BANK OF CHINA (HONG KONG) LTD v. PERPETUAL WEALTH (HONG KONG) LTD AND OTHERS

HCMP 680/2024

[2025] HKCFI 2300

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 680 OF 2024

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J U D G M E N T

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A.  INTRODUCTION

1.  By Originating Summons filed on 23 April 2024 (“the Originating Summons”), the plaintiff asked for the following orders from the Court:

(1)  Payment of all monies due under a mortgage dated 23 May 2017, a second legal charge dated 18 September 2017 and 2 Deeds of Guarantee dated 11 May 2017 and 28 August 2017 respectively;

(2)  Delivery of vacant possession by the 1^st defendant to the plaintiff of the mortgaged properties set out in the Schedule to the Originating Summons (“the Properties”); and

(3)  Costs on indemnity basis.

B.  RELEVANT FACTUAL BACKGROUND

2.  The following background is largely taken from the plaintiff’s skeleton argument which is undisputed or indisputable.

B1.  The mortgage loan

3.  On around 27 April 2017, Messrs. Stevenson Wong & Co (“SWC”)  was engaged by the plaintiff to handle the preparation and execution of documents in relation to a mortgage loan in the original amount of $38.4 million (“the Mortgage Loan”).

4.  On 9 May 2017, SWC issued a letter to the 2^nd defendant which enclosed a prescribed Warning Notice (Appendix C)  (“the Mortgage Loan Warning Notice”), a copy of a facility letter dated 10 May 2017 whereby the plaintiff agreed to grant the 1^st defendant a general banking facility for the purposes of a mortgage loan of up to $38.4 million (“the 1^st Facility Letter”), and a copy of a deed of guarantee to be given by the 2^nd defendant in favour of the plaintiff to guarantee all monies due by the 1^st defendant to the plaintiff (“the 1^st Deed of Guarantee”).  The said letter was sent to the 2^nd defendant by email (through a Mr Ryan Hui)  on 10 May 2017.

5.  On 10 May 2017, Mr Ryan Hui (representing the 2^nd defendant)  replied by way of email attaching a copy of the Mortgage Loan Warning Notice duly signed by the 2^nd defendant.

6.  On 11 May 2017, the 2^nd defendant signed, inter alia, the followings:

(1)  The 1^st Facility Letter;

(2)  The 1^st Deed of Guarantee;

(3)  A mortgage (“the Mortgage”)  on behalf of the 1^st defendant whereby:

(a)  The 1^st defendant mortgaged the Properties to the plaintiff to secure due and punctual payment of the secured indebtedness by the 1^st defendant; and

(b)  in consideration of plaintiff’s agreement to grant certain banking facilities to the 1^st defendant, the amount of which is to be determined by the plaintiff from time to time;

(4)  Chinese confirmation documents in relation to the 1^st Deed of Guarantee and the Mortgage.

7.  On 23 May 2017, the plaintiff as lender and the 1^st defendant as mortgagor and borrower executed the Mortgage.

8.  Pursuant to the terms and covenants of the Mortgage, the 1^st Deed of Guarantee and the 1^st Facility Letter, the plaintiff advanced to the 1^st defendant the Mortgage Loan which was first drawn down by the 1^st defendant on 23 May 2017.

B2.  The term loan

9.  On about 24 July 2017, SWC was engaged by the plaintiff to handle the preparation and execution of documents in relation to a term loan in the original amount of $50 million (“the Term Loan”).

10.  On 3 August 2017, SWC issued a letter to the 2^nd defendant, which was sent to him by way of email (through Mr Ryan Hui)  on the same day.  The letter enclosed a prescribed Warning Notice (Appendix C)  (“the Term Loan Warning Notice”), a copy of a facility letter dated 24 July 2017 whereby the plaintiff agreed to grant the 3^rd defendant a general banking facility for the purposes of a term loan of up to $50 million (“the 2^nd Facility Letter”)  and a Deed of Guarantee in favour of the plaintiff to guarantee all monies due by the 3^rd defendant to the plaintiff (“the 2^nd Deed of Guarantee”).

11.  On 21 August 2017, Mr Ryan Hui (representing the 2^nd defendant)  replied by way of email, and attached thereto a copy of the Term Loan Warning Notice duly signed by the 2^nd defendant.

12.  On 25 August 2017, SWC sent, amongst others, a copy of a Second Legal Charge (“the Second Legal Charge”)  to the 2^nd defendant (through Mr Ryan Hui)  by way of email for his perusal and consideration.  The purposes of the Second Legal Charge was:

(1)  For the 1^st defendant to charge the Properties to the plaintiff  and secure the due and punctual payment of the secured indebtedness by the 3^rd defendant;

(2)  As consideration of the plaintiff’s agreement to grant certain banking facilities to the 3^rd defendant, the amount of which is to be determined by the plaintiff from time to time.

13.  On 28 August 2017, the 2^nd defendant signed, inter alia, the followings:

(1)  The 2^nd Facility Letter;

(2)  The 2^nd Deed of Guarantee;

(3)  The Second Legal Charge;

(4)  Chinese confirmation letters in relation to his obligations under the 2^nd Deed of Guarantee and the Second Legal Charge.

14.  On 18 September 2017, the plaintiff as lender, the 1^st defendant as mortgagor and the 3^rd defendant as borrower executed the Second Legal Charge.

15.  Pursuant to the terms and covenants of the Second Legal Charge, the 2^nd Deed of Guarantee and 6 other facility letters (“the 2^nd to 7^th Facility Letters”), the plaintiff advanced to the 3^rd defendant the Term Loan.  It was first drawn down by the 3^rd defendant on 18 September 2017.

C.  THE DEFENCE

16.  There is no dispute that the defendants have been in default of repayment.

17.  However, it is argued by the defendants that the Mortgage, the Second Legal Charge, the 1^st Deed of Guarantee and the 2^nd Deed of Guarantee are liable to be set aside on the grounds of (1)  misrepresentation; and/or (2)  non est factum.  

18.  It is the defendants’ case that prior to executing documents concerning the Mortgage Loan, the 2^nd defendant has expressly informed the plaintiff’s staff (whom the 2^nd defendant cannot tell his/her identity due to the long lapse of time (“the Officer”))  that he does not read English and cannot comprehend the context of the English documents.  The Officer then assured him that those were mere formalities required by the plaintiff, and so long as the 1^st defendant could repay the Mortgage Loan on time, he had nothing to worry about. It is further alleged that the Officer stated that the 1^st defendant as borrower would be wholly liable for the Mortgage Loan and that the plaintiff would only chase after the 2^nd defendant when the 1^st defendant was unable to repay the debts (“the Representation”).

19.  Another batch of English documents (i.e. the 2^nd Facility Letter, the 2^nd Deed of Guarantee and the Second Legal Charge)  in respect of the Term Loan were executed around 3 months after the Mortgage.  The 2^nd defendant alleged that an officer (who might or might not be the Officer)  just repeated the Representation at the time when he executed them.  Further, given that the 2^nd defendant had “experience” in executing similar documents before, the officer explained even more briefly and merely asked him to sign the relevant documents quickly to complete the “formalities”.

20.  The defendants also alleged that the plaintiff has failed to comply with the statutory requirement under Order 88 rule 5(3)  of the Rules of the High Court (Cap.4A, Laws of Hong Kong)  (“RHC”).

D.  THE LEGAL PRINCIPLES

21.  The legal principles applicable to Order 88 proceedings are well-established and have been summarised by Au-Yeung J in The Hongkong and Shanghai Banking Corporation Ltd v King Wai Piece Goods Company Ltd & Others [2025] HKCFI 1371 at [53] – [56] as follows:

(1)  Unlike Order 14 applications where the defendant is obliged to provide sufficient grounds to justify the action continuing to trial, the burden in summary judgment applications under the originating summons procedure is on the plaintiff to justify its entitlement to summary judgment.

(2)  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.  Hence, there may in practice be little difference between an application for summary judgment in originating summonses and an application for summary judgment under Order 14.

(3)  If the defendants can show that there are factual issues which cannot be resolved on the affirmations, then a trial is inevitable. But in discharge of their evidential burden is concerned, they are expected to condescend upon particulars as a defendant must do in resisting a summary judgment application.

(4)  Where oral representations are alleged, the defendant’s assertions are to be taken in the context of the background which is either undisputed or beyond reasonable dispute. This means that they should be tested against contemporaneous documents or circumstances to see if they are so incredible or contradicted that it becomes clear that the defence is a sham.

(5)  One also bears in mind that it is rare in modern commercial litigation to encounter a claim based on an agreement which is not only said to have been oral but of which there is no contemporaneous documentary record of any kind. The prevalence of emails, text messages and other forms of electronic communication is such that most agreements or discussions which are of legal significance, even if not embodied in writing, leave some form of electronic imprint.

(6)  The best approach for a judge to adopt at the trial of a commercial case is to place little if any reliance on witnesses’ recollection of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts.

E.  DELIBERATION

E1.  Order 88 rule 5(3)

22.  Order 88 rule 5(3)  of the RHC provides that:

“Where the plaintiff claims delivery of possession the affidavit must show the circumstances under which the right to possession arises and except where the Court in any case or class of case otherwise directs, the state of the account between the mortgagor and mortgagee with particulars of –

(a)  the amount of the advance,

(b)  the amount of the periodic payments required to be made,

(c)  the amount of any interest or instalments in arrear at the date of the originating summons and at the date of the affidavit, and

(d)  the amount remaining due under the mortgage.”

23.  There is no doubt that the aforesaid information has already been set out in the Affirmation of Zhao Jialu which was filed in support of the Originating Summons.  Hence, any allegation that the plaintiff has failed to comply with the requirement under Order 88 rule 5(3)  of the RHC is without basis.

24.  It seems that what the defendants are really complaining is that they do not understand how the plaintiff calculated the amount said to be outstanding.  However, this argument is hopeless, as they are unable to point out in what way the plaintiff has gone wrong in its calculation. 

25.  The defendants also alleged that the default administrative charges for both the Mortgage Loan and the Term Loan should not be considered as debt owed to the plaintiff in these proceedings, and the default interest rate should not be applied to such charges.  However, such an argument was made in total disregard of Clause 6.2 of the General Terms and Conditions for General Banking Facilities and Loan Facility(ies), which has expressly given the plaintiff a right to charge default interest on any sum which is not paid when due.

26.  Hence, there is nothing in these complaints.

E2.  Misrepresentation

27.  The defence of misrepresentation is only relied on by the 2^nd defendant.

28.  The so-called “representation” has been explained in paragraph 7(16)  of the 2^nd defendant’s affirmation as follows:

“I expressly informed the Officer that I do not read and cannot comprehend the context of those English documents. Nevertheless, the Officer assured me that those were mere procedural requirements by the Plaintiff, so long as the 1^st Defendant could repay the Mortgage Loan on time, I had nothing to worry about. According to the Officer, the 1^st Defendant as borrower would be wholly liable for the Mortgage Loan and the Plaintiff would only chase after me when the 1^st Defendant was unable to repay the debts (‘Misrepresentation’).”

29.  I bear in mind that this Court is now asked to dispose of the whole case summarily rather than after trial, and therefore, if there is any relevant dispute of facts, then this Court should not conduct a trial on affidavit.

30.  Here, there is a dispute as to whether the plaintiff’s officer had indeed made the Representation as alleged.  However, in my view, that dispute is irrelevant for our purpose.  This is because, even if the Representation has indeed been made, it is clear that such representation was actually accurate: The facts of the present case show (and it is not disputed by counsel for the defendants)  that the plaintiff indeed only chased after the 2^nd defendant upon the default of the 1^st and 3^rd defendants.

31.  The defence on misrepresentation must therefore fail.

E3.  Non est factum

32.  Again, the defence of non est factum is only relied on by the 2^nd defendant.

33.  The principles on non est factum have recently been explained by DHCJ Le Pichon in Dah Sing Bank Limited v Sun Create Richly Holdings (Asia)  Limited & Another [2024] HKCFI 1512 at [18] – [20] as follows:

“18. The legal requirements for establishing a defence of non est factum can be found in Soshila Keswani v Motiram Keswani [2022] 2 HKLRD 822 at §34:

‘For the defence of non est factum to apply, it has to be established that (i)  the defendant was under a disability, whether permanent or temporary; (ii)  the document he signed was fundamentally different from what he thought he was signing; (iii)  he was not careless in appending his signature to the document: Saunders v Anglia Building Society [1971] AC 1004. The defendant bears a heavy burden of proof and he must establish each of the three components.’

19.  A person of age and capacity is normally bound by his signature to a document. Thus, in Ming Shiu Chung & Ors v Ming Shiu Sum & Ors (2006)  9 HKCFAR 334 at [84],

‘[84] … 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 documents signed. But they are held to the documents which they have chosen to sign unless there is shown to be a recognised 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.’

20.  The plea of non est factum was further explained by Lord Reid in Saunders v Anglia Building Society [1971] AC 1004(at 1016E):

‘But the essence of the plea non est factum is that the person signing believed that the document he signed had one character or one effect whereas in fact its character or effect was quite different. He could not have such a belief unless he had taken steps or been given information which gave him some grounds for his belief. The amount of information he must have and the sufficiency of the particularity of his belief must depend on the circumstances of each case.’ ”

34.  With the above principles in mind, I am of the view that the 2^nd defendant has no hope of establishing a defence on the basis of non est factum:

(1)  He was not under any disability at all, as he could read;

(2)  Not understanding English (even if that is true)  cannot be regarded as a “disability” at all in the present case, because the nature of the transactions had been set out in the warning notices and confirmation documents in Chinese;

(3)  Even if the nature of the transactions was totally different from what the 2^nd defendant thought, he must have been careless[1] in that:

(a)  he did not take independent legal advice on the transactions despite the fact that he had been reminded to do so (as apparent from, for example, the Chinese confirmation documents); and

(b)  he proceeded to execute the documents in English even though he did not understand what they meant.

35.  This defence must also fail.

E4.  Other miscellaneous arguments

36.  In the conclusion of the defendants’ skeleton submission, it was further mentioned that the documents which the 2^nd defendant was asked to sign in his personal capacity as guarantor were not explained to him, and were not translated in the circumstances where he did not know English.

37.  For the sake of completeness, I should reiterate that there was no duty on the part of the plaintiff’s solicitors (who admittedly did not act for the defendants in the relevant transactions)  to take the extra steps mentioned above.  It was all up to the 2^nd defendant to engage his own lawyers if he felt fit.

38.  The aforesaid concluding remarks made on behalf of the 2^nd defendants therefore cannot assist him at all.

F.  CONCLUSION

39.  For reasons of the aforesaid, I make an order in terms of the Originating Summons.

40.  Costs should follow the event.  I make an order nisi that the defendants shall bear the plaintiff’s costs of the action, which shall be summarily assessed on indemnity basis[2].  The above order nisi shall become absolute in the absence of application to vary (which, if any, will be disposed of on paper)  within 14 days hereof.

41.  Unless any application for variation of the aforesaid costs order nisi is made within time, the defendants shall lodge and serve their statement of objection within 21 days hereof[3].  Summary assessment of the plaintiff’s costs of the action will be conducted on paper (no matter whether any statement of objection is lodged by the 1^st defendant within time)  thereafter, and such costs shall be paid within 14 days after assessment.