BANK OF COMMUNICATIONS (HONG KONG) LTD v. CHINA FORTUNE ENTERPRISES LTD AND OTHERS

DCCJ 116/2023

[2025] HKDC 801

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 116 OF 2023

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BETWEEN

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DECISION

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1.  By an Inter Partes Summons issued on 20 December 2024, the 4^th Defendant (“D4”) seeks leave to appeal against my Decision dated 6 December 2024 ([2024] HKDC 2015). In the Decision, I dismissed D4’s appeal against the decision of a Master entering summary judgment against him and striking out his counterclaim.

2.  There is also another Summons issued by D4 on 14 January 2025, seeking to amend the draft Notice of Appeal originally filed in support of the leave application.

3.  The plaintiff does not object to the amendment to the draft Notice of Appeal. I can see no prejudice to allow the amendment. I grant leave to D4 to amend the draft Notice of Appeal, and to proceed with his leave application on the basis of the amended draft, with costs to the plaintiff, to be taxed summarily on party-and-party basis.

4.  It is trite that D4 shall be granted leave to appeal against my Decision if its intended appeal is reasonably arguable; or there are some reasons to grant leave to appeal in the interest of justice. Reasonable prospect in an intended appeal means the merits are more than fanciful, but there is no need to show that it will probably succeed: SMSE v KL [2009] 4 HKLRD 125.

5.  This is my decision on the D4’s application for leave, after considering the respective written submissions filed by the parties. I shall go through the 7 intended grounds of appeal as set out in D4’s draft Notice of Appeal (as amended). The abbreviations and definitions used in my Decision will be adopted unless otherwise indicated.

Ground 1(a)

6.  D4 complains that I conducted a mini-trial on affidavits, contrary to the usual principles adopted by the court in the context of a summary judgment application.

7.  D4 accepts the summary of facts as set out in §§2-8 of the Decision[1].

8.  In my view, it is important to bear in mind that D4 does not challenge the authenticity of his signatures on the Facility Letter and the Guarantee: c f §§5.9 – 5.10 of the Decision. It is the plaintiff’s case that, on the strength of Facility Letter and the Guarantee, it has demonstrated that it is prima facie entitled to judgment. Therefore, the burden is shifted to D4 to show a triable issue: Order 14 rule 3(1) of the Rules of the District Court (Cap 336H).

9.  Whilst D4 argues it is inept for the plaintiff to refer to Ling Wai Hoi v Jetland Global Investments Ltd [2022] 5 HKLRD 156, because the standard of proof expected of a debtor in raising a defence to set aside a statutory demand proceedings is different from that of a defendant in raising a triable issue under Order 14 rule 3(1), it remains trite that the court is not obliged to suspend its critical faculties and assume that the defendant’s evidence is accurate when assessing the credibility of the defendant’s factual case, whilst ensuring that it does not embark on a mini-trial on affidavit evidence: see eg Guanghua SS Holdings Limited v Lim Yew Cheng & Anr[2022] HKCFI 1052 (Ng J; 20 April 2022) at §13.

10.  It is D4 who raises a case of fraud practised on him by Mr Tsui; a case that he was misrepresented as to what he was allegedly asked to sign in a carpark; and a case that the plaintiff should be fixed with constructive notice of Mr Tsui’s misrepresentation and/or undue influence on him. I agree with the plaintiff’s submissions that I was entitled to critically examine D4’s allegations to see whether they afford him an arguable defence worthy of full investigation at a trial. Whilst D4’s submissions pinpoint to various allegations on which I am said to have wrongly found to be implausible and practical moonshine, I do not detect any submissions in showing how I allegedly overstepped the assessment of evidence, to the extent that I conducted a mini-trial on affidavits.

11.  I think it is sufficient for me to set out my views on 2 particular points relied on by D4 under this ground.

12.  First, D4 claims that the facts of the present case are similar to Dao Heng Bank v Ho Yin Yuk & Anr [2003] 1 HKLRD 28. In that case, the court held, after trial, that Madam Ho’s agreement to mortgage her properties as security for a loan advanced to his godson was procured by the godson’s misrepresentation and undue influence. D4 argues that my reasoning in §§19.1 – 19.2 of the Decision is faulty when it is compared to how the court found and accepted that Madam Ho in Dao Heng Bank was under the influence of her godson’s misrepresentation and undue influence.

13.  I cannot accept D4’s submissions. Madam Ho in Dao Heng Bank was a 72-year-old widow when she mortgaged her properties away, uneducated, illiterate, and had little contact with her own children. The court must have evaluated the allegation of misrepresentation and/or undue influence against such a background. In the present case, when I was asked to evaluate whether D4’s allegations on misrepresentation and/or undue influence were even plausible to afford him an arguable defence, the context was distinctly different[2]. In my view, it is wrong for D4 to say that I erred because he was not even given the opportunity to have his evidence tested at trial – but why should he be allowed such chance when his case was, in my decision, practical moonshine? There is certainly much force in the plaintiff’s submissions that D4’s approach is fundamentally misconceived, because his submissions are based on the antecedent premises that his case on misrepresentation and/or undue influence must be plausible.

14.  Next, D4 argues that I ignored the proper context of the transaction relating to the Ka Shin Street Property in §§19.3 – 19.4 of the Decision.

15.  I find the plaintiff right in saying D4 fails to show my reasoning is wrong. It was D4’s allegations that he was asked to sign on some blank signing pages some time in late 2017, certainly after August 2017: see §§5.6 – 5.8. The assignment of the Ka Shin Street Property was executed in January 2017. Therefore, even if D4 asserts that Mr Tsui asked him to sign on those pages before the assignment of the Ka Shin Street Property, such allegation is plainly inconsistent with the documentary evidence, and is not believable at all. There was nothing wrong in the Decision to reject D4’s allegations summarily.

16.  Ground 1(a) does not enjoy any reasonable prospect of success.

Ground 1(b)

17.  D4 says I erred in making tentative assessment of the respective chances of success of the parties and the relative strength of their good or bad faith.

18.  What I have said above under ground 1(a) applies equally to this ground.

19.  Further, I agree with the plaintiff that D4’s argument on the suitability of adjudicating fraud in a summary judgment application is entirely misconceived. I agree that, whilst previously[3] a plaintiff could not apply for summary judgment based on allegations of fraud, it has long been accepted that the court may reject any defence raised on the basis of fraud, whether by the plaintiff or a third party. There is no statutory prohibition or case authority to the effect that, once a defendant raises an allegation of fraud as a defence, the court must grant leave to defend to allow the defendant to have his allegation tested at trial.

20.  Ground 1(b) is not reasonably arguable.

Ground 2

21.  D4 complains that I erred in not drawing an adverse influence against the plaintiff, on the basis that Mr Ng has not provided evidence in support of the plaintiff’s application for summary judgment.

22.  The plaintiff does not require Mr Ng’s evidence to complete its cause of action against D4; nor to demonstrate that it is prima facie entitled to judgment. D4 claims that, contrary to what can be detected on their face, his signatures on the Facility Letter and the Guarantee were actually not witnessed by Mr Ng; and this allegedly supports the existence of an arguable defence. I disagree with D4 that I failed to find the plaintiff’s case suspicious because Mr Ng has not provided any affidavit evidence in favour of the plaintiff. This goes to an evaluation of the plausibility (or the lack of it) of D4’s bare assertions. In the Decision, I found that D4’s allegations were not capable of belief, even when evidence from Mr Ng was absent. I am not persuaded that I erred in any way.

23.  Ground 2 is not reasonably arguable.

Ground 3

24.  D4 says that I erred in §15.1 of the Decision, in which I concluded that the plaintiff was not fixed with any constructive notice of Mr Tsui’s misrepresentation, given D4’s interest in Year Fortune.

25.  Reliance is placed on Royal Bank of Scotland Plc v Etridge (No 2) [2001] 3 WLR 1021 to the effect that, even the relationship between D1 and D4 was apparently not non-commercial, this does not mean that the plaintiff was not put on inquiry as to the provenance of the Facility Letter and the Guarantee.

26.  D4 further refers to §49 of Etridge (No 2), in which the House of Lords held that, in the case where the wife became a surety for the debt of a company whose shares were held by her and her husband, the bank was still put on inquiry given that the shareholding interests would not be a reliable guide to the identity of the persons who actually had the conduct of the company’s business.

27.  The saying that in law, context is everything is not just cliché – the House of Lords in Etridge (No 2) proceeded to discuss different permutations of fact (of which joint shareholding by husband and wife in a family business was one) on the basis that husband and wife was one of those special relationships that the bank might be put on enquiry as to the possible existence of misrepresentation and/or undue influence. Such a special relationship is apparently absent here. I explained in the Decision why I found it implausible for the bank to have notice that D4 allegedly reposed trust and confidence in Mr Tsui, which might turn the relationship between D1 and D4 into a non-commercial one: §18 of Decision.

28.  D4 argues that the plaintiff has adduced no evidence to rebut his case that he reposed trust and confidence in Mr Tsui. The correct way of looking at the matter is that D4 never informed the plaintiff that he so reposed trust and confidence in Mr Tsui; nor is there any evidence showing that the plaintiff might have worked it out on its own. The plaintiff is not required to perform mind-reading in a run-of-the-mill commercial transaction.

29.  This ground is not reasonably arguable.

Ground 4

30.  Under this ground, D4 complains that I erred in §15.3 of the Decision, when I declined to accept that Mr Ng must have been complicit in Mr Tsui’s scam, assuming he flouted the plaintiff’s guidelines on how documents like the Facility Letter and the Guarantee should be signed and witnessed.

31.  D4 does not add much under this ground in addition to what he has already pointed out in relation to the previous grounds. What I set out above in evaluating the merits of ground 2 applies to this ground as well.

32.  Again, I agree with the plaintiff that D4 proceeds on the misconceived assumption that his allegations of fraud were believable at the first place. Since I found otherwise in the Decision, D4 cannot try to make a mountain out of a molehill from the absence of evidence from Mr Ng.

33.  D4 does not have any reasonable prospect of success in his intended appeal under this ground.

Ground 5

34.  D4 says that I erred in finding that Mr Tsui could not have acted as the plaintiff’s agent: §17 of the Decision.

35.  In his submissions, D4 refers to §60 of Bank of China (Hong Kong) Ltd v Wong Yuk Ping & Anr [2003] 1 HKLRD 1:-

“60. Agency is a question of fact. As between spouses, such occurrences are rare. The mere fact that a debtor is required by his bank to obtain security for facilities afforded to him whether by way of guarantee or otherwise and he then approaches the surety, does not mean that the debtor is acting as agent of the bank; in such circumstances, he may well just be acting for himself: Barclays Bank Plc v O’Brien [1994] 1 AC 180 at pp.193G-194B.”

36.  In my decision, the above passage is even more apposite in the context of an apparently arms’ length relationship between the debtor and the surety. This passage fortifies the views I formed in §§16-17 of the Decision. I am not persuaded that I erred in any way.

37.  This ground provides no reasonable basis for D4’s intended appeal.

Ground 6

38.  D4 says I erred in distinguishing the present case from China Citic Bank International Limited v China Will Enterprise Limited & Ors[2024] HKCFI 1859 (Deputy Judge Jonathan Wong; 24 July 2024). It is submitted that I did not properly consider that the alleged scam practised on D4 by Mr Tsui actually overlapped in time with the alleged fraud practised by Mr Tsui on D2, raised by D2 as his defence in China Citic Bank. Further, the learned Judge in China Citic Bank drew adverse inference against the bank on the absence of direct evidence from the officer who claimed to have witnessed the execution of the various documents in that case. It is submitted that I erred in not doing the same.

39.  With respect, I think D4 has been misunderstanding the factual context of China Citic Bank. The default judgment entered against D2 covered the whole indebtedness of China Will, guaranteed by the unlimited guarantee provided by D2. The bank’s claim in that case relied on all of the facility letters allegedly countersigned by D2 and witnessed by the bank officer. Therefore, in face of serious allegations made by D2 that the bank officer did not actually witness the signing of the facility letters, and was an active participant of Mr Tsui’s fraud, the learned Judge was obviously concerned that no direct evidence from the bank officer was adduced by the bank to rebut D2’s case. Hence, despite the learned Judge’s finding that D2’s evidence regarding the due execution of the facility letters in 2017 and early 2018 appeared inconsistent[4], D2 demonstrated a reasonably arguable defence to set aside the default judgment.

40.  In the present case, D4 does not allege that his signatures on the Facility Letter and the Guarantee were forged; those signatures were just inappropriately obtained. I have already explained above that the lack of direct evidence from Mr Ng does not affect the analysis, because I found D4’s defence plainly unarguable in other respects. Having revisited China Citic Bank, I am still convinced that the subsequent and substantial increase in the credit limit extended to China Will through alleged forgery in that case was completely different in nature and character from D4’s defence here.

41.  I also maintain my view that the times Mr Tsui allegedly committed equitable wrongs on D2 in China Citic Bank, and on D4 in the present case were different, such that China Citic Bank cannot be given due weight to show merits in D4’s defence.

42.  I do not find Ground 6 reasonably arguable.

43.  I cannot see it is otherwise in the interest of justice to allow D4 to appeal against the Decision.

Conclusion

44.  D4’s application for leave to appeal is dismissed with costs to the plaintiff, with certificate for a counsel. Similar to the Decision, I order costs to be taxed on an indemnity basis.

45.  The plaintiff has not submitted a statement of costs for the purpose of summary assessment. I shall summarily assess the plaintiff’s costs for both the leave application and the amendment of the draft Notice of Appeal at HK$86,000.00.

46.  The above costs order is nisi. Any application for variation should be made by letter within 14 days of this Decision, and shall be dealt with on paper.

Mr Lincoln Cheung and Mr Kin Lau, instructed by Gallant, for the plaintiff

Mr Dicky Cheung and Ms Teresa Yu, instructed by Heung Massie & Clement, for the 4^th defendant

DCCJ 116/2023

[2024] HKDC 2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 116 OF 2023

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BETWEEN

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DECISION

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1.  The 4^th Defendant (“D4”) appeals against the Decision given by a Master on 1 August 2024, whereby a final judgment was entered against him with respect to the plaintiff’s claim, and his counterclaim was struck out under Order 18 rule 19 of the Rules of the District Court (Cap.336H). By this appeal, D4 asks that he should be given unconditional leave to defend the plaintiff’s claim, and the striking out order should be set aside.

Background

2.  It is well known that the plaintiff is a licensed bank in Hong Kong. According to the plaintiff:

2.1. By a facility letter dated 17 November 2017 and signed by the signatories on 22 November 2017 (“the Facility Letter”), together with its terms and conditions for banking facilities (“the Terms and Conditions”), the plaintiff’s predecessor entity[1] granted an instalment loan of $8,000,000.00 (“the Loan”) to the 1^st defendant (“D1”) [2];

2.2. In consideration of the Loan, each of the 2^nd to 5^th defendants (“D2” to “D5” respectively) executed a Deed of Guarantee dated 22 November 2017 (“the Guarantee”), by which they jointly and severally agreed to pay the plaintiff, on demand in writing, all sums of money owed to the plaintiff by D1.

3.  D1 defaulted on the repayment of the Loan. After receiving a written demand asking for repayment of D1’s indebtedness from the plaintiff, none of D2 to D5 so repaid the plaintiff. As at the issue of the Writ on 10 January 2023, D1’s indebtedness amounted to $2,352,797.93.

4.  D1 and D3 did not appear in the present case after they were served with the Writ. Final judgments have already been entered against them. Apart from D4, D2 has also entered appearance and sought to defend the plaintiff’s claim. It appears that the plaintiff is attempting to serve the Writ on D5 out of jurisdiction.

5.  By way of his Defence and Counterclaim dated 20 March 2023, D4 claims that:

5.1. He was born in China and was educated up to the 1^st year in high school. He came to Hong Kong in 1989. He can only understand Chinese: §2;

5.2. D1 is owned by a BVI company called Year Fortune Holdings Limited (“Year Fortune”) and a Hong Kong company called Able Style Limited (“Able Style”), with D3 as its director: §5.1[3]. D4 is neither a shareholder or a director of D1: §5.2;

5.3. D4 was introduced to Mr Tsui King Leung Leo, D3’s husband, in 2015: §5.3.1. Since then, D4 invested into the restaurant business held out by Mr Tsui to be owned and managed by him and D3: §5.3.5. This first involved a loan of $2,500,000.00 D4 extended to China Luck Enterprises Limited, which D3 understood to be one of the companies comprising Mr Tsui’s restaurant business, on 21 December 2015: §5.3.6. This loan was fully repaid according to its terms: §5.3.8;

5.4. D4 and Mr Tsui also opened a restaurant called Hei Wo Restaurant in 2016. But D4 transferred his shares to some third parties in 2018 upon losses suffered by the restaurant: §5.4;

5.5. In 2017, Mr Tsui “formally informed” D4 his plan to seek listing on the stock exchange to expand his restaurant business. Mr Tsui invited D4 to invest in Asia Catering (Holding) Limited (“Asia Catering”), in which D3 was a director. D4 was further told that D2, D3 and D5 would also be shareholders in Asia Catering, but he was not told whether Asia Catering would be holding Mr Tsui’s restaurant business, or whether it would be the corporate vehicle for listing Mr Tsui’s restaurant business. D4 agreed to invest and became a 12.6% shareholder in Asia Catering in 2017[4]: §5.5;

5.6. In August 2017, Mr Tsui asked D4 to sign some documents purportedly for Asia Catering’s daily operations: §6.2.1;

5.7. Afterwards, D4 was asked by Mr Tsui to attend the plaintiff’s branch in Ngau Tau Kok for opening a corporate account for Asia Catering. On that occasion, D4 was not asked to produce his identity card, nor was he required to sign any document: §6.2.2;

5.8. Later in 2017, Mr Tsui again asked D4 to sign some documents purportedly for opening a bank account. On that day and at the carpark of D4’s residence, Mr Tsui only provided some signing pages to D4: §§6.2.5-6.2.6;

5.9. D4 signed on those blank signing pages, believing them were for opening a bank account in relation to Asia Catering, because of (i) Mr Tsui’s assurance that it would be safe for him to sign on them; and (ii) he saw D2, D3 and D5 had already signed on them: §6.2.10. D4 signed those pages in the absence of D2, D3 or D5, or any of the plaintiff’s representatives: §6.2.5;

5.10. It later turned out that D4 actually signed on the Facility Letter and the Guarantee: §11.7.

6.  It is D4’s claim that (i) he had no knowledge that the plaintiff extended the Loan to D1 by way of the Facility Letter; (ii) he did not know he became a guarantor for the Loan; and (iii) he did not know he was a shareholder of D1.

7.  In reply to D4’s Defence and Counterclaim, the plaintiff pleads in its Reply and Defence to Counterclaim that:

7.1. Apart from the Facility Letter and the Guarantee, D4 also signed (i) an Application Form on 29 September 2017; (ii) an Acknowledgement on 29 September 2017; (iii) a Warning Notice on 21 November 2017; and (iv) a Confirmation from Surety on 22 November 2017: §7(a). The parties refer (i) to (iv) as the “Supplementary Documents”;

7.2. On various parts of the Supplementary Documents, there were Chinese translations which could indicate to D4 that he was to act as a surety in signing them;

7.3. D4 signed on the Supplementary Documents with Mr Ng Shing Pan (“Mr Ng”), an officer employed by the plaintiff, as the witness[5]: §7(c). Mr Ng also explained to him the Loan and the Guarantee.

8.  The plaintiff supported its application for summary judgment and striking out by the Affirmation of Wong Kai Wing dated 22 February 2024 (“Wong 1^st”), and the 2^nd Affirmation of Wong Kai Wing dated 17 July 2024 (“Wong 2^nd”). D4 files his affirmation dated 20 June 2024 in opposition to the application (“Lai Aff”). Upon hearing the parties, the learned Master ruled in favour of the plaintiff, and gave the orders as set out above.

9.  It is trite that, in this appeal, I am not bound by the reasons given by the learned Master. Indeed, parties have not sought to put before me the ex tempore reasons given by the learned Master.

This appeal

10.  D4’s counsel, through their industry, have submitted a 64-page skeleton argument and a list of authorities with 22 cases to this Court[6]. Insofar as I can understand them, they argue that D4 has raised a triable defence because:

10.1. D4 was a victim of an elaborated scam perpetuated by Mr Tsui. He was asked to make investments in companies like Asia Catering, which turned out was not relevant to Mr Tsui’s restaurant business;

10.2. In relation to the present case, the scam was practised on D4 through Mr Tsui’s misrepresentation and/or undue influence in procuring D4’s signatures on the Facility Letter and the Guarantee;

10.3. Mr Tsui misrepresented the Facility Letter and the Guarantee as documents for opening a bank account for Asia Catering. Based on D4’s pleaded case, these documents must have been signed at the carpark of his residence, where only he and Mr Tsui were present;

10.4. Mr Tsui unduly influenced D4 as D4 reposed trust and confidence in him, in relation to matters concerning Mr Tsui’s restaurant business that D4 invested in;

10.5. The plaintiff knew or ought to have known that the relationship between Mr Tsui and D4 was non-commercial, in that D4 was not paid any fee for entering into the Guarantee; and D1 was not part of the companies running Mr Tsui’s restaurant business;

10.6. In any event, the Facility Letter and the Guarantee should be declared null and void because of non es factum, or it being an unconscionable bargain;

10.7. The Supplementary Documents lend support to D4’s case. Despite D4 puts the plaintiff to strict proof to show that the signatures on the Supplementary Documents were genuinely his, the plaintiff has not put forward any evidence from Mr Ng directly to show that he did witness D4’s signatures. As such, the circumstances in which the Supplementary Documents were purportedly signed by D4 were suspicious, such that this Court should not enter a summary judgment in the plaintiff’s favour.

11.  The plaintiff’s counsel, through equal industry, have submitted a 50-page skeleton argument with a list of authorities of 15 cases to this Court. They submit that the summary judgment was rightly entered by the learned Master because:

11.1. D4’s case on any fraud and/or misrepresentation was purely premised on his bare assertions. It should be rejected as simply unbelievable;

11.2. D4 has not raised at least a triable issue on whether the plaintiff ought to be bound by Mr Tsui’s fraud, misrepresentation, and/or undue influence;

11.3. In any event, the defences of non es factum and unconscionable bargain have not been made out;

11.4. The challenge to the authenticity of D4’s signatures on the Supplementary Documents is irrelevant to the plaintiff’s application for summary judgment. The challenge fails to cast doubt on the authenticity of those signatures anyway.

12.  After hearing counsel on both sides, I conclude that the plaintiff is entitled to summary judgment.

13.  First, I am of the view that D4 fails to show why the plaintiff ought to be fixed with any constructive notice of the fraud Mr Tsui allegedly practised on him. This is fatal to the merits of any proposed defence raised by D4.

14.  Assume, for the moment, that D4 indeed signed some blank signing pages as requested by Mr Tsui at the carpark of his residence some time in November 2017. D4 asks me to infer that Mr Ng must have been asked by Mr Tsui not to go to the carpark to witness D4’s signature; as such, Mr Ng ought to have known that D4’s signature was procured by some equitable wrongs Mr Tsui practised on D4.

15.  I cannot accept D4’s submissions for the following reasons:

15.1. As shown by a Certificate of Incumbency dated 8 May 2017 and issued by Year Fortune’s agent in BVI, D4 was an 18% shareholder in Year Fortune alongside with D2, D3 and D5. Another Certificate of Incumbency dated 1 December 2017 confirmed the same shareholding structure. These certificates were put forward by the plaintiff as exhibits to Wong 1^st. They bear Mr Ng’s name stamp or signature. D4 does not have any challenge to the plaintiff’s knowledge about the shareholding in Year Fortune and in D1;

15.2. From the plaintiff’s point of view, there were ample reasons why D4 was willing to provide a guarantee to the loan extended to D1. It could not have been surprising that D2 to D5 would agree to act as guarantors for a subsidiary like D1[7];

15.3. There is no other evidence which may implicate Mr Ng in Mr Tsui’s scam, or suggest that the plaintiff knew or ought to have known the existence of the scam. In light of the seriousness of D4’s allegation, I find the inference he invites me to draw as practical moonshine. It might be that Mr Ng flouted the plaintiff’s guidelines on how documents like the Facility Letter and the Guarantee should be signed and witnessed, if D4’s assertions on how he signed them believable. But this cannot be equated to Mr Ng being complicit in Mr Tsui’s scam.

16.  D4 then suggests that Mr Tsui acted, or should be seen as having acted, as the plaintiff’s agent in obtaining his signatures at the carpark. Therefore, the plaintiff was bound by Mr Tsui’s misrepresentation and/or undue influence.

17.  Again, I cannot accept D4’s submissions. There is no evidence to suggest that Mr Tsui had any actual authority from the plaintiff to act as its agent. I find that Mr Tsui did not have any ostensible authority as well:

17.1. Even on D4’s own case, he does not suggest to have been told that Mr Tsui was authorised by the plaintiff in any way;

17.2. On D4’s own case, Mr Tsui did not seek to act as a witness to his signatures. The document he signed were purportedly ones for opening Asia Catering’s account. On that understanding, D4 could not have expected the plaintiff to have made any representation concerning its interest through Mr Tsui. In my view, there was no conduct in Mr Tsui that could be said to have represented the plaintiff.

18.  Thirdly, I find no substance in D4’s submissions that the plaintiff knew, or ought to have known that the relationship between D1 and D4 was non-commercial, such that it was put on constructive notice when the Facility Letter and the Guarantee were manifestly disadvantageous to D4’s interest:

18.1. As stated above, the plaintiff was informed that D4 was a shareholder one of D1’s holding company;

18.2. There is no evidence to show that the plaintiff knew, or ought to have known that D4 reposed trust and confidence in Mr Tsui. There was nothing sinister, without more, for Mr Tsui to allegedly run the errands of getting documents signed for Asia Catering;

18.3. Hence, I find that, from the plaintiff’s point of view, D4 had an arm’s length relationship with D1. Such a relationship is common in the business world. It is not arguable at all that the plaintiff knew, or ought to have known that D4 was probably taken advantage of in agreeing to the Facility Letter and the Guarantee.

19.  Fourthly, I find D4’s case on the alleged misrepresentation and/or undue influence by Mr Tsui plainly unbelievable. D4’s case on how his signatures appeared on the Facility Letter and the Guarantee is purely based on his bare assertions. Whilst I accept D4’s submissions that, looking at the nature of his case, there is necessarily a lack of contemporaneous documents corroborating his assertions, I find his evidence implausible in light of the surrounding circumstances:

19.1. As the plaintiff submits, it was stated in English and Chinese on the signing page of the Guarantee that it was a deed of guarantee to be signed, sealed and delivered by the persons signing on that page;

19.2. D4 asserts, sweepingly and generally, that he was not given the whole page by Mr Tsui when he put down his signature in the carpark; and Mr Tsui could have easily covered the Chinese words on the page. I find it inherently implausible that D4 did not raise an eyebrow despite how overtly Mr Tsui allegedly hindered him from seeing the full signing page;

19.3. D4 also seeks to suggest he would not have been alerted to Mr Tsui’s misrepresentation even if he saw Chinese words of guarantee on that signing page, because he was also in a joint venture with D2 and D3 for purchasing a property in Ka Shin Street in Kowloon (“the Ka Shin Street Property”). Before the assignment of the Ka Shin Street Property, Mr Tsui asked him to sign on certain documents, which he was told were for making mortgage applications to several banks. He was also told that he might need to provide a personal guarantee for such application(s);

19.4. The land search of the Ka Shin Street Property shows that it was assigned to D2 on 20 January 2017, with a mortgage executed on the same day. D2, D3, D4 and D4’s associate entered into a written agreement on 15 June 2017, in which the parties acknowledged that D2 would hold the Ka Shin Street Property on trust for D4 and his associate. Clause 5 of that agreement stated that D2 agreed not to seek any re-mortgage or additional mortgage, the performance of which was guaranteed by D3;

19.5. Based on the documents, after June 2017, there could be no basis for D4 to be called up to give a personal guarantee for any mortgage application for the Ka Shin Street Property. The mortgage was already in place; and D4 extracted a promise from D2 and D3 that the mortgage would remain in place. Hence, D4 could not have mistaken any Chinese words of guarantee that Mr Tsui asked him to sign to be relating to the Ka Shin Street Property, when he saw those words on the papers he was asked to sign in the carpark in late 2017;

19.6. D4 deposes that he withdrew his investment in Hei Wo Restaurant upon his own decision, apparently without any influence from Mr Tsui. This appears inconsistent with D4’s stance that he relied on Mr Tsui for his decisions concerning Mr Tsui’s restaurant business.

20.  D4 refers me to China Citic Bank International Limited v China Will Enterprise Limited & Ors[2024] HKCFI 1859 (Deputy Judge Jonathan Wong; 24 July 2024). In that case, D4 was the 12^th defendant; D1, D2, D3 and D5 were also named as defendants. The learned Judge decided, upon D2’s application, to set aside a default judgment against D2 for $37,000.00 and $49,886,876.25 plus interest.

21.  The bank’s claim was premised on an unlimited guarantee signed by D2 to D5 in respect of the liabilities of China Will Enterprise Limited (“China Will”). Whilst D2’s evidence appears to be conflicting on whether he signed the guarantee and the 2 facility letters extending credit limit of $4,000,000.00 to China Will in 2017 and early 2018, he argued that he did not know about the 3 subsequent facility letters in mid-2018 to 2020 that progressively increased the credit limit to $51,659,000.00.

22.  The learned Judge accepted that D2 demonstrated a sufficiently plausible defence for setting aside the default judgment. His reasoning appears to me to lay emphasis on the following matters:

22.1. In MTR Corporation Limited v China Luck Enterprises Limited[2024] HKCFI 1099 (Deputy Judge Reyes SC; 17 April 2024), the court accepted that D2’s signature in the surety deed executed in favour of MTRC on 1 June 2018 was probably forged by D3 and Mr Tsui;

22.2. Despite the substantial increase in the credit limit granted by the 3 subsequent facility letters, the bank did not put forward, unlike the guarantee signed by D2 in 2017, evidence showing that D2 acknowledged that the bank’s established procedures were complied with;

22.3. Coupled with other inconsistencies in the bank’s documentary case, it was suspicious that the bank did not put forward any affidavit evidence from the officer allegedly witnessing D2’s signatures in the 3 subsequent facility letters.

23.  In my judgment, the circumstances in which the learned Judge in China Citic Bank concluded that D2’s defence therein was not unbelievable were different from the present case:

23.1. I do not find the plaintiff’s evidence inconsistent or suspicious as to how the Facility Letter, the Guarantee, and the Supplementary Documents were signed by D4;

23.2. In China Citic Bank, the 3 subsequent facility letters which substantially increased the credit advanced to the borrower were not signed by D2 contemporaneously with the guarantee, but at much later times. It was open to the learned Judge to think that the propensity of fraud allegedly practised by Mr Tsui was significant. For the present case, the Facility Letter and the Guarantee were executed by D4 at the same time. The likelihood of such fraud was not the same. I doubt whether the learned Judge would think D2 still believable, if the bank’s claim were restricted to the guarantee and the 2 earlier facility letters;

23.3. The times at which Mr Tsui committed the alleged equitable wrongs on the parties were different: the alleged misrepresentation in the present case purportedly happened in 2017; China Citic Bank concerned forgery allegedly committed in mid-2018 and thereafter.

24.  Hence, I disagree with D4; I find China Citic Bank unhelpful to evaluate whether D4 has raised a defence worth investigating at trial.

25.  Finally, I can dispose of D4’s arguments on non es factum and unconscionable bargain shortly. It is D4’s own case that he knew he was only given part of a document when he was allegedly asked by Mr Tsui to sign on them. There is nothing to indicate that D4 was prevented, apart from Mr Tsui’s persuasion, from taking time to make whatever inquiry as to the nature and effect of the few pieces of papers he was given. Given his background as a businessman[8], I find him clearly careless in defending himself against assuming any legal liability that he was not told of. In my judgment, D4 fails to overcome the heavy burden placed upon him for invoking non es factum[9]. Nor has D4 shown that his bargaining position was so weak that the law should offer him protection against any alleged unfairness in enforcing the Guarantee against him[10].

26.  In my judgment, D4’s arguments do not reveal any defence to resist the plaintiff’s claim.

27.  Given my decision that the plaintiff is entitled to summary judgment against the defendant, it is proper to strike out the defendant’s counterclaim as frivolous and an abuse of the process of the court: see the commentary in Hong Kong Civil Procedure 2024 at §18/19/7.

Conclusion

28.  D4’s appeal is dismissed with costs to the plaintiff, with certificate for a counsel. Clause B(d) of the Guarantee provides that the plaintiff’s costs in relation to the Guarantee shall be repaid by the guarantors on a full indemnity basis. I think it is fair for the costs of this appeal to be taxed on indemnity basis.

29.  The plaintiff has submitted a statement of costs for summary assessment, asking for $185,156.00. I consider the sum excessive[11] even when it is to be taxed on indemnity basis. I summarily assess the plaintiff’s costs at $160,000.00.

30.  The above costs order is nisi. Any application for variation should be made by letter within 14 days of this Decision, and shall be dealt with on paper.

Mr Lincoln Cheung and Mr Kin Lau, instructed by Gallant, for the plaintiff

Mr Dicky Cheung and Ms Teresa Yu, instructed by Heung Massie & Clement, for the 4^th defendant