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CACV 20/2021
[2022] HKCA 95
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF APPEAL
CIVIL APPEAL NO 20 OF 2021
(ON APPEAL FROM HCA NO 366 OF 2020)
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BETWEEN
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T |
Plaintiff |
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v |
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W |
Defendant |
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Before: Hon Kwan VP and G Lam JA in Court
Date of Hearing: 30 November 2021
Date of Judgment: 30 November 2021
Date of Reasons for Judgment: 14 January 2022
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REASONS FOR JUDGMENT
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Hon G Lam JA (giving the Reasons for Judgment of the Court):
1. The question in this appeal is whether an action brought on a dishonoured cheque should be stayed because of an arbitration clause in the underlying loan agreement between the parties, under which the cheque had been provided as a post-dated cheque for repayment of the principal. At the conclusion of the hearing the appeal against the refusal of a stay was dismissed. These are the reasons for our decision.
Background
2. The facts are straightforward and may be stated as follows. By a written agreement dated 21 March 2017, the plaintiff agreed to lend $5 million to the defendant for one year ending on 21 March 2018, with interest payable each month at the rate of 2.5% per month. The money was advanced and the defendant drew a cheque post-dated 21 March 2018 in the amount of $5 million for repayment of the principal.
3. The loan was not repaid and, on 20 April 2018, the parties entered into a written agreement to extend the repayment date to 21 March 2019. The date of the post-dated cheque was also amended to 21 March 2019.
4. The loan was again not repaid in March 2019 and, on 16 May 2019, the parties entered into another agreement to extend the repayment date, this time for half a year, to 21 September 2019. The defendant issued a new cheque in favour of the plaintiff for $5 million post-dated 21 September 2019 for repayment of the principal. We shall refer to this as the “Loan Agreement” and the “Cheque”. The Loan Agreement, which is written in Chinese and in the same terms, mutatis mutandis, as the earlier two agreements made in March 2017 and April 2018 respectively, provides as follows:
「 上述乙方 [XXX] 向甲方 [XXX] 借款，共借港幣五百萬元整，即HKD $5,000,000.00
借款期限為：半年，即由二零一九年三月二十二日到二零一九年九月二十一日止。
借款利息按每月以現金支付為每月2.5%即每月HKD $125,000.00
第一個月在二零一九年四月二十一日支付，之後每個月在二十一日支付一次，最後一次在二零一九年九月二十一日支付，共六次。
甲方出借人已發出中國銀行21-3-2017港幣五百萬元借款
支票號碼：630999（“出借人支票”），
乙方收到存入並未清還，現該借款繼續。
乙方借款人發出南商銀行港幣五百萬元二零一九年九月二十一日還錢期票
號碼：[000524]（“借款人期票”）。
上述借款人期票將會在借款限期到期日即二零一九年九月二十一日支付還款。
上述出借人支票和借款人期票副本分別已微信發給甲乙雙方作為憑證。
未盡事宜，友好協商，此借據以香港法律為準，如有任何糾紛，會在香港以仲裁處理，此借據一式兩份，甲乙雙方各執一份。」
English translation:
“ The above Party B, [XXX], borrows from Party A, [XXX], a total sum of Hong Kong dollars five million, namely HK$5,000,000.00.
Loan period: Half a year, namely from 22 March 2019 to 21 September 2019.
Interest on the loan is 2.5% per month, to be paid monthly in cash, namely HK$125,000.00 per month. The first monthly payment is to be made on 21 April 2019, and subsequent monthly payments are to be made on the 21st day of each month. The last payment is to be made on 21 September 2019, making a total of six payments.
Party A, the lender, has already issued a cheque no. 630999 (“the lender’s cheque”) of Bank of China 21-3-2017 for the loan in the sum of Hong Kong dollars five million.
Party B has received (it and) deposited (it) and made no repayment, and now the loan continues.
Party B, the borrower, has issued a post-dated cheque no. 000524 (“the borrower’s post-dated cheque”) of Nanyang Commercial Bank for repayment in the sum of Hong Kong dollars five million dated 21 September 2019.
The above borrower’s post-dated cheque will be (used) for repayment on the due date of the loan, namely 21 September 2019.
Copies of the lender’s cheque and the borrower’s post-dated cheque mentioned above have already been sent to Party A and Party B respectively via WeChat as proof.
Matters not covered shall be dealt with through friendly negotiation. This loan agreement is subject to the laws of Hong Kong. In case of any disputes, they shall be dealt with through arbitration in Hong Kong. This loan agreement is made in duplicate, and each party has a copy.”
5. The loan was still not repaid in September 2019. Negotiations ensued and led eventually to the execution of what was called a provisional supplemental agreement between the same parties dated 21 January 2020 (“Supplemental Agreement”), which provides as follows:
「 2020年1月21日臨時補充協議及收據如下：
[XXX]（“[T]小姐”）與 [XXX]（“[W]總”）：—
就上述雙方原借貸合同到期日是去年2019年10月21日。
但到期[W]總未還，以原合同利率支付利息至2019年12月7日，但仍欠利息HKD125,000.00（12月8號至1月7號）及HKD52,500（1月8號至今天1月21號）共：HKD177,500.00，[W]總承諾在2020年2月4號用現金清還，並在不影響原合同的權益包括原支票五百萬元的訴訟權利，[T]小姐以此為據：
除在今年1月7號收取了[W]總港元伍拾萬元支票過了數外，今天1月21號再收到[W]總本票∕支票（入票後，以能過數為效）。為此立據：
簽署：簽名 （[XXX]））
確實：簽名 （[XXX]））
見証：簽名（[XXX]） ） 於2020年1月21日
（備註： 若今天第二次伍拾萬元過數後，計算利息基礎將是港元四百萬元，即以每日HKD3,300由明天1月22日起計[W]總支付利息至全部還款日：暫定為上述2020年2月4日）」
English translation:
“ Provisional supplementary agreement and receipt dated 21 January 2020 as follows:
[XXX] (“Miss T”) and [XXX] (“General Manager W”): —
In respect of the original loan agreement between the above two parties, the due date is 21 October last year, 2019.
However, General Manager W did not make repayment when it was due. Interest was paid up to 7 December 2019 according to the interest rate of the original agreement. However, interest in the sums of HKD125,000.00 (8 December to 7 January) and HKD52,500 (8 January to today, 21 January), totalling HKD177,500.00, is still outstanding. General Manager W undertakes to settle the repayment in cash on 4 February 2020. Without affecting the rights and interests in the original agreement, including the [litigation rights][1] in respect of the original five million dollars cheque, Miss T states the following as proof:
Apart from the cheque for five hundred thousand dollars, which has been honoured, received from General Manager W on 7 January this year, a cashier’s order / cheque (to be deemed effective if honoured upon presentation) has been received from General Manager W today, on 21 January. This is prepared as proof accordingly:
Signed by: Signature of T ([XXX]) )
Confirmed by: Signature of W ([XXX]))
Witnessed by: Signature ([XXX]) ) on 21 January 2020
(Note: Upon the transfer of the second five hundred thousand dollars today, the basis for calculation of interest shall be four million dollars; that means interest of HKD3,300 per day is to be paid by General Manager W from tomorrow, 22 January, till the day of full repayment, which is tentatively fixed at 4 February 2020 as mentioned above.)”
6. On 10 March 2020, the plaintiff presented the Cheque for payment but it was dishonoured. After giving notice of dishonour, the plaintiff issued the writ in the action below on 19 March 2020 simply suing on the Cheque. In response, the defendant applied to the Court of First Instance for an order staying all further proceedings in the action and referring the parties to arbitration, on the basis of the provision in the Loan Agreement – which we shall refer to as the “arbitration clause” – that:
「 未盡事宜，友好協商，此借據以香港法律為準，如有任何糾紛，會在香港以仲裁處理」
English translation:
“ Matters not covered shall be dealt with through friendly negotiation. This loan agreement is subject to the laws of Hong Kong. In case of any disputes, they shall be dealt with through arbitration in Hong Kong”
7. The defendant disputed the plaintiff’s claim, though he did not condescend upon particulars, except that he said one of the grounds was that he denied owing the plaintiff $5 million and thus the plaintiff had presented the Cheque for payment without his authority. It was also said that the amount owed was only $4 million and the Cheque had become void and unenforceable.
8. Under section 20(1) of the Arbitration Ordinance (Cap 609), which gives effect in Hong Kong to Article 8 of the UNCITRAL Model Law, the court must refer the parties to arbitration if “an action is brought in a matter which is the subject of an arbitration agreement” and must make an order staying the action. Further, it is not in dispute that the general approach of these courts is that unless it is clear that the dispute in question does not fall within the arbitration agreement, the matter should be stayed in favour of arbitration, for the arbitral tribunal to decide its own jurisdiction: PCCW Global Ltd v Interactive Communications Services Ltd [2007] 1 HKLRD 309, §60.
The decision below
9. In her decision dated 18 November 2020 dismissing the defendant’s application,[2] Mimmie Chan J noted that the Cheque was a separate contract from the Loan Agreement and that bills of exchange were generally regarded as the equivalent of cash. She noted that the Court of Appeal in CA Pacific Forex Ltd v Lei Kuan Ieong [1999] 1 HKLRD 462 held that there must be a plain manifestation in the arbitration clause that it is to apply to bills of exchange if the presumption against taking bills of exchange into arbitration is to be rebutted. She rejected the defendant’s submission that the court should depart from CA Pacific and adopt the “one-stop shop dispute resolution presumption” following Fiona Trust & Holding Corporation & others v Privalov & others [2007] UKHL 40 and Uttam Galva Steels Ltd v Gunvor Singapore Pte Ltd [2018] 2 Lloyds Rep 152. She held that if there was any conflict as to the significance to be placed on any presumption, she was bound by the decision in CA Pacific.[3]
10. Construing the Loan Agreement as a whole, the judge found that the parties had intended the Cheque to act as security for the repayment of the loan on the due date and that the word “disputes” in the arbitration clause was to be construed to mean disputes relating to the Loan Agreement and the parties’ claims and...
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