HCA1257/2013

HCA1257/2013

A A HCA 1257/2013 B B C IN THE HIGH COURT OF THE C HONG KONG SPECIAL ADMINISTRATIVE REGION D COURT OF FIRST INSTANCE D ACTION NO 1257 OF 2013 E E ________________________ F F BETWEEN G G PACIFIC HARBOR ADVISORS PTE LTD 1st Plaintiff H H nd PACIFIC HARBOUR SPECIAL HOLDINGS LIMITED 2 Plaintiff I I and J J WINSON FEDERAL LIMITED 1st Defendant K K FREDERICK KAN KA CHONG (in his capacity as the 2nd Defendant L executor of the Estate of Cho Yuk Kei Carlos) L CHO WOON MING VINCENT 3rd Defendant M M th INTERNATIONAL HOTELIERS & ASSOCIATES 4 Defendant N LIMITED N UP SPEED INVESTMENTS LIMITED 5th Defendant O O th RANMARK INVESTMENTS LIMITED 6 Defendant P P FURAMA (SHENYANG) COMPANY LIMITED 7th Defendant Q _______________________ Q R R Before: Deputy High Court Judge B Chu in Chambers S Date of Hearing: 10 June 2014 S Date of Judgment: 1 August 2014 T T U U V V  - 2 - A A ________________ B B JUDGMENT C ________________ C D D Introduction E E 1. The plaintiffs are presently seeking summary judgment F against the defendants for only those monetary claims in the amended F statement of claim. G G H 2. The plaintiffs will be collectively referred to as Ps, and the 1st, H nd rd th th 2 , 3 , 4 , and 6 defendants will collectively referred to as Ds. I I J 3. Ps’ claims in the main action arose out of two written loan J st agreements under which loans had been made by the 1 plaintiff (“P1”) to K K the 1st defendant. P1 is seeking repayment of such loans and specific L performance of various security documents executed pursuant to those L loan agreements. The 2nd plaintiff (“P2”) has been joined as co-plaintiff M M pursuant to certain sub-participation or assignment agreements and deed N between Ps. Ps were represented by Senior Counsel Mr Jason Pow N assisted by Mr Hugh Kam. O O P 4. The 1st, 3rd, 4th, and 6th defendants were represented by the P same firm of solicitors and Counsel Ms Zabrina Lau. Q Q R 5. The 2nd defendant was represented by a separate firm of R solicitors and Counsel Ms Elaine Liu. S S T T U U V V  - 3 - A A 6. The 5th defendant and 7th defendant were BVI companies, and B B had not been served. They were not legally represented and were absent C at the hearing before this court. C D D Dramatis Personae E E 7. P1, Pacific Harbour Advisors Pte Ltd, is a Singapore limited F private company incorporated on 3 October 2006 and P2, Pacific Harbor F Special Holdings Limited, is a BVI limited private company incorporated G G on 9 August 2011. Both companies were and are carrying on business as H an investment fund. H I I 8. Mr Warren Allderige (“Allderige”) is the managing director J of Ps and Edward Foo (“Foo”) has been described as his business partner. J Wayne Ang (“Ang”) was an associate director at P1 until about May 2013. K K L 9. The 1st defendant (“Winson Federal”) is a Hong Kong L limited private investment holding company incorporated on 15 July 1993. M M There were two registered equal shareholders of Winson Federal, Cho Yuk N Kei Carlos (“Carlos”) and the 5th defendant (“USI Ltd”), a BVI limited N private investment holding company incorporated on 28 January 2000 O O owned 100% by Carlos. P P 10. Carlos was one of the directors of Winson Federal until he Q Q passed away on 14 November 2008 and probate has been granted to the 2nd R defendant Mr Frederick Kan who is sued in his capacity as executor of R Carlos’ estate (“Executor”). The 3rd defendant (“Vincent”) is the son of S S Carlos and was a director of Winson Federal until 19 June 2013. T T U U V V  - 4 - A A 11. The 4th defendant (“International Hoteliers”) is a Hong B B Kong limited private company carrying on a business of consulting in the C hotel industry, and its registered shareholders were Carlos 95% and C Vincent 5%. D D E 12. The 6th defendant (“RI Ltd”) is a Hong Kong limited private E investment holding company, of which Carlos and UI Ltd were equal F F shareholders. G G 13. The 7th defendant (“Furama Shenyang”) is a BVI limited H H private investment holding company of which there were two shareholders I Carlos 21% and International Hoteliers 79%. Through its subsidiary I Furama Shenyang Investment Company Limited (“SFIC Ltd”), Furama J J Shenyang is the owner of a property and hotel development in the Shenhe K District in Shenyang, PRC (“Project”). From 2004 to 2007, Carlos and K International Hoteliers gradually acquired the majority ownership of SFIC L L Ltd through Furama Shenyang, with the majority of the funding provided M by a loan from CITIC Ka Wah Bank. M N N 14. Madam Chang Myao Che, Ruby (“Ruby”), is Carlos’ widow O and Vincent’s mother who lives in Toronto and was a director of Winson O Federal, International Hoteliers, and RI Ltd. P P Q Background Q R 15. According to Allderige, he and Foo first met Carlos during a R lunch in Singapore on 22 February 2006 through the introduction of Ang. S S Thereafter, there were further meetings between February and December T 2007. During such meetings, Carlos had represented to Allderige and/or T U U V V  - 5 - A A Foo that, among other things, he and Vincent through their personal B B companies were in the process of acquiring the Project owned by SFIC Ltd, C which was at that time 88% owned by Shenyang Furama and the C remaining 12% owed by another entity. Carlos and Vincent wanted a D D short term loan to acquire the remaining 12% interest in SFIC Ltd. E E 16. P1 agreed to a loan to International Hoteliers and a loan F F agreement was signed on 3 December 20071 (“2007 Loan Agreement”). G Pursuant thereto, P1 advanced to International Hoteliers US $5,000,000 on G 22 December 2007 and another US$2,500,000 on 25 March 2008, totalling H H US$7.5m (“Previous Loan”). I I 17. Subsequently on about 22 May 2008, International Hoteliers J J acquired the remaining 12% interest in SFIC Ltd. K K 18. According to Vincent, it was never the intention of Furama L L Shenyang and/or International Hoteliers to independently carry out the M Project as Furama Shenyang did not have sufficient funds to do so, and it M was all along the intention of Furama Shenyang to seek an outside partner N N to jointly carry out the Project. O O 19. In early 2008, Carlos and Vincent approached P1 to seek a P P further loan in the nature of a “bridging facility” pending the refinancing of Q the indebtedness from CITIC Ka Wah Bank. According to Allderige, Q before entering into new loan agreements, P1 agreed with Winson Federal R R and International Hoteliers that, for ease of administration, would regard S the Previous Loan as being rolled into the new loan. S T T 1 B:67-81 U U V V  - 6 - A A 20. It was not disputed that thereafter Winson Federal then B B entered into 2 loan agreements with P1 in June 2008 for 2 loans (“Loans”). C C 21. The 2 loan agreements entered into between P1 and Winson D D Federal were: E E (i) An Agreement dated 2 June 2008 under which P1 agreed to F F lend to Winson Federal up to the sum of US$10m, subject to G the terms thereof, and the purpose of which was stated to be G exclusively for acquiring 12% of the issued and outstanding H H shares of SFIC Ltd (“1st Loan Agreement”)2; I (ii) An Agreement dated 2 June 2008 under which P1 agreed to I lend to Winson Federal up to the sum of US$30m subject to J J the terms thereof, and the purpose of which was stated to be K exclusively for repaying the loan provided by CITIC Ka Wah K Bank (“2 Loan Agreement”) . nd 3 L L 22. Two promissory notes, relating to respectively the 1 st Loan M M Agreement and the 2nd Loan Agreement had also been executed by Winson N Federal (respectively “1st Original Promissory Note” and “2nd Original N Promissory Note”). O O P 23. The date for repayment of the principal of the 2 Loans was P 2 June 2009 (“1st Payment Date”) 4 . As stated in both Original Q Q Promissory Notes, the accrued interest on any outstanding principal was to R R S S 2 Clause 3, B:13 3 Clause 3, B:42 T T 4 Clause 3, B:83, and B:86 U U V V  - 7 - A A be paid every 3 months on 2 September 2008, 2 December 2008, 2 March B B 2009, and on 2 June 2009 the balance of the accrued interest. C C 24. As a security for the 2 Loans, the following security D D documents were entered into (“Securities”): E E (i) Two letters of undertaking dated 2 June 2008, by Carlos and F F Vincent in their personal capacities to sell a property in G Guangzhou (“Guangzhou Property”) to pay the net sale G proceeds to satisfy the loans; H H (ii) 8 share pledge agreements dated 2 June 2008 to pledge the I shares respectively in RI Ltd, International Hoteliers, Furama I Shenyang, and also in a company Shanghai Bund Park Lane J J Shopper’s Plaza Co Ltd (“SBPLSPC Ltd”), which held a K property in Shanghai (“Shanghai Property”) to P1; K (iii) 2 personal guarantees by Carlos and 2 corporate guarantees by L L Furama Shenyang. M M 25. By reason of the Securities, the following landed properties N held by various companies or their value were in effect collaterals for the N 2 Loans: O O P P (i) The Project held by Furama Shenyang, the value of which, Q according to a valuation report dated 4 March 2010 prepared Q by CB Richard Ellis Ltd, as at 5 January 2010 was R RMB 705m; R S (ii) The Guangzhou Property, held by Carlos and Vincent; S T T U U V V  - 8 - A A (iii) The Shanghai Property, held by SBPLSPC Ltd in which RI B B Ltd held 90% shareholding. C C 26. On 30 June 2008, a deed of novation was entered into D D between International Hoteliers, Winson Federal and P1 pursuant to which E International Hoteliers was released and discharged from its obligations in E relation to the Previous Loan under the 2007 Loan Agreement upon F F Winson Federal’s undertaking to perform and be bound by all the G obligations and terms of the 2007 Loan Agreement5. G H H 27. It was Ps’ case that a total sum of US$38m had been loaned to I Winson Federal under the 1st Loan Agreement and the 2nd Loan I Agreement. J J K 28. Allderige had produced a receipt dated 2 July 2008 from K Winson Federal stating that it had received US$7.5m pursuant to the Loan L L Agreement dated 2 June 2008. By the time of the hearing, it was not M really disputed by Ps that this amount of US$7.5m was the Previous Loan. M N N 29. In July 2008, International Hoteliers transferred its 12% O interest in SFIC Ltd to Furama Shenyang. Since then, Furama Shenyang O has been the sole ultimate beneficial owner of the Project. P P Q 30. The payments received from P1 by Winson Federal after the Q signing of the 1st and the 2nd Loan Agreements and the 1st and 2nd Original R R Promissory Notes were as follows: S S T T 5 B:162-170 U U V V  - 9 - A A B Date Sum Received B 8 July 2008 US$2,500,000 C C 17 July 2008 US$1,500,000 D D 26 August 2008 US$6,500,000 E E 10 October 2008 US$10,000,000 F 21 October 2008 US$10,000,000 F G G 31. That a total amount of US$38m had been drawn down and H H received by Winson Federal and/or International Hoteliers from P1 was not I I disputed6. It was also not disputed that there was a sum of US$2m J undrawn under the 1st and the 2nd Loan Agreements. J K 32. After Carlos passed away in November 2008, Vincent took K over the handling of the Shenyang Hotel Project and dealing with L L 7 representatives of P1, in particular Ang . M M 33. Winson Federal failed to pay the interest due on 2 September N N 2008 and 2 December 2008. O O 34. According to Allderige, by early April 2009, it had become P P clear that Winson Federal was going to continue to default on its Q obligations under the 1st and the 2nd Loan Agreements and that P1 was Q forced into negotiations on rolling over the Loans for another extended R R S S 6 Para 18, A:159 T T 7 B:187 U U V V  - 10 - A A short term. Allderige had produced some emails with draft agreements B B first dated 14 April 20098. C C 35. On 30 April 2009, there was a luncheon meeting between Ang D D and Vincent (“1st Meeting”). It was not disputed that at this meeting, E Ang personally handed Vincent 4 interest payment invoices in relation to E interest accrued between 2 June 2008 and 2 December 2008 totalling F F US$3.2m, based on a fully drawn down amount US$40m (“02.09.08 G Interest Invoices”)9. G H H 36. According to Vincent, at the 1st Meeting, Ang also informed I him that Allderige would only collect interest on the Loans for the first I 6 months and would leave the remaining outstanding interest until the final J J repayment of the principal of the Loans. Further, Ang stated to Vincent K that he understood the financial situation of Winson Federal and K International Hoteliers and would not call for the repayment of the Loans L L on the stated maturity date, but would only do so when they had the means M to repay the entire Loans including the principals (“1st Representation”). M Vincent said at this 1st Meeting he had pointed out to Ang that the interest N N calculations on the 02.09.08 Interest Invoices which were based on the full O drawdown amount of US$40m were wrong and suggested that either the O interest calculation be amended or Winson Federal be allowed to draw P P down the remaining US$2m of the 2 Loans. Q Q 37. Thereafter, on 5 May 2009, Vincent said he had another R R nd luncheon meeting with Ang (“2 Meeting”). According to Vincent, S S 8 B:515-529 T T 9 B:198-200, 508-510 U U V V  - 11 - A A during this meeting, Ang informed Vincent that P1 would need some time B B to raise the remaining undrawn amount of US$2m demanded by Vincent, C and Ang further told Vincent “in confidence” that P1 did not have the cash C for the drawdown under the 2 Loan Agreements (This was later denied by D D Allderige). Vincent then informed Ang that Winson Federal would only E pay US$1.6m as interest by early June 2009 and would wait for the E drawdown of the remaining US$2m before paying the remaining US$1.6m F F interest. G G 38. Thereafter, on 3 June 2009, Vincent received an email from H H Ang10 attaching 2 invoices dated 2 June 2009 for re-calculated interests, I one for the period from 15 July 2008 – 2 June 2009 on US$28m of I US$3,344,263.89, and one for the period from 4 June 2008 – 2 June 2009 J J of US$1,370,208.33 on US$10m, totalling about US$4,714,292.22 11 K (“02.06.09 Interest Invoices”). K L L 39. In the afternoon of 3 June 2009, according to Vincent, he had M a coffee meeting with Ang (“3rd Meeting”) and informed Ang that despite M the 02.06.09 Interest Invoices they would only pay US$1.6m as originally N N stated, and Ang agreed to Vincent’s suggestion. Further, Vincent said at O this meeting Ang had represented to him that there was no urgency to the O repayment of the interest and that Winson Federal could pay whatever P P nd amount and whenever comfortable (“2 Representation”). Q Q R R S S 10 B:191 T T 11 B:190-194 U U V V  - 12 - A A 40. Subsequently on 9 June 2009 Winson Federal did pay to P1 B B US$1.6m for interest. What seemed to be in dispute was the period for C which such interest was paid. According to Allderige, the US$1.6m C interest was for the period from 2 March 2009 to 2 June 2009. According D D to Vincent, the US$1.6m was for the first 3 month period from 2 June 2008 E to 2 September 2008 calculated on the basis that the full amount of the E Loans of US$ 40m had been drawn down, based on the 02.09.08 Interests F F 12 Invoices . G G 41. Anyway, according to Vincent, he had another luncheon H H meeting with Ang on 12 June 2009 (“4th Meeting”), and Ang had again I stated to him that P1 could n4ot pay them yet the undrawn balance of I US$2m under the 2 Loan Agreements, and did not know when P1 would J J have to the means to allow the drawdown. K K 42. Vincent apparently reported the gist of his conversations with L L Ang in all the above 4 Meetings by an email dated 15 June 2009 to the M Executor, although in the email, the year of the 4 Meetings was mistakenly M typed as 2008 instead of 2009 (“Report Email”)13. N N O 43. In the meantime, the parties agreed to sign two amendment O agreements in respect of the 1st Loan Agreement and the 2 nd Loan P P 14 Agreement respectively (“Amendment Agreements”) , and new Q Q R R S S 12 B:199-200 13 B:196-197 T T 14 B:204-211 U U V V  - 13 - A A promissory notes were executed by Winson Federal (respectively “1st New B B Promissory Note” and “2nd New Promissory Note”)15. C C 44. The 2 Amendment Agreements and the 2 New Promissory D D Notes (collectively “New Documents”) were all dated 2 June 2009, but it E appeared from an email dated 31 July 2009 from P1 to Winson Federal, E these 4 New Documents were in fact signed by Winson Federal sometime F F on or after 31 July 2009, and the duly signed copies were only returned by G Winson Federal to P1 on about 21 August 200916. G H H 45. It was Vincent’s pleaded case that pursuant to the 1st and 2nd I Representations, a partial payment of interest of US$1.6m was paid, the I Amendment Agreements were executed and no demand was made by P1 J J for payment of interests on the stipulated payment dates therein. K K 46. Under the New Documents, the date of payment of the L L principal was extended from the 1st Payment Date to 4 December 2009 M (“2nd Payment Date”). The first interest payment was due on M 2 September 2009, but again Winson Federal failed to pay the same. N N O 47. Vincent said that even after the 2 nd Payment Date, P1 had O taken no steps whatsoever to chase for the repayment of the Loans or any P P interest accrued, and instead since December 2009, P1 stepped up its Q efforts in seeking outside investors for the Project. According to P1, Q as the 2nd Payment Date approached, it became clear that D1 was likely to R R default again, and P1 had little choice but to enter into a further agreement, S S 15 B:213-218 T T 16 B:220 U U V V  - 14 - A A this time to help in finding potential purchasers/investors for the Project, B B in the hope of expediting D1’s repayment of the Loans and interest due C thereon. C D D 48. What was not disputed was that on 1 December 2009, E the Executor, the International Hoteliers and P entered into an agreement E whereby the Executor and International Hoteliers engaged P1’s F F representatives Ang and Foo to provide referral services of sourcing, G arranging and identifying a purchaser of the Project for a period of 6 G months in return for a fee on a successful sale (“Referral Agreement”)17. H H I 49. On the 2nd Payment Date, 4 December 2009, D1 failed to I repay the principal of the 2 Loans. J J K 50. Vincent had produced a series of emails from about end of K November 2009 onwards to demonstrate P1’s involvement in seeking L L outside investors, and/or seeking loans including from the United Overseas M Bank, and identifying a number of potential investors. M N N 51. Vincent further produced an email from Ang to him on O 10 May 2010 with the subject “Favor”, in which Ang had requested that O Winson Federal make a declaration that the Loans were not in default and P P that no event of default as defined in the 1st and 2nd Loan Agreements had Q occurred and that the ownership structure of the Project had not changed 18 Q (“Declaration Email”). Allderige explained the reason for the R R Declaration Email was that P1 had needed a valuation of the debt for an S S 17 B:222-228 T T 18 B:341 U U V V  - 15 - A A audit of their fund and at that time, the parties were in negotiations for a B B further roll over of the Loans from 4 December 2009 to 6 December C 2010 19 and P1 genuinely believed that those further amendment C agreements would be executed. Unfortunately, Vincent later refused to D D execute them. E E 52. It was not disputed that on about 10-11 January 2011, F F Ang went with Vincent to Toronto to meet with Vincent’s mother Ruby. G According to Allderige, this was for the purpose to seek repayment of the G Loans, but according to Vincent, Ang told him the purpose was to keep H H Ruby informed of the latest situation regarding the Loans and the Project, I and in relation to certain potential buyers or investors for the Project, I and Vincent denied that Ang had ever asked for the repayment of the J J Loans. K K 53. In the meantime, P1 began actively participating in the L L maintenance and continued development of the Project. Vincent said in M about December 2010, he had orally informed Ang that Winson Federal M had no more money to pay for operating expenses of the Project and Ang N N had agreed that P1 would take care of those expenses. O O 54. Although it was not disputed that P1 had made contributions P P towards the maintenance of the Project, the amount of the contributions Q was disputed. According to P1, the total sum came to US$1.635m, Q but according to Vincent, based on the records available to Winson Federal R R and Furama Shenyang, the total amount received by those two companies S was RMB 5,222,333 and HK$3,038,282. S T T 19 B:555-572 U U V V  - 16 - A A 55. P1 acknowledged that there were no written demands for the B B repayment of the Loans and the interest thereon between 4 December 2009 C and May 2013, and explained that this was because: C D D (i) Vincent had repeatedly represented during that period that his E family and their companies were in the process of selling the E Project and they were unable to make any repayment and F F interest thereon; and that while P1 was involved in locating G purchases and investors, Vincent, his family and their G companies were equally doing so independently at the same H H time (in the earlier part of the period in question); I (ii) The defendants knew well that they owed P1 the sums of the I 2 Loans and the interest outstanding thereon and that P1 had J J expected prompt repayment, and there was no need to repeatedly waste time and effort issuing demand notes. K K (iii) Vincent was very defensive whenever P1 brought up the issue L L of repayment orally. P1 did not wish to antagonize him M further as they required his cooperation in selling the Project. M N 56. According to Allderige, finally by early 2013 they had no N choice but to pursue legal action, as it became clear to Ps that : O O P (i) Vincent, his family and their companies had no genuine P intention of selling the Project, eg an indicative offer made on Q Q 29 September 2011 for the purchase of the Project at R US$100m, which was higher than the valuation on 5 January R 2010 of RMB 705,000,000, was rejected by Vincent and/or S S Ds without any measured consideration. T (ii) Vincent had abandoned work trying to sell the Project; T U U V V  - 17 - A A (iii) An attempt by P1’s valuers to visit/enter the site in late March B B 2013 was refused and in spite of enquiries, no explanation C was provided and no assistance was provided by Vincent C and/or Ds. D D E 57. Ps’ solicitors sent to Ds formal demand letters dated 31 May E 2013. It would appear that settlement meetings then followed but were F F not fruitful. Eventually, on 10 July 2013, Ps issued the writ in the present G action against all the defendants. In the re-re-amended writ, Ps claims G were, among other things, the following: H H I Against Winson Federal and/or the Executor and/or Furama I Shenyang J J (i) Payment of the total sum of US$38m under the 1st Loan K Agreement and 2nd Loan Agreement; K (ii) Reimbursement of the costs of maintenance and legal costs L L under the 2 Loan Agreements totalling US$1,633,849; M M (iii) Interests on (i) above of US$1,692,016.25; N (iv) Late charges pursuant to the 2 New promissory Notes; N (v) Interests on (i) as stipulated in the 2 Loan Agreements and the O O 2 Promissory Notes from 30 August 2013 until date of P payment P Q Q Against the Executor and/or Vincent R (i) Specific performance of the LOU in respect of the Guangzhou R Property S S T T U U V V  - 18 - A A Against the Executor and/or USI Ltd B B (i) Specific performance of the agreements on the pledging of the C C shares of RI Ltd D (ii) Specific performance of the agreements on the pledging of the D shares of International Hoteliers E E F Against the RI Ltd F (i) Specific performance of the agreements on the pledging of the G G shares of SBPLSPC Ltd H H Against the Executor and/or International Hoteliers I I (i) Specific performance of the agreements on the pledging of the J shares of Furama Shenyang J K K 58. Ps’ statement of claim of 5 September 2013 was later L amended and filed on 18 November 2013 (“ASOC”). Vincent’s defence L of 6 November 2013 was then amended and filed on 16 December 2013 M M and Winson Federal, International Hoteliers, RI Ltd filed their joint N defence on the same day. The Executor had also filed a defence on N behalf of Carlos’ estate. P’s replies to the defences were filed on O O 19 February 2013. P P 59. On 6 December 2013, Ps took out the present summons under Q Q Order 14 rule 1 of RHC in which they sought final judgment against all the R defendants for the reliefs claimed in the ASOC, except the relief of specific R performance of the LOU in relation to the Guangzhou Property. It was S S T T U U V V  - 19 - A A subsequently clarified by Mr Pow that the summary judgment application B B was solely concerned with the “monetary claims” in the ASOC20. C C 60. Ps’ monetary claims in the ASOC were against Winson D D Federal and/or the Executor and/or Furama Shenyang only. As Furama E Shenyang had not been served yet, the Ps’ Order 14 summons should be E confined to only Winson Federal and/or the Executor. F F G The Legal Principles on Order 14 G H 61. The principles in a summary judgment application are trite. H It has been stated in paragraph 14/4/1 of the Hong Kong Civil Procedure I I 2014, Vol 1 (“HKCP”) and in the case of Man Earn Ltd v Wing Ting Fong J [1996] 1 HKC 225, the underlying policy of the summary procedure is to J prevent a defendant from delaying the plaintiff from obtaining judgment in K K a case in which the defendant clearly has no defence to the plaintiff’s L claim21, and that the procedure enables plaintiffs in cases where there is no L defence to obtain expeditious summary judgment to avoid unnecessary M M delay. N N 62. It is further stated in HKCP that: O O P (i) It is for the plaintiff to establish a prima facie case22. Once P this is done, he will become entitled to judgment and the Q Q burden shifts to the defendant to satisfy the court why R judgment should not be given against him23. R S 20 Para 2, Ps’ skeleton submissions dated 5 June 2014 S 21 See Holding (1), pg 225, Man Earn 22 Paras 14/1/3 and 14/4/1, HKCP T T 23 Para 14/4/1, HKCP U U V V  - 20 - A A (ii) The defendant may show cause against the plaintiff’s B B application by : C C (a) A preliminary or technical objection; D (b) On the merits, eg that he has a good defence to the claim D on the merits, or (subject to Order 14A) that a difficult E E point of law is involved, or a dispute as to the facts which F ought to be tried, or a real dispute as to the amount due F which requires the taking of an account to determine or G any other circumstances showing reasonable grounds of a G bona fide defence24 H H I 63. Mr Pow SC submitted that the defendant has to meet two I limbs: J J K (i) Whether the defendant’s assertions are believable, as stated in K Re Safe Rich Industries Ltd, CACV 81/1994, 3 November L L 1994; Furthermore, as seen from Manciple Ltd v Chan On M Man [1995] 3 HKC 459 (CA), the defendant’s assertions M should be tested against contemporaneous documents and N other pertinent circumstances25. N O (ii) If the answer to the above limb is in the affirmative, the O second to be considered is whether there is/are “a fair P probability or reasonable grounds that a bona fide defence P exists”, as seen in Toy Major Trading Co Ltd v Plastic Toys Q Q Ltd [2007] 3 HKLRD 345 (CA)26. R R S S 24 Para 14/4/2, HKCP 25 At 466G T T 26 At 349G U U V V  - 21 - A A 64. Further, as submitted by Mr Pow SC, if the above burden is B B not met by the defendant, judgment should be entered in favour of the C plaintiff without more. If the burden is met, the defendant should be C granted unconditional leave to defend. It is possible, if the defence set up D D is “shadowy” or if the case is almost one in which summary judgment E should be ordered, to grant leave conditional upon the full amount in E dispute being paid into court, and he referred to what was said by Cheung F F JA in Cheung Hung v Lau Kwok Mong CACV 320/2006, unreported, G 6 February 200727. G H H 65. As has been said in Man Earn28, judgment should be granted I in favour of the plaintiff if the defence put forward by the defendant is I “frivolous and practically moonshine”. It has also been said29 in Bank of J J Credit and Commerce Hong Kong Ltd v Quadrutec Hotel Management & K Development Ltd [1996] 4 HKC 316 (CA) that summary judgment K proceedings are eminently suitable for claims on “dishonoured guarantees L L when the primary facts are not in doubt and the only result of letting the M M case go on trial would be delay the plaintiff further in the recovery of the N money plainly due to him.” N O 66. Further Ms Lau submitted as follows30: O P P (i) Order 14 is for clear cases, ie cases in which there is no Q Q serious material factual dispute and, if a legal issue, then no R R S 27 At para 12 S 28 At 228E, per Godfrey JA, as he then was, in Man Earn 29 At 324A-C, per Godfrey JA, as he then was, Bank of Credit and Commerce T T 30 Para 14/4/9-11, HKCP U U V V  - 22 - A A more than a crisp legal question as well decided summarily as B B otherwise; C C (ii) The procedure is entirely inappropriate where the plaintiff’s D entitlement to recover any sum is the subject of any serious D dispute, whether of law or fact. E E (iii) Leave to defend should be given, for example, (1) where the F defendant raises a substantial issue of fact which ought to be F tried; (2) where there is a fair dispute as to the amount of G liability; (3) where on the facts sworn there is a prima facie G case on both sides; (4) where liability depends on professional H H opinions. I (iv) In considering whether there are triable issues the Court will I not take the alleged defence on its face value but test it against J J the evidence disclosed in the affidavit including matters such K as contemporaneous documents. K (v) On the other hand, a complete defence need not be shown. L L The defence set up need only show that there is a triable issue M or question or that for other reason there ought to be a trial; M and leave to defend ought to be given unless there is clearly N N no defence in law and no possibility of a real defence on the O question of fact. O P 67. With the above principles in mind, I turn to the present P application. Q Q R P’s Case for summary judgment R S 68. Ps’ case was that the oral representations alleged by Vincent S were unbelievable and inherently incredible in the light of the indisputable T T U U V V  - 23 - A A contemporaneous documents and conduct of the parties, and the defences B B of promissory estoppel and/or estoppel by convention were built upon C practically moonshine allegations. The parties’ “promises” were C recorded in the written Amendment Agreements and the New Promissory D D Notes, and their common assumption was that principal and interest of the E 2 Loans were repayable at specifically defined and stipulated dates. E F F D’s defence G G 69. D3’s pleaded case in his defence was that by reason of P1’s H 1st and 2nd Representations, and P1’s conduct since early 2009, namely by H entering into the Referral Agreement, by cooperating and assisting Winson I I Federal in the maintenance and continued development of the Project, J by failing to make any demands for repayment of the Loans, P1 had J represented to Winson Federal, or it was the common communicated K K assumption of P1 and Winson Federal that P1 would not call for the L repayment of the Loans or enforce the Securities until the successful L liquidation or monetization of the Project. M M N 70. Further Vincent had pleaded that in reliance of the 1st and 2nd N Representations or common assumption above stated, Winson Federal had O O acted to its detriment, and thus P1 was estopped from bringing the present P action, or otherwise not entitled to claim any sums under the 2 Loan P Agreements. Q Q R 71. Ds further denied the calculation of interests, and averred that R any sums claimed as Default Interest or late charges under the 1st and 2nd S S Amendment Agreements or the 1st and 2nd New promissory Notes were T irrecoverable as being penalties in law. Ds also denied that T U U V V  - 24 - A A US$1,635,000 or any part thereof was remitted by P1 pursuant to Clause B B 11 of the Loan Agreements. C C Relevant Principles on estoppel D D 72. In Luo Xing Juan v Estate of Hui Shi See (2009) 12 HKCFAR E E 1, Ribeiro PJ set out the requirements of promissory estoppel as follows 31: F F a. the parties are in a relationship involving enforceable or G G exercisable rights, duties or powers; H b. one party (the promisor), by words or conduct, conveys or is H reasonably understood to convey a clear and unequivocal I I promise or assurance to the other (the promisee) that the J promisor will not enforce or exercise some of those rights, J duties or powers; K K c. The promisee reasonably relies upon that promise and is L induced to alter his or her position on the faith of it, so that it L would be inequitable or unconscionable for the promisor to act M M inconsistently with the promise. N N 73. It is enough if the promisee has altered his position in reliance O on the promise so that it would be inequitable to allow the promisor to act O inconsistently with it: for example, if the promisee has foreborne from P P taking steps that he would otherwise have taken to safeguard his legal Q position; or if he has performed, or made efforts to perform the altered Q obligation32. R R S S 31 At para 55 T T 32 See Chitty on Contracts 31st ed, at para 3-094 U U V V  - 25 - A A 74. As for the requirement that it must be inequitable for the B B promisor to go back on his promise, it cannot be defined with anything C approaching precision, but the underlying idea is that the promisee must C have acted in reliance on the promise in one of the ways above described, D D so that he can no longer be restored to the position in which he was before E he took such action33. E F F 75. As a general rule a promissory estoppel only causes a G temporary and limited change in the rights of the parties and the promisor G can revert to his strict rights after the promise has been restored to his H H former position34. I I 76. There was no real dispute on the above general legal J J principles. K K 77. Ms Lau referred this court to the case of Kan Chi Cheun v L L New Happy Limited, CACV 15312001 22 January 2002, in which the M Court of Appeal had granted the defendants unconditional leave to defend. M In that case, the defence case to the plaintiff’s claim to enforce the loan N N agreements was of a set off agreement or representations, and alternatively O there was the defence of promissory estoppel. However, I note in that O case the Court of Appeal found that there were 3 items of evidence or the P P lack of it which were in relation to the set off agreement or representations Q and which were not dealt with by the lower court and the appeal was Q allowed mainly for these reasons. R R S S 33 See Chitty on Contracts 31st ed, at para 3-095 T T 34 Para 13-023 , Handley on Estoppel by Conduct and Election U U V V  - 26 - A A 78. Mr Pow SC had referred this court to an admiralty case Lee B B Shing Hong Credit Limited and Mei Kwan Engineering Company Limited C and others HCAJ 52/2009, unreported, 16 December 2009, in which the C plaintiff had loaned monies to the 1st defendant on the security of 3 vessels D D and personal guarantees from other defendants. The loans were E restructured later on the same securities. The 1 st defendant then E encountered financial hardship in meeting its obligations under the loan F F agreements. The defendants alleged that the plaintiff’s general manager G orally agreed that, in consideration of the defendants trying their best to G repay the outstanding sums, they could pay whatever amount they could H H afford and the plaintiff would grant them further time to discharge their I liabilities. The defendants had contended that in light of this oral I J agreement, the plaintiff was estopped from bringing the proceedings. J K 79. Reyes J found the defence by the defendants untenable at law K for 3 reasons, namely (i) it was inherently implausible that the plaintiff L L should make the oral agreement alleged, and that he doubted that the M M plaintiff, a commercial moneylender, would agree by way of an N enforceable contractual promise that its creditors could pay whatever N amounts they could, whenever they were able to do so; (ii) even if there O O were such an agreement varying the repayment terms of the relevant loans, P the agreement (if it was to be enforceable) must be supported by valid P consideration moving from the defendants to the plaintiff, and (iii) insofar Q Q so there might have been an estoppel arising out of some informal (that R was, non-contractually binding) willingness by the plaintiff to afford the R defendants more time to pay, such an estoppel could only have been S S suspensory or temporary at law, and after a period of reasonable notice, T the plaintiff would be entitled to enforce its strict rights under the loan T U U V V  - 27 - A A agreements as restructured. Reyes J held that the defendants had no B B arguable defence and gave judgment against them in favour of the plaintiff. C C 80. Mr Pow SC also referred this court to two applications for D D summary judgment by Lucky Zone Holdings Limited against two separate E lots of defendants in HCA 784/2012 and HCA 785/2012, unreported, E 29 May 2013, which were heard together. F F G 81. In Lucky Zone, there was no dispute that the plaintiff G advanced 3 principal sums to the defendants in accordance with 3 sets of H H subscriptions agreements and the plaintiff was the registered holder of I 3 convertible note instruments issued by the defendants pursuant to I subscription agreements. There was also no dispute that despite repeated J J demands for repayment, the interest and principal amounts due under the K three 3 convertible notes were not repaid upon maturity. The defendants’ K defence was that the agreement between the plaintiff and the defendants L L was made partly orally, partly in writing and partly by conduct. They M relied on a prior oral agreement. M N N 82. To J found that the oral term to be affront to commercial O sense as the 3 convertible note instruments were prepared and drafted by O lawyers and the alleged oral term was a very important term, and if the P P parties had reached agreement on this term, there was no reason why the Q defendants had not told their lawyers about the oral terms, and if they had Q done so, there was no reason why their lawyer would have inserted a R R clause in the convertible note instruments which was inconsistent with the S oral term. Furthermore, the alleged oral term sat very uncomfortably S with the fact that the convertible notes were designed as negotiable T T U U V V  - 28 - A A instruments which were freely transferrable and with the exclusive B B agreement clause and the alleged oral term could not be brought to the C notice of a third party holder in due course. C D D 83. To J had found that the alleged oral term relied on by the E defendants lacked commercial sense and was inconsistent with the express E exclusive agreement clause of the share subscriptions agreements and F F further the alleged oral term was vague and imprecise, and he gave G judgment for the plaintiff in both the actions. G H H 84. To J had in his judgment considered a number of authorities I including Natamon Protpakorn v Citibank NA [2009] 1 HKLRD 455 I which had also been referred to this court by Mr Pow. Natamon was a J J customer of the defendant bank and she had relied on certain oral K representations made to her by the vice president of the bank in relation to K foreign exchange contracts before she entered into 2 agreements for FX L L trading. She sued the bank for breach of the 2 agreements when the bank M closed out her FX contracts because of concerns about her sources of M wealth. The bank then relied on its standard clause in their agreements, N N which stated that no amendment or waiver of any provision would be O effective unless the same was in writing and signed by the bank. O Her claim was struck out at first instance but her appeal was allowed by P P the Court of Appeal. Q Q 85. In Natamon, Cheung JA held that whether the entire R R agreement clause applied depended on the construction of the terms and S that such a clause could be waived, and that because of the banks’ S subsequent conduct in allowing the plaintiff to trade on the terms of the T T U U V V  - 29 - A A 2 agreements the question of waiver and estoppel arose. Cheung JA had B B said the issue open to dispute was the effect of waiver and estoppel on an C entire agreement clause. C D D 86. In Fortis Insurance Company (Asia) Limited and Lam Hau E Wah Inneo CACV 86/2010, 28 October 2010, Kwan JA had agreed with E what Cheung JA had said in Natamon and that there was room for debate F F on the applicability and effectiveness of the entire agreement clause in G situations where waiver and estoppels might be invoked and on the facts of G that case, the defendant’s case, if believed, could found a factual basis for H H waiver and estoppels and allowed the defendant’s appeal against the I plaintiff’s summary judgment. I J J Discussion K K 87. Ps’ claims were based on the written documents, including the L 2 Loan Agreements, the 2 Original Promissory Notes, the 2 Amendment L Agreements and the 2 New Promissory Notes. It was clear under the M M Amendment Agreements, the Loans had to be repaid in full by the N 2nd Payment Date, and interests were payable under the Amendment N Agreements. The total amount received by Winson Federal/ International O O Hoteliers of US$38m was not disputed, and it was further not disputed that P other than the sum of US$1.6m paid on 9 June 2009 towards interests, P there had not been any payment of interests, or any repayments of the Q Q Loans or any part thereof. I am satisfied that Ps had established a prima R facie case. R S S T T U U V V  - 30 - A A 88. The burden then shifts to Ds to satisfy this court why B B judgment should not be given against them for those monetary claims C sought by Ps. C D D Defence of promissory estoppel E E 89. Ds’ defence of promissory estoppel was based mainly on the F oral representations allegedly made by Ang to Vincent during those F 4 Meetings (“Oral Representations”). In the defence the 1st G G Representation and the 2nd Representation were specifically pleaded, but H Ms Lau had referred to 3 oral representations during the hearing and she H seemed to be including what was allegedly said by Ang during the I I 2nd Meeting on 5 May 2009, but this representation was not one which was J pleaded to be relied on by Winston 35 . Anyway, I will refer to all J representations alleged in these 4 Meetings as Oral Representations, which K K include the 1st and the 2nd Representations. L L 90. Ms Lau had submitted it was pertinent to note that Ps did not M M file any evidence from Ang to rebut Ds’ case. This, however, can equally N be said against Ds. There was no evidence that they had tried to contact N Ang to ask him to confirm the Oral Representations or to give evidence to O O support their case either. P P 91. The main contemporaneous document relied on by Vincent Q Q for the alleged Oral Representations was the Report Email. R R S S T T 35 See para 18, A:66 U U V V  - 31 - A A 92. The Report Email was dated 3 days after the 4th Meeting. B B It contained a careful record of what was said by Vincent and what was C allegedly said by Ang, and recording the time and venue for each of the C 4 Meetings, save there was a typing error as to the year. It was sent to the D D Executor and copied to a HB Tsui of WP Holdings. According to E Vincent, he sent the Report Email to report to the Executor the E conversations in the 4 Meetings36. F F G 93. The Report Email was marked Importance “High”, although it G did not appear from the contents that any action was required to be taken H H by the Executor, or any one else, upon receipt. As pointed out by I Mr Pow, there was no reference to the Report Email by the Executor in his I short affirmation filed to oppose the present application. The Executor J J did not adopt any part of Vincent’s affirmation, nor was there any K reference to Vincent’s affirmation. It was Ps’ case that they had reasons K to suspect that the Report Email was not an authentic document. L L M 94. Ms Lui, for the Executor, had, however, pointed out that what M Allderige had said in his 4th affidavit in relation to the Report Email was N N only that it was self-serving and should not be given any weight, and there O was nothing therein to indicate that Ps would challenge the authenticity of O the Report Email, and therefore there was no need for the Executor to refer P P to the Report Email. I accept her submissions in this regard, and shall Q Q assume for the purpose of the present application, the Report Email was R sent to and received by those persons named and on the date stated therein. R S S T T 36 Para 32, A:163 U U V V  - 32 - A A 95. Allderige had commented that it was “greatly curious” that B B Vincent saw fit to record in great detail as between himself and the C Executor what allegedly transpired between him and Ang, but never saw C fit to put on record as between him and P1, and this would suggest that D D Vincent knew that P1 would immediately reject his account of the E 4 Meetings. E F F 96. The Report Email was clearly not between the contracting G parties, and it was self-serving. On the other hand, Ps had themselves G also produced their own internal emails from 28 May 2009 to 3 June 2009 H H between Allderige and Ang indicating that Allderige was insisting Ang to I get the interest paid on the Loans during that period, with Ang replying he I was working on this and also “working on exit”37. J J K 97. It did not appear from those internal emails that Ang was K going to or had made any of the Oral Representations to Vincent as alleged, L L nor was there any reason as to why Ang would go out of his way to flout M his superior’s order. However, similar to the Report Email, P1’s internal M emails would also be self-serving. N N O 98. Mr Pow had submitted that D’s allegations of Oral O Representations were unbelievable, but even if D’s were able to P P demonstrate that there were indeed Oral Representations by Ang, such Q would have been superseded by the New Documents. Q R R S S T T 37 B:1-5 U U V V  - 33 - A A 99. Vincent’s explanation was that he continued to place reliance B B on the 1st and 2nd Representations, that despite the express terms contained C in the New Documents, P1 would not call for the repayment of the Loans C or the payment of interest accrued unless Winson Federal was in the D D position to repay the entire principal of the Loans. Further Ds’ case was E that the New Documents were only signed as a matter of formality. E F F 100. The New Documents were signed by Allderige and Foo on G behalf of P1, and Vincent on behalf of Winson Federal. According to G Allderige, Vincent had a degree from the University of Toronto and further H H Allderige had produced an annual report of Lingnan University for I 2005/2006 showing Vincent to be a director of the Advisory Board for the I English Language Education and Assessment Centre38, and an email and J J attachments showing that Vincent was attempting to raise a real estate fund K of US$100m to US$150m with a partner on about 29 March 200939. K L L 101. The evidence presently before this court, including in M particular Vincent’s detailed record in the Report Email, indicated Vincent M to be an educated, intelligent and financially astute man. N N O 102. Allderige had produced emails and attachments to show that O there were earlier versions of the New Documents which were dated P P 14 April 2009 which seemed to be prepared by the legal associate director Q on P1’s side. These were initially signed by Vincent around 14 May Q R R S S 38 B:483 T T 39 B:495-507 U U V V  - 34 - A A 2009 and returned to P1 for P1’s signature40. However, there were then B B subsequent changes. C C 103. Allderige had said it took the parties several months to draft, D D consider, amend and execute the Amendment Agreements, and that E Vincent had informed P1 that he would seek his own legal advice before E executing the Amendment Agreements, and that there was a delay in F F execution as time was needed to finalize the terms. G G 104. It appeared that the New Documents were eventually only H H signed sometime on or after 31 July 2009 by Vincent on behalf of Winson I Federal. I J J 105. There were 4 main areas of changes between the earlier K versions and the subsequently signed New Documents, namely (i) the K original date for payment for principal stated in the earlier versions was L L 2 September 2009, which was later changed to the 2 nd Payment Date M ie 4 December 2009 in the Amendment Agreements; (ii) then there was an M amendment to Clause 2 (a) of the earlier versions in relation to interest to N N specify the due dates in the Amendment Agreements for payment of O interest; (iii) Clause 5 (b) was added in the Amendment Agreements under O “conditions for effectivity” and (iv) a new Clause 6 (a) added under P P “consequences of effectivity date” in the Amendment Agreements. Q Q 106. The earlier versions of the New Documents should have been R R received by Vincent shortly after the 2nd Meeting, and were in fact signed S by Vincent prior to the 3rd Meeting and prior to the alleged S T T 40 B:515-529 U U V V  - 35 - A A 2nd Representation. Vincent had signed these earlier versions of the B B amendment agreements including promissory notes promising to pay the C principal of the 2 Loans on 2 September 2009, and to pay the accrued C interest on the outstanding principal by a coupon payment to the order of D D 41 the P1 on 2 June 2009 . E E 107. Ms Lau submitted that there was nothing to suggest that must F F have been further discussions between the parties before the Amendment G Agreements were eventually signed by both sides, and it was unclear who G had made the changes and under what circumstances they were made. H H I 108. I accept the emails only showed there were earlier versions I dated 14 April 2009 and signed by Vincent on about 14 May 2009. J J However, in my view, it would not be believable for Vincent not to be K aware of those 4 changes, and in any event he had several months between K April and July 2009 and at least one and half months after the Report L L Email, before he eventually executed the New Documents. There was no M evidence that at any time before he executed the New Documents that he M had put in writing or on record to P1 the 1st and 2nd Representations, or any N N Oral Representations alleged by him or recorded in the Report Email. O There was no satisfactory explanation from Vincent as to why he felt it O necessary to record those alleged Oral Representations in the Report Email P P to the Executor, a renowned solicitor, and yet found it not necessary to put Q Q them on record in writing as between him and P1 before he signed the New R Documents. R S S T T 41 Clause 3, B:520, 527 U U V V  - 36 - A A 109. P1 is an investment fund whereby external parties inject funds B B into P1 for its manager to invest on their behalf. According to Allderige, C the funds do not belong to P1 and P1 remains continuously accountable to C its investors for the funds, particularly in terms of interest payments. D D It was Allderige’s evidence that it was the policy of their fund not to make E loans lasting beyond a year, and that the Loans were “bridging facilities” E in order to provide Carlos and Vincent them with time to negotiate the F F refinancing from CITIC Ka Wah Bank. Vincent had himself also referred G to the 2 Loans from P1 as a “bridging loan”42. Thus, the 2 Loans were G not meant to be long term loans and Vincent was well aware of this. H H I 110. I accept Mr Pow’s submissions that the effect of the Oral I Representations would result in Ps being completely at Ds’ mercy as far as J J repayments were concerned, and this would defy commercial or business K sense. Ms Lau submitted it was not Ds’ case that the repayment should K be postponed indefinitely but time had not yet come, as Ds’s case was that L L they would be required to repay when they had money to do so. M M 111. Ds’ case seemed to have changed somewhat. In Vincent’s N N affirmation filed on 17 March 2014, what he alleged to have been said by O Ang in relation to the 1st Representation was that P1 would only seek O repayment when Winson Federal had the means to repay the entirety of the P P Loans. What he alleged to have been said by Ang in relation to the Q Q 2nd Representation was that Winson Federal could pay whatever amount of R interest whenever it was comfortable to make payment. R S S T T 42 Para 9, A:156 U U V V  - 37 - A A 112. It would seem that even on Vincent’s own case on the 1st and B B the 2nd Representations, there was nothing alledged to have been said by C Ang to support what was pleaded by Ds in their respective defences43 and C what seemed to be now Ds’ case, namely that P1 would not enforce or call D D for the repayment of the Loans until the successful liquidation or E monetisation of the Project. E F F 113. Also, if Ang had indeed said what was alleged by Vincent, G then the Loans would become “indefinite”. G H H 114. Further, the alleged Oral Representations were clearly I inconsistent with the Amendment Agreements and the Original and the I New Promissory Notes. Vincent had said they were a “formality”. If P1 J J had indeed through Ang give those alleged Oral Representations, then why K would the parties bother to have these New Documents, which took several K months to finalise, signed at all? L L M 115. The Original and the New Promissory Notes are all M transferable and negotiable instruments, as reflected in paragraph 1 of all N N these Notes. I would pose a similar question, as that posed by To J in the O case of Lucky Zone44, how can those alleged Oral Representations be O brought to the notice of a third party holder in due course? P P Q 116. Ds had disagreed that the making of the Oral Representations Q defied commercial common sense. Vincent had said it was clear to P1 all R R along the value of the Securities, notably the Project, far exceeded the S S 43 See para 15, D3’s defence, A:65, and para 19, Defence of D1, D4, D6, A:78 T T 44 At para 20 U U V V  - 38 - A A principal amount of the Loans, and that P1 had never been in a hurry to B B enforce the Loans. Ds relied on P1’s failure to chase for repayment of the C principal or interest until June 2013, almost three and half years after the C expiry of the 2nd Payment Date to demonstrate that the Loans remaining D D outstanding was not of serious concern to P1, nor was it of sufficient E impact to its cash flow. E F F 117. Allderige had explained that P1 did not issue any formal G demand as there were representations from Vincent and Ruby that they G were looking for buyers and that they were unable to pay, and therefore H H pointless for Ps to issue a formal demand. Vincent and Ruby had denied I making any such representations. I J J 118. In any event, Mr Pow submitted that any delay on the part of K P1 to issue a demand for payment would not constitute a waiver as seen K from clause 13 of the 1st Loan Agreement and clause 14 of the 2 nd Loan L L Agreement. M M 119. Clause 13 of the 1st Loan Agreement stated: N N O “No delay or omission of either party in exercising any right, O power or privilege under this Agreement shall operate to impair such right, power or privilege or be construed as a waiver of it. P P Any single or partial exercise of any such right, power or privilege shall not preclude any other or future exercise of any Q Q other right, power or privilege. R The rights of either party under this Agreement may be R exercised as often as necessary and may be waived only in writing and specifically. S S Any provision of this Agreement may be amended or supplemented if the Lender and the Borrower so agree and any T T Default may be waived before or after it occurs and the U U V V  - 39 - A A performance of any provision of this Agreement may be waived B or exercised if the Lender so agrees, in each case in writing B signed by both parties with the same formality as this Agreement45.” C C D 120. Clause 14 of the 2nd Loan Agreement was similar to D Clause 1346. E E F 121. Further, clause 5(C) of the Original and the New Promissory F Notes clearly stated that: G G H “Even if, at a time when Borrower is in Default, the Note Holder H does not require immediate payment in full as described in Section 5(A) above, the Note Holder will still have the right to I I do so if Borrower is in Default at a later time”. 47 J J 122. It was not Ds’ case that Ps had waived the above clauses. K K L 123. Ms Lau had submitted, based on the Natamon case, and on the L Fortis case, the effect of such Oral Representations on the above written M M clauses would need to be considered and the matter should be allowed to N go to trial. N O O 124. However, in my view, Ds had to demonstrate that the factual P basis of the Oral Representations is believable first before the effect of the P Oral Representations is considered. Q Q 125. Ms Lau submitted that P1’s conduct subsequent to the R R Amendment Agreements was consistent with Ds’ case, and was directly S S 45 B:19 46 B:45 T T 47 B: 84, 87, 214, 217 U U V V  - 40 - A A consequent to the 1st and 2nd Representations. In particular, Ms Lau B B referred to the Referral Agreement which was entered into before the 2 nd C Payment Date. C D D 126. The parties to the Referral Agreement were P1, the Executor, E International Hoteliers. Winson Federal was not a party to the Referral E Agreement. The Referral Agreement was only for a period of 6 months, F F and expired at end of May 2010. Under the Referral Agreement, G the Executor and International Hoteliers appointed P1 as their G representatives to, among other things, assist in sourcing and identifying H H potential purchasers for the Project in return for a success fee, being a I maximum of 1.5% of the sale consideration payable for the acquisition of I the Project. The Referral Agreement was in my view clearly a separate J J and independent document from the Loan Agreements. K K 127. It was not disputed that P1 was helping Ds to sell the Project L L and to help contribute towards the maintenance of the Project. Allderige M had said there was no reason for P1 to go to such great efforts to manage M the Project if they did not want, or want to expedite, the repayment of the N N Loans and the interest thereon, as P1 had no equity in the Project. In fact, O Allderige had said that P1 was forced to manage the Project to protect the O value of their collaterals for the Loans and to try to sell it at the highest P P price possible to ensure that they could recoup as much of the Loans and Q Q interests due thereon as possible. R R 128. Ms Lau had submitted that P1 was acting not as a pure lender, S but as if it were a partner. Allderige said his role was akin to a receiver or S a manager in an insolvency matter. Whichever, P1’s efforts in finding T T U U V V  - 41 - A A potential investors and trying to assist in the sale of the Project including B B maintaining were equally consistent with Ds’ case, as with Ds’ case. C C 129. Another “important” document relied on by Ds was the D D Declaration Email. E E 130. As mentioned earlier, according to Allderige, this was during F F the period when P1 was asking Winson Federal to execute further G amendment agreements. Allderige had produced the draft 2nd amendment G agreements dated 4 December 2009 which were to be executed by Winson H H Federal after the expiry of the 2 nd Payment Date, and which subsequently I Vincent refused to sign. I J J 131. There was no reference in the Declaration Email to any of K Oral Representations made by Ang to Vincent. Further, it was not Ds’ K case that the Loans were not repayable but only the time had not come yet. L L M 132. Mr Pow submitted that at most, the Declaration Email from M Ang to Vincent requesting a favour for a declaration to be made N N indicated that Ps were not treating the Loans to be in default at that time, O ie around 10 May 2010. He further submitted that Ps could treat the O Loans as being in default at any time, and the Declaration Email did not P P mean that Ps had foregone their right to enforce under the Loan Q Agreements and/or the Amendment Agreements. I accept Mr Pow’s Q submissions. R R S S T T U U V V  - 42 - A A 133. It was Ds’ case that in reliance of the Oral Representations or B B common assumption, Winson had acted to its detriment in: C C (i) Not budgeting or preparing for any repayment of the Loans, D D or interest thereon before the successful liquidation or E monetization of the Project; E (ii) Winson Federal did not make full repayment of outstanding F F interest payments and only made one payment in the amount G it felt “comfortable”; G H (iii) Winson Federal continued to incur substantial expenses and H time and effort in maintaining the Project; I I (iv) Winson Federal focused its efforts on completing or selling J off the Project and allowed time to run on the outstanding J Loans thereby letting substantial interest to continue to K accrue; K L (v) Winson Federal agreed to accede to or take into account the L views of P1 in relation to matters of the Project. M M 134. No admission to (i) to (iii) above was made by Ps. N N O 135. As for (i), as mentioned earlier, even if there had been Oral O Representations, there was nothing contained in those alleged Oral P P Representations which indicated that the repayment of the Loans or Q interest thereon was upon the successful liquidation or monetization of the Q Project. R R S S T T U U V V  - 43 - A A 136. As for (ii), during the 2nd Meeting, according to Vincent, B B he had informed Ang that he would pay interest of US$1.6m and would C only pay the balance upon the drawdown of the remaining US$2m and C then after the 2nd Representation that he informed Ang that he would only D D nd pay US$1.6m as originally stated in the 2 Meeting. Allderige had E denied that P1 was not in a financial position to allow Winson Federal to E drawdown the balance and said what Ang more likely to have said was F F simply that P1 would not provide the remaining balance. In any event, G it would appear that with or without the Oral Representations, Winson G Federal was going to pay only US$1.6m. H H I 137. As for (iii), this seemed to be contradictory to what Vincent I said in his affirmation that in around December 2010, he had orally J J informed Ang that Winson Federal had no more money to pay for K operating expenses and Ang agreed that P1 would take care of those K expenses. Further, those emails produced by Vincent from 16 December L L 48 2009 until 4 June 2012 showed that it was P1 which was actively M M participating in the continued development of the Project. N N 138. Ps had denied (iv) and (v). Ps had averred that in particular, O no, or little action was taken by Winson Federal in completing the Project, O and at least 10% of the construction work had remained to be completed, P P and further there had been no, or little action taken by Winson Federal in Q Q selling the Project, and in particular, Ds had rejected an indicative offer for R the purchase of the Project by a potential purchaser in about end of R September 2011 for US$100m. S S T T 48 Para 50, A:169-171, and also B:280-337 U U V V  - 44 - A A 139. Ms Lau submitted it was for Ps to make good there was such B B an indicative offer, and that there were no supporting documents. C Allderige’s allegations that Ds had no genuine intention of selling the C Project and that their rejection of the above indicative offer for US$100m D D were first pleaded in Ps’ reply to D3’s defence, and Vincent should be E aware of such allegations. These allegations were, however, not E challenged by Vincent in his subsequent affirmation filed in opposition to F F Ps’ present application. G G 140. Having considered the present evidence and contemporaneous H H documents before this court, I do not find that it is believable that Ang I could have made those Oral Representations, including the 1st and the I 2nd Representations, as alleged by Ds. To summarise, my reasons include J J the following:- K K L (i) the Loans would become “indefinite” under the 1st and 2nd L Representations and would not make commercial sense; M M (ii) Vincent did not see fit to record any of the Oral N Representations with P1, prior to signing the New Documents N or thereafter; O O (iii) Ds did not raise the fact that there were Oral Representation P when they received Ps’ demand letter dated 31 May 2013. P Q 141. Further, in my view, even if any of the Oral Representations Q made, they were vague, imprecise and not unequivocal. R R S 142. It has been said by DDJ Ho in the cases of AIA International S Limited and Shum Ka Wai and others, DCCJ 1571, 1615, 1616, 1620, 1685, T T U U V V  - 45 - A A 1686, 1687, 1688, 1690 of 2013, Decision dated 20 January 2014 that for B B the purpose of resisting an Order 14 application, it is no good for a C defendant to say he may be able to improve his case if given the chance to C go to trial, and he must be able to demonstrate he has an arguable defence D D right at the time of the Order 14 application. Mr Pow submitted that the 6 E issues which Ms Lau said should be allowed to go to trial were either E “moonshine” or irrelevant. F F G 143. Ms Lau accepted that P1 could revert to its original position G upon giving Ds “reasonable notice”, as a promissory estoppel would only H H cause a temporary and limited change in the rights of the parties, although I this had not in fact been pleaded by Ps. It was Ms Lau’s submission that I the 7 day notice, given by Ps in their solicitors’ formal demand letters J J dated 31 May 2013 to Winson Federal, the Executor, International K Hoteliers, RI Ltd49, was not reasonable. These letters although dated K 31 May 2013 seemed only to be sent out by registered post on 14 June L L 2013. M M 144. Anyway, on 24 June 2013, the Executor had replied by N N referring to clause 2.3 of the Guarantee Agreement, ie the guarantor only O becoming liable when the Loans became due and payable after 15 business O days of a written notice. There was no reference to any Oral P P Representations, or that the Ps were estopped from claiming repayment of Q Q the principal and the accrued interest. It transpired that the Executor had R spoken to Ps’ solicitor and was suggesting a settlement meeting among all R stake holders. S S T T 49 A:206-213 U U V V  - 46 - A A 145. Winson Federal, International Hoteliers and RI Ltd had also B B instructed their solicitors to reply on 25 June 2013 to the demand letter C from Ps’ solicitors. In their reply letter, the companies referred to clause C 7.1 (c) of the Loan Agreements and stated that the companies should be D D given 15 days for remedying any default. Again, there was no reference E at all to any of the Oral Representations, or that the Ps were estopped from E claiming repayment of the principal and the accrued interest. F F G 146. D’s complaint seemed to be the notice should be 15 days and G not 7 days. In any event, by now, more than a year has gone by. H H I 147. So far as the Executor was concerned, Ms Liu pointed out that I Executor had no personal/direct knowledge of the matters as between Ps J J and Ds. She made two brief points, namely as mentioned earlier, that K there was no reason for the Executor to refer to the Report Email in his K affirmation, and further to update the court that the value of Carlos’ estate L L was just over HK$15m as at mid May 2014. M M 148. Having considered all the above and in light of my view that N N the Oral Representations were unbelievable, I have come to the conclusion O that Ds have not made out a good defence, or any reasonable grounds of a O bona fide defence based on promissory estoppel. P P Q Q R R S Defence of default interest and late charges being penalties in law S T T U U V V  - 47 - A A 149. It was also Ds’ defence that even if any part of the Loans was B B repayable, any such sums claimed as Default Interest or late charges under C the Amendment Agreements or the Promissory Notes were irrecoverable C as being penalties in law. D D E 150. Ms Lau’s skeleton submissions on the penalty point were only E in relation to late charges and after considering her submissions, Mr Pow F F indicated that Ps no longer sought the late charges in their present Order 14 G application, which should be left for trial. G H H 151. At the hearing, Ps were also content to seek only those I interest based on Ds’ calculations, leaving the rest for trial. Ms Lau did I not put forward any submissions on law in relation to Default Interest. J J Ds had not shown that they had a good defence to Ps’ claim on law in K relation to interest. Ds’ other main challenge was in respect of the K calculations. As Ps had decided that at this stage to adopt Ds’ L L calculations which came to US$43,307,389 until 10 June 2014, I will give M judgment for that amount. M N N Reimbursement of the costs of maintenance and legal costs under the Loan O Agreements O 152. Under this head, Ps were originally seeking : P P Q Q (i) US$1,645,000 as reflected by remittance advices 50 which R would convert to HK$12,708,405; R (ii) Legal costs of US$117,257.58 as pursuant the Loan S S Agreements. T T 50 B:539-549 U U V V  - 48 - A A 153. At the hearing, Ps made further concessions and sought B B only (i) above. Vincent had produced a table to show the amounts of C what he said were remittances from P1 but as pointed out by Allderige, C Vincent seemed to have missed out those remittances in 2010 and 2013. D D Again, Ds were not able to show a good and arguable defence on (i) as the E remittance advices clearly indicated the remittances to the various E beneficiaries were for Winson Federal. I will give judgment for the F F amount claimed. G G Order H H 154. My order is to the following effect: I I J (i) Final judgment of the total sum of US$38m under the Loan J Agreements and the Amendment Agreements in favour of Ps K K against Winson Federal and/or the Executor; L (ii) Interest on (i) above of US$43,307,387 up until 10 June 2014; L M (iii) Interests on (i) above at 20% pa on US$10m from 11 June M 2014 to date of judgment and 22% pa on US$28m from N 11 June 2014 to date of judgment, and thereafter at judgment N rate; O O (iv) Reimbursement to Ps of the costs of maintenance totalling P P HK$12,708,405 by Winson Federal; Q (v) Ds be given leave to defend on the rest of Ps’ claims in the Q ASOC. R R 155. The question of costs will be adjourned for argument. Ps are S S to lodge written submissions on costs within 21 days, Ds shall lodge their T written submissions in response within 21 days thereafter, and Ps shall T U U V V  - 49 - A A lodge their reply written submissions, if any, within 14 days thereafter. B B The question of costs will be dealt with on paper, unless any party requests C for an oral hearing within 7 days after all written submissions on costs C have been lodged, and/or otherwise directed by the court. D D E Final Matters E F 156. I would like to point out that in the present case, F the lever-arch file of Bundle B consisted of almost 600 pages of exhibits, G G and the index for the exhibits did not even bother to set out the date and H description of each exhibit. It was time consuming to try to identify and H find a particular exhibit, and in future, to assist the court, practitioners I I should prepare a proper index with the date and description of each J document. I would also remind practitioners again the provisions of J paragraph 5 of PD 5.6 which states that in relation to the paginated bundles K K “Lever-arch files and ring-binders must not be over-filled (and should L never include more than 250 pages)”. L M M 157. Lastly, I would thank all Counsel for their helpful N submissions and assistance to the court. N O O P P Q (Bebe Pui Ying Chu) Q Deputy High Court Judge R R S S T T U U V V  - 50 - A A Mr Jason Pow SC and Mr Hugh Kam, instructed by Oldham Li & Nie for B the 1st and 2nd plaintiffs B C Ms Zabrina Lau, instructed by Cheung & Choy, for the 1st, 3rd, 4th and 6th C defendants D D Ms Elaine Liu, instructed by ONC Lawyers, for the 2nd defendant E The 5th and 7th defendants were not represented and did not appear E F F G G H H I I J J K K L L M M N N O O P P Q Q R R S S T T U U V V