawyer were present, she would not have signed any mortgage documents.   However, as shown in the documents produced in these proceedings, she had clearly signed mortgage documents in the presence of only a clerk before.  These included mortgage loans carrying high interest rates of 30% and 21.6% p.a.

131.  YH would also conceal the truth, introduce wholly new allegations and grossly exaggerate her evidence, to portray the impression that she had been cheated or pressurized into entering into the subject transactions in these proceedings. 

(1)  YH gave evidence for the very first time during cross-examination that serious threats were made to her by Lam, Au, and Ho. However, her evidence as to these threats changed from time to time throughout her cross-examination.

(a)  On Day 2 of the trial, YH alleged she paid 4 months of interest to NC because Lam had threatened her in a meeting on or about 20 June 2015 that he would burn down her house, beat her up, trouble her family members, pour red paint and “renovate” her place.

(b)  On Day 6, YH said every time Lam, Au and Ho met her, including when they all came to collect cheques from her, all the three of them would say that if she did not follow the rules (“如果你不跟規矩”), on the lighter side, they would 釘契 and sell her house so she could become homeless. On the more serious side, they would pour red paint, help her to renovate, and post her photographs on the street.  YH said every time they impliedly made these threats. Later, YH said that they had expressly made these threats.  However, she could not remember who had said what at when.

(c)  When put to her that Ho was never present to collect cheques from her, YH insisted that all the three of them came to collect the cheques and Ho was definitely there on 9 April and 3 May 2015.  She said that Ho would sometimes find her not for the purpose of singing any document, but only for discussing matters with her.  However, YH later agreed that Ho only ever met her for the purpose of signing mortgage documents at the end of each of January to June 2015.

(2)  YH alleged that she only entered into the CCB mortgages because Wong from CCB had told her she had to “free” herself from the triad money lenders, and assured her that she only needed to stay with CCB for 2 months before she could transfer her mortgages away.  When asked why she then stayed with CCB for more than 2 years, YH could not offer any satisfactory explanation.  She first said it was because she was subject to litigation and hence could not have mortgage at anywhere else.  However, when it was pointed out to her that the present litigation had started only 6 months after her entry into the CCB mortgages, she insisted she was embroiled in litigation, everything was a mess and one of her properties had been charged.  Despite all this, the objective fact is that she could still manage to mortgage King’s Park Villa, Pacific Trade Centre and Laguna City a total of 21 times to various money lenders in 2016 and 2017.  Facing all these, YH then said that she left CCB after 2 years because she hated them. 

(3)  YH said that in the 26 Jun 2015 Meeting, she definitely did not know the CCB loans had been granted on 3 June 2015, and was informed of the CCB loans in July by Wong.  Later, YH said that she saw the CCB facility letters only for the first time on Day 6 of the trial.  However, YH subsequently changed her evidence and said she could not remember when she had seen them first but it was after she had issued the cheques at KOC’s offices.  Later, YH said that she first saw the facility letters when the first counsel, ie Ms Leung, cross-examined her.  YH’s evidence cannot be true.  YH must have signed the facility letters before CCB granting the mortgage loans to her.  As submitted by Ms Tong, YH was trying to conceal the fact that in the 26 Jun 2015 Meeting, she was willing to leave post-dated cheques as she knew her CCB loans had been approved and would be available shortly after.

(4)  YH claimed that she did not know how to calculate interest, and she did not know the difference between monthly interest and yearly interest.  Being an experienced investor in the properties market who had entered into numerous mortgages before 2015, this allegation is inherently improbable.  The only reasonable explanation for YH putting forward this allegation is, as submitted by Ms Tong, to cover up the fact that YH could full well calculate and in fact aware of the financial benefit to herself of the entire mortgage restructuring exercise.

(5)  YH also alleged that after she became aware that HK$3m had been taken from her, she asked Ho to give her an explanation.  Ho told her that “they” (without specifying whom) had split her money, used the money to gone on holiday and had spent it all.  This is a very serious allegation.  However, this allegation was not raised in the police statement, which was made less than a month after she had allegedly found out the dissipation of the HK$3m.  YH was accompanied by 2 solicitors retained by her when she was making the police statement.  The allegation was also not raised in her witness statement filed in these proceedings.  YH’s explanation was that she did not wish to think about these matters before, but she was slowly recalling these events while she was giving evidence in the trial.  In my view, this explanation is incapable of being believed.  The HK$3m is a subject matter in these proceedings.  If there is any truth in this allegation, there would be no reason why YH did not raise the allegation at any time before she entering the witness box.

132.  Throughout her evidence, YH tried to avoid mentioning that Au was a mortgage consultant from GA.  YH claimed that she was under the impression that Au was from ICBC, NC and/or KOC.  YH’s evidence is incapable of being believed.

(1)  On Day 4 of the trial, YH claimed that she saw the Consultation Agreement for the first time and she had never seen it before that.  This cannot be true.  It is an undisputed fact that the signature on the Consultation Agreement is YH’s signature.  The Consultation Agreement has been raised in the pleadings and disclosed by GA a long time ago before the commencement of the trial.  YH must have seen the Consultation Agreement before the commencement of the trial.  Having seen and signed the Consultation Agreement, YH must know the existence of GA and the role of GA in the mortgage restructuring exercise.

(2)  It is also an undisputed fact that YH signed the HK$3m Authorization Letter.  The HK$3m Authorization Letter is also evidence showing that YH in fact has knowledge as to the existence of GA and its role in the mortgage restructuring exercise.

(3)  According to YH, Li and Wong both gave her their name cards, which stated they worked at ICBC and CCB respectively.  YH remained skeptical as to whether they really worked at those banks, and so she made calls to the banks to check their identities.   She stated that she harboured similar suspicions over Au’s identity after the IFC meeting.   Yet, YH made no attempt to ask Au for his name card or to confirm the identity of Au.  When asked why she would trust Au despite the fact that he did not give her his name card, YH simply said she would take Au’s words as the truth (referring to Au being staff of both ICBC and NC).  YH’s answer is highly out of character with her usual distrust of other people.

(4)  YH could not give any satisfactory answer as to (a) why it was not odd that ICBC staff would tell her to bring business to a competitor, CCB, and (b) why she thought Au was from KOC and did not attempt to clarify what his role was there, despite also believing he was from ICBC and New Century.

(5)  In my view, all YH has said is try to cover up the fact that she knew that Au was from GA, and she also knew the role of GA in the mortgage restructuring exercise. 

133.  Apart from all the above, I would also draw adverse inferences against YH by reason of YH’s failure to call the Husband and YH’s domestic helper to give evidence in these proceedings, and YH’s non-disclosure of the police notes and the other police statements.

(1)  The Husband was present in the 26 Jun 2015 Meeting and would have been able to give evidence on the allegations concerning the events in that meeting, including the signing of the HK$3m Authorization Letter by YH.  However, YH did not call the Husband to give evidence in these proceedings.  YH explained that this was because the Husband began suffering from dementia 1-2 years ago.  However, no documentary evidence concerning the Husband’s health has been produced.  Even it is true that the Husband has been suffering from dementia for 2 years, the Husband’s health problems only commenced in about 2018, ie about 3 years after the occurrence of the events in 2015.  There is no reason why a statement from the Husband was not made during at any time between 2015 and 2018. 

(2)  Further, under cross-examination, YH admitted that the Husband was still able to go into work for several hours a day until the beginning of Covid-19 earlier this year, and the Husband was still discharging his duties as a director of their two companies, ie Fuk Luen and Fortone.   In the light of these admissions, it is extremely doubtful that the Husband was not able to give evidence in the trial of these proceedings.

(3)  According to YH, her domestic helper was accompanying her in all the meetings from January to May 2015.  That being the case, the domestic helper would be able to tell what happened in those meetings.  The domestic helper’s evidence would be relevant to the improprieties occurred in these meetings as alleged by YH.  However, YH did not call the domestic helper to give evidence at the trial.  Under cross-examination, YH said the domestic helper might give evidence and she brought her along to the trial in case that the domestic helper might be required to give evidence.   However, YH has been legally represented at all times in these proceedings.  The fact is that YH has never filed and served a witness statement of the domestic helper in these proceedings, and there has never been an application from YH’s side to call the domestic helper to give evidence in the trial.  I do not see any satisfactory explanation from YH for not doing all these.

(4)  Under cross-examination, YH mentioned the existence of the police notes taken on 23 July 2015.  She also said that apart from the police statement, there were some other police statements.  These police notes and the other police statements would show whether YH’s complaints made to the police are consistent with YH’s allegations in these proceedings.  As to why all these had not been disclosed, YH said she needed to go back to search the documents.  This is not a satisfactory explanation.  These proceedings were commenced in 2015 and YH has been legally represented at all times.  YH had ample time to prepare and to disclose all the relevant documents before the commencement of the trial.  YH has simply failed to do what ought to have been done.

134.  In my judgment, YH has not provided any satisfactory explanation as to the absence of the aforesaid witnesses and the non-disclosure of the said documents in these proceedings.  I draw an adverse inference against YH that the evidence of these witnesses, and the contents of those documents, would not assist YH’s case.

135.  In light of the above, I reject all the evidence given by YH.

Lam, Au, Ho and Clifton

136.  Having seen and heard the evidence, I am of the view that Lam, Au and Ho are honest witnesses and their evidence is in line with the documents.

137.  I observe that there is a minor discrepancy among Lam, Au and Ho in relation to who was the first one explaining documents to YH in the 29 Jan Meeting, Lam or Ho.  According to Lam, he was the first one explaining documents to YH in that meeting.  However, Ho said she explained her documents to YH first and then she left the meeting.  Au said that Lam and Ho explaining documents to YH first (without specifying who was the first one), and thereafter Au explained his documents to YH.  Given the long lapse of time, it is understandable that the witnesses may have different recollections as to the minor details of some events.  Notwithstanding this minor discrepancy, I accept that all the documents signed by YH in fact had been explained to her before YH signing the same.  Further, YH was given the opportunities to read the documents before signing the same.  No one prevented her from reading any document or any part of any document before YH signing the same.

138.  Clifton’s evidence mainly concerns the 26 Jun 2015 Meeting:

(1)  He only came to know the Consultation Agreement when Ho went into his office and told him the same on 26 June 2015 Meeting.  Ho told Clifton that YH had signed an agreement to pay a consultation fee to GA and wanted KOC to pay out this fee from the loan proceeds granted by CCB.  Ho showed him some documents, including the Invoice.

(2)  Clifton told Ho that he was not prepared to approve this unless KOC had a written authorization from YH to do so.  He asked Ho to prepare a written authorization letter for YH to sign.

(3)  Ho went to her desk to draft an authorization letter and then showed it to Clifton for his approval.  Clifton approved the draft prepared by Ho, after which Ho arranged for YH to sign the same.

(4)  After seeing the HK$3m Authorization Letter signed by YH, Clifton gave his approval for a cheque to be issued by KOC to GA for HK$3m.

139.  Clifton also said that it was usual for a mortgagor to pay the mortgagee’s legal fees by settling the fees directly with the mortgagee’s solicitors.  That meant KOC’s legal fees would be paid from the loan monies advanced by the mortgagee to the mortgagor borrower.  This has always been the usual practice of KOC, and at the two other law firms Clifton worked at prior to KOC.  KOC would still regard the mortgagee as the firm’s client, from whom they took instructions.

140.  Mr Law submits that the evidence given by the other parties’ witnesses is not credible.  Mr Law also submits that adverse inferences should be drawn against the other parties’ cases because of the absence of some witnesses and the non-disclosure of some documents.  Mr Law says the following in his submissions:

(1)  Lam failed to mention in his 2 witness statements that in fact YH has overpaid a certain sum to Pins Credit, and Law only revealed this under cross-examination.

(2)  Lam said he did not have any recollection of a document in the trial bundles[27].  On the face of the document, the document is a letter to NC and KOC, dated 29 January 2015 and signed by YH.  In that letter, YH referred to the loan amount of HK$15m, and gave instructions to NC and KOC to issue cheques to pay certain sums by deducting the same from the HK$15m.  Mr Law argues that Lam should be disbelieved.

(3)  An adverse inference should be drawn against NC, for NC has failed to disclosed the name card given by Lam to YH in the Mid-Jan Meeting.

(4)  Au’s oral evidence substantially deviated from Au’s witness statement.  The details of the IFC Meeting and the details of the Park Meeting mentioned by Au in his oral evidence have not been set out in Au’s witness statement.

(5)  An adverse inference should be drawn against GA, for GA has not called Li to give evidence in the trial.

(6)  Ho and Clifton should not be believed, for (a) they have made some clarifications at the trial after filing their witness statements; (b) KOC acted for CCB and NC when there was “potential conflict of interest”, and (c) a lot of documents prepared for YH were ill-prepared yet bore YH’s signatures.  These allegations are plainly without merit.

141.  With respect, I am of the view that there is no merit in these submissions.

(1)  While it is true that Law has not mentioned the overpayment by YH to Pins Credit in his 2 witness statements, this criticism must be viewed in context.  The 2 witness statements of Lam are prepared to meet YH’s case in these proceedings.  In these proceedings, YH is not disputing the amount of the outstanding loan owed to NC, but is disputing the liability by relying upon the misrepresentations, non est factum, and the undue influence pleaded in her pleadings.  Understandably, Lam would not be focusing on the quantum issue when he was preparing the 2 witness statements.  When being asked on the overpayment matter, Lam frankly agreed that YH had overpaid a certain sum to Pins Credit, and he would be willing to deduct the said sum in NC’s claim.  In my judgment, Lam’s credibility is not affected by this criticism.

(2)  As to the document[28] in respect of which Lam said he did not have any recollection, on the face of that document, the document is a letter to NC and KOC, dated 29 January 2015 and signed by YH.  In that letter, YH referred to the loan amount of HK$15m, and gave instructions to NC and KOC to issue cheques to pay certain sums by deducting the same from the HK$15m.  Given the long lapse of time, Lam’s answer is not a surprise.  Cross-examination is not a test of a witness’ memory[29].  The fact that Lam has no recollection of this document, without anything more, cannot lead to any adverse inference against Lam.

(3)  In respect of the name card given by Lam to YH in the Mid-Jan Meeting, it is common ground that this incident did occur.  So, that name card would be a document in YH’s possession, not in Lam’s possession. The one who should disclose that name card is YH, not NC.

(4)  As to the absence of details of the IFC Meeting and the details of the Park Meeting in Au’s witness statement, as rightly submitted by Ms Wong, the real issue between YH and GA is the Consultation Agreement, which was signed by Au in the 29 Jan Meeting. Naturally, Au would focus on the 29 Jan Meeting in his witness statement.

(5)  In respect of not arranging Li to be a witness in the trial, there is no reason why GA should do so.  Even according to YH, Li only attended the IFC Meeting and the Park Meeting.  YH has not made any allegation that GA has done anything improper in the IFC Meeting and in the Park Meeting.

(6)  The criticisms against KOC also have no merit:

(a)  The corrections made by Ho and Clifton in examination in chief are minor clarifications, such as the dates of the February to May 2015 meetings, which are not disputed by any party, including YH.  As a matter of fact, Mr Law did not confront Ho or Clifton during cross-examination in respect of those clarifications.  In these circumstances, it is not open to Mr Law to criticize Ho and Clifton based upon those clarifications.

(b)  It has never been pleaded by YH that KOC was in a position of “potential conflict of interest” by acting for both CCB and NC. Under cross-examination, Clifton has explained that KOC was not in any position of conflict in acting for both CCB and NC, and that if, before the CCB loan drawdown, YH was unable to repay the loan owed to NC and discharge the relevant mortgages, Clifton would write to CCB informing them of this and the CCB loan would not be made.  I do not see any “potential conflict of interest” as alleged by Mr Law.

(c)  The allegation that “lots of documents were ill-prepared” is unparticularised and not supported by any reliable evidence.  Further, it is unclear how this allegation would impugn the credibility of Ho and Clifton’s evidence. 

142.  I accept the evidence given by Lam, Au, Ho and Clifton.  I attach full weight to their evidence.

The Rule in Browne v Dunn

143.  In her final submissions, Ms Tong refers me to the rule in Browne v Dunn[30] and submits that the evidence of KOC’s witnesses that YH gave oral and written instructions to Ho to pay HK$3m to GA was not challenged in Ho or Clifton’s cross-examination and must be taken to have been accepted by YH.  For the avoidance of doubt, I have to say that I have not approached the evidence by applying the rule in Browne v Dunn as suggested by Ms Tong.

144.  In Pacific Electric Wire & Cable Co Ltd v Texan Management Ltd[31], Kwan JA (as she then was) said:

“124. The rule in Browne v Dunn, as noted in Phipson on Evidence (17^th ed) at §12-12, is not an inflexible one. It is not broken even if a material matter is not put to a witness, if the witness can fairly and objectively be said to be on notice of it or where the point is so apparent (Flower & Hart v White Industries (Qld) Pty Ltd (1999) 163 ALR 744 at §§51 to 52; Fong Ka Yeung v Medical Council of Hong Kong, CACV 157/2007, §30(1)). It is pertinent to have regard to the full written opening of PEWC so Willi must be on notice of the allegations that would be made against him.

125. Nor does the principle in Browne v Dunn inflexibly require every point which might be used against a witness to be put to him.  In essence, the principle is breached if in all the circumstances an omission to cross-examine on a specific point is unfair to a witness (Kaifull Investments Ltd v Commissioner of Inland Revenue [2002] 1 HKLRD 858 at §31(4)).  Here, the judge had indicated to the parties on the second day of the trial he was prepared to take a more relaxed view about the rule in Browne v Dunn, and that he would accord a ‘generous margin of deference to counsel’ as to whether they have been fair in the light of what was done in the cross-examination even if a point has not been put.”

145.  YH’s allegation that she did not give any oral or written instruction to KOC to pay HK$3m to GA has been raised in [13] of YH’s Reply to KOC’s Defence.  KOC’s witnesses had notice of the YH’s stance on the HK$3m before the commencement of the trial.  Further, in the course of the trial, I mentioned that it would not be necessary for counsel to put matters which had already been raised in the pleadings to the other side’s witnesses. In these circumstances, I would not apply the rule in Browne v Dunn to reach a conclusion on the HK$3m issue.

146.  I accept KOC’s witnesses’ evidence, because their evidence is inherently probable and consistent with the documents.  Their evidence remains unshaken after cross-examination.

ANSWERS TO THE AGREED ISSUES

147.  I have held that YH is an untruthful witness, and I have rejected her evidence in its entirety.  That being the case, there is no evidence before the court in support of 1^st Representation, the 2^nd Representation and the 3^rd Representation alleged by YH in her pleadings.  There is also no evidence proving the non est factum and the undue influence as alleged by YH in her pleadings.  All these allegations must therefore be rejected.  As a result, there is no reason why YH should not be bound by the documents signed by her.

148.  Further, in the light of the evidence given by Lam, Au and Ho (which in my view is credible and reliable), there is no impropriety in the execution of all the documents signed by YH.

149.  In my judgment, YH is bound by the Letter and the Second Mortgage executed by her.  Pursuant to these documents, YH is liable to NC to repay the outstanding principal together with interest to NC.  There is no ground upon which YH may rescind the Letter or the Second Mortgage.  YH’s counterclaim against NC must be dismissed.

150.  YH is also bound by the Consultation Agreement signed by her.  I am of the view that GA has provided the consultation service to YH by assisting her to transfer some of her mortgages to NC and then to CCB.  Such a restructuring has helped YH to save interest in the long run.  YH is bound by the Consultation Agreement to pay the consultation fee of HK$3m to GA as stipulated in the Consultation Agreement.

151.  The only cause of action pleaded in YH’s counterclaim against GA is unjust enrichment.  For the purpose of establishing unjust enrichment, the relevant questions are as follows[32]:-

(1)  Was the defendant enriched?

(2)  Was the enrichment at the plaintiff’s expense?

(3)  Was the enrichment unjust?

(4)  Are any of the defences applicable?

152.  Where a payment is made by one party to another party pursuant to a valid and subsisting contract, it cannot be said that the receiving party has been unjustly enriched.  As said by Recorder Eugene Fung SC recently in Credit One Finance Limited v Yeung Kwok Chi and Others[33]:

“37. It is a principle in the law of unjust enrichment that restitutionary remedies cannot be awarded where their effect would be to subvert what the parties have agreed in a valid contract: see e.g. G Virgo, The Principles of the Law of Restitution (3^rd ed, 2015) (“Virgo”) pp 133-134. Therefore, for example, where a benefit is transferred to the defendant pursuant to a contractual obligation, the continued existence of the contract will usually defeat the restitutionary claim. As Millett LJ said in Portman Building Society v Hamlyn Taylor Neck (a firm) [1998] 4 All ER 202 at 208d-e:

‘The continuing validity of the transaction under which the money was paid to the firm is, in my judgment, fatal to the society’s claim. The obligation to make restitution must flow from the ineffectiveness of the transaction under which the money was paid and not from a mistake or misrepresentation which induced it. It is fundamental that, where money is paid under a legally effective transaction, neither misrepresentation nor mistake vitiates consent or gives rise by itself to an obligation to make restitution.’

Similarly, in Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79, Ribeiro PJ at §92 said:

‘While a contract continues to subsist between the parties, one party who makes a payment to the other party in accordance with his obligations under that contract cannot be allowed to mount a claim in restitution for the return of that sum since such a claim would be inconsistent with what the parties had agreed. It is in this sense that the contract would be “undermined” or, as Professor Birks puts it, that the restitutionary claim would “subvert bargains” (Birks, An Introduction to the Law of Restitution (1989 Rev ed.) p.47).’ ” (Emphasis added)

153.  See also Dimskal Shipping Co SA v International Transport Workers Federation (The Evia Luck) (No 2)[34], in which Lord Goff said:

“It was common ground between the parties before your Lordships that the money in respect of which the owners claimed restitution was paid to the I.T.F. under a contract, albeit a contract which the owners claim to have been voidable by them, and indeed to have been avoided by them, on the ground of duress. It follows that, before the owners could establish any right to recover the money, they had first to avoid the relevant contract. Until this was done, the money in question was paid under a binding contract and so was irrecoverable in restitution……” (Emphasis added)

154.  Since YH is bound to pay HK$3m to GA under the Consultation Agreement, which is a valid contract binding upon YH, YH’s counterclaim for the HK$3m against GA based upon unjust enrichment must fail.

155.  As to YH’s counterclaim against KOC in relation to the HK$3m as pleaded in YH’s pleadings, YH must also fail in this counterclaim.  The HK$3m Authorization Letter is a document signed by YH, and YH must be bound by this document. The document is a clear authorization from YH to KOC, allowing and directing KOC to pay HK$3m to GA from the CCB loan proceeds.  Further, according to the evidence given by Ho and accepted by this court, YH also orally authorized KOC to pay the HK$3m to GA in the 26 Jun Meeting. In these circumstances, there is no basis upon which YH may hold KOC liable to her in respect of the HK$3m.

156.  For the sake of completeness, I would also say that I do not regard there is any solicitor-client relationship between KOC and YH for the purposes of the Letter, the Second Mortgage and the paying the HK$3m to GA.  Based upon the evidence accepted by this court, there has not been any express retainer between KOC and YH for these purposes.  I also do not see any objective facts proved by evidence showing that a such retainer should be implied or presumed.

157.  Mr Law refers me to International Trading Co Ltd v Lai Kam Man[35]. Mr Law relies heavily on the fact that YH paid legal fees to KOC in support of his argument that a solicitor-client relationship between KOC and YH should be implied in respect of the Letter and the Second Mortgage.  In the ITC case, Tang J (as he then was) held that an implied retainer arose where the vendor’s solicitor charged the purchaser for distinct attestation services offered only to the purchaser.  In my view, as rightly submitted by Ms Tong, the situation here is distinguished from the ITC case.  Here, YH merely paid NC’s legal fees to KOC on behalf of NC.  Given the facts of this case, I am of the view that Mr Law’s argument based upon the ITC case cannot succeed.

158.  Even if there is a solicitor-client relationship between KOC and YH in respect of the Letter, the Second Mortgage and the matters relating to the HK$3m, based upon the facts as found by this court, I do not see in what way KOC has breached the fiduciary duties (if any) owed by them to YH.

159.  Further, it should be borne in mind that YH’s only claim against KOC is about the HK$3m paid to GA.  Based upon the facts as found by this court, YH signed the Consultation Agreement in the 29 Jan Meeting and committed to pay the HK$3m on that date.  YH only revealed the HK$3m matter to Ho in the 26 Jun Meeting.  In other words, YH’s liability to pay the HK$3m to GA has already incurred before revealing the same by her to Ho in the 26 Jun Meeting.  In the circumstances, even if KOC has breached any duty owed to YH, that would not have the effect of causing YH to suffer a loss of HK$3m.  After all, YH has already been bound by the Consultation Agreement to pay the HK$3m to GA before revealing the HK$3m matter to Ho.

160.  For all these reasons, the alleged breach of fiduciary duty and the alleged breach of trust put forward by YH against KOC must be rejected.  The alleged undue influence must also be rejected.  KOC is not liable to YH as alleged by YH in her counterclaim.

161.  In my judgment, the answers to the agreed issues are as follows:

Between NC and YH

(1)  NC is entitled to the outstanding loan and interest under the Letter.

(2)  The non est factum alleged by YH in her pleadings is untrue and is rejected.

(3)  Ho had not unduly influenced YH into executing the Letter and the Second Mortgage.  The undue influence alleged by YH in her pleadings is rejected.

(4)  The 1^st Representation, the 2^nd Representation, and the 3^rd Representation alleged by YH in her pleadings are untrue and are rejected.  As a result, the fraudulent misrepresentations alleged by YH do not get off the ground.

Between YH and GA

(5)  GA is entitled to the HK$3m in accordance with the Consultation Agreement.  YH’s claim for the HK$3m against GA based upon money had and received is dismissed.

Between YH and KOC

(6)  KOC did not owe fiduciary duties to YH in relation to the Letter, the Second Mortgage, and the matters concerning the HK$3m paid to GA.  YH did give oral and written authorizations to KOC to pay the HK$3m to GA in the 26 Jun Meeting.  KOC is not liable to YH in any aspect in relation to the HK$3m.

DISPOSITION

162.  I allow NC’s claim.

163.  Although the sum claimed by NC in its Statement of Claim is HK$3,088,000, Ms Leung now only seeks an order to require YH to repay HK$2,881,379.39 plus interest.  In his evidence, Lam said that NC should not charge the set-up fee of HK$190,000, and YH had overpaid HK$88,000 to Pins Credit.  NC also does not require YH to bear the legal fee of HK$38,000 paid to KOC.  After deducting all these and taking into account some repayments made by YH and some interest elements, NC suggests that the sum due from YH to HC as at 7 July 2015 is HK$2,881,379.39.  Mr Law does not dispute this figure.

164.  Ms Leung suggests that as per the Letter, the pre-judgment interest rate should be 26.4% per annum.  Mr Law submits that according to YH, in about May 2015, Au agreed that the monthly interest could be reduced from HK$374,000 to HK$309,000, and hence the pre-judgement interest rate should be 21.81% per annum.  With respect, I cannot accept Mr Law’s submissions.  First, since I have refused to accept YH’s evidence, Mr Law’s submission does not have the necessary evidential basis.  Second, there is no allegation, let alone evidence, showing that Au would have the authority to act on behalf of NC to reduce the interest rate as provided in the Letter.

165.  There is no dispute that the post-judgment interest rate should be the judgment rate.

166.  I order that YH do pay to NC HK$2,881,379.39 together with interest thereon at the rate of 26.4% per annum from 8 July 2015 until the date of this judgment, and thereafter at the judgment rate until full payment.

167.  I dismiss YH’s counterclaim against NC, GA and KOC.

168.  Costs should follow the event.  I am of the view that YH’s case is very unreasonable and is bound to fail.  I regret to say that YH has made up stories to try to escape the liabilities under the documents signed by her.  The court cannot condone this conduct.  In my judgment, YH should be required to pay indemnity costs to the successful parties.  Further, in YH’s counterclaim against KOC, various factual and legal issues are involved.  I would give a certificate for 2 counsel.

169.  At the present stage, I do not know whether there has been any without prejudice communication between the parties which may have an impact on costs.  Accordingly, I would make a costs order on nisi basis.  There be a costs order nisi that costs of these proceedings (including all costs reserved) be paid by YH to NC, GA and KOC on an indemnity basis, with a certificate for 2 counsel, to be taxed if not agreed.

170.  Lastly, it remains for me to thank counsel for the assistance rendered to the court.