FUBON BANK (HONG KONG) LTD v. BRIGHT IDEA PROMOTION LTD AND OTHERS

CACV 532 /2024, [2025] HKCA 1070

On appeal from [2024] HKCFI 3267

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 532 OF 2024

(ON APPEAL FROM HCMP NO 1987 OF 2023)

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REASONS FOR JUDGMENT

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Hon Kwan VP (giving the Reasons for Judgment of the Court):

1.  This is the appeal of the 1^st to 7^th defendants against the judgment of Deputy High Court Judge K C Chan in a mortgage action given on 8 November 2024 at the conclusion of the hearing of the originating summons. Reasons for the judgment were handed down on 15 November 2024 (“Reasons for Judgment”)^[1]. The judge found no arguable defence or triable issue raised by the defendants. He therefore granted judgment to the plaintiff bank for the outstanding sum of HK$67,185,119.51 and RMB 16,010,444.47 with interest, vacant possession of the charged properties, and costs to the plaintiff on an indemnity basis^[2].

2.  The defendants appealed to set aside the judgment and sought an order that the originating summons be continued as if begun by writ.  They raised only one ground of appeal, namely, that the judge erred in finding it is inherently improbable that the plaintiff “would promise to drop these proceedings merely based on the defendants’ repayment of the relatively minor sum of HK$1,260,000”^[3].

3.  We dismissed the defendants’ appeal at the conclusion of the hearing.  These are the reasons for our judgment.

Background

4.  The relevant background has been set out in the Reasons for Judgment at §§10 to 18.  For present purpose, it may be summarised as follows.

5.  The 4^th and 3^rd defendants are husband and wife.  The corporate defendants are all incorporated in Hong Kong.  The 3^rd defendant is and was a director and shareholder of all five corporate defendants.  The 4^th defendant is and was a director of the 1^st, 2^nd and 5^th defendants and a shareholder of the 1^st and 5^th defendants.

6.  A number of loans were advanced by the plaintiff to the 5^th and 6^th defendants by four Facility Letters dated 3 January 2022 and 18 February 2022 (“1^st Facility” to “4^th Facility”, collectively “Facilities”).  The 3^rd, 5^th and 6^th defendants executed four deeds of guarantee in respect of the liabilities of the 5^th and 6^th defendants to the plaintiff under the Facilities.  Six all monies legal charges all dated 31 January 2022 were entered into by the 1^st, 2^nd, 3^rd and 4^th defendants in favour of the plaintiff to secure all liabilities under the Facilities.  The 7^th defendant executed two deeds of guarantee on 8 August 2023 for the liabilities of the 5^th and 6^th defendants under the Facilities.

7.  There is no dispute that around January 2023, the 5^th and 6^th defendants began failing to make punctual repayments on the respective due dates of various loans.  The plaintiff issued the originating summons on 1 November 2023 and took out a summons for summary disposal.

8.  The plaintiff filed a supporting affidavit by its officer Ms Lee Sim Fong on 19 February 2024.  The defendants filed an affirmation in opposition by the 3^rd defendant on 12 June 2024 (“D3’s Aff”) and the plaintiff filed a second affirmation of Ms Lee in reply on 3 July 2024.

The defendants’ contentions in this appeal

9.  As mentioned, there is only one ground of appeal.  Ms Eunice Lui, who appeared for the defendants on appeal, raised the defence of promissory estoppel.  She submitted that the judge made a “palpable error” in finding that this defence is inherently improbable in that he had misunderstood the content or subject matter of the representation which founded this defence.

10.  The contents of the representation or the oral promise were set out in D3’s Aff at §§20 and 24 and stated correctly by the judge in §48 of the Reasons for Judgment:

“Third, D3 alleged that certain promises were made by the Bank, that ‘during one of those meetings in or around November 2023 in which Ms Chan^[4] was present … I was told that the Plaintiff would not continue with its legal action against the Defendants and that the Facilities would resume with on-going discussions on alternative repayment schedule and method if payments could be made to the 3^rd Facility’ (§20 of D3’s Aff), and that D3 accordingly made repayment in the total sum of HK$1,260,000 in January 2024, and that ‘on 5 March 2024 … Ms Chan again assured me that if payments could be made to the 3^rd Facility, the legal proceedings would not be continued after the Originating Summons hearing’ (in §24 of D3’s Aff).”

11.  The palpable error of the judge was said to arise in this way.

12.  In rejecting the allegation of the promises made by the plaintiff as “not at all believable”, the judge stated “it is most inherent [sic] improbable that the Bank would promise to drop these proceedings merely based on Ds’ repayment of the relatively minor sum of HK$1,260,000”^[5]. (Emphasis supplied) This should be contrasted with the oral promises allegedly made in which it was said that the plaintiff “would not continue” with its legal action and that the legal proceedings “would not be continued”.

13.  Ms Lui submitted that the phrases “would not continue” and “would not be continued” should be construed to mean that the plaintiff “will not push forward the progress of” the proceedings if the defendants made repayments according to the repayment schedule.  The judge however understood these phrases to mean “drop these proceedings” and that is directly contradictory to the plain meaning of these phrases.  Ms Lui argued there is a world of difference between “not continuing” an action and “dropping or discontinuing” an action.  “Dropping or discontinuing” an action means that there would no longer be any proceedings against the defendants and it would render any subsequent action on the same facts liable to be struck out for abuse of process^[6]. In contrast, “not continuing” an action means that the proceedings against the defendants would still stand and the plaintiff would have the liberty to restore the proceedings if the defendants should renege on the agreed payment schedule.

14.  Because the judge made this “palpable error” in his assessment of the evidence in finding that the alleged promise is not believable, Ms Lui submitted that this provides justification for the appeal court to interfere with his finding of fact.  His evaluation of the evidence was based on his misunderstanding of the content or subject matter of the promise and is therefore plainly wrong.  While it would be inherently improbable for the plaintiff to “discontinue” these proceedings and bear the risk of being struck out for abuse of process if it attempts to enforce its rights in future actions, she argued that it would not be inherently improbable for the plaintiff to “temporarily slow down the progress of the proceedings” in hopes of the defendants making timely repayments.  Once the content of the promise is properly understood to be a “suspension” of the proceedings, the judge would not have fallen into the error of finding that the promise is unbelievable, at least without hearing oral evidence.  The question of what exactly was the representation is factually sensitive and it is necessary to resolve this with oral evidence tested by cross-examination instead of summary disposal based on affidavit evidence.

15.  Furthermore, the conclusion that the defence of promissory estoppel was not believable was made without consideration of these relevant matters: (1) the defendants repaid the total sum of HK$630,000 on 12 January 2024; (2) the plaintiff issued an email on 17 January 2024 reminding the defendants to “make punctual repayment for each instalment loan going forward”; and (3) the defendants repaid a further HK$630,000 on 31 January 2024.  These matters are consistent with the existence of the representation, as the plaintiff actively engaged in negotiations with the defendants and even reminded the defendants to repay according to the repayment schedule, instead of relying on the legal proceedings as the primary mechanism for recovery.

16.  Once the representation is found believable, it is clear on the affidavit evidence that the defendants had suffered detriment in reliance on the representation in these respects: (1) by arranging for earlier repayment of HK$1,260,000 instead of waiting until the defendants were found liable by the end of the ongoing proceedings; and (2) by complying with the plaintiff’s request to make payment to the 3^rd Facility, causing interest to “snowball” on the 1^st, 2^nd and 4^th Facilities, in hopes that the plaintiff would “slow down” with the progress of the proceedings.

17.  Lastly, while promissory estoppel is suspensory in effect and may be terminated by reasonable notice, Ms Lui submitted there was no reasonable notice given by the plaintiff that it would exercise its full legal rights in that the representation was repeated to the 3^rd defendant on 5 March 2024 after the chain of emails between the parties from November 2023 to January 2024.

Discussion

18.  Mr Martin Kok, who appeared for the plaintiff on appeal and below, submitted that Ms Lui has engaged in a “contrived word game” in drawing a semantic distinction between “not continuing” an action and “dropping or discontinuing” an action.  We are inclined to agree.

19.  It seems to us pure sophistry that discontinuing an action is not the same as not continuing an action.  The contention that a party is at liberty to restore proceedings if proceedings are not continued but would not be liberty to do so where proceedings are discontinued has no basis in law.  The discontinuance of an action without leave is no bar to a subsequent action for the same cause of action.  The effect is the same where the discontinuance is with leave, unless the order giving leave expressly prohibits the commencement of a fresh action, see Rules of the High Court Order 21 rule 4 and Hong Kong Civil Procedure 2026, vol 1, §21/5/13.  What was said in Wing Fai Construction Co Ltd v Yip Kwong Robert at §75(10) was in the context of a stale action that has been struck out for delay.  Where the plaintiff brings fresh proceedings in that situation as limitation period has not expired, he “may well be met by an application to strike out or stay on the basis that the fresh proceedings, in view of the history, constitute an abuse and should not be permitted to continue”.  We reject the contention the judge had made a “palpable error”.

20.  In arriving at the conclusion that the alleged promise is not believable, the judge reviewed the email exchanges between the parties.  He rightly noted that the alleged oral promise was not only not mentioned or recorded in the continuous string of emails exchanged^[7], but that the contemporaneous emails directly contradicted such alleged promise, in particular the plaintiff “has been discussing with D3, D5 and D6 concerning the repayment of all the outstanding indebtedness and not just the repayment of the loans made under the 3^rd Facility, and that the Bank has been rejecting the proposals put forth by D3, D5 and D6”^[8].  It was expressly stated in three of the plaintiff’s emails^[9] that the plaintiff “could consider to further negotiate the settlement plan if the properties are surrendered to the Bank for disposal”.  However, the properties charged were never surrendered to the plaintiff.

21.  The judge then explained in §50 how he arrived at his “clear and firm view” that the alleged promise is “not at all believable”:

“Moreover, in view of the contents of the parties’ discussion by email, the clear stance expressed and emphasized by the representatives of the Bank and the much more substantial amount of outstanding indebtedness as compared to HK$1,260,000, it is most inherent [sic] improbable that the Bank would promise to drop these proceedings merely based on Ds’ repayment of the relatively minor sum of HK$1,260,000.”

22.  There is no basis at all to interfere with the judge’s assessment of the evidence and his finding of fact.  His conclusion that there is no triable issue in that regard cannot be impugned.

23.  It is not necessary to deal with the additional grounds in the respondent’s notice in support of the judgment in detail. Suffice it to say we agree with the plaintiff’s submission that essential requirements of promissory estoppel are not made out.  The alleged promise was not clear and unequivocal.  It is unclear what is meant by “resuming on-going discussions”, what the “alternative repayment schedule and method” entailed, or how much payment to the 3^rd Facility would suffice.  It does not appear to us that the conduct alleged to constitute detriment was such that the defendants would not have suffered but for their reliance on the promise, as the repayments were discharge of pre-existing contractual obligations.  As pointed out by Mr Kok, the defendants were already indebted to the plaintiff in excess of HK$60 million plus RMB 15 million prior to the commencement of these proceedings in November 2023.  It is absurd to suggest that they made any “earlier repayment” of HK$1,260,000.  The defendants were legally obliged to repay the outstanding sums under each of the Facilities, any increase in interest accrued solely from their default and failure to repay cannot amount to detriment suffered by them.

24.  For the above reasons, we dismissed the defendants’ appeal with costs to the plaintiff on an indemnity basis.