GLORY SKY FINANCE LTD v. CHEN JIANHUA AND ANOTHER

HCMP 2482/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2482 OF 2014

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DECISION

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The application

1.  There are the following applications before the court:

(1)   The plaintiff’s (“P’s”) summons dated 5 May 2017 to set aside the order of Master K. Lo on 27 May 2017 (Master Lo’s Order”) on the ground of irregularity, and alternatively for leave to be granted to amend Master Lo’s order (“P’s Summons”), and

(2)   The defendants’ (“Ds’”) summons dated 22 August 2017 for, inter alia, an order that P do pay Ds such sum of money into court as the court see fit pursuant to O.2 r.3 RHC, and P’s witness statement of Yeung Sau Han Fanny filed on 9 May 2017 (“P’s WS”) be removed from the court’s record (“Ds’ Summons”).

(3)   P subsequently applied to amend its summons dated 5 May 2017 to be released from the sanction of Master Lo’s Order and asked for leave to serve P’s WS (“P’s application for amending its summons”).  The amended summons will retain the request for setting aside Master Lo’s Order and in the event this Court refuses to set aside Master Lo’s Order, P asks for relief under Order 2, rules 4 and 5 RHC and that P’s WS be retained.

2.  The above applications are contested and the parties are legally represented.[1]

3.  Today, P applies for an adjournment for the matter to be brought before Master K. Lo for the parties’ intention to be ventilated before her.  This application is contested.  Having considered the complexities of such application before Master K. Lo and in the interest of justice for the parties, I consider that the disputes should be resolved today before myself.  P had taken out the summonses for setting aside and alternatively for relief from sanction under Order 2, which will ultimately resolve all these procedural issues between the parties.  I refuse P’s application for adjournment of the summonses.  P has taken out a summons to appear before Master K. Lo.  This summons is set aside and the hearing be vacated.

The brief facts

4.  The brief facts of the matter are that P is a company engaged in money lending business.  P’s case is that Ds had on two occasions obtained two loans totally $17,000,000 with a charge on their property of Flat B, 41, Tower 3, Grand Promenade, No. 38 Tai Hong Street, Hong Kong (“the Property”).

5.  P had taken out an action to enforce the charge on the Property for the repayment of the loans.

6.  Ds’ case is basically that P had mistaken the identity of the persons who approached and entered into the loan agreement and the two mortgage agreements with P, and that the title deeds of the Property were stolen by the fraudsters who had misused the identity of D1 and D2.

7.  Ds’ case is that Ds could not have been the persons who entered into the mortgages with P as D1 was not in Hong Kong on 12 February 2014, 28 April 2014 and 8 May 2014.  Ds counterclaim for, inter alia, a declaration that the Power of Attorney, the loan agreements and the two mortgages are legally invalid, null and void; for the registration of the two charges to be vacated; and for the title deeds of the Property to be returned to Ds.[2]

Facts leading to P’s summonses

8.  P’s applications arise out of Master Lo’s Order, which were couched in these terms:

“by consent, unless on or before 4 pm on 4 May 2017 P do exchange its signed witness statement(s) of fact with D1 and D2, P be debarred from adducing evidence at the trial herein and D1 and D2 do serve their signed witness statement(s) of fact on P’s solicitors.”

9.  The above terms are somewhat different from Ds’ summons for the unless order.  In Ds’ summons, the terms are “Unless within 7 days from the Order be made the Plaintiff do exchange its signed witness statement(s) of fact with the 1^st and 2^nd Defendants…”

10.  P’s solicitor agreed to the terms of Ds’ summons above and confirmed the agreement by a letter emailed to Ds’ solicitors.  It contends that if the court made the Order in those terms, the counting of the 7 days would, under Order 3, r.2(5), exclude Saturday, Sunday and general holiday.  The deadline will then be 10 May 2017 whereas P intended to serve its witness statement on 9 May 2017, well within the time prescribed by the law.

11.  Master K. Lo was quite right to make the “unless order” the way she did in accordance with P.D. 16.5:

“2. The common form of peremptory order known as an “unless” order should prescibe the period within which ian act is to be done, failing which the ordered consequences will follow.  These orders fall into two categories:

(a) …

where the party ordered is present/represented, or if a consent order is made, in which case the wording should be –

(b) “unless by [4 p.m. on Thrsday, 1^st December 1988] etc. as above.

It is desirable that the time be spelt out to avoid future argument.”

12.  It would be for Ds’ solicitor to draft the proper order for the application, taking into account of the above Practice Direction.

13.  In any event, the difference between the date of Master Lo’s Order and the agreed date as perceived by Ds is 6 days.

14.  Nevertheless, Master Lo’s Order is a valid court order unless it is set aside.

P’s application for amending its summons

15.  Before I consider P’s summons, I have to consider its application for amending the summons.

16.  In view of the facts leading to P’s summons, it is obvious that the discrepancies between the parties leading to the making of Master Lo’s Order must be resolved fairly within the context of Order 1A, with particular reference to ensuring fairness between the parties and the primary aim in exercising the powers to secure the just resolution of disputes in accordance with the substantive rights of the parties.

17.  In exercising the judicial discretion, I allow P’s application to amend its summons.

P’s application for setting aside Master Lo’s Order

18.  It is a misconceived application because this Court simply has no power to set aside Master Lo’s Order, which is the power of the appellate court.  As I understand it, Master Lo’s Order has been perfected.  As such, this order cannot be set aside, not even by Master Lo herself, still less by this Court.  See Goh Kim Lay v Versatile Advertising Company Ltd & Messrs TL Ip & Co (unreported, HCA 8090/1994, 19 September 1994) Yam J. §§2, 3 & §5. See also Moores Rowland (a firm) & Another v Grant Thornton (a firm) & Others (unreported HCA 1126/2010, DHCJ Lok (as he then was), 8 June 2012 §§18-30).  Such application must be dismissed with costs.  So I order.

P’s application for relief from sanction of the unless order

19.  Ds oppose this application on the grounds that the application was not made within 14 days from the date of non-compliance with the “unless order”; there was no affidavit evidence in support of the application and that Ds are prejudiced because they had served their witness statements on P, giving it the advantage of reading their evidence before it serves its witness statement.

20.  Ds are right to point out that the application has to be made within 14 days from the date of non-compliance with the “unless order” under O.2, r.4 RHC.  The deadline is 18 May 2017.  In order for P to ask for the relief, P has to obtain an extension of time for it to make the application.  Now leave has been granted to P to amend the summons, P is within time to ask for the relief.

21.  P’s WS refers to the two affirmations that have been filed in this action.[3] They are evidence in this proceeding at any rate.  To disallow P to use its witness statement at the trial pursuant to Master Lo’s Order is tantamount to striking out P’s claims against Ds in this matter as it has the burden of proof against Ds, particularly in light of Ds’ defence of fraud by other people on P in obtaining the loans from it.

22.  The delay in P’s exchange of the witness statements with Ds in accordance with Master Lo’s Order under the relevant circumstances must be weighed against the drastic effects mentioned above.  It is apparent that the drastic result is disproportionate to the default by P. The Court should therefore grant relief to P to serve P’s WS out of time.  So I order, subject to whether I should impose condition of making payment into court as proposed by Ds in their summons.  I shall discuss this issue below.

Ds’ Summons

23.  In this summons, Ds ask for two remedies: money to be paid into court as security and removal of P’ WS.  As I have granted leave to P to serve its witness statement, the latter remedy is out of the question.  I shall now consider the proposed remedy of paying money into court as security.

24.  Ds’ application for security for costs under Order 2, rule 3 RHC is related to P’s application to set aside Master Lo’s Order and the application to amend its summons.[4] They rely upon Chu Kwok Kee Kookie v Ming Chor Pao & Anor (unreported, HCMP704/2015, 12 June 2015, DHCJ Marlene Ng at §§35‑42).  Having considered a number of the UK cases, DHCJ M. Ng summarized at §42:

“The above authorities clearly showed that Order 2 rule 3 of the RHC gives a power to impose conditions on a party in limited circumstances. It is only in an exceptional case where there have been repeated breaches of the rules and/or court orders or otherwise demonstration of want of good faith as explained in Mealey Horgan plc, Olatawura and Ali[5] that the court will consider penalising the relevant party by making an order for payment into court. …”

25.  In fact, the imposition of a conditional order is a penalty, which should not be imposed upon a party under the normal circumstances.  See §36 of Chu Kwok Kee Kookie.

26.  According to the chronology of events supplied by Ds, there had been four “unless orders”, three of them on P and one on both parties.  The above events leading to the applications must be taken into account.

27.  Ds submit that P’s case is without merit because there is evidence to show that at the material times, Ds or either of them were not in Hong Kong.  The photographs of the signatories of the Mortgages and the loan documents do not match Ds.  These are the facts to be decided at the trial.  To say that the photographs of the signatories do not match Ds is puzzling.  There is no evidence that Ds attended the signing of the legal documents.  In fact, Ds deny that they were parties to the signing of the legal documents.  The attending solicitor or clerk had no chance to compare the photographs on the identification documents with Ds.  They could only compare the photographs with those before them.

28.  Ds’ allegation that P’s claim is not in good faith is not acceptable, bearing in mind the following facts:

(1)   There is no dispute that the two loans were made by P to the so‑called fraudsters;

(2)   There is also no dispute that some installments were made to repay P.  But the loans have not been repaid.

(3)   Ds allege that the original title deeds of the property were in P’s possession.

(4)   Those title deeds were deposited by the so‑called fraudsters with P for the loans and mortgages of the property.

(5)   Ds have pleaded in the Defence and Counterclaim that the title deeds were stolen and the matter had been reported to police;

(6)   P does not accept such explanation and it pursues the matter in this action, the matter having been reported to police too.  Obviously, P is putting Ds to explain the facts leading to the loss of the title deeds, which fell into the hands of the so‑called fraudsters.

(7)   P also submits that in the evidence, there are similarities of the identification documents of the so-called fraudsters and Ds’ and that Ds had refused to answer questions in relation to the occupiers of the Property.

29.  The above facts are largely undisputed.  P clearly has a right to ask for an explanation for the original title deeds being in the hands of the so‑called fraudsters in court.

30.  In the circumstances, there is no evidence that P’s claim is without good faith.

31.  An order for security for costs under O.2, r.3 RHC, under the circumstances, should not be made.  I dismiss Ds’ summons.

32.  As to costs of the applications, the costs for P’s applications to set aside Master K. Lo’s Order and for leave to amend the summons, Ds ask for indemnity costs against P.  This Court has to take into consideration of Ds’ obligation of putting forth the proper use order to Master K. Lo, bringing her attention to the agreed terms and the excluded days under Order 3 RHC.  Obviously, Ds had not discharged the duties.  However, after the “unless order” had been made, P asked Ds not to perfect the Order, which they disagreed and immediately sealed the Order.  The conducts of the parties after the Order have to be taken into consideration under O.62, r.5, RHC.  On the other hand, P has failed in its application for setting aside Master K. Lo’s Order.  The appropriate costs order for P’s application should be no order as to costs.

33.  As to the costs for Ds’ summons, the costs should follow the event.  Costs of this summons are granted to P assessed summarily under O.62, r.9A RHC.  The parties agree at $40,000 to be paid within 14 days from the date hereof.

Order

34.  I shall now make an order in terms as follows:

(1)   P’s summons for setting aside Master K. Lo’s Order be dismissed;

(2)   Leave be granted to P to amend P’s summons for the relief against sanction under O.2 and the relief from sanction is granted;

(3)   Ds’ summons be dismissed;

(4)   Costs of P’s applications and D’s summons be as per paragraphs 32 and 33 above;

(5)   By consent, P shall allow inspection of the documents on the list of documents to Ds within 14 days from the date hereof.