SUN HUNG KAI CREDIT LTD v. GUAN WENNA

DCCJ 2294/2021

[2024] HKDC 1524

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2294 OF 2021

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BETWEEN

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DECISION

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Background

1.  In this action, the Plaintiff Sun Hung Kai Credit Limited (“P”) sues the Defendant Guan Wenna (“D”) for, inter alia, repayment of an outstanding loan and interest under a loan agreement dated 16 October 2020 (“Loan Agreement”).

2.  The trial of this action is scheduled to commence on 17 October 2024 with 6 days reserved.

3.  D took out a Summons on 9 August 2024 (“D’s Summons”), shortly before the Pre-Trial Review (PTR) fixed to be beard on 12 August 2024 by this court, seeking the following:

(1) Relief from sanction of the unless order by consent dated 13 September 2023 against D (“Unless Order”) to take out these interlocutory applications (“Relief from Sanction Application”);

(2) Adjournment of trial and vacation of the trial dates reserved and a transfer of these proceedings to the Court of First Instance (CFI) (“Transfer Application”); and

(3) Leave to amend D’s Defence and Counterclaim filed on 2 November 2021 (“D&CC”) and to join Madam Mannie Cheng Suet Mui (“Cheng”) as the 2^nd Defendant in the Counterclaim (“Joinder Application”).

Procedural History

4.  The following events are relevant in the court’s consideration of D’s Summons:

18.5.2021	Filing and service of the Statement of Claim
2.11.2021	Filing and service of the D&CC
28.12.2022	D filed a Listing Questionnaire stating that she would apply for consolidation of this action with another CFI action (HCA 744/2021) involving the same/‌related parties; (No application for consolidation was made subsequently)
2.8.2023	D filed an Updated Listing Questionnaire stating that she would apply to transfer this action to CFI by 27 September 2023
9.8.2023	The Master made an Order at the Case Management Conference (CMC) that unless D took out all interlocutory applications within 14 days, D shall be debarred from doing so
13.9.2023	Unless Order by consent granting extension of time up to 25 September 2023 for D to take out all interlocutory applications, failing which D shall be debarred from doing so
7.11.2023	Leave to set case down was granted for trial on the fixture list to commence on 17 October 2024 (with 6 days reserve)
13.11.2023	Application to set the case down for trial
9.8.2023	D’s Summons
12.8.2023	PTR

5.  At the PTR, directions were granted for the parties to file and serve written submissions, list of authorities and statements of costs for this court to, if appropriate, deal with D’s Summons by paper disposal, which I now do.

Milestone Date

6.  It is not disputed that trial dates are milestone dates. Under O 25 r 3(3) of the Rules of the District Court (Cap 336H) (RDC), “exceptional circumstances” must be demonstrated in order to justify the variation of a milestone date.

Relief from Sanction / The Jurisdiction Argument

7.  The whole basis of D’s argument is that her counterclaim, in the amount of $3,631,800, exceeds the jurisdictional limit of the District Court as set out in section 32 of the District Court Ordinance (Cap 336) (DCO). D argues that accordingly this action must be transferred to CFI pursuant to section 41 of DCO.

8.  On the same basis, D argues that relief from sanction of the Unless Order should be granted because this is a matter which goes to jurisdiction, not just a matter of case management.

Whether D has a Counterclaim of Over $3 million

9.  This is a straightforward loan and mortgage enforcement action by P, a licensed money lender, against D for repayment of a loan advanced to D under the Loan Agreement.

10.  It would be helpful to set out the following pleaded facts and the claims:

(1) P advanced a personal loan of $2,000,000 to D, secured by a mortgage on a property;

(2) D failed to make any repayment ever in breach of the terms of the Loan Agreement;

(3) P sues D for, inter alia, repayment of the loan plus interest, and delivery of vacant possession and title deeds of the mortgaged property;

(4) In the D&CC, D pleads that she was the victim of a telephone scam. She had opened 2 bank accounts in her name with Bank of China (Hong Kong) Limited (“P’s BOC Accounts”) following the fraudsters’ instructions, and deposited into these accounts 3 sums of money (including the $2,000,000 loan advanced from P under the Loan Agreement and 2 sums of money totalling $1,631,800 of her own savings and borrowings from siblings). The money was subsequently transferred out of P’s BOC Accounts and untraceable. D was thus defrauded the total sum of $3,631,800;

(5) D pleads that she had acted under the influence and duress of the fraudsters in entering into the Loan Agreement. D’s employee and representative Cheng, in arranging the loan and despite having notice of the misrepresentations, duress and undue influence, and the suspicious circumstances indicative of a fraud, had failed to make reasonable enquiry or advise P to seek independent legal advice, etc. P should thus be taken to have actual or constructive notice of the fraud;

(6) D counterclaims for a declaration that the Loan Agreement and the related mortgage are unenforceable on the ground of illegality, or alternatively against P for damages in the amount of the total defrauded sum of $3,631,800.

11.  I accept the submissions of P’s counsel Mr Vincent Chen on the jurisdiction argument that the court should not take whatever is pleaded by a party at face value in considering whether or not a matter should be transferred from the District Court to CFI.

12.  As stated in Wan Chi Hing v Wong Chung Kai trading as Kai Hing Trading Company, unreported, DCCJ 592/2006, 5 August 2013, an authority heavily relied on by D, in §5: the court has to decide whether the claimed sum as framed does not amount to an abuse and whether there is anything conclusively contradictory to the framed claim at an interlocutory stage.

13.  A careful review of D’s pleaded counterclaim reveals that she does not have a valid counterclaim of over $3 million. D has framed her claim as one for damages. The particulars of loss and damage set out in §26 of the D&CC include 2 sums of money of the respective amounts of $657,000 and $974,800, and the loan advance of $2,000,000 from P under the Loan Agreement.

14.  There is no question of D suffering loss and damage of the $2,000,000 which was a loan advance from P to begin with. If P prevails in its claim, it would be entitled to recover the loan and other relief sought in the original action.

15.  On D’s pleaded case, she had only suffered loss of the 2 sums of money of the respective sums of $657,000 and $974,800 paid out of her own savings and borrowings from siblings. She will not in any event additionally recover a further sum of $2,000,000 from P. The simple reason is that she did not suffer such loss.

16.  Even if D wins her counterclaim totally, she will not be able to recover the loan advanced from P, or an additional $2,000,000. In practical terms D’s pleaded counterclaim (of $3,631,800) would be set off by P’s inability to recover from D the loan advanced in the sum of $2,000,000. D would be left with a claim of $1,631,800, ie the 2 sums of money defrauded out of P’s savings and borrowings from siblings.

17.  D’s framed case is illogical and amounts to an abuse. She has not suffered loss of the $2,000,000 which was a loan advance made by P to her under the Loan Agreement. She does not have a counterclaim of over $3,000,000 as pleaded.

18.  Whichever way one frames or looks at it, D’s counterclaim still falls within the general jurisdiction of the District Court in accordance with section 32 DCO which provides:

“(1) The Court has jurisdiction to hear and determine any action founded on contract, quasi-contract or tort where the amount of the plaintiff’s claim does not exceed $3,000,000.

(2) In this section and in section 34, the amount of the plaintiff’s claim means the amount the plaintiff claims after taking into account —

(a) any set-off or any debt or demand the defendant claims or may recover from the plaintiff;…”

(emphasis added)

19.  In any event, section 41 DCO on transfer to CFI relied on by D does not apply to a counterclaim, as it provides:

“(1) The Court shall, either of its own motion or on the application of any party, order that an action or proceeding be transferred to the Court of First Instance where an action or proceeding commenced in the Court, not being a counterclaim, is outside the jurisdiction of the Court but is within the jurisdiction of the Court of First Instance.”

(emphasis added)

20.  The above deals with the jurisdiction point. There is no justification in D’s application for a transfer of the action from the District Court to CFI. D cannot rely on it as the basis to seek relief from sanction.

Relief from Sanction

21.  No explanation is given by D for the non-compliance of the Unless Order and for the delay in seeking relief from sanction.

22.  It is wrong for D’s counsel Mr Brian Lo to suggest as stated his written submissions that “(the issue of jurisdiction) was not raised by either parties in the case management stage thus far, resulting in this unfortunate delay” given the following events in the procedural history of this action:

(1) The C&CC filed on 2 November 2021 pleads the counterclaim at $3,631,800 from day one;

(2) In her Listing Questionnaire filed on 28 December 2022, D raised the issue of prospective consolidation of this action with other CFI actions involving the same/‌related parties;

(3) In another Listing Questionnaire filed on 2 August 2023, D stated that she would apply to transfer this action to CFI by 27 September 2023;

(4) In the 1^st CMC held on 9 August 2023, D’s Solicitors submitted that further counsel's advice would be sought on the issue of transfer of this action to CFI. The Master made an unless order;

(5) D requested for further time; the Unless Order by consent was made on 13 September 2023 which states “Unless the Defendant do take out interlocutory applications as may be advised on or before 25.9.2023, D shall be debarred from doing so”.

23.  Against this background, P’s counsel argues and I accept that D had contemplated and been advised on the issue of transfer, and the “interlocutory application” contemplated under the Unless Order was exactly the Transfer Application.

24.  D has not provided any explanation why the Transfer Application is now made shortly before trial and long after she had apparently made the decision not to do so a year ago upon advice. Her Solicitors should be alerted to these matters of jurisdiction from day one upon filing of the D&CC almost 3 years ago in November 2021 should they wish to take (wrongly unfortunately) the jurisdiction point.

25.  It is trite that lateness without explanation itself is a ground for refusal of applications such as transfer to a different court level, joinder and amendment of pleadings which applications will result in an imminent trial being vacated.

26.  P’s counsel refers to the judgment of Hon Mimmie Chan J in Hong Kong Changyi Real Estate Development Limited v Neo-China (Group) Infrastructure Investment Limited & Ors, unreported, HCA 1576/2011, 25 February 2014 at §1:

“Nearly 5 years after the implementation of the Civil Justice Reform, parties should be under no doubt by now that the courts will have no hesitation now to reject a late application, made when trial is imminent, for either amendment of pleadings, discovery or the filing of witness statements, which application has the effect of disrupting the preparation for trial with the risk of milestone dates such as a pretrial review or the trial dates themselves being affected. Delay itself is a ground justifying refusal of leave, since delay of a trial is prejudice to a party, who has every right to expect that a trial fixed months ahead with due notice to the parties can proceed without disruption and time and costs being wasted. I can add very little to what has already been summarized and set out in Kinetics Medical Health Group Co Ltd v Dr Tse lvan Cheong Yau, HCA 1115/2010, unreported, 8 May 2013 and in the decision of the Court of Appeal in Li XiaoYun v China Gas Holdings Limited, CACV 38/2013, 11 March 2013. The applicant for leave must establish, by affidavit evidence, exceptional circumstances to explain and justify the delay.…”

(emphasis added)

27.  In Waddington Limited v Chan Chun Hoo Thomas, unreported, HCA 3291/2003, 7 May 2013, DHCJ Lok (as he then was) dismissed the late applications on the basis of delay alone, despite the learned judge considered most of the applications did have merits but for the timing of the applications. In that case the learned judge said:

“51. In this action, the parties have taken out a lot of late applications shortly before the PTR. This practice is highly unsatisfactory and should be discouraged. Apart from the prejudice likely to be caused to the parties by such late applications including the possible adjournment of the trial, there is serious disruption to the court diary as the court has to struggle to find some time during the limited time before the trial to hear the applications (see also the dicta of Lam JA in Li Xiao Yun & Anr v China Gas Holdings Ltd, unreported, CACV 39/2013, decision on 11 March 2013, at §18).

…

53. Express warning about late applications has already been given in §34 of Practice Direction 5.2, and practitioners should be reminded that late applications may be dismissed on the basis of delay alone. Unless there are exceptional circumstances and there are good reasons for the delay, one should not expect the courts to grant any late applications taken out shortly before the PTR. This is the case even if the applications have satisfied all the other threshold requirements for the granting of the relevant orders. Practitioners should therefore give serious thought about the question relating to outstanding interlocutory applications when they fill in the listing questionnaires before the case is set down for trial, otherwise they only have themselves to blame if their late applications are rejected on the ground of delay alone.…”

(emphasis added)

28.  No exceptional circumstances are demonstrated to explain the lateness or would justify vacating the milestone date of a trial.

29.  D’s applications for relief from sanction and transfer to CFI are refused.

The Joinder Application

30.  D also seeks leave to amend the D&CC to join Cheng as the 2^nd Defendant in the Counterclaim.

31.  D’s pleaded case as set out in the D&CC (3/58/§26), and elaborated by her counsel Mr Brian Lo in his written submissions, has all along been that P is part of the conspiracy to defraud D and the loan was made for the purpose of enabling D to pay out the money to the group of fraudsters to which P conspired with.

32.  D’s counsel submits that the Joinder Application is necessary in the interest of justice as Cheng is shown to be part and parcel of the conspiracy. The application to amend the D&CC is premised on (i) the joinder of Cheng and (ii) allegations arising from the recordings provided by P in the form of particulars in the course of these proceedings.

33.  It is clear that D had all along known of the involvement of Cheng, an employee of P and its representative dealing with the application and conclusion of the Loan Agreement, as is pleaded in the D&CC.

34.  The Joinder Application, taken out almost 3 years after filing of the D&CC and 2 months before trial, is extremely late. To allow the Joinder Application or proposed amendments to D&CC sought by D now would likely result in the need for P to plead to amendments, consider new documents and evidence, file supplemental witness statements, etc. There will be many months before the case will be ready for refixing for trial. The primary aim in exercising the powers of the court to secure the just resolution of disputes of the parties will be totally defeated.

35.  D relies on (i) a transcript of audio recording of a telephone conversation with Cheng provided by P to D in these proceedings on 12 December 2022; and (ii) D being tied up with some other court proceedings in Wuhan, PRC in 2021 and the Covid situation in the last few years to explain the delay in taking out the Joinder Application.

36.  It is fairly argued by P’s counsel that as D had all along been dealing with Cheng who was a representative of P, and had taken part personally in the telephone conversation with Cheng, there is no reason why D would have to wait for the transcript of audio recording to ascertain or know about Cheng’s role and involvement leading to the late Joinder Application.

37.  D being busy or not in Hong Kong cannot be an explanation for the delay when she was legally represented in these proceedings all along.

38.  These explanations, apart from being unreasonable, cannot explain why the Joinder Application could not be made in 2023 the latest after D was provided with the transcript of audio recording.

39.  Turning to D’s proposed amendments to the D&CC, I accept the submissions of P’s counsel that the newly amended paragraphs (in particular §§25(b)-(f)) do not contain material facts, but are matters of evidence/‌submissions/‌arguments which have no place in pleadings.

40.  These proposed amendments are neither necessary for disposing fairly of the cause of matter nor for saving costs. The requirement of Order 20 rule 8(1A) RDC is not satisfied. They should not be allowed, extreme lateness aside.

41.  Having considered all matters raised by D’s counsel, I find D’s explanations amount to nothing but a lame excuse in taking out these last minute applications.

42.  Again, no exceptional circumstances as required under Order 25 rule 3(3) RDC are demonstrated warranting the grant of leave to joinder and amend pleadings which has the inevitable effect of derailing the trial dates.

Conclusion

43.  I consider D’s applications for relief from sanction, transfer to CFI, joinder and amendments of D&CC to be unmeritorious.

44.  In accordance with the underlying objectives set out in Order 1A rule 1 of RDC and the court’s duty under rule 2 RDC, I exercise this court’s case management discretion to disallow the applications in D’s Summons.

Costs

45.  Costs of the Summons should follow the event upon dismissal, hence D should pay P’s costs.

46.  P seeks indemnity costs against D.

47.  I have considered the following authorities referred to by counsel for P Mr Chen:

(1) In Li Xiao Yun v China Gas Holdings Limited, unreported, HCCL 18/2011, 6 March 2013, the plaintiffs took out urgent applications by summons seeking leave, inter alia, to add new defendants and to amend the pleadings to advance claims against those new defendants on 25 February 2013, about 2 weeks before the 12-day trial of the action was due to commence on 12 March 2013. The trial date was fixed a year earlier in March 2012. Hon Mimi Chan J dismissed the applications with costs. The plaintiffs’ appeal (unreported, CACV 38/2013, 11 March 2013) in relation to the joinder of new parties and amendments applications were rejected by the Court of Appeal on 11 March 2013 as being obviously and utterly without merits. The appeal was dismissed with indemnity costs to the defendant. The trial commenced on 12 March 2013 and proceeded as scheduled. Lam JA (as he then was) stated in §18, inter alia, “… Last minute pre-trial applications also disrupt the preparation for the trial on the part of a trial judge in terms of reading into the case. Instead of getting himself or herself familiar with the issues that have to be tackled at the trial, the judge would have to divert attention and spend time and efforts on such applications. Thus, such practice has to be discouraged and, unless there are good justifications, the unsuccessful appellant should normally be expected to face an order for indemnity costs.” (emphasis added)

(2) The indemnity costs reasoning in Li Xiao Yun (supra) was applied by DHCJ MK Liu in Liu Hon Wong & Ors v Liu Chee Kyvan & Anor [2022] HKCFI 315. In that case the plaintiffs’ late applications (for amendment of the claim, discovery and giving of evidence by some of the plaintiffs’ witnesses by video conferencing facilities during trial) at the PTR, a month before the scheduled 9-day trial was scheduled to commence on 15 November 2022, were dismissed with indemnity costs. It was commented (in §51) that “… last minute pre-trial application is a practice which must be discouraged… (the plaintiffs) have not put forward any satisfactory reason to justify the lateness (of the applications)… to show the court’s disapproval of such practice, I order indemnity costs…”.

48.  In the present case, for reasons stated hereinabove, I conclude that D’s late applications are likewise obviously and utterly without merits but an attempt to derail the trial which was fixed almost a year earlier. No satisfactory reason is put forward to justify the lateness.

49.  To show the court’s disapproval of this practice, an order of indemnity costs would be appropriate.

50.  I consider it appropriate to deal with costs of D’s Summons by summary assessment. For those purposes, I have directed and parties have submitted their respective statements of costs.

Disposition

51.  To conclude, I make the order that:

(1) D’s Summons issued on 9 August 2024 be dismissed;

(2) A costs order nisi that D shall bear P’s costs of D’s Summons, on an indemnity basis, with certificate for counsel;

(3) Summary assessment of costs of D’s Summons will be conducted by paper disposal. D shall lodge and serve her list of objections in respect of P’s statement of costs lodged on 5 September 2024 within 7 days from the date hereof;

(4) The above costs order nisi shall become absolute in the absence of application to vary the same within 14 days from the date hereof.