DYNAMIC MATRIX LTD v. WONG HOI YAN BIBIANNA

 HCA 2205/2019

[2022] HKCFI 557

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2205 OF 2019

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DECISION

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1.  This is the defendant’s appeal from the order of Master Dick Ho dated 29 December 2020 granting summary judgment to the plaintiff. At the conclusion of the hearing, the Decision was reserved which I now give.

Procedural history

2.  The procedural history of these proceedings up to the issuance of the defendant’s summons dated 18 November 2021 (for leave to adduce her 3^rd affirmation and accompanying exhibits into evidence) is set out in §3 (a) to (k) of this court’s Reasons for Decision dated 20 January 2022 (“the January Decision”) to which reference should be made.

3.  The subsequent events are set out below:

(a)  the defendant’s application to admit her 3^rd affirmation into evidence was dismissed on 19 January 2022;

(b)  the defendant’s skeleton submissions for the appeal hearing[1] due on 31 January 2022[2] were not lodged;

(c)  on 4 February 2022, the defendant filed a notice to act in person[3];

(d)  the defendant then “filed” her “4^th affirmation” dated 9 February 2021 at the Registry notwithstanding the absence of any application and order granted for its filing;

(e)  on 11 February 2022, after hearing the defendant, the application (“the 1^st application”) for (a) the admission of her 4^th affirmation into evidence and (b) an adjournment of the appeal hearing then listed for 15 February 2022 was refused, the court ordering that the defendant’s “4^th affirmation” be expunged from the court record;

(f)  on 14 February 2022, upon the defendant’s application[4] for an adjournment of the appeal hearing (“the 2^nd application”) (based on a sick leave certificate[5] of 4 days from 13 February 2022 to 16 February 2022), the appeal hearing was adjourned to 18 February 2022;

(g)  on 16 February 2022, the defendant’s application[6] by letter (“the 3^rd application”) for a three-month adjournment (attaching the diagnosis of Dr Yip Pui Lam a psychiatrist dated 15 February 2022 (“Dr Yip’s report”)) was refused. Dr Yip’s report[7] requested that the defendant be allowed[8] to be legally represented;

(h)  it should be noted that the defendant was represented by counsel up until 31 January 2022 when her insistence to make another application for further evidence to be admitted and for an adjournment notwithstanding counsel’s advice left her counsel no choice but to return the papers to KWL;

(i)  on 18 February 2022 about an hour prior to the appeal hearing, the court found another letter (in Chinese) from the defendant (“the Letter”) faxed earlier that morning which referred to a telephone conversation between Mr Tong and Dr Yip the previous evening and attaching a ‘sickness certificate’ dated 15 February 2022 recommending 10 days of sick leave from 15 February 2022[9].

4.  Pausing there, it is remarkable and wholly inexplicable that the ‘sickness certificate’ was not submitted together with Dr Yip’s report[10] when the defendant made her 3^rd application.

The appeal hearing 

5.  The court had no opportunity to process the last minute 3^rd application for an adjournment before the hearing. At the commencement of the hearing, the court interpreter orally translated the Letter in court.

6.  The Letter made serious allegations against the plaintiff’s solicitors concerning the service of documents on the defendant. Mr Avery Chan, counsel for the plaintiff, denied those allegations and made representations on behalf of the handling solicitor, inter alia, explaining that the occasion referred to had nothing to do with the present proceedings.

7.  Rather, the allegations of “serving the documents like “triads”” related to a hearing on 27 October 2021 before the Master in relation to issues arising in the service of a bankruptcy petition on the defendant in HCB 4739/2021 and at which hearing the defendant was present.

8.  That hearing was necessitated by difficulty in serving the bankruptcy petition on the defendant which has been resolved by service pursuant to an order for substituted service. I understand that there is a further hearing of the petition before Master Phoebe Man on 23 February 2022.

9.  The court proceeded with the substantive appeal hearing for the following reasons:

(a)  this was the defendant’s appeal by a notice of appeal dated 12 January 2021, first heard on 23 June 2021[11] by DHCJ Patrick Fung;

(b)  that hearing had to be adjourned (with indemnity costs awarded to the plaintiff) because the defendant who sought to impugn Master Dick Ho’s order, failed to obtain a transcript of the hearing for her appeal;

(c)  on 25 October 2021 the appeal hearing was re-fixed for 15 February 2022[12] before this court;

(d)  it was the defendant’s choice to become a litigant in person[13] having until then had legal representation;

(e)  the defendant had already made 3 unsuccessful applications for an adjournment;

(f)  the defendant’s repeated attempts to adduce fresh evidence despite legal advice to the contrary have wasted judicial time and resources;

(g)  any further adjournment would likely result in further attempts to adduce fresh evidence and/or further requests for adjournments of the appeal hearing;

(h)  to further adjourn the appeal hearing would obstruct rather than promote the underlying objectives[14] set out in RHC O.1A, r.1;

(i)  in particular, the considerations stated in subparagraphs (b), (d) and (f) of r.1 overwhelmingly tilt the balance in favour of proceeding with the appeal hearing, bearing in mind fairness to the plaintiff who should not be deprived of the fruits to which a successful litigant is entitled in the absence of real substance in the defence; and

(j)  having perused the hearing bundles, it did not strike the court that there was a bona fide defence raised.

10.  The court reserved its Decision at the conclusion of the hearing so that documents relevant to the defendant’s defence could be further reviewed.

The plaintiff’s claim

11.  A loan agreement dated 30 August 2013 (“Loan Agreement”) was entered into between the plaintiff as lender and the defendant and her husband (“Mr Tong”) as co-borrowers (“the Tong couple”). The principal sum was $4.5 million (“the loan”), $3.5 million of which was drawn down the same day and the remaining $1 million on 2 September 2013.

12.  The repayment date was 25 August 2019. The loan was not secured by any security or guarantee and was interest-free in substance (with a nominal $1 interest for the term of the loan) in the absence of any default.

13.  Clause 13 of the Loan Agreement set out events of default. Those events included the bankruptcy of any of the Tong couple.

14.  In the event of default, the Tong couple had joint and several obligations to promptly inform the plaintiff of such an occurrence[15] and the plaintiff may give notice to the Tong couple to declare that the loan and the interest accrued thereon become immediately payable[16].

15.  Mr Tong was adjudged bankrupt on 26 July 2017 but the plaintiff was never informed of Mr Tong’s bankruptcy at the time or any time thereafter. It only came to light after the repayment date of the loan.

16.  In the event that the Tong couple failed to pay any sum due under the Loan Agreement, interest is payable at the default interest rate (HSBC prime rate +2.75% per month) on such sum from and including the due date to the date of actual payment[17].

17.  The Tong couple has not made any repayment whether in respect of principal or interest accrued.

The hearing below

18.  On 15 July 2020, the plaintiff issued an amended summons seeking (1) summary judgment against the defendant as borrower for sums due under the Loan Agreement; (2) an order striking out the defendant’s counterclaim.

19.  A week prior to the substantive hearing of the plaintiff’s summons before Master Dick Ho on 29 December 2020, the defendant who became legally represented on 26 November 2020, issued a summons to amend her defence and counterclaim (“the amendment summons”)

20.  In view of the amendment summons, the plaintiff was content to pursue summary judgment on the basis of the draft amended defence and counterclaim (“the draft ADCC”) and not to apply to strike it out. Accordingly, the Master adjourned the amendment summons sine die. To date, there has been no application to revive the same.

21.  The Master granted summary judgment to the plaintiff.

The defendant’s appeal

22.  The backdrop to the defendant’s appeal is as follows:

(a)  The notice of appeal was filed by the defendant as a litigant in person on 12 January 2021 to set aside the summary judgment order and for leave to adduce further evidence.

(b)  On 3 February 2021, KWL[18] filed a notice to act for the defendant.

(c)  However, no application was made to adduce further evidence until the defendant’s summons of 18 November 2021 which was heard and dismissed on 19 January 2022.

(d)  KWL remained her solicitors in these proceedings until the defendant filed her notice to act in person on 4 February 2022.

(e)  As earlier noted[19], her 1^st application (made as a litigant in person) for an adjournment of the appeal hearing was heard and dismissed on 11 February 2022.

(f)  Prior to this hearing, the defendant had made 2 further applications (on 14 and 16 February being the 2^nd and 3^rd applications) which have also been dismissed.

23.  For this appeal, the evidence is the same as that which was before Master Dick Ho.

24.  The crux of the defendant’s case (discerned from her defence and counterclaim, the draft ADCC and her 1^st and 2^nd affidavits) is that the plaintiff and the Tong couple entered into a composite business deal that had 3 components or parts:

(a)  the acquisition by the plaintiff of 60% of the issued shares of a company called BOM City Limited (“BOM”) set up by the Tong couple and other investors in January 2012 (“part 1”);

(b)  the Loan Agreement (“part 2”); and

(c)  the issuance/transfer of 5% of the issued shares of Sophie Kindergarten Limited (“SKL”) (“the SKL shares”), SKL being a wholly owned subsidiary of the plaintiff’s operating the business of a kindergarten (“part 3”).

25.  The defendant’s case is that consideration from the plaintiff for the business deal consisted of $9.5 million and the SKL shares and that the Tong couple only agreed to borrow from the plaintiff in consideration of parts 1 and 3. It is her case that the Loan Agreement is not a stand-alone transaction.

26.  Part 1 is evidenced by

(a)  a Memorandum of Understanding (“MOU”) of 26 April 2013 made between the Tong couple, True Delight Limited, (“TDL”) a company through which they held shares in BOM and the plaintiff under which the Tong couple agreed to procure the sale of 6000 shares representing 60% of the issued share capital of BOM (“the BOM shares”) to the plaintiff for $4 million, with completion on or before 31 May 2013 unless otherwise agreed.

(b)  a Sale and Purchase Agreement dated 31 May 2013 entered into by TDL as vendor, Next Glory Limited (a company controlled by Mr Pong) as purchaser and the Tong couple as guarantors for the acquisition of the BOM shares for $4 million. In addition to the deposit paid under the MOU which was to be applied as part payment, a further $2.5 million was paid, with the balance of $500,000 payable upon, inter alia, the surrender of the lease on or before 31 August 2013.

27.  Part 2 is the Loan Agreement dated 30 August 2013 duly executed and signed by the Tong couple.  Its relevant provisions are set out in §§ 11-17 above.

28.  There is simply no evidence in support of part 3 other than the bare assertions of the defendant.

29.  It is common ground that in early February 2013, the plaintiff had put forward a three-part proposal. That proposal was “subject to contract” and was never concluded because certain conditions precedent could not be fulfilled.

30.  By late April 2013, the parties signed the MOU which related exclusively to the proposed acquisition of the BOM shares without any mention of either the loan or the SKL shares.

31.  There was never any written evidence of an agreement that the transfer of the SKL shares was part of an overarching business arrangement between the parties.

32.  The draft ADCC also contains allegations that Mr Pong made extensive representations which induced the defendant to enter into the business deal, that such representations were false thus entitling the defendant to seek rescission of the entire business deal and damages.

33.  However, the representations said to have been made were all made orally. There is no evidence to substantiate the defendant’s allegations. More surprisingly, the 2 affidavits filed by the defendant (admitted into evidence) make no mention of such representations. Nor is there any reference to such representations in the email exchanges the parties.

34.  Those matters aside, any representations would have been excluded by the entire agreement clause in the sale and purchase agreement of the BOM shares.

35.  Even assuming for the sake of argument that part 3 is part of the composite arrangement, and/or that the plaintiff/Mr Pong is in breach such that the defendant has a counterclaim in respect of that “breach”, it cannot assist the defendant given that the Loan Agreement expressly excludes the right to set-off: see clause 9.1 of the Loan Agreement and Worldwide Flight Services Holding v Kai Tak Cruise Plaza [2019] 4 HKLRD 56 at §23.

36.  In §30 of the draft ADCC the defendant counterclaims for loss and damages including investment costs of $10.8 million and loss of profits and business opportunities to be assessed. The $10.8 million appears to be a reference to the cost BOM incurred in renovating the premises in 2012 in anticipation of a sale of the majority shares to the plaintiff. Such costs incurred prior to the alleged three-part transaction is obviously irrecoverable.

37.  As regards the claim for loss of profits and business opportunities, the claim is hopeless. It has been held that the complete lack of particularisation is itself an issue and puts the court in an impossible position in trying to assess the merits of the defence and could be a ground for rejecting the defence as an arguable defence[20].

38.  The fact that the repayment obligation under the Loan Agreement is self-contained, independent and unconditional is significant. It is triggered by the first to occur of an event of default or 25 August 2019. The existence of an independent repayment date reinforces the stand-alone nature of the Loan Agreement as it is not contingent or linked to another part of a composite transaction or any other condition.

39.  In Sinom Investments Limited v CCMD Overseas Limited & Ano , unrep., HCCT 43/2015, 22 August 2016 at §§26-28, it was held that the provision of an independent repayment date clearly indicates that the parties did not intend to link the repayment of the loan with the operation of the joint venture business. The same reasoning applies in the present case.

Conclusion

40.  I have no hesitation in dismissing this appeal. The defendant has singularly failed to raise any bona fide defence to the plaintiff’s claim. Her defence being unsupported by credible evidence is hopeless.

41.  Accordingly, the Master’s decision to award summary judgment is affirmed and the defendant’s summons to set aside the Master’s order is dismissed with costs.

42.  The court’s attention was drawn to clause 14.1.3 of the Loan Agreement pursuant to which the plaintiff is entitled to costs on an indemnity basis. The plaintiff’s statement of costs dated 9 February 2022 is before the court.

43.  Since that date, the plaintiff has had to incur additional costs as a result of the defendant’s 1^st, 2^nd and 3^rd applications for an adjournment of the appeal hearing. In respect of those applications, the plaintiff seeks additional costs reflecting 3 hours of the handling solicitor’s time charged at the rate of $3200 per hour. Accordingly, this amount is to be added to the plaintiff’s current statement of costs.

44.  Costs are to be summarily assessed on an indemnity basis. The defendant is directed to submit her list of objections to the statement of costs in writing within 14 days of this Decision.

HCA 2205/2019

[2022] HKCFI 280

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2205 OF 2019

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REASONS FOR DECISION

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1.  This is the defendant’s application for leave to adduce new evidence for the upcoming hearing (on 15 February 2022) of her appeal from the order of Master Dick Ho dated 29 December 2020 granting summary judgment to the plaintiff. At the conclusion of the hearing, the defendant’s application was refused with costs.

2.  The defendant sought leave to adduce her draft 3^rd affidavit and accompanying exhibits of over 200 pages on 18 November 2021.

Procedural history

3.  The relevant events are as follows:

(a)  the writ was issued on 28 November 2019;

(b)  on 22 July 2020, the plaintiff took out an amended summons seeking summary judgment under RHC Order 14;

(c)  the Order 14 application was supported by an affirmation of Pong Wilson Wai San dated 15 July 2020;

(d)  on 16 September 2020, the defendant who then was acting in person filed 2 affidavits, respectively “D 1^st” and “D 2^nd” in opposition;

(e)  on 26 November 2020, Messrs Littlewoods filed a notice to act for the defendant;

(f)  on 22 December 2020, a summons, inter alia, to amend her defence and counterclaim was taken out;

(g)  on 29 December 2020, Master Dick Ho adjourned the defendant’s amendment application sine die, with liberty to restore and granted summary judgment to the plaintiff;

(h)  Littlewoods ceased to act for the defendant on 12 January 2021 when the defendant filed a notice to act in person;

(i)  on the same day, she took out a notice to appeal the Master’s Decision;

(j)  on 3 February 2021 Messrs KW Luk & Co (“KWL”) filed a notice to act for the defendant;

(k)  the present summons was taken out on 18 November 2021 seeking leave to adduce the defendant’s 3^rd affidavit and the accompanying exhibits into evidence.

This application

4.  It is common ground that the only issue that arises is whether the conditions laid down in Ladd v Marshall [1954] 1 WLR 1489 are satisfied, the conditions being that:

(a)  the evidence could not have been obtained with reasonable diligence for use at the hearing below;

(b)  the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; and

(c)  the evidence must be such as is presumably to be believed.

5.  So far as the 1^st condition is concerned, it appeared to the court that the defendant’s defence discernible from her 3^rd affidavit is no different from that already advanced in her 1^st and 2^nd affidavits, namely, that the agreement reached with the plaintiff comprised 3 parts and that the loan agreement was but one part of the overall transaction. Further, the matters canvassed in the 3^rd affidavit are matters that plainly were in the defendant’s possession, custody or control at the time the matter came before the Master in December 2020 (“the December hearing”).

6.  In response to the court’s question as to what was said to be unavailable at the December hearing, Mr Calvin Law, counsel for the defendant informed the court that the exhibits to the earlier affidavits were not before the Master. Those exhibits are said to include a key document that supports the defendant’s case of an overall agreement comprising 3 parts.

7.  The document referred to is an email exchange on 4 February 2013 between Coman Sit (the plaintiff’s employee) and Dominic Tong (the defendant’s husband). It shows (a) an offer from the plaintiff for the acquisition of a 60% equity interest of BOM City Limited (a company operating children education businesses which held a lease of specified premises) for a consideration that comprised 3 parts and (b) confirmation (on behalf of the defendant) of acceptance of the offer with a request for sight of the 1^st draft when available.

8.  The loan agreement which was the subject matter of the summary judgment is dated 30 August 2013, some 5 months after the email exchange during which period negotiations as to the precise terms of the business transaction between the plaintiff and the defendant were evolving.

9.  Neither Mr Law nor KWL were at December hearing. At that time, the defendant was represented by Littlewoods and different counsel.

10.  Mr Avery Chan, counsel for the plaintiff who was at the December hearing, informed the court that the exhibits (including the key document) did form part of the hearing bundles and that he had the relevant page reference to that document.

11.  In those circumstances, the relevance of the email exchange was a matter for the Master.

12.  Mr Law acknowledged that all the matters set out in the defendant’s 3^rd affidavit were matters within the defendant’s possession at the time of the December hearing but added that they were scattered in different locations and unorganised. He submitted that as a litigant in person she did not know how to marshal them properly.

13.  However, between 26 November 2020 (a full month prior to the December hearing) and 12 January 2021, the defendant was legally represented. In fact, her then solicitors filed a summons on her behalf, inter alia, to amend her defence and counterclaim.

14.  Pausing there, one would have thought it evident that if an amendment was considered necessary, it would have been in the context of having reviewed the defence, including what had been set out in the defendant’s 1^st and 2^nd affidavits. It is telling that no application was made to file further evidence in support or to seek an adjournment of the December hearing in order to do so.

15.  The fact that the defendant may be dissatisfied with the advice she was given at the time is not a matter which concerns her present application nor would it excuse compliance with the Ladd v Marshall conditions.

16.  Since the defendant is unable to show that the Ladd v Marshall conditions have been satisfied, her application must fail.