YIFUNG PROPERTIES LTD AND OTHERS v. MANCHESTER SECURITIES CORP AND OTHERS

CACV 258/2015 AND CACV 259/2015

CACV 258/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 258 OF 2015

(ON APPEAL FROM HCA NO. 1359 OF 2014)

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AND

CACV 259/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 259 OF 2015

(ON APPEAL FROM HCA NO. 1341 OF 2014)

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J U D G M E N T

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Hon Kwan JA (giving the judgment of the court):

1.  At the conclusion of the hearing on 1 September 2016, we dismissed two appeals against the Strike Out Decision of Au-Yeung J handed down on 19 October 2015. We gave reasons for our judgment on 9 September. For convenience, we will use the same abbreviations as in our Reasons for Judgment.

2.  The appellants in CACV 258/2015 are the plaintiffs in the 1359 Action and they are referred to as the Mortgagors.  The appellants in CACV 259/2015 are the defendants in the 1341 Action and they are referred to as the ex-directors.

3.  On 29 September 2016, the appellants filed a notice of motion in each appeal seeking leave to appeal to the Court of Final Appeal raising three questions said to be of great general or public importance.  The questions in CACV 258/2015 read:

(1)   Otherwise than in accordance with the Rules of the High Court, does Article 35 of the Basic Law[1] preclude the courts of the Hong Kong SAR from debarring a civil plaintiff from pursuing his lawful right to litigate therein his reasonable cause of action in pursuit of the judicial remedies available therein?

(2)   Does the majority decision in Goldsmith v Sperrings Ltd [1977] 1 WLR 478 correctly state the current law of the Hong Kong SAR?

(3)   Is a Court of First Instance Judge entitled to disapply the principles of RHC O 18 r 19 when striking out a plaintiff’s statement of claim and dismissing his action?

4.  The questions in CACV 259/2015 are to similar effect.  The only changes are necessitated by the fact that the appellants are the defendants in the relevant action, so questions (1) and (3) are altered to read:

(1)   Otherwise than in accordance with the Rules of the High Court, does Article 35 of the Basic Law preclude the courts of the Hong Kong SAR from debarring a civil defendant from pursuing his lawful right to litigate therein his reasonable defence therein?

(3)   Is a Court of First Instance Judge entitled to disapply the principles of RHC O 18 r 19 when striking out a defendant’s defence?

5.  Questions (1) and (2) have not been argued by the appellants’ former leading counsel before the judge or on appeal in this court.

Question (1)

6.  Mr Barlow, SC’s argument is as follows.  In the 1359 Action, despite finding that the Estoppel Point gives rise to a reasonable cause of action, the judge dismissed the claim as frivolous and an abuse of process of the court.  Similarly, in the 1341 Action, despite finding that the Estoppel Point gives rise to a reasonable ground of defence, she struck out the Estoppel Point from the defences.  In so doing, neither the judge nor did this court ever find that the appellants had pursued the Estoppel Point in bad faith or with an intention to invoke the court’s processes for an improper purpose, see E T Marler Ltd v Robertson [1974] ICR 72 at 76G to H.  The judge’s decision, which is in error, has undermined the appellants’ right of access to the courts of the Hong Kong SAR enshrined in Article 35 of the Basic Law.

7.  We are not inclined to grant leave to appeal on this question.

8.  First of all, the Court of Appeal has a practice of not granting leave to appeal for a completely new point not argued on appeal and below, but leaving it to the Appeal Committee of the Court of Final Appeal to determine if there are exceptional circumstances to warrant the granting of leave despite the hurdle of “not considered on intermediate appeal” (Flywin Co Ltd v Strong & Associates Ltd (2002) 5 HKCFAR 356 at §39; followed in: Kung Ming Tak Tong Co Ltd v Park Solid Enterprises Ltd & Anr, CACV 227/2005, 26 June 2007, at §4; Ageas Insurance Co (Asia) Ltd v Lam Hau Wah Inneo, CACV 65/2014, 19 May 2015, at §§7 to 9; The Law Society of Hong Kong v A Solicitor, CACV 78/2014, 10 July 2015, at §§4 to 7; Tadjudin Sunny v Bank of America, CACV 12/2015, 28 September 2016, at §11).

9.  In any event, we do not find the appellants’ contentions reasonably arguable.

10.  The right of access to the courts under Article 35 is not an unfettered entitlement.  As stated by Li CJ in Ng Yat Chi v Max Share Ltd (2005) 8 HKCFAR 1 at §5, it would be absurd to suggest that this constitutional right involves a right to abuse the court’s process.  “The pursuit of abusive proceedings would be an improper exercise of the right of access and may be regarded as adversely affecting the right of access of others with meritorious cases.”  The court is clearly entitled to strike out a claim which is vexatious or an abuse of process.

11.  The striking out of a claim as being frivolous or vexatious or an abuse of process of the court is plainly not restricted to the situation where there is bad faith or improper purpose.  Quite clearly, there is an abuse of process if the claim is groundless or entirely without substance.  The judge’s finding that “there may be a reasonable cause of action in the Estoppel Point” (§19 of the Strike Out Decision), on the assumption that the facts pleaded are true, is simply not an endorsement of the arguability or merits of the Estoppel Point.

Question (2)

12.  Mr Barlow sought to rely on a passage in the judgment of Bridge LJ, who was in the majority in Goldsmith v Sperrings Ltd, at 503F to H which reads:

“In my judgment, one can certainly go so far as to say that when a litigant sues to redress a grievance no object which he may seek to obtain can be condemned as a collateral advantage if it is reasonably related to the provision of some form of redress for that grievance. On the other hand, if it can be shown that a litigant is pursuing an ulterior purpose unrelated to the subject matter of the litigation and that, but for his ulterior purpose, he would not have commenced proceedings at all, that is an abuse of process. These two cases are plain; but there is, I think a difficult area in between. What if a litigant with a genuine cause of action, which he would wish to pursue in any event, can be shown also to have an ulterior purpose in view as a desired byproduct of the litigation? Can he on that ground be debarred from proceedings? I very much doubt it.”

13.  He then submitted that the judge’s conclusion (formed in the Injunction Decision) that the appellants’ cases were but “desperate attempts by a debtor to resist an impossible situation” is but a conjecture and this cannot abrogate the appellants’ right to pursue their reasonable cause of action or their reasonable defence to final adjudication at trial on the merits.  He contended that the above passage in Goldsmith v Sperrings Ltd is engaged in that the judge had found the Estoppel Point gives rise to a reasonable cause of action or defence, and so the appellants should not be debarred from pursuing their claims or defence to trial even if there was an ulterior purpose in view as a desired byproduct of the litigation.

14.  This is again a completely new point not argued before the judge or on appeal in this court, so leave to appeal should be refused on this basis.

15.  We also think it is not reasonably arguable.  The limbs for striking out under Order 18 rule 19(1) are separate and independent.  As we have held, there is no contradiction in holding there may be a reasonable cause of action in the Estoppel Point, assuming the facts pleaded are true, and the conclusion that having considered the evidence, there is no prospect of success in that point (Reasons for Judgment, §25).  Furthermore, the passage cited in Goldsmith v Sperrings Ltd has little relevance to the present situation.  The issue there was whether there was a collateral purpose for the pursuit of a libel action against the secondary distributors of a magazine. In the present case, the striking out applications were not brought on the basis there was ulterior purpose or collateral motive on the part of the appellants, but simply that the case advanced by them was flatly contradicted by contemporaneous documents and had no prospect of success and so is frivolous or vexatious or an abuse of the process of the court.

Question (3)

16.  Mr Barlow contended that the judge had “disapplied” the principles of Order 18 rule 19 when she struck out the claim or pleading by wrongfully considering evidence and conflating the principles of striking out with those applicable to interlocutory injunctions.

17.  We do not think his contentions are reasonably arguable.  The arguments have been canvassed by the appellants’ former counsel before us and rejected as fully explained in the Reasons for Judgment, see §§16 to 27.

Conclusion and costs

18.  We dismiss the application for leave to appeal in each of the appeals.  None of the questions raise reasonably arguable matters of great general or public importance.

19.  We order the appellants to pay the costs of the respondents in each application.

20.  We have considered the various sets of statement of costs submitted by the respondents for gross sum assessment.

21.  In respect of the costs of the 1^st and 4^th defendants in CACV 258/2015, we allow the costs claimed in full at $240,950.

22.  For the costs of the 2^nd and 3^rd defendants in CACV 258/2015, we tax down the costs from $136,256 to $111,256.  Likewise, the costs of the plaintiff in CACV 259/2015 are taxed down from $136,256 to $111,256.