WONG CHI KEI v. TO YUK FUNG

HCA 357/2019

[2020] HKCFI 1565

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 357 OF 2019

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J U D G M E N T

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1.  On 6 December 2019 Master KW Wong granted the plaintiff summary judgement pursuant to RHC Order 14 rule 1. The defendant has appealed and I heard argument on the appeal on 2 June 2020. In addition, in the same way as before the Master, there is an application for an interim payment pursuant to RHC Order 29 rule 10 and rule 12(c). Further, the defendant has applied to amend the defence, and as it would be necessary to consider the proposed amendments when considering the summary judgment application, I ordered that the application to amend the defence should be heard at the same time. This is my judgement on the various applications.

Background

2.  The statement of claim alleges that in or about 2011 the plaintiff lent to the defendant the sum of HK$7,300,000 on various occasions.  The defendant denies that, and contends that in January 2011 the plaintiff made an investment of HK$5 million in a company incorporated in Papua New Guinea which was buying land for development.  By paragraph 13 of the skeleton argument of the plaintiff on this appeal the case appears to have changed.  It says that;

“Between 2011 to 2013, on two occasions, P transferred to D sums of money. The first block of money was in 2011 was HK$5 million and the second block of money was HK$5 million in 2013.”

3.  The plaintiff’s affidavit seems to confirm that only HK$5 million was transferred to the defendant in 2011.  It accepts that it was transferred in relation to the company in Papua New Guinea, but alleges that it was a loan with an interest rate of 15%, rather than an investment.  The plaintiff points out that in fact no shares have ever been transferred to him.

4.  The plaintiff’s affidavit goes on to contend that in or around mid July 2013 the defendant requested a further loan of HK$5 million, again related to investment in Papua New Guinea, and the plaintiff transferred a sum of HK$3 million to the defendant, with a further HK$2 million to be transferred at the end of August 2013.  The plaintiff’s affidavit says that this HK$2 million was paid partly by way of cheque and partly by way of cash, apparently paid to alleged creditors of the defendant.

5.  The plaintiff then says that the defendant met with him on or around 29 October 2013 and promised him that, as a gesture of gratitude, she would pay an additional HK$500,000 as interest for the loan.

6.  By way of a document dated 29 October 2013, which has been signed by the defendant, the following is recorded (taken from the translation provided by the court translator as requested by the court on 2 June 2020):

“I To Yuk Fung [transliteration], (holder of ID card No. [redacted]) have taken out a loan of HK$5.5 million only from Wong Chi Kei [transliteration]. Verbal statement is no guarantee, hence, this (document) is drafted specifically as evidence for this preface.”

7.  The defendant contends that she was induced to sign this document by misrepresentations from the plaintiff, and it is a sham. 

8.  The plaintiff then says that by 29 August 2014, irrespective of the nature of the transactions that had occurred prior to that date, the parties orally agreed to treat all amounts outstanding as a loan, fixed in the sum of HK$12.8 million.  That apparently was calculated as being HK$7.3 million in relation to the first loan and HK$5.5 million in relation to the second loan.  It is said that repayment of the loans so agreed was to be performed by way of the defendant paying part of the purchase price for a house to be purchased by the plaintiff in the New Territories on one of the defendant’s company’s developments.  According to the plaintiff the defendant did not honour that agreement.

9.  The defendant denies that agreement, and contends that the plaintiff had cash flow problems at the time that he wished to purchase house and asked the defendant to pay HK$1.6 million to the developer, which would then be treated as a partial settlement of the HK$3 million loan.

10.  A typed document entitled “Declaration of Loan”, dated 15 June 2017, and signed by both the plaintiff and the defendant states the following (with the last two points having been hand written, I am told in the plaintiff’s handwriting):

“Party B [the defendant] promises and confirms to repay the two following loans to Party A [plaintiff]

1. Party A in 2011, lent money in his private capacity to Party B, for a real estate project in Papua New Guinea. Since the project has made no progress for many years, Party B promised on 29 August 2014 to repay at market value of HK$7.3 million to Party A.

2. Party B on 29 October 2013 borrowed from Party A cash in total of HK$5.5 million.

3. Party A promises not to institute any legal claims while negotiations with Party B remain possible in the circumstances.

4. Party A also promises not to institute any legal claims before 25 December 2018.”

11.  The plaintiff relies upon this document as demonstrating an acceptance by the defendant of a total amount owed, as at 15 June 2017, of HK$12.8 million.

12.  The defendant denies the validity and effect of this document.  She says that it was never intended to create legal relations, which is why the handwritten comments were added at the end.  As a result, she says that the court cannot rely upon this document as evidence of any agreement that she would pay, or otherwise owed, the sum of HK$12.8 million as at 15 June 2017.

13.  It is agreed between the parties that there were payments made by the defendant to the plaintiff as follows, although there is a disagreement as to whether the first of those payments amount to the payment of interest, or of a combination of principal and interest:

22 July 2014	$560,000
19 May 2015	$200,000
22 January 2018	$500,000
13 April 2018	$500,000
28 November 2019	$1,600,000
TOTAL	$3,360,000

14.  In the light of the various sums identified above, it is difficult for this court to determine what the plaintiff’s case really is as to the amount which is now due and owing, and how that is made up in terms of principal and interest.

14.1.  Even if the Declaration of Loan Document is considered as valid, it simply records that the 1^st loan was valued at HK$7.3 million as at 15 June 2017, and that the 2^nd Loan was in the amount of HK$5.5 million. 

14.2.  There is no recording of the interest rates applicable (if any) to either loan after the date of the Declaration of Loan, and

14.3.  there is no indication as to how the payments which post date either loan, but predate the Declaration of Loan are to be apportioned as between the principal of either loan or the interest of either loan.

15.  I note that the plaintiff contends that the first loan was to carry interest at 15% (which inevitably the Defendant denies because she says it was an investment), but he makes no allegation as to the interest payable on the second loan.  He also makes no suggestion as to what would happen concerning interest on either loan once the oral agreement was reached in August 2014.  In the statement of claim he seeks statutory interest, and the figures he refers to in the statement of claim seem to indicate that his case is that no interest was payable post the Declaration of Loan Agreement.

16.  Thus taken at its highest the court can only decide that:

16.1.  As at 15 June 2017 HK$7.3 million was due on the first loan.

16.2.  As at 15 June 2017 a second loan in the sum of HK$5.5 million was outstanding (with no interest);

16.3.  There was no agreement on interest thereafter.

16.4.  As at today, an amount of HK$2,600,000 had been repaid since 15 June 2017, leaving a maximum amount outstanding of HK$10,200,000.

17.  Confusingly however, the Statement of Claim also deducts the payment of HK$200,000 made on 19 May 2015 from the amounts which are said to be owed, so that (taking into account the one payment made after the statement of claim was filed in April 2019) the amount said to be due would be HK$10,000,000.

18.  Notwithstanding these difficulties in the clarity of the plaintiff’s case, I turn to consider the defendant’s case.

19.  The first defence relates to the nature of the payment of the first sum of HK$5 million paid in 2011.  The defendant contends that it was an investment, whereas the plaintiff contends that it was a loan.  The plaintiff has referred me to various corporate filings in respect of the company that it is alleged he invested in, and has shown me that he has never been recorded as a shareholder.  In the face of that documentation the defendant’s allegation is mere assertion, and I do not find it credible.

20.  In any event, I accept the proposition made by the plaintiff to the effect that by signing both the document dated 29 October 2013, and the Declaration of Loan dated 15 June 2017 the defendant has recorded that, certainly as at those dates, she was treating the amounts paid to her as loans.  In many ways it is irrelevant what the original basis of the payment was.  Even assuming that the initial intention was that it was to be an investment, it is clear that the shares to which the plaintiff would be entitled never materialised, and I accept that even on that basis the parties have subsequently agreed that the amount paid would be treated as a loan.

21.  I do not accept that there is an arguable case that the 29 October 2013 document was a sham.  I can see no evidence of any reason why the defendant would sign the document other than that it represented what they had, by at least that date, agreed on the status of the money paid by the plaintiff to the defendant.  The defendant alleges that the plaintiff represented to her that if she signed the note, he would be able to raise more money for her.  I do not see anything in this proposition and I do not believe that it raises a triable issue.  It is mere assertion raised for the first time in the affidavits and has no other evidential basis to support it.

22.  The position is further clarified by the 15 June 2017 Declaration of Loan, which is consistent only with the money paid by the plaintiff to the defendant being treated as a loan.

23.  The second defence relates to whether the additional HK$2 million was paid in cash or by cheque as the plaintiff alleges.  I accept that it was so paid.  If it had not been paid I see no reason why the defendant would have agreed to sign the documents on 29 October 2013 and 15 June 2017, both of which effectively record the payments. 

24.  The defendant says that there were Whatsapp messages between the parties on the same dates as the payments were alleged made which did not mention the fact of payment.  She contends that this suggests that no payments were made.  That proposition does not carry any weight and does not give rise to a triable issue.  There are many reasons why the messages might not mention the fact of payment, and the mere absence of any reference to the payments does not raise a triable issue as to whether they were made or not in the light of the other evidence which supports the fact of payment.

25.  The third defence relates to the status of the two documents which the defendant has signed which record the amounts owed by her to the plaintiff.  She effectively says that both of them are shams, and that neither of them reflect the true situation, or the fact that the money was lent to her.  I do not believe that either proposition demonstrates a triable issue.  The fact is that she signed those documents of her own free will, and it is difficult for her now to suggest that they do not accurately reflect what the position was.  There is no evidence of any oppression, and there is no objective evidence by which it can sensibly be suggested that each of the parties intended that the documents were prepared simply for the purposes of giving a false impression as to the true position.

26.  I reject the claim of misrepresentation in relation to the 29 October 2013 document.  I also reject the proposition that the Declaration of Loan was signed to hide any involvement of the plaintiff in the purchase of the house so as to avoid the plaintiff’s wife from becoming suspicious.  It seems to me that there is absolutely no basis for this assertion.  It is not a credible defence.

27.  Overall therefore, I reject the proposition that the defendant has demonstrated a credible defence and one that gives rise to a triable issue.

28.  I grant summary judgment to the plaintiff in the sum of HK$10,000,000.

29.  In the circumstances I do not need to address the applications for an interim payment.  Insofar as the amendments to the defence are concerned, I confirm that I have taken them into account when addressing this case, but given my conclusions I do not need to make any order on the application to amend the defence.

30.  I make a costs order nisi that the defendant is to pay the costs of the plaintiff of the action, to be taxed if not agreed.  If either party wishes to challenge that order they should do so within seven days, in writing (page limit 5 pages) and the other party will have 3 days to reply (page limit 3 pages).  No further submissions are required and the matter will be dealt with on the papers.