21 FINANCE LTD v. GAN LEI AND ANOTHER

HCMP 507/2022 & HCMP1231/2022

(Heard Together)

[2023] HKCFI 1600

HCMP 507/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 507 OF 2022

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AND

HCMP 1231/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1231 OF 2022

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(Heard Together)

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REASONS FOR JUDGMENT

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1.  This was the hearing of the two mortgage actions both commenced by Originating Summons by the same lender mortgagee which have been ordered to be heard together by the Order of Deputy High Court Judge H Au-yeung made on 4 April 2023.

2.  Mr Hon represented the Plaintiff in both sets of proceedings, while Mr Pang represented all the Defendants in both sets of proceedings.

3.  As confirmed by Mr Pang, and made apparent from the two affirmations of Mr Gan Lei filed respectively in each set of proceedings on behalf of the relevant Defendants, there is no dispute over any issue on liability or on the amounts of the outstanding principals and interest payable by the Defendants in respect of the relevant loan agreements, mortgages and guarantee, which will be alluded to below.

4.  The issues raised by the 2 sets of Defendants are:

a.  they have reached an agreement with the Plaintiff whereby the Plaintiff agreed to withdraw both sets of proceedings to let the respective Defendants sell the respective mortgaged properties privately and then to repay the Plaintiff (“the Agreement Issue”); and

b.  alternative, a promissory estoppel arose from the Plaintiff’s such agreement or promise (“the Estoppel Issue”).

5.  The Defendants asked that an order be made to convert the two sets of proceedings into Writ actions to litigate these two issues.

6.  The Plaintiff hotly disputed these issues, and said that they were baseless and were not triable and asked that the proceedings be summarily disposed of by entering judgments against the Defendants in terms as sought.

7.  At the conclusion of the hearing, I gave judgement to the Plaintiff in both sets of proceedings with reasons to be given later.  This I now do.

RELEVANT FACTS AND PROCEDURAL HISTORY

8.  As there are no other disputes save the said two issues, I will only introduce the relevant undisputed facts and procedural history briefly, as follows.

9.  The Plaintiff at all material times has been a licensed money lender.  The Defendants in HCMP 507/2022, namely, Gan Lei (“Gan”)  and Tu Bin (together “Ds in 507”)  are husband and wife.  The 2^nd Defendant in HCMP 1231/2022, namely, Gan Kelu (“Gan Senior”)  is the father of Gan.

10.  In relation to HCMP 1231/2022 :

a.  Pursuant to a loan agreement signed by the Plaintiff and the 1^st Defendant (“Golden Horse”)  dated 19 July 2018, the Plaintiff lent to and Golden Horse borrowed HK$14,000,000 (“the Original Loan”).

b.  The Original Loan was secured by (i)  a second mortgage by Golden Horse in favour of the Plaintiff over the property known as Flat B on 5^th Floor of Tower 9 and Car Parking Space No C167, Provident Bay, No 5 Fo Chun Road, Tai Po, New Territories (“Flat B” and “Flat B 2^nd Mortgage”), and (ii)  a guarantee executed by Gan Senior in favour of the Plaintiff (“1^st Guarantee”).  The Flat B 2^nd Mortgage and the 1^st Guarantee were both dated 19 July 2018.

c.  As Golden Horse could not repay the Original Loan despite an extension of 12 months was given by the Plaintiff under a Letter of Supplement and a Supplementary Loan Agreement both dated 18 July 2019, a refinancing arrangement was agreed whereby Golden Horse made a part payment of HK$2,000,000 and entered into a Supplementary Loan Agreement dated 18 July 2019 for a loan of HK$12,000,000 (“1^st Loan”)  secured by the Flat B 2^nd Mortgage and the 1^st Guarantee.

d.  Pursuant to another loan agreement signed by Golden Horse as borrower dated 23 June 2021, the Plaintiff further lent and Golden Horse further borrowed HK$2,000,000 (“the 2^nd Loan”).

e.  The 2^nd Loan was secured by the 2^nd guarantee of Gan Senior (“2^nd Guarantee”)  and a 3^rd mortgage of Flat B (“Flat B 3^rd Mortgage”)  respectively dated 29 June 2021 and 30 June 2021.

f.  In breach of the terms of the respective agreements relating to the 1^st Loan and the 2^nd Loan, and the Flat B 2^nd Mortgage and the Flat B 3^rd Mortgage, Golden Horse defaulted (i)  in paying the monthly interest instalments on the 1^st Loan since the instalment due on 19 December 2021, (ii)  in paying the monthly interest instalments on the 2^nd Loan since the instalment due on 30 December 2021, and (iii)  in repaying the 2^nd Loan or any part thereof on the due date of 19 February 2022.

g.  By two letters both dated 22 February 2022, the Plaintiff respectively demanded Golden Horse as borrower and Gan Senior as guarantor to repay the total aggregate sum of HK$14,534,817.87.

h.  On 25 March 2022, Golden Horse and Gan Senior caused to be made to the Plaintiff a part payment of HK$891,873.92. No further repayment has been made by Golden Horse or Gan Senior since.

11.  In relation to HCMP 507/2022 :

a.  Pursuant to a loan agreement dated 29 July 2021 signed by Ds in 507 jointly as borrowers, the Plaintiff lent to and Ds in 507 borrowed HK$24,000,000 (“the 3^rd Loan”).

b.  The 3^rd Loan was secured by a mortgage by Ds in 507 in favour of the Plaintiff over the property known as Flat A on 5^th Floor of Tower 9, Provident Bay, No 5 Fo Chun Road, Tai Po, New Territories (“Flat A” and “Flat A Mortgage”).

c.  Pursuant to another loan agreement signed by Ds in 507 also jointly as borrowers dated 24 March 2022, the Plaintiff further lent to and Ds in 507 further borrowed HK$3,000,000 (“the 4^th Loan”).

d.  The 4^th Loan was secured by a second mortgage by Ds in 507 in favour of the Plaintiff over Flat A executed and dated 25 March 2022 (“Flat A 2^nd Mortgage”).

e.  In breach of the terms of the respective agreements relating to the 3^rd Loan and the 4^th Loan, and the Flat A Mortgage and the Flat A 2^nd Mortgage, without the prior written consent of the Plaintiff, Ds in 507 executed a Legal Charge of Flat A dated 3 April 2022 in favour of one Gui Xiaoling securing the sum of HK$21,000,000 which was registered in the Land Registry by Memorial No 22040401450019.

f.  By two demand letters both dated 8 April 2022 respectively issued to Ds in 507, the Plaintiff terminated all facilities granted to Ds in 507 and demanded repayment of the aggregate sum of HK$26,874,513.35.

g.  On 3 May 2022, the Originating Summons was issued but not served at the time.

12.  All parties agreed[1] that the following events took place between the time the Originating Summons in HCMP 507/2022 was issued (3 May 2022)  and the time it was served, namely 25 August 2022:

a.  Between mid to late May 2022, part repayments in the total sum of HK$260,000 was made by Ds in 507 to the Plaintiff to repay part of the 3^rd Loan and the 4^th Loan.

b.  On 10 July 2022, Gan alleged that there was a buyer interested to purchase Flat B at the price of HK$37,800,000 through acquiring the entire share capital of Golden Horse which owned Flat B.

c.  Between 21 July 2022 and early August 2022, there were WeChat messages and voice calls exchanged between Gan and Mok Yiu Keung (“Mok”), Marketing Director of the Plaintiff, in which Gan told Mok that Gan Senior intended to sell Flat B by the sale of Golden Horse but he lost the company kit, that there was another buyer lined up to purchase Flat A at the price of HK$45,000,000, and Mok requested the payment of outstanding interests and also be provided with a copy of the sale and purchase agreement in respect of the sale of Flat B or Golden Horse.

d.  Between 8 to 15 August 2022, there were further WeChat messages exchanged between Gan and Mok in which Mok requested the payment of outstanding interests under all the loans and stated that failing such payment resumption of litigation was necessary.  Mok further requested for information relating to the status concerning the sale of Flat A and Flat B that Gan said were being lined up.

e.  On 24 August 2022, the Plaintiff issued two long letters before action to respectively Golden Horse and Gan Senior relating to the loans, mortgages and guarantees, the subject matters of HCMP 1231/2022 demanding full repayment on or before 29 August 2022 failing which proceedings would be commenced.

13.  It is common ground that no interest payments have been made by any of the Defendants since mid July 2022.

14.  On 25 August 2022, the Originating Summons in HCMP 507/2022 was served on Ds in 507.

15.  On 31 August 2022, the Originating Summons in HCMP 1231/2022 was issued and served onto Golden Horse and Gan Senior.

16.  Between 1 to 5 September 2022, there were further communications between Gan and Mok in which the Defendants alleged an agreement to withdraw the proceedings was reached or the promise to that effect was made by the Plaintiff.

17.  As confirmed by Mr Pang, since then there was no communication whatsoever between the parties in connection to, or in furtherance of, such alleged agreement or promise by the Plaintiff.

18.  On respectively 14 September 2022, Ds in 507 by their solicitors filed their Acknowledgment of Service indicating an intention to contest in HCMP 507/2022.  On 20 September 2022, Golden Horse and Gan Senior by their solicitors filed their Acknowledgment of Service indicating an intention to contest in HCMP 1231/2022.

19.  On 14 December 2022, Gan filed an affirmation in each of the 2 sets of proceedings.

20.  On 21 December 2022, the two sets of Defendants issued a summons in each set of proceedings to convert the same to a Writ action.  Their Summonses in both set of proceedings were dismissed by a Master on 16 February 2023.

THE APPROACH AND APPLICABLE TEST

21.  It is trite and not disputed that, under RHC O.28 r.4, at the hearing of an originating summons, the action may be disposed of summarily where the court is satisfied that there are no triable issues.

22.  The approach and applicable test have been succinctly summarized by Fok J (as he then was)  in Billion Wealth Group Ltd V Strategic Media International Ltd[2]

“3.  As Ma J (as he then was)  held in Wing Hang Bank Ltd v Liu Kam Ying & Ors [2002] 2 HKC 57 at §10 :

“… The burden in summary judgment applications under the originating summons procedure is on the Plaintiff to justify its entitlement to summary judgment. However, once this is prima facie demonstrated on the evidence, it is then up to the defendant to show that he does have a defence or defences to the claim. In this way, there may in practice be little difference between an application for summary judgment in originating summonses and an application for summary judgment under RHC, Order 14.”

4.  And it is trite that on a summary judgment application, the court simply has to determine two questions : firstly, whether what the defendant says is believable as opposed to whether its version of events is to be believed; and secondly, if it is, whether what the defendant says amounts to an arguable defence in law.

5.  Whether a party’s assertions are believable is a question to be answered not by taking the assertions in isolation but by taking them in the context of so much of the background as is either undisputed or beyond reasonable dispute : per Deputy Judge To (as he then was)  in Ip Kam Wah v Fair City Group Ltd [2005] 4 HKLRD 168 at §8.”

THE AGREEMENT ISSUE

23.  I first take note of the following background as context :

a.  The fact that (i)  the Originating Summons in HCMP 507/2022 was issued on 3 May 2022 but was not served until 25 August 2022 and (ii)  the Originating Summons in HCMP 1231/2022 was not issued until 31 August 2022 despite the first letter of demand was issued on 22 February 2022 showed that the Plaintiff had been giving the Defendants time by withholding proceedings.

b.  Though the Plaintiff gave time, it had through Mok repeatedly and persistently demanded for the payment of outstanding interests.

c.  In early to mid August 2022, Mok had stated that failing such payment of interests, litigation would be resumed.

d.  On 24 August 2022, the Plaintiff issued the letters before action containing essentially an ultimatum.  Yet no interest payment was made, and the Plaintiff served the Originating Summons in HCMP 507/2022 and issued the Originating Summons in HCMP 1231/2022 and immediately served it.

24.  I next note that in the affirmation of Gan, no particulars of such an oral agreement or promise were given.  He never even mentioned in which communication had Mok so agreed or promised, or what was the gist of the conversation in which the agreement was reached or the promise made.  There was no mention about any discussion concerning detail practical matters that one would expect naturally would arise from an arrangement to withdraw the proceedings in order to let the Defendants sell Flat A and Flat B on their own – such as the costs of the proceedings so far incurred by the Plaintiff, any time frame within which the sales and therefore the repayment of all the loans would have to take place etc.

25.  The Defendants’ case as contended at the hearing was that the alleged agreement was reached or the promise made in the communications exchanged between 1 to 4 September 2022.

26.  The Defendants said that the communications are shown by the printout of WeChat messages[3] which show

a.  There was a voice call between Gan and Mok for 2 minute 28 seconds beginning at 9:04 am on 1 September 2022. The call then ended abruptly as the signal was not good.

b.  Several minutes later, Gan recorded 3 voices messages consecutively, which were transcribed by the Defendants :

“莫總現在，這個內地確實資金，目前一下也沒有，但現在反正有幾個買家在這談，跟公司這麼把這個法院東西一出，那這個這個這個賣房子這個又困難了，這也不是解決事情的根本辦法，是，我這邊房子我已經搬空了，我這現在我就是準備賣，賣了之後，你這個錢又這個，你又不會有一分一分錢損失，雖然每個月利息沒給，但是我這個房子賣出去的時候，會都是一下給你給你補齊的，所以這麼弄的話，這個說白了，這個這個這個這個，這個對你們沒有任何好處，那對我來說，那更是致命的這種這種損失。”

“所以，這個我還是看能不能請你跟公司，這個這個這個再商量一下這個這個這個損人不利己，你這個這個這個做法完全這個這個還是要要要怎麼這個幫助我把這個事情來解決一下。”

“那就如果是這樣的話，那那我最壞的辦法無非我我房子我損失幾百萬七五六百萬七八百萬低價去賣掉，對你們沒有任何好處的，那那何必要這樣？是，你看看你看看這個，這個還有沒有什麼幾個其他的辦法，這個這個這個真的不能這樣，這邊我父親那一套，就是那個資料找不到，現在那邊的律師跟我這律師一直在對接，你這麼弄一下，那我這個這個這搞都沒辦法搞了，那，那這個這不是解決辦解決事情的辦法了。哎呀，你看看你看看，看看還有還還有沒有什麼好的辦法。”

c.  Then on 10:23am on the same day, Gan messaged :

“莫總好！我需要寫個什麼給您公司，您那可有樣式？”

d.  Mok replied at 11:00am the same day :

“寫你需要時間，30/11/2022之前還清款項，簡單可以”

e.  On 4 September 2022 20:35, Gan sent to Mok two pictures, both of a short note written in handwriting.  The first one dated 3 September 2022 was illegible.  Mr Pang confirmed at the hearing that its contents were very much similar to the 2^nd note dated 5 September 2022 and the Defendants were content to rely on the 2^nd note[4], which was legible :

“為了快速出售物業，並用於歸還貴公司借款，現特向貴公司友好商議，我們確認在貴公司向法院撤回並終止訴訟日起三個月內清還貴公司的借款，請支持為感。

[signed by Gan]” (my emphasis)

27.  As can be seen from the plain language of the 3 transcribed voice messages and the 2^nd note, and also rightly conceded by Mr Pang, that nothing was said by Gan there that even hinted at, not to say showed, that an arrangement to withdraw the two sets of proceedings has been agreed between Mok and Gan or been promised by Mok.  Quite clearly, especially from reading the part in bold, the 2^nd note was couched in polite language to seek to amicably discuss.

28.  Moreover, if such an agreement was reached or such a promise made by Mok on behalf of the Plaintiff as alleged, it is completely inexplicable and highly improbable that

a.  There was no further communication whatsoever, whether between any of the Defendants to their solicitors informing them the existence of such an agreement or arrangement, or between the Plaintiff’s solicitors with the Defendants’ solicitors to follow up and implement it formally.

b.  Rather and shortly after, the Defendants in the two sets of proceedings filed their respective Acknowledgment of Service indicating an intention to contest.

c.  Also, in the Defendants’ solicitors’ letter dated 2 November 2022 in which they requested an adjournment of 3 months in the two set of proceedings, nothing whatsoever was mentioned about the alleged agreement or promise by the Plaintiff.

29.  Mr Pang suggested that the agreement might have been reached or the promise by the Plaintiff made in the 2 minute 28 seconds voice call between Gan and Mok at about 9:04 am on 1 September 2022.  If an agreement had been reached, it would be completely illogical and inexplicable why Gan would continue to persuade to a point of pleading with Mok in the 3 transcribed voice messages which followed almost immediately after the voice call.  I cannot accept such suggestion as anywhere near believable.

30.  In all, I take the view that the Defendants’ allegation that an agreement to withdraw the two sets of proceedings or a similar promise having been made by the Plaintiff utterly unbelievable and no triable issue is thereby raised.

THE ESTOPPEL ISSUE

31.  Mr Pang referred to the oft-cited case of Luo Xing Juan Angela v the Estate of Hui Shui See, Willy, deceased & Ors (2009)  12 HKCFAR 1, at paragraph 55 where Ribeiro PJ succinctly set out the elements of promissory estoppel :

“55. A promissory estoppel may be said to arise where (i)  the parties are in a relationship involving enforceable or exercisable rights, duties or powers; (ii)  one party (“the promisor”), by words or conduct, conveys or is reasonably understood to convey a clear and unequivocal promise or assurance to the other (“the promisee”)  that the promisor will not enforce or exercise some of those rights, duties or powers; and (iii)  the promisee reasonably relies upon that promise and is induced to alter his or her position on the faith of it, so that it would be inequitable or unconscionable for the promisor to act inconsistently with the promise.”

32.  Mr Pang argued that there was a triable issue in the two sets of proceedings based on promissory estoppel.

33.  I do not accept that argument.

34.  Firstly, for the reasons above expressed, I do not find there is a triable dispute of fact that Mok had made a promise to Gan that the Plaintiff would withdraw the two sets of proceedings.

35.  Secondly, I do not think the Defendants have shown a triable issue on the 3^rd element of reliance and alteration of position such as to make the continue prosecution of these two sets of proceedings by the Plaintiff unconscionable.

36.  In this regard, all that was deposed by Gan was this

“36 … In fact, if it was not the Plaintiff’s promise, I would have sought out a prospective purchase [sic] to buy the 1^st and 2^nd Property at a lower price.”

37.  Exactly what Gan meant by that, and how losing an opportunity to sell Flat A and Flat B at “lower” prices would be a detriment to the Defendants are not clear at all.

38.  Mr Pang contended at the hearing that the efforts expended by the Defendants to seek out prospective purchasers were detriments to the Defendants.  However, as shown by (a)  the chronological sequence of the agreed events, (b)  the Whatsapp messages exchanged between Gan and the estate agent on 10 July 2022[5] and (c)  as stated in paragraph 35(4)  of the Defendants’ written submissions that the Defendants had taken significant steps to seek the sale of the properties prior to the commencement of HCMP 1231/2022, that the efforts to seek purchasers were expended before, and not in reliance of and therefore after, the promise allegedly made by Mok between 1 and 4 September 2022.  In fact, it seems to me that it was the other way round – that Gan was trying to seek out and then represent to Mok the existence of the potential sales at such prices to induce or procure the Plaintiff to withdraw the proceedings.

39.  Thus, I reject the Estoppel Issue as a triable one.

DISPOSAL

40.  For the reasons expressed above, there are no triable issues in these 2 sets of proceedings.

41.  I thus gave judgment to the Plaintiff in the two sets of proceedings in terms as sought in the respective Notices of Appointment to Hear Originating Summons, which as sought do not include an order for sale of Flat A and Flat B respectively, with the following alterations :

a.  the wording of “Judgment be entered” be used and certain words in both paragraphs 1(i)  describing the loans and interest as being secured by the relevant mortgages be deleted;

b.  the interest rate in paragraph 1(ii)  and 1(iii)  in HCMP 1231/2022 be corrected from 27% to 15%, as canvassed with both counsel at the hearing; and

c.  the words “to the Plaintiff for further relief as it may be entitled to, including an order for sale of the Property” be added to the liberty to apply under paragraph 4 in both instances.

42.  Lastly, I thank counsel for their assistance.