LAW LAI LAN v. TAMANG PREM CHANDR

DCCJ 4766/2016

IN THE DSTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4766 OF 2016

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D E C I S I O N

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1.  This is the Plaintiff’s appeal against a master’s decision made on 17 August 2017 by which the master granted leave to the Defendant to defend conditional upon his payment of $200,000 into Court on or before 14 September 2017, and on payment, the Defendant may defend the action by filing and serving his Defence within 28 days of 14 September 2017 (“the said master’s decision”).

2.  Though no notice of payment was served on the Plaintiff, presumably out of the ignorance of the Defendant who became acting in person on 7 September 2017, a sum of $200,000 was paid into Court on 13 September 2017 by him. His Defence was filed on 11 October though Mr How, solicitor for the Plaintiff, said he only received the Defence at the date of hearing.

3.  The Plaintiff’s appeal was lodged by way of a Notice dated 29 August 2017 under O.58 r.1 RDC for setting aside of the said master’s decision and in place thereof, summary judgment for the Plaintiff in the sum of $406,000 or such other sum as the Court thinks fit with leave to defend conditional upon his payment into Court the balance of the Plaintiff’s claim. It is noted that in the summons for summary judgment returnable before the master, the Plaintiff asked for summary judgment of $416,000 as pleaded in the Amended Statement of Claim. The reasons for asking $10,000 less in the appeal will be apparent after the following analysis.

4.  An appeal from the master to the judge in chambers is dealt with by way of an actual re-hearing. It is a hearing de novo as though the matter came before the judge for the first time: see para 58/1/2 of Hong Kong Civil Procedure 2018 (Vol 1).

The Plaintiff’s Case

5.  By the Amended Statement of Claim amended on 18 January 2017, the Plaintiff sued the Defendant for an outstanding debt of $416,000 in respect of a total loan of $750,000. According to the Plaintiff, the loan is evidenced by a written confirmation signed by the Defendant dated 11 May 2012 (“written confirmation”).  It was the Plaintiff’s pleaded case that 3 loans of $250,000 each were advanced to the Defendant on respectively 30 May 2011, 11 May 2012 and 14 May 2012, making a total advance of $750,000. A total sum of $16,000 as interest is also required to be paid for the said loan. Repayments had been made on 16 occasions totalling $350,000 ($334,000 appropriated towards capital and $16,000 interest), leaving a balance of $416,000 unpaid.

6.  In the Plaintiff’s affirmation affirmed on 17 January 2017 filed in support of the summary judgment, the Plaintiff exhibited the written confirmation which is a type-written note signed by the Defendant. By this written confirmation, the following loans were acknowledged to have been advanced by the Plaintiff to the Defendant by deposit of the following cheques into the latter’s bank account maintained with Hang Seng Bank no. 775-065154-668:

	Date	Amount (HK$)	By the Plaintiff’s cheque
	27 May 2011	250,000	Dated 30 May 2011
	11 May 2012	250,000	Dated 10 May 2012
	14 May 2012	250,000	Dated 13 May 2012

7.  It was stated that the loan of $750,000 was to be repaid in 4 months as from 11 May 2012, i.e. on 11 September 2012. Accordingly, the total repayment required of from the Defendant pursuant to the agreement as evidenced by the written confirmation is $766,000. i.e. $750,000 + 16,000.

8.  In the supporting affirmation the Plaintiff exhibited a bank deposit slip and various cheques of one Himali Engineering Construction Limited (“Himali”) issued for repayment of the said $350,000[1].

9.  In the affirmation by Mr Leung Yiu Cheung (“Leung”) affirmed on 11 May 2017 filed on behalf of the Plaintiff, Leung deposed to the fact that he was a barrister and came to know the Defendant after he had acted for him in a personal injury case. They became friends thereafter. Leung said the Defendant was in need of funds for Himali’s business and requested assistance from him. He then introduced the Plaintiff, who he knew for over 30 years, to help the Defendant. The first sum of $250,000 was deposited into the Defendant’s personal account on 30 May 2011. About a year later, apart from not being able to repay the original $250,000, the Defendant asked Leung or the Plaintiff for another $500,000 for a term of 4 months with interest at $4,000 per month. Leung then persuaded the Plaintiff to make further advances on his guarantee for repayment. The Plaintiff agreed. Two further advances each of $250,000 were made on respectively 11 and 14 May 2012.

10.  The written confirmation was said to have been signed by the Defendant before Leung, acknowledging the previous advance of $250,000 and the two subsequent advances of $250,000 which were all borrowed from the Plaintiff by the Defendant (my emphasis).

11.  In his 3 affirmations to oppose, the Defendant did not dispute the alleged repayment of $350,000 pleaded by the Plaintiff[2]. It amounts to an admission of a loan. It will therefore be unnecessary for this Court to set out in details how the money was received by the Plaintiff on each occasion and the relevant details of the cheques including their numbers. 

The Defendant’s Defence framed by His Affirmations

12.  The Defendant filed 3 lengthy affirmations to oppose the summary judgment application. The Defendant’s 2^nd and 3^rd affirmations were filed after the Plaintiff’s reply affirmation and that of Leung.

13.  In the Defendant’s first affirmation (“D’s 1^st Aff”), he deposed that he did not know the Plaintiff who was only Leung’s friend. He only knew Leung who was his counsel in his personal injury claim some years ago. After the conclusion of his claim Leung has become an investor of his business, Himali, a construction sub-contractor of whom the Defendant is now the sole director and shareholder.  In or about 2011, Himali was in need of funds. Leung agreed to help. Since then Leung had agreed to invest in or lend him and/or Himali money. He alleged that he did not know the money was coming from the Plaintiff. However, after reading the D’s 1^st Aff, it is fair to conclude the following:

i)   He does not deny the alleged $750,000 given to him being in the nature of a loan which requires repayment[3]. His case is that the said loan has been fully repaid. Himali had repaid a total of $760,000, and therefore the lender has been overpaid by $10,000, particular of which are set out in the following paragraphs[4];

ii)   Further, the Defendant has never disputed (and in fact not in any of his affirmations) that the said written confirmation was signed by him. At the hearing before me, the Defendant alleged for the first time that he was forced to sign the said written confirmation in 2015 though it was dated 2012. However, these allegations have never been mentioned in any of his 3 affirmations. Neither is it stated in his Defence. His allegations are therefore unacceptable and are hereby rejected;

iii)   Although he said the 3 sums of $250,000 each were from Leung and that he did not know the Plaintiff [5], he did acknowledge that Leung had told him the money  came from the Plaintiff: see [9] of D’s 1^st Aff. He did repay the Plaintiff as requested by Leung[6]. In fact, as evidenced by cheques drawn for the alleged repayments of the loans, the Defendant did not deny he knew the Plaintiff. He confirmed he was very often asked by Leung to draw cheques specifically made payable to the Plaintiff for the purpose repaying the $750,000 loan[7].

iv)   He acknowledged all the cheques and repayment record exhibited by the Plaintiff were for part repayment of the pleaded loan. What he would like to drive at is that Himali has repaid the Plaintiff much more than the $350,000 as alleged by the Plaintiff[8];

v)   In addition to the $350,000 repayment said by the Plaintiff, the Defendant said he had paid a further total sum of $410,000, comprising cash of $110,000 and 10 cheques totalling $300,000 in 2 batches.

vi)   The payee of the 1^st batch of cheques (see [14(ii)] below) was the Plaintiff. In fact, according to what had been written on the cheque stubs of the 2^nd batch of cheques (see [14(iii)] below), the payee of each of the 2^nd batch of cheques was also the Plaintiff. It is also written on each stub of the 2^nd batch of cheques these 2 words, namely, “Loan repayment[9]”.  

14.  The alleged sum of $410,000 said to have repaid the Plaintiff are more particularly set out below:

i)   Cash of $110,000: It was given to Leung upon Leung’s request for repayment on the ground that the Plaintiff “was in need of a small amount of cash”. It is the Defendant’s case that he cashed a cheque of Himali in the sum of $110,000 on 29 August 2011 and delivered the cash to Leung for repaying Plaintiff[10]. It is to be noted that the date of alleged repayment was prior to the date of the written confirmation;

ii)   A total sum of $230,000 represented by 5 cheques (“the 1^st batch of cheques”)[11]: He kept copies of these cheques all made payable to the Plaintiff and given to Leung[12];

iii)   Another sum of $70,000 according to 5 cheque stubs of Himali (“the 2^nd batch of cheques”): According to the Defendant Himali had drawn these 5 cheques in favour of the Plaintiff. These cheques were given to Leung and were alleged to have been cleared[13]. At the time of the P’s 1^st Aff, he was awaiting reply from the bank for production of the cheques[14].

15.  In the D’s 1^st Aff, the Defendant also deposed that between 2014 to 2015, Leung had invested in Himali a sum of $3,500,000. He was asked by Leung to sign 2 investment documents, one dated 13 June 2014 (“June 13 Agreement”)[15] and the other 16 October 2014 (“October 16 Agreement)[16]. However, from time to time the said investment was repaid by 40 cheques of Himali, comprising 39 cheques amounting to $2,610,000 and another one of $1,000,000. It appears that the Defendant was alleging that it was Himali who was the borrower of the 2 respective loans or investment of $3,500,000 and $750,00, because it was the company, not the Defendant, who had received the money[17]. However, he was ambivalent as can be seen in [7] and [8] of the Defence: he admits Leung may be acting as the Plaintiff’s agent.

16.  In a nutshell, his defence as set out in the D’s 1^st Aff is that the said loan of $750,000 has been fully repaid. Additionally, it is Himali, not the Defendant, who should be liable for the loan.  However, it is clear from his Defence filed subsequently that, despite his own allegation the loan has been fully repaid, the cheques and cash payments listed under [8] of the Defence only add up to $730,000, not $750,000 as alleged by the Defendant or $776,000 as asserted by the Plaintiff.

The Parties’ Subsequent Allegations

17.  It is not in dispute that the Plaintiff sought discovery of the 2 batches of cheques against the Defendant. Of the 10 cheques comprised in the 2 batches, the matters stated under the “Remarks” column below are facts supported by bank documents and are basically not in dispute:

1st Batch of Cheques
Item No	Cheque No	Date of Cheque	Amount ($)	Remarks
(i)	274932 [18]	15.03.2014	50,000	Cheque dishonoured, and admitted by the Defendant[19]
(ii)	274801  [20]	21.03.2014	50,000	Amount already taken into account by the Plaintiff [21]
(iii)	274802  [22]	21.03.2014	20,000	Amount already taken into account by the Plaintiff [23]
(iv)	275001  [24]	10.04.2014	10,000	Cheque cashed by the Defendant on 10.4.2014 as his name and ID number were written at cheque’s back[25]
(v)	276007  [26]	10.01.2015	100,000	Cheque never been presented and the Defendant cannot be sure whether it had been presented for payment [27]
		Total:	230,000
2nd Batch of Cheques
(vi)	273142  [28]	10.10.2012	10,000	Cheque dishonoured, and admitted by the Defendant[29]
(vii)	273454  [30]	07.02.2013	10,000	Agreed by the Plaintiff this has been overlooked as this was deposited by the Defendant’s partner without any notice to her
(viii)	273815  [31]	19.09.2013	10,000	Cheque cashed by the Defendant’s wife as her name and ID number were written at cheque’s back [32]
(ix)	274077  [33]	18.10.2013	10,000	Cheque cashed by the Defendant as his name and ID number were written at cheque’s back [34]
(x)	275401  [35]	15.07.2014	30,000	The Plaintiff acknowledged receipt of this cheque but said it was for dividend of her investment pursuant to the June 13 Agreement[36]
		Total:	$70,000

18.  After discovery, it is apparent that out of the 10 cheques comprised in the 1^st and 2^nd batches of cheques:

i) 3 cheques were cashed by either the Defendant or his wife, not the Plaintiff: see items (iv), (viii) and (ix) totalling $30,000;

ii) 2 cheques were dishonoured and returned to the Defendant: see items (i) and (vi) totalling $60,000; and

iii) 1 cheque remained unpresented: item (v) totalling $100,000.

19.  The Defendant filed his 2^nd affirmation (“D’s 2^nd Aff”) to explain the situation. The gist of his explanation is as follows:

i) The bouncing of cheques took place long ago and he now could not recall the details;

ii) For item (i) which was a dishonoured cheque of $50,000, he could now recall that after the cheque was returned, Leung instructed him to repay $50,000 more for the next time. As a result, he issued cheques nos.274801 (in fact it is item (ii)) for $50,000 and 274802 (in fact it is item (iii)) for $20,000[37];

iii) For item (vi) which was a dishonoured cheque of $10,000, he could now recall that after this cheque was returned Leung instructed him to issue another cheque. He did so accordingly on 15 November 2012 by another cheque no 273302 for $20,000. It was presented for payment on 27 November 2012[38];

iv) For the unpresented cheque item (v), he insisted that the cheque had been given to Leung but admitted he did not know whether it had been presented for payment or not[39]. However, he supplemented that he had overlooked 2 more cheques of Himali, one dated 27 June 2014 and the other 13 May 2016, each for $50,000, i.e. a total of $100,000 made payable to him. He said he personally cashed these 2 cheques and paid cash to Leung[40].

20.  It is observed that the 3 cheques sought to be introduced by the D’s 2^nd Aff (see (ii) and (iii) referred to in the preceding paragraph), namely, nos.274801[41] for $50,000, 274802 for $20,000[42] and cheque no 273302 for $20,000[43], are in fact cheques which the Plaintiff has already taken into account in the repayment sum of $350,000[44]. In fact, the first 2 cheques are also items (ii) and (iii) of the 1^st batch of cheques[45], and are considered as double repeats. Accordingly, the reference to these 3 additional cheques cannot help the Defendant.

21.  The 3^rd Aff of the Defendant (“D’s 3^rd Aff”) serves to set out his financial means as at the date of the affirmation, i.e. 21 June 2017.

Applicable Principles

22.  The principles on summary procedure for judgment are trite. The procedure provides that in plain and obvious case the plaintiff can obtain expeditious summary judgment against the defendant without going through a trial. The underlying policy of such procedure is to prevent a defendant from delaying the plaintiff from obtaining judgment in a case where the defendant clearly has no defence to the plaintiff’s claim at all: see paragraph 14/4/1 of Hong Kong Civil Procedure 2018 (Vol 1). 

23.  As a matter of procedure, the plaintiff has to verify the facts to be relied on by affidavit and to show that the case is clearly within the scope of the rules. The onus then is on the defendant to show cause against the plaintiff’s application. He may raise technical objections, for example, that the case is not within the Order or that the preliminary requirements are not satisfied. He may also raise objection as a matter of merits in that there are triable of issues of facts or/or law, for example, he has a good defence to the claim, that a difficult point of law is involved, or a dispute as to the facts which ought to be tried, or a real dispute as to the amount due which requires the taking of an account to determine, or any other circumstances showing reasonable grounds of a bona fide defence: see paragraphs 14/4/2 & 14/4/3 of Hong Kong Civil Procedure 2018 (Vol 1).

24.  In assessing whether the defendant can raise triable issues, the defendant has to satisfy that he has a real or bona fide defence, or a fair probability or reasonable grounds that a bona fide defence exists. The test is whether the defendant’s assertions are believable by taking the assertion not in isolation but rather, by taking them in the context of so much of the background as is either undisputed or beyond reasonable dispute: see paragraph 14/4/9 of Hong Kong Civil Procedure 2018 (Vol 1) and Schindler Lifts (Hong Kong) Limited v Ocean Joy Investments Limited[46]. The issue is NOT whether they are to be believed, but whether they are believable: Ng Shou Chun v Hung Chun San^[47] and Mass International Ltd v Hillis Industries Ltd & Anor^[48].

25.  However, the court should not embark on a mini trial on affidavit: Mass International Ltd v Hillis Industries Ltd & Another^[49]; Paul Y Management Ltd v Eternal Unity Development Ltd^[50];and paragraph 14/4/9A of Hong Kong Civil Procedure 2018 (Vol 1).

26.  The defendant’s affidavit must condescend upon particulars, and should as far as possible, deal specifically with the plaintiff’s claim and affidavit, and state clearly and concisely what the defence is, and what facts are relied on to support it. It is particularly so when the defence of set-off and a counterclaim are raised: see paragraphs 14/4/4 and 14/4/14 of Hong Kong Civil Procedure 2018 (Vol 1).

27.  If the court is satisfied that there are triable issues, the defendant should be granted unconditional leave to defend. On the other hand, where the defence put up is shadowy; or there is little or no substance in it; or that it is presented in a suspicious manner; or that the court is left with a real doubt about the defendant’s good faith; or that there is a very good ground to believe that the defence set up is a sham one; or that the court is prepared very nearly to give judgment, then it is appropriate to grant leave to defend conditional on the amount claimed being paid into court: paragraph 14/4/16 Hong Kong Civil Procedure 2018 (Vol 1).

28.  The above principles will be applied to consider the issues now raised by the Defendant.

Discussion

29.  From the parties’ affirmation evidence, it is safe to form a provisional view that Leung and the Plaintiff have some other dealings with Himali and/or the Defendant. As noted above, it appears that the Defendant is trying to say if the loan as alleged is found due and owing, it is Himali instead he himself that should be liable. In an attempt to paint such picture, the Defendant has repeatedly stated in his affirmations that he did not know the Plaintiff, or alternatively all deals were made through and upon direction of Leung.

30.  However, it is observed that:

i) The borrower in the written confirmation was expressly stated to be the Plaintiff;

ii) the Defendant has never denied in his affirmations or Defence the written confirmation being signed by him;

iii) there is no mention of Himali in the said written confirmation;

iv) the Defendant did admit the Hang Seng Bank account number 775-065154-668 in which the 3 advances of $250,000 was deposited being his personal account[51];

v) in both the 1^st batch of cheques and the stubs of the 2^nd batch of cheques which were produced by the Defendant in purport settlement of the debts, the payee of the cheques was stated to be the Plaintiff. It was written in the stubs, obviously for the drawer’s reference as to the purpose for which the cheque was drawn, the words “loan repayment”; and

vi) in his Defence he does admit Leung may be agent of the Plaintiff, or at the very least, he does not deny the Plaintiff being the borrower.

31.  All these documents were either signed by the Defendant or originated from the Defendant. In the Court’s judgment, it is not up to the Defendant now to deny he is not but Himali is the debtor. He expressly stated that it is he who is the borrower. His allegation that Himali is the borrower is contradicted by documents under his hand, and no explanation whatsoever has been given.

32.  The other ground of defence is whether the outstanding debt has been fully repaid. The Defendant acknowledged the $350,000 pleaded by the Plaintiff being paid in partial satisfaction of the debts.  In addition, he said by other various cheques and cash payments he had fully settled the balance. After finding out the problems with his allegation as referred to in [18] above, he further alleged he had paid 3 other cheques[52] and cash payment of $100,000 to Leung. 

33.  As analysed above, the additional 3 cheques in fact cannot help him. Now that a total of 10 cheques and 2 cash payments, (respectively of $110,000 and $100,000) are said to have been paid for settlement of the outstanding loan. So it is a matter of whether a particular cheque or payment which he said being made for repayment was believable. The principles stated above will be applied to see whether any of the alleged payment is believable. It has to be remembered that even according to the Defence, he can only identify payments made amounting to $730,000 instead of $750,000 or $766,000.

The Alleged Cash Payment of $110,000 [53]

34.  The alleged payment was said by the Defendant to have been made in August 2011. However, it does not sit well with the written confirmation which is a document not disputed by him in his 3 affirmations and Defence and came into existence prior to the said alleged repayment. Had the repayment been made as alleged, it should had been reflected in the written confirmation. Further, no receipt had ever been produced for repayment of this substantial amount. No explanation whatsoever had been mentioned in any of the affirmations filed by the Defendant. This payment as alleged is, in the Court’s judgment, not believable.

The Alleged Cash Payment of $100,000 [54]

35.  This was said to have been made on the respective dates of the cheques, i.e. 27 June 2014 and 13 May 2016. This Court has to say the alleged repayment should be viewed with scepticism. Firstly, it was only alleged after the bounced cheques, unpresented cheques and cashing cheques by him and/or his wife, etc, were pointed out to him. One wonders why this is not disclosed when he filed the D’s 1^st Aff bearing in mind this is not an insubstantial amount. Secondly, like the alleged payment of $110,000, the Defendant can produce no receipt for such substantial repayment. Although this Court considers it not impossible for a debtor making repayment in cash without asking for receipt, the onus remains on the Defendant to explain why in the circumstances of this case, no receipt was asked for in respect of this substantial cash repayment.

36.  Since the manner in which the allegation was made is so suspicious, this Court will require $100,000 be paid into Court as a condition for defending to the extent of $100,000.

2 Dishonoured [Items (i) & (vi)] and 1 Unpresented       Cheques     [Item (v)]

37.  These cheques were either bounced or unpresented. Any allegation of repayment relying on them is without basis and should be rejected. 

3 Cheques Cashed by Either the Defendant or his Wife [Item    (iv), (viii) & (ix)]

38.  It has been pointed out that these cheques were not banked in by the Plaintiff, and that they were cashed either by the Defendant or his wife. As the Defendant made no further explanation, this Court cannot see how the Defendant can rely on these cheques. No triable issue could possibly be raised.

2 Cheques Already Taken into Account [Items (ii) & (iii)]

39.  These 2 cheques amounting to a total of $70,000 had already been taken into account when the parties referred to the repayment of the undisputed repayment of $350,000[55]. They can raise no triable issues at all.

1 Cheque Acknowledged to have been Overlooked [Item (vii)]

40.  The Plaintiff has acknowledged to have overlooked this cheque of $10,000. As the notice of appeal is taken out asking for summary judgment for a sum of $406,000 instead of $416,000 as pleaded in the Amended Statement of Claims, the Plaintiff has already made concession to take into account of this overlooked amount.

1 Cheque Said to be for Another Purpose [Item (x)]

41.  As stated above, the Plaintiff and the Defendant and/or Himali had other dealings. There appears to be difference in understanding of the parties as to the purpose for which this cheque was issued. The test is whether the Defendant’s explanation is believable as against whether it is to be believed which is a matter for trial. However, given the overall allegations of the Defendant in response to the Plaintiff’s case which are considered suspicious, this Court doubts very much whether his explanation is a real or bona fide one. It would only be fair and reasonable in the circumstances that leave to defend should only be granted subject to condition. This Court will grant conditional leave to the Defendant to defend to the extent of $30,000 on payment into court of this amount.

Interest

42.  In the Defence filed by the Defendant, he denied any liability on interest in respect of the loan of $750,000. It appears that the Defendant’s grounds are these: he has already referred clients to Leung; Leung has never charged interest on other investments he made. Alternatively, by accepting payment by cheques, such rights to interest have been waived.

43.  On the face of these grounds, this Court cannot really find any relevance to the question of interest. Further, neither of these grounds had ever been mentioned in any of the Defendant’s 3 affirmations. In addition, and perhaps most important of all, his said allegations simply contradict the written confirmation signed by him. It has been expressly provided in the written confirmation that interest is $4,000 per month for the loan which is to be repaid in 4 months. The Defendant did not deny the said written confirmation being signed by him. In fact, he admitted expressly that the signature there was his though he alleged he was forced to sign, which allegation this Court has no hesitation to reject. His allegations regarding interest are simply unbelievable.

Conclusion

44.  By the aforesaid reasons, this Court considers the following orders should be made:

i) Summary judgment in the sum of $276,000, i.e. $406,000 – ($100,000 + $30,000) be granted to the Plaintiff against the Defendant; and

ii) Defendant do have leave to defend the rest of the Plaintiff’s claim on condition that a sum of $130,000 is paid into Court within 7 days from today.  

45.  The said master’s decision is therefore set aside, and an order in terms of (i) and (ii) set out in the preceding paragraph be made in place thereof.

46.  In addition, this Court also directs that of the $200,000 already paid into Court by the Defendant, a sum of $130,000 do remain in Court and be treated as his payment in satisfaction of the aforesaid condition to defend. The balance of $70,000 be released to the Plaintiff in partial satisfaction of the summary judgment herein.

47.  The said master’s decision on costs is also set aside. This Court directs the plaintiff be paid two-thirds of the costs of both the appeal and the hearing before the master (with certificate for counsel) as well as two-thirds of the costs of the action up to the date hereof, with the remaining one-third costs being in the cause. It is a costs order nisi, and it will be made absolute if no application is made to vary the same within 14 days.