SPEEDY FINANCE LTD v. ZHANG XIAOPING

HCMP 222/2019

[2021] HKCFI 3822

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 222 OF 2019

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DECISION

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1.  This is the hearing of the appeal by the defendant (“D”)  against Master Lai’s order of 2 September 2021 dismissing D’s application by Summons of 30 August 2021 (“30/8/21 Summons”)  for extension of time to make the interim payment in the sum of HK$19,203,050 (the “Interim Payment”)  which she was ordered to pay by Master Phoebe Man (“Master Man”)  on 27 July 2021 (the “Interim Payment Order”).

2.  By her Notice of Appeal of 15 September 2021, D seeks a hearing of only 30 minutes.  The matter is hence set down before this court as a 9:30 hearing.

3.  Mr Thomas Wong appeared for the plaintiff (“P”).  Ms Wendy Lau appeared for D.

Background

4.  P filed its Statement of Claim on 1 April 2021.  P’s claim in gist is as follows.  It is a licensed money lender.  By a loan agreement dated 9 October 2017 (the “1^st LA”), P lent D the sum of HK$22,000,000 (the “Loan”). The loan was secured by a mortgage (the “Mortgage”)  on a property at the Coronation (the “Property”).  D failed to repay the Loan under the 1^st LA.  The time for repayment of the same was subsequently extended by another loan agreement of 18 October 2018 (the “2^nd LA”).  D has failed to repay the Loan as extended by the 2^nd LA.  As at 19 February 2019, the total outstanding principal and interest was HK$22,977,336.56.  P hence is suing for repayment of the same, together with delivery of vacant possession of the Property.    

5.  D on 25 May 2021 filed her Defence and Counterclaim.  D avers that the 1^st LA was vitiated by misrepresentation, and the 2^nd LA by economic duress.  She avers alternatively that the Loan was extortionate under the Money Lenders Ordinance Cap 163.  She seeks a Declaration to the effect that the 1^st LA and 2^nd LA are void.  She seeks also, in terms of damages, the higher interest on the Loan under the 1^st LA in the sum of HK$2,640,000 (the “Alleged Misrepresentation Damages”)  which she says she was required to pay as a result of the alleged misrepresentation, and interest on the Loan under the 2^nd LA in the total sum of HK$156,950 which she says she paid as a result of the alleged economic duress (the “Alleged Economic Duress Damages”).

6.  On 16 June 2021, P took out a summons (the “16/6/21 Summons”)  before Master Man for final judgment against D, and an order that D’s Counterclaim be struck out;

7.  On 27 July 2021, Master Man:

(a)  granted P leave to amend the 16/6/21 Summons by the addition of §1A for interim payment against P in the sum of HK$19,203,050 (the “Amended Summons”);

(b)  ordered D to make the Interim Payment within 35 days (i.e. the Interim Payment Order);

(c)  gave directions for the further conduct of the Amended Summons; and

(d)  directed that there be another call-over hearing on 27 September 2021.

8.  Mr Wong explains, supported by the figures, that Master Man arrived at the amount of the Interim Payment by deducting from the amount of HK$22,000,000 which P was seeking under the 16/6/21 Summons the Alleged Misrepresentation Damages and Alleged Economic Duress Damages.

9.  No appeal has been lodged by D against the Interim Payment Order.

10.  The deadline for D to make the Interim Payment was 31 August 2021.

11.  By the 30/8/21 Summons, D sought an extension of 28 days (from the date of the order allowing extension)  for payment of the Interim Payment.

12.  The 30/8/21 Summons was supported by D’s 4^th affirmation of 31 August 2021.  She says therein that she has since 2018 been intent on selling the Property.  Estate agents have been engaged.  After the Interim Payment Order, she has given instructions to the estate agents to lower the asking price, and has been in constant contact with them.  With the pandemic easing, she believes it has become easier for her to sell the same.  She says that she is sincere in repaying the Loan, and seeks more time from the Court.    

13.  The application came before Master Lai on 2 September 2021, who dismissed the same.  That dismissal is the subject matter of the present appeal.

14.  During the call-over hearing on 27 September 2021, Master Man allowed P’s application by Summons of 10 September 2021 to further amend the Amended Summons so as to increase the amount of interim payment from HK$19,203,050 to HK$22,977,366.56 (the “Re-amended Summons”).  Master Man further ordered that the Re-amended Summons be adjourned for substantive argument before a Judge.  The Re-amended Summons has subsequently been fixed to be heard before this Court on 11 May 2022.

The applicable law

15.  I agree with Mr Wong that D is in effect seeking a stay of the Interim Payment Order.

16.  Mr Wong has cited to me Credit Lyonnais v SK Global Hong Kong Ltd [2003] 4 HKC 104.  As explained and observed by Ma CJHC (as the ex-Chief Justice then was):

(a)  In addition to those situations expressly permitted under the Rules of the High Court, the court retains an inherent jurisdiction, in suitable cases, to make orders staying execution so as to avoid injustice, prevent abuse, preserve the dignity of the court or to facilitate the administration of justice [§2];

(b)  That power is a discretionary one.  The appropriate test to apply in considering how that discretion is to apply is not “balance of convenience”. Whilst no exhaustive list can be drawn out, the jurisdiction will only be activated where an injustice would otherwise be caused, to prevent abuse, to preserve the dignity of the court or to facilitate the administration of justice [§3];

(c)  Where a party has obtained a judgment, the starting (and often, finishing)  point is that the judgment creditor should be able to take all legitimate measures to enforce that judgment [§4];

(d)  It is not up to the court to use its inherent jurisdiction to create a regime in which a judgment debtor or insolvent company is able to obtain a moratorium on its debts (or to put it more crudely, to give it some ‘breathing space’ to allow it to negotiate with creditors)  [§10].

17.  Also in Credit Lyonnais v SK Global, Rogers V-P at §21 observed to similar effects that in relation to judgments which have been regularly obtained and in respect of which there is no challenge as to their validity or appeal pending, it is difficult to imagine circumstances in which the court’s power to stay its enforcement should be exercised short of there being shown to be some abuse or very special circumstances.

18.  I apply those principles.

Discussion

19.  The starting point is that the Interim Payment Order was regularly obtained, and D has not sought to appeal against it.

20.  I refer to D’s 4^th affirmation.  She accepts that she is indebted to P, and has since 2018 been intent on selling the Property to settle the indebtedness.  She has not been able to do so.  She points to various alleged reasons, like the social unrest in Hong Kong and the pandemic.  She has however not been able to say when she would be able to do so.  She has provided no specifics.  She by the 30/8/21 Summons sought 28 days.  It is now more than 3 months from the hearing.  She still has not been able to sell the Property, and is still asking for time. 

21.  D has made her 6^th affirmation in support of the present appeal.  She adopts what she has said in her 4^th affirmation.  She claims that she does not mean to delay compliance of the Interim Payment Order.  She says that she has been making active arrangements with her estate agents to sell the Property, but that no appropriate buyer has been found.  To show her alleged sincerity, she produces documents showing that she has made arrangement to come to Hong Kong (she being normally in the Mainland).  Ms Lau this morning told me that D is now in Hong Kong, and is under quarantine.  D believes that her presence will facilitate the sale.  She craves the Court to bear in mind the pandemic and her old age.  She seeks 28 days, from the date of any order this court may make, or alternatively 28 days after resolution of the Re-amended Summons.

22.  Even if this Court is to consider D’s 6^th Affirmation despite Order 58 rule 1(5), still no specifics have been provided.  Nothing has been placed before the Court suggesting with any confidence when D would be able to sell the Property.  It is an open-ended request for time which D has been seeking.

23.  Importantly, D has not even explained whether she owns other assets, or whether she could only meet the Interim Payment Order by selling the Property.

24.  Ms Lau submits that P has “taken out 3 summons [sic] to amend its summons to complicate the Action.”  All the amendments relate to whether the application should be made pursuant to Order 14 or Order 88, bearing in mind the fact that the action has been ordered to be continued as if started by writ, and relate to the relief for interim payment and its amount.  The matters have not been complicated thereby.  Ms Lau’s submission has no merits.

25.  Ms Lau further submits that if the 1^st LA and 2^nd LA may be void or voidable, D “is entitled to loss and damages which can be offset by the sum claimed by [P]”.  This submission ignores the fact that the amount of the Interim Payment was arrived at by deducting from the amount of HK$22,000,000 which P was seeking under the 16/6/21 Summons the Alleged Misrepresentation Damages and Alleged Economic Duress Damages.  Any damages which D might be entitled to have been taken into account.

26.  In my view, no circumstance has been made out for any extension of time or stay, not to mention exceptional ones as explained in Credit Lyonnais v SK Global.

27.  I reject also her alternative request for a stay until 28 days after the resolution of the Re-amended Summons:

(a)  The discussion above in relation to her main request equally applies;

(b)  Specifically in relation to her alternative request, D only asserts that it would be fairer to her that way, because if she wins her case, the loss and damage she has suffered can be set off against the Loan (§6 of her 6^th affirmation).  But as explained above, the Alleged Misrepresentation Damages and Alleged Economic Loss Damages have been factored in when working out the amount of the Interim Payment;

(c)  More fundamentally, the 16/6/21 Summons was before Master Man when the Interim Payment Order was made.  The learned Master must have reached a view on the merits of D’s case before deciding whether an order for interim payment should be made there and then, or whether P’s application for summary judgment should be decided first.  By now seeking a stay until 28 days after the resolution of the Re-amended Summons, D is in effect seeking to by-pass the Interim Payment Order without appeal, and without any principled basis have been established.

Disposition

28.  I dismiss the appeal.

Order 29 rule 15

29.  Having delivered my reasons as set out above, I invited counsel’s view on Order 29 rule 15.  I read out in Court that rule, and part of the commentary in §29/15/2 of the Hong Kong Civil Procedure 2022.

30.  Both counsel told me that they have no objection to his Court hearing the Re-amended Summons.  Upon my express enquiry, Ms Lau specifically stated and confirmed D’s consent to this Court hearing the Re-amended Summons. 

31.  Given parties’ confirmation, I will leave the listing as it is.

32.  I further sought parties’ view as to whether this Decision should be uploaded for circulation.  Again, Ms Lau specifically confirmed her view that it should be.  Given her confirmation, and open justice being the norm, I will not direct otherwise.

Costs

33.  I accept Mr Wong’s submission that the appeal has no merits whatsoever, and justifies a costs order against D on an indemnity basis.  I so order.  Ms Lau asked for taxation.  In my view, the costs of an interlocutory appeal of the present nature should be summarily assessed, and I see no reason suggesting otherwise.

34.  I have considered the Statement of Costs submitted by Mr Wong.  The amount claimed is HK$68,655, which in my view is reasonable.

35.  I order that D shall bear the costs of the appeal on an indemnity basis, with certificate for counsel, which I summarily assess at HK$68,000.

HCMP 222/2019

[2021] HKCFI 713

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 222 OF 2019

________________________

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DECISION

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1.  By the order of Master SP Yip dated 18 October 2019, it is ordered that the following issues be determined by a judge for further directions:

(1)  whether the counterclaim raised by the defendant (“D”) herein be struck out under Order 28 rule 7(2); and

(2)  further conduct of these proceedings under Order 28 rule 4 or Order 28 rule 8.

2.  By the Order of DHCJ To dated 11 November 2020, it is ordered that the aforesaid matters be determined on paper.  Both the plaintiff (“P”) and D have provided the court their respective written submissions, and I have considered the same.  This is my decision on the matters specified in the master’s order made on 18 October 2019.

Background

3.  P’s case is as follows:

(1)  P is a licensed money lender.  On 9 October 2017, P and D entered into a loan agreement (“the 1^st Loan Agreement”), pursuant to which P provided a loan of HK$22 million to D at the interest rate of 12% per annum.  The loan was secured by a legal charge against a property (“the Property”).  D was required to repay the loan and interest after one year, but she failed to do so.

(2)  After some discussion, P and D reached a second loan agreement on 18 October 2018 (“the 2^nd Loan Agreement”), by which P agreed to extend the time for repayment to 8 January 2019, and the interest rate was enhanced to 14% per annum.  However, D still failed to repay the loan and interest by the deadline.

(3)  P therefore commenced these proceedings on 19 February 2019 to claim for the repayment of the loan and the interest, and for possession of the Property.

4.  D made the following allegations:

(1)  She was induced by some misrepresentations made by a Rick Wat (who was P’s agent), and in reliance of those misrepresentations, D entered into the 1^st Loan Agreement.

(2)  She entered into the 2^nd Loan Agreement as a result of the economic duress exerted by P on her.

(3)  Both the 1^st Loan Agreement and the 2^nd Loan Agreement are exorbitant transactions and are liable to be reopened under s.25 of the Money Lenders Ordinance.

5.  For the present purpose, it would not be necessary to go into details of these allegations. Based upon these allegations, D raised a counterclaim against P. 

6.  The relevant procedural matters are set out in the table below:

Date	Event
19 February 2019	P issued the Originating Summons herein and commenced these proceedings.
24 May 2019	Master Lai directed the parties to file and serve affidavit evidence.
14 June 2019	D filed her 1st Affirmation in opposition to P’s application for a default judgment[1].
27 June 2019	P filed the Affirmation of Lam Wing Ka in response to D’s 1st Affirmation.
17 July 2019	D commenced HCA 1288/2019 against P.  D’s claim in HCA 1288/2019 is same as the counterclaim raised in these proceedings.
18 July 2019	D made an application to consolidate HCA 1288/2019 and these proceedings.
19 July 2019	Master SP Yip directed the parties to file and serve supplemental affidavit evidence in these proceedings.
22 July 2019	D’s solicitors wrote to P’s solicitors, proposing to convert these proceedings to a writ action, so that it would not be necessary to have a consolidation of two set of proceedings.
25 July 2019	D filed her 2nd Affirmation.
30 July 2019	D discontinued HCA 1288/2019.
16 August 2019	P filed the 2nd Affidavit of Chung Chun Hung Simon in response to D’s 2nd Affirmation.
30 August 2019	In a hearing before Master SP Yip, D submitted a draft counterclaim to the court.  The master directed that D should file and serve a supplemental affirmation in support of the counterclaim, with the counterclaim exhibited thereto.
11 September 2019	D filed her 3rd Affirmation to raise the counterclaim, with the counterclaim exhibited thereto.
10 October 2019	P filed the 3rd Affidavit of Chung Chun Hung Simon, by which P applied for striking out the counterclaim.

Analysis

7.  Order 28 rule 7(2) provides:

“A defendant who wishes to make a counterclaim under this rule must at the first or any resumed hearing of the originating summons by the Court but, in any case, at as early a stage in the proceedings as is practicable, inform the Court of the nature of his claim and, without prejudice to the powers of the Court under paragraph (3), the claim shall be made in such manner as the Court may direct under rule 4 or rule 8.” (Emphasis added)

8.  Counsel for P submits that:

(1)  D did not raise her counterclaim in the hearing before Master Lai on 24 May 2019.  D also did not do so in the hearing before Master SP Yip on 19 July 2019.

(2)  In D’s solicitors’ letter dated 22 July 2019, D did not say that she was prepared to raise a counterclaim in these proceedings.

(3)  D’s counterclaim was only raised in the hearing on 30 August 2019, without any prior notice to P.

(4)  There has been delay on D’s part in raising the counterclaim.  D has not offered any reasonable explanation for the delay.

(5)  In these circumstances, there has been non-compliance with Order 28 rule 7(2), and D’s counterclaim should be struck out.

(6)  Irrespective of the outcome of the striking-out application, these proceedings should not be converted to a writ action.  The parties have filed their respective affidavit evidence.  The deponents of the affidavits and the affirmations filed in these proceedings can be required to give viva voce evidence in the trial and be subject to cross-examination.  The court can hear their evidence and make a determination on the disputes between the parties.

9.  Counsel for D submits that there are factual disputes in these proceedings, which cannot be resolved without hearing viva voce evidence from the witnesses.

10.  Having considered the papers and the parties’ submissions, in my view, it cannot be said that D has any inordinate delay in raising the counterclaim.  It is true that D did not raise the counterclaim in the first hearing before Master Lai on 24 May 2019.  However, just a few weeks thereafter, D commenced HCA 1288/2019 on 17 July 2019.  By her solicitors’ letter dated 22 July 2019, D proposed not to have two set of proceedings but to convert these proceedings to a writ action.  It would be plain and obvious to an ordinary reasonable reader that D was proposing to determine her claim raised in HCA 1288/2019 as a counterclaim in these proceedings.  This proposal was not accepted by P.  In the next hearing, the hearing on 30 August 2019, D raised her counterclaim.  With these events in mind, I would not say that there has been any inordinate delay by D in raising the counterclaim.  I am unable to agree with P that D has not raised the counterclaim at an early stage in these proceedings.  I would dismiss the striking-out application made by P.

11.  D’s counterclaim in fact is a defence to P’s claim.  In my view, there are factual disputes between the parties, and those factual disputes should be properly dealt with in a writ action.  In a writ action, the issues in disputes are defined by pleadings, and all the documents relating to the disputes would have been disclosed by the parties.  In order to facilitate the resolution of factual disputes, pleadings and discovery are essential.  It would not be desirable to resolve factual disputes in the absence of any pleading and discovery.

12.  Converting the present proceedings to a writ action would not lead to unnecessary delay. If P is of the view that none of the matters raised by D is believable and there is no arguable defence to P’s claim, P may apply for summary judgment in the writ action.  If P is right, P may obtain judgment against D within a relatively short period of time.  However, if any of the matters raised by D is a triable issue, it would be necessary to spend time to resolve the matter in a proper trial in the writ action.

13.  For avoidance of doubt, I make no comment on the merits of the parties’ respective cases in this decision.  Nothing said in this decision should be taken as a comment on the substantive merits of the parties’ cases.

14.  I would give the following directions:

(1)  these proceedings be continued as if the cause or matter had been begun by writ;

(2)  leave to P to file and serve a statement of claim within 14 days;

(3)  leave to D to file and serve a defence and counterclaim within 14 days thereafter;

(4)  leave to P to file and serve a reply and defence to counterclaim within 14 days thereafter;

(5)  leave to D to file and serve a reply to defence to counterclaim within 14 days thereafter;

(6)  liberty to apply.

Deposition

15.  For the reasons above, I dismiss P’s application for an order to strike out D’s counterclaim. I also give the directions as set out in [14] above.

16.  P failed in the striking-out application.  P also failed in opposing D’s application for an order converting these proceedings to a writ action.  Costs should follow the event.  There be a costs order nisi that costs of these applications (including costs reserved) be paid by P to D forthwith and be summarily assessed on paper.  There be leave to D to file and serve a bill of costs for summary assessment within 7 days after the costs order nisi becoming absolute, and leave to P to file and serve a written reply to the said bill within 7 days thereafter.