THE BANK OF EAST ASIA, LTD v. LABOUR BUILDINGS LTD AND OTHERS

CACV 33/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 33 OF 2008

(ON APPEAL FROM HCMP NO. 769 OF 2002)

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J U D G M E N T

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Hon Rogers VP:

1.  The order that we will make is that there will be indemnity costs against the first defendant, costs against the second defendant, payment out of the money in court to the plaintiff and certificate for three counsel.

2.  The application by the plaintiff that its costs against the first defendant are to be borne by Yan Hei is to be adjourned sine die with liberty to restore.

3.  We do that because, at the moment, the facts relating to that are not clear.  There is an affidavit from Mr Chan Hon-tsang which, in itself, is not sufficient, but I would draw attention to one matter which has been raised in this court and that is, under paragraph 3.1, it is said that Yan Hei, the party that the plaintiff wishes to bear the costs payable by the first defendant, did not pay the first defendant’s legal fees although, as the plaintiff said in paragraph 9 of the sixth affidavit of Mr Ho, there was a record in the general meeting of 18 April 2002.

4.  Mr Kwan, on behalf of the plaintiff, has reminded this Court that there was produced to this Court on previous applications a letter from the HSBC showing that Right Gain Management Limited did pay considerable sums of money in counsel’s fees, on behalf of the first defendant.  There is no dispute that Right Gain Management Limited is a subsidiary of Yan Hei and, in that respect, there is a great deal left to be desired out of what has been said in paragraph 3.1 and, in those circumstances, whatever suspicions this Court may have that Yan Hei, or some other party at its direction, was responsible for the first defendant’s and, indeed, probably the second defendant’s costs on this appeal, that has not been established, although it may well be established.

5.  Mr Kwan has indicated that an application might be possible under Order 24 against the first defendant so that the funder of its costs can be revealed.  It is premature that that should happen at the moment at least until those costs have not been satisfied.  But, if they have not been satisfied, it should be open to the plaintiff to make such application to find out who did pay the first defendant’s costs.  Whether or not that application would succeed will have to be left for another day.

(Submissions by counsel)

6.  This is an application for leave to appeal to the Court of Final Appeal.  It is put on two bases.  The first basis is under section 22(1)(a) of the Hong Kong Court of Final Appeal Ordinance.  What is said is that under the judgment of this Court, the interest to which the plaintiff is entitled is compound interest and what is said to be at issue under section 22(1)(a) is the difference between the compound interest which the plaintiff is now entitled to under this Court’s judgment and interest which the plaintiff might be entitled to under a restitutionary claim.

7.  The restitutionary claim came about as explained in paragraph 18 of the judgment of this Court.  It was a few days before this appeal was to be heard, and after the skeleton argument of the plaintiff in respect of the claim to restitution had been filed, that the skeleton argument of the defendants was filed.  In that skeleton argument, it was conceded, for the first time, that the plaintiff was entitled to restitution.  If the plaintiff was entitled to restitution, it would be on the basis that it would be regaining possession of its own money and the party admitting that it was bound to make that restitution was the first defendant.  It was therefore expressly admitted that it was holding money of the plaintiff.  If it was holding money of the plaintiff, it was some form of trustee of that money for the plaintiff.  In the intervening time, it had traded with that money in that it had used that money for commercial purposes.

8.  It was well within the powers of the court, even on a restitutionary claim, to order compound interest.  In my view, there has been no attempt made to show what the difference in the interest would have been under the debenture which this Court has held that the plaintiff is entitled to, and under the restitutionary claim.

9.  I would add that at the conclusion of paragraph 18 of my judgment, I said: 

“It was said, however, that the amount which the plaintiff would recover on a restitutionary basis was less than the amount it would recover under the debenture because the rates of interest which a court would order on a restitutionary clam would be lower than under the debenture.  Whether that would be so is, probably, highly questionable.”

10.  In saying that, I had grave doubts as to whether there would be any difference in the amount of interest ordered because I could not understand why, in the circumstances of this case, when the first defendant was admittedly holding the plaintiff’s money and has admittedly used it for commercial purposes, it should not pay interest equivalent to that which it would have otherwise had to pay under the debenture.

11.  The next basis upon which the application for leave is made is under section 22(1)(b) of the Hong Kong Court of Final Appeal Ordinance on the basis that there are questions of great general or public importance.  I have to say at the outset that there are 18 numbered paragraphs which fall within this, most of which are of the ilk of paragraph 5 which reads:

“Further or in the alternative, the final appeal will deal with questions of great or general public importance”

and it goes on in that vein.  The only attempt which has been made to identify some question on which Mr Lo, this morning, has sought to rely on is subparagraph (iv) of paragraph 8 which reads:

“Whether under the Laws of Hong Kong, the party (assuming it could establish estoppel) could use the doctrine of estoppel as a sword to validate a document purportedly entered into by a company which is held not to have been authorised by its board of directors.”

12.  In my view, that question simply does not arise.  The estoppel which this Court has held to arise has not been used as a sword, it has been used as a defence to the defence which the first defendant has sought to raise, and the defence arises much in the way, as has been pointed out in the course of argument by Barma J, as Brandon LJ said in the case of Amalgamated Investment & Property Company Limited (in Liquidation) v Texas Commercial International Bank Limited [1982] 1 QB 84 at page 131.  That is a case that was indeed cited by Mr Lo but it is instructive to consider what was said at page 131, starting at letter E:

“In my view, much of the language used in connection with these concepts is no more than a matter of semantics.  Let me consider the present case and suppose that the bank had brought an action against the plaintiffs before they went into liquidation to recover the moneys owed by A.N.P.P. to Portsoken.  In the statement of claim in such an action, the bank would have pleaded the contract of loan incorporating the guarantee, and averred that, on the true construction of the guarantee, the plaintiffs were bound to discharge the debt owed by A.N.P.P. to Portsoken.  By their defence, the plaintiffs would have pleaded that, on the true construction of the guarantee, the plaintiffs were only bound to discharge debts owed by A.N.P.P. to the bank and not debts owed by A.N.P.P. to Portsoken.  Then in their reply, the bank would have pleaded that, by reason of an estoppel arising from matters discussed above, the plaintiffs were precluded from questioning the interpretation of the guarantee which both parties had, for the purpose of the transactions between them, assumed to be true.

In this way, the bank, while still, in form, using the estoppel as a shield would, in substance, be founding a cause of action on it.  This illustrates what I would regard as the true proposition of law, that while a party cannot in terms find a cause of action on an estoppel, he may, as a result of being able to rely on an estoppel, succeed on a cause of action on which, without being able to rely on that estoppel, he would necessarily have failed.  That in my view is, in substance, the situation of the bank in the present case.”

13.  In my view, that principle which was so clearly enunciated by Brandon LJ in the last paragraph cited above applies equally in this case.  In my view, the defendants have not shown that there are issues of great general or public importance which this Court should certify should go to the Court of Final Appeal for decision.

14.  I would therefore dismiss this application for leave to appeal.

Hon Le Pichon JA:

15.  I agree.

Hon Barma J:

16.  I also agree.