HOU YUANJIE v. LAW LAP SAN NIXON

DCCJ 1110/2023

[2026] HKDC 722

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1110 OF 2023

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DECISION

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1.  I will continue to use the defined terms and expressions in the Judgment herein handed down on 8 October 2025 after a 4-day trial (“the Judgment”).

2.  By the Judgment, this Court held in favour of P’s claim and adjudged D liable to repay P the loan of HK$2,000,000 with interest made pursuant to a loan agreement made partly orally and partly in writing by the Written Agreement.

3.  By summons dated 4 November 2025, D sought leave to appeal against the Judgment. By another summons dated 6 March 2026, D applied for a stay of execution of the Judgment pending appeal. These applications were directed to be disposed of on papers. Having considered the parties’ submissions, this is my decision.

4.  I will not repeat here the background matters, the parties’ respective pleaded case and evidence and my discussions and holdings thereon, which have been set out in the Judgment.

LEAVE TO APPEAL

5.  The principles regarding the granting of leave to appeal are trite and not disputed. Essentially, under Section 63A(2) of the District Court Ordinance Cap 336, leave to appeal shall not be granted unless the court is satisfied that the appeal has a reasonable prospect of success, or there is some other reason in the interests of justice why the appeal should be heard. To amount to a reasonable prospect of success, the prospect of succeeding must be reasonable and therefore more than fanciful, without having to be probable; while it is insufficient to show that the appeal was “mere arguable” and “not fanciful” (SMSE v KL [2009] 4 HKLRD 125, KNM v HTF (unrep HCMP 288/2011); Hong Kong Civil Procedure 2026 §59/2A/4).

6.  In his draft Notice of Appeal, D raises 3 grounds, which I summarize as:

(1)  I erred in ruling that D was not permitted to introduce an unpleaded case of illegality regarding the enforceability of the agreement pleaded by P;

(2)  I descended into the arena to the extent that a fair-minded and informed bystander would say that D did not receive a fair trial; and

(3)  The new evidence now provided by Ng would justify a re-trial.

Ground 1 - Ruling against D pursuing an unpleaded case of illegality

7.  P’s pleaded case in gist was that in the course of the discussion in the 2^nd Meeting between Uncle Hou, Ng and D regarding Ng and D rendering  assistance to P for his intended QMAS application, Ng and D proposed a loan arrangement, which was shortly after orally accepted by P, and pursuant to which part of the loan amount was transferred to bank accounts designated by Ng as discussed in the meeting, and then the Written Agreement was signed by D as the borrower and Ng as the guarantor, thereafter the remainder of the loan amount was transferred to bank accounts designated by Ng.

8.  D’s pleaded case in gist was that he was in fact not present in the 2^nd Meeting, that he was only an assistant of Ng helping Ng on administrative matters concerning Ng’s assistance to P on the QMAS application, that the loan was a transaction between P and Ng only, over which he had no part, but he was “forced”, “persuaded” and/or “coerced” by Ng to sign the Written Agreement, which he signed under “undue influence”.

9.  Ng averred[1] that in the Racecourse Lunch, Ng suggested to Uncle Hou that to enable P to apply for QMAS successfully, P was to pay Ng HK$2,100,000 “so that Ng’s company can pay monthly salary to the Plaintiff by this HK$2,100,000 for a total of 7 years of work (HK$2,100,000 for 7 years, i.e. HK$300,000.00 per annum, i.e. HK$25,000.00 per month – this is the basic requirement for the QMAS application” which Uncle Hou then indicated his (or P’s) agreement.

10.  Thus, not pleaded in the Amended Defence are:

(a)  What the actual contents or terms of the agreement reached between Ng and Uncle Hou (on behalf of P) were;

(b)  There was no mention whatsoever about any illegality allegation; 

(c)  Even if, as Ng so averred, this payment (not by way of loan) of HK$2,100,000 by P to Ng was part of the arrangement to help P succeed in his QMAS application, which or what law or regulation such arrangement has breached and/or how it was illegal;

(d)  As said, D’s pleaded case was that the transaction/agreement (whatever that was) was only between P and Ng over which he had no part, and he signed the Written Agreement under undue influence. It was not pleaded that in the event such defence failed, that D would run a fallback case contesting that the terms and contents of the transaction/agreement in fact were such, and such was tainted by illegality such that the Court should not enforce it for policy reasons. None whatsoever along that line was pleaded by D.

11.  To complete the picture, there was also no mention whatsoever in D’s witness statement that he would be running such a fallback defence.

12.  Such being the state of pleading (and evidence), Mr Poon, trial counsel for D, said in §52 of his Opening Submissions:

“D accepts that illegality has not been pleaded in its Amended Defence. However, it is well-established that this Court retains the discretion to decide if the contract is unenforceable if “the relevant contract is ex facie illegal - or if it is not, the Court is nonetheless satisfied that all the relevant facts and circumstances bearing on the question of illegality are fully known to it” : Igal Dafni v CMA CGM SA [2013] 2 HKLRD 73 [D#7] at §§31-34.” (Mr Poon’s emphasis by underline; my emphasis by bold)

13.  The introduction of this unpleaded illegality issue was objected to by Ms Chan, counsel for P at the opening stage of the trial.

14.  Mr Poon insisted that under Igal Dafni, D was entitled to.

15.  As I explained to Mr Poon during the exchanges between counsel and bench and in my oral ruling, what was unpleaded was not only the actual allegation of illegality (which by itself was already objectionable), but also and also significantly the much more basic averments/matters that I alluded to in §10 above were not pleaded. P was therefore completely taken by surprise. The so-called “illegality” issue was completely unformulated and unparticularized. Uncle Hou was then about to take the stand and give oral evidence. He would be caught completely and utterly unprepared to meet whatever allegations and whatever questions that D might cross-examine him on relating to this so-called “illegality” issue. It seemed to me crystal clear that this so-called “illegality” issue was a complete non-starter, that P’s objection was sustained, and D could not be allowed to pursue this so-called “illegality” issue. I so ruled orally at the trial.

16.  With respect, the reliance on Igal Dafni was, and now is, misplaced.

17.  In Igal Dafni, Igal sued on a Heads of Agreement, which was a written agreement. The case concerned the defendant’s application on Day 8 of trial to amend its Amended Defence and Counterclaim and Re-Amended Rejoinder to introduce an illegality defence after the evidence of all the factual witnesses had already been completed. The illegality allegation was that clause 5 of the Heads of Agreement providing for payment of an agreed remuneration in a foreign account was agreed “in order to avoid the incidence of Hong Kong and Taiwan tax” and thus was illegal. Recorder Horace Wong SC refused the application for amendment for a number of reasons, in the course of which he set out the principles (at §§30-33) relating to the contention made by counsel for the defendant that where an issue of illegality is properly brought to the court’s attention, the court is duty bound to investigate into the illegality whether the same is pleaded or not. For present purpose, I need only quote what the Recorder said at §32 :

“32. The proper approach which the court should adopt in a case where evidence of illegality is before the court but has not been relied on in the pleaded defence is that set out in the judgment of Devlin J in Edler v Auerbach[1950] 1 QB 359, 371, cited by Potter LJ in the case of Pickering v McConville [2003] EWCA Civ 554, at §18, as follows:

“First that, where a contract is ex facie illegal, the court will not enforce it whether the illegality is pleaded or not. Secondly, that where, as here, the contract is not ex facie illegal, evidence of extraneous circumstances tending to show that it has an illegal object should not be admitted unless the circumstances relied on are pleaded. Thirdly, that where unpleaded facts, which taken by themselves show an illegal object, have been revealed in evidence (because perhaps no objection was raised or because they are adduced for some other purpose) the court should not act on them unless it is satisfied that the whole of the relevant circumstances are before it but, fourthly, that where the court is satisfied that all the relevant facts are before it and it can see clearly from them that the contract had an illegal object, it may not enforce the contract whether the facts are pleaded or not.”

18.  Thus, it is only when the agreement sought to be enforced is ex facie illegal, or where the illegal object is shown by unpleaded facts revealed in evidence or where the illegal object can clearly be seen from all the relevant facts  before the court (pleaded or unpleaded), that the court would consider not to enforce the agreement because of illegality. However, in the latter 2 scenarios, a clear criterium that must be met is that the court is satisfied that “the whole of the relevant circumstances” or “all the relevant facts” are already before it.

19.  In the present case, the loan agreement pleaded and enforced by P is not ex facie illegal. In insisting that Igal Dafni was applicable and when asked by the bench, Mr Poon could not point to the pleadings, witness statements, or any clear documentary evidence to show that “the whole of the relevant circumstances” or “all the relevant facts” of the agreement (as contested by D, and not as pleaded by P) were already before the court. He but could only refer to a small number of WhatsApp messages exchanged with P that vaguely or very briefly mentioned about some payment of salary, which by themselves, hardly amount to evidence having such a probative effect.

20.  D clearly failed flat to bring his allegation of “illegality” under the scenarios mentioned in Igal Dafni.

21.  There is no prospect of success on this proposed ground.

22.  I should also mention that (a) my ruling at trial against D running the “illegality” issue was not based on “my view” that what Recorder Wong SC said in Igal Dafni was obiter, as D now seems to suggest; there was but a one-sentence query by the bench put to Mr Poon as to whether what was said there in Igal Dafni might be obiter, and (b) the transcript of trial now provided by D in the hearing bundle for this leave application concerning my exchanges with Mr Poon[2] is but only the latter part of the discussion at trial.

Ground 2 - D did not receive a fair trial

23.  This proposed ground has 5 sub-paragraphs, 2 of them (sub-paragraphs (3) and (4)) consist of complaints over rather subjective matters - that when I asked D questions in the course of evidence, I used a “hostile and dismissive tone” and I “actively debated with” D. I say subjective, because a stern attitude and tone to some mean a “serious” and “authoritative” attitude and tone, but to others might mean “hostile” and “dismissive”. Equally, asking follow-up questions testing the earlier answer by logic, chronological sequence, common sense, and even some purposeful doubt could be useful means to test the veracity of the earlier answer, some would call it “testing” the evidence, some might call it “debate”. Moreover, I think the well-informed bystander could also observe and perceive the context and/or reasons for the follow-up questions and also understands generally that a truthful witness would not easily feel threatened by such questions.

24.  Sub-paragraph (1) of this ground complains of “leading questions” I put to Tse in her re-examination. In D’s written submissions, only one topic was identified which concerned whether the “$300,000” in the hand-written note had been mistakenly recorded as Hong Kong dollars instead of RMB. The transcript will show that this Court asked questions of Tse after Mr Poon’s cross-examination to clarify how and by whom the hand-written note was made and how the transactions and amounts recorded corresponded with other transactional records, if at all. I asked Tse whether the record of “$300,000” could in fact have been RMB but was mistakenly recorded as HKD because the arithmetic suggested that possibility. Aa always, Mr Poon was given the opportunity to ask Tse further questions following her answers given to my questions. It is part of the court’s function and duty to decide disputes based on substantive merits, and not based on typos or inadvertent slips; my questions were asked to help decide which was the case here.

25.  There are no merits to this complaint.

26.  Sub-paragraphs (2) and (5) complained that this Court had “extensively cross-examined” D and that D’s evidence over 2 of the topics I have asked questions about form “the key reasons” for disbelieving D.

27.  Paragraph 18 of D’s written submissions identified the topics this Court had asked a number of questions on:

(a)  WhatsApp records of messages between D and Ng that were not produced in this action[3];

(b)  D’s case on undue influence: (i) changes in D’s  versions[4] , (ii) circumstances concerning the signing of the Written Agreement[5], (iii) whether D read the Written Agreement before signing it[6]; and

(c)  D’s version or evidence that the loan under the agreement would be provided only if P had a successful QMAS application[7]; In this regard, D complained that there was “a lengthy debate” between the bench and D.

28.  I note that :

(a)  There is no complaint that D has not been afforded proper opportunities to answer the questions I posed, nor was D’s counsel not afforded the opportunities to ask questions following from mine.

(b)  There is no complaint that any one of the questions asked by this Court was not other than proper questions, or not asked in a proper manner. In fact, D readily gave answers to some of my questions – like whether he had read the Written Agreement before signing it, or whether he had communicated with Ng concerning the subject dealings through WhatsApp or WeChat.

29.  The well-informed bystander would have observed that the clarifications / further questions / questions were asked on those topics in view of the following background or context:

(a)  While D stated in no uncertain terms in his witness statement that he has never read the Written Agreement in detail, however, Mr Poon in his opening expressly stated that save the allegation of undue influence D abandoned all other allegations for vitiating his signature on the Written Agreement. Thus, whether D still maintained factually that he has not read the Written Agreement before he signed it was something to be clarified in evidence.

(b)  Regarding D’s allegation that he was “forced”, “coerced” and “persuaded” by Ng to sign the Written Agreement, it was unclear on his pleaded cases and evidence as to what acts or words formed the coercion, force or persuasion. In D’s opening, this Court asked Mr Poon to state D’s case before P’s witnesses took their stand to give evidence. Mr Poon was only able to give equivocal and vague answers and ultimately stated that D’s case was that this was a Class 2(B) category of presumed undue influence and therefore the burden shifted to P. In light of this, what D actually pleaded and said in his witness statement in that regard were something to be clarified and examined.

(c)  D’s primary case was that he has nothing to do with the loan and he was just giving Ng administrative help. There was, however, little said in his witness statement concerning how he worked with Ng in providing such help. Notably, there was also a complete lack of documents not only in relation to the communications between Ng and D concerning such “administrative” matters, but also in the subject dealings generally. Despite D’s own conspicuous lack of documents, the principal lines of questions put by Mr Poon in cross-examination to P’s witnesses challenging the truth of P’s case was that P failed to proffer contemporaneous records of communications. Thus, D’s own case concerning the existence and then the production of the contemporaneous communication records between Ng and D, if any, was a topic that called for clarification.

30.  Moreover, and specific to asking D about the conspicuous difference between his past and present pleaded versions concerning his case of undue influence, I have explained in §40 of the Judgment the reasons I so asked and would not repeat them here.

31.  Lastly, the well-informed bystander would also observe that in the Judgment I analyzed and deliberated and that I held against D in each of the 3 topics with full reasons, which were not solely based on my negative assessment over D’s credibility but based very much on D’s own evidence and other relevant matters.

32.  I conclude that there is no reasonable prospect of success on this proposed ground of appeal.

Ground 3 – Fresh evidence from Ng

33.  D now in his affirmation filed on 6 March 2026 says that he had previously lost contact with Ng, but that one week after the Judgment was handed down and through a coincidence, he was able to get in touch with Ng again, and Ng now can be his witness to contest P’s claim herein. By this ground, Ng asked that because of the availability now of Ng’s such “new” evidence, the Judgment should be set aside and a re-trial ordered.

34.  Ng filed an affirmation also on 6 March 2026 and exhibited as NCC-1 a 12-page signed witness statement and about 80 pages of documents as annexure to his witness statement, which documents included 61 pages of WhatsApp messages between him and Tse and 15 pages of WhatsApp messages between him and Uncle Hou. I would comment at this juncture that it seems to me that the documentary evidence proffered by Ng as well as the matters he deposed to in his witness statement are not dispositive of the disputes at hand. I understand that Mr Cheung has not so put forth.

35.  Mr Cheung refers to the procedures set out in footnote 1 in the judgment of Lam VP (as the learned PJ then was) in Man Tin Fook v 梁根林 [2019] HKCA 846, which are not disputed by Miss Chan. The learned Judge there observed in gist that whether new evidence would be admitted is a matter for the CA to decide after leave to appeal has been granted; however, an applicant for leave to appeal can support such an application by reference to the new evidence if he can demonstrate that it is reasonably arguable that the CA would grant leave to adduce the new evidence by reference to the criteria in Ladd v Marshall, and therefore the first instance judge processing the application for leave to appeal would have to examine if the new evidence could arguably satisfy these criteria; if not, such new evidence should be disregarded for the purpose of the application for leave to appeal.

36.  The 3 criteria or conditions in Ladd v Marshall are well known, all 3 must be met before the court would grant leave to adduce the new evidence. They are:

(1)  The evidence could not have been obtained with reasonable diligence for use at the trial;

(2)  The evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; and

(3)  The evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible.

37.  It is well established that when considering whether the first condition is met, the degree of reasonable diligence which the court expects the applicant to have exercised in his effort to obtain the evidence in question must be assessed against the overall circumstances of the case. The court will take into account all relevant factors, such as the time available to the defendant to gather the evidence, the nature of the evidence, the difficulty encountered in obtaining the evidence, the effort that the defendant had used in gathering the evidence (The Bank of New York Mellon v Sun Jiangrong [2016] 1 HKC 137 at §25; Sky Joy Investment Ltd v Zheng Dunmu & Another [2018] HKCA 259 at §13; Treasure Spot Finance Co Ltd v Ho Kwan Cheong And Others [2026] HKCA 585 at §7).

38.  In D’s said affirmation, he said in gist that in late 2020, he had lost in Mainland the phone provided to him by his insurance team (not his personal phone), and as the sim card used therein was a recharge phone card, he was thus unable to obtain a verification code (which would be sent to that telephone number) to log on the WhatsApp account, he therefore lost contact with Ng since. He also said that with the loss of that phone, he had also lost the contacting information of various clients. After he received P’s solicitors’ letter before action on 10 February 2023, he had tried to re-establish contact with Ng – visiting Jockey Club in person and visiting Ng’s office address in San Po Kwong. Jockey Club refused to give him Ng’s contacting information for privacy reasons and Ng’s company (東現科技(香港)有限公司) had already moved and was no longer occupying that address. He did not know the address of Ng’s residence. Therefore, he said that he had used best efforts and tried all reasonable and practical means but was unable to contact Ng. However, about a week after the Judgment was handed down, he had an injury and visited the bone-setter in Tuen Mun whom he used to consult. The bone-setter was his and Ng’s mutual friend. On that occasion, the bone-setter gave him Ng’s contact number and he was therefore able to re-establish contact with Ng.

39.  Ng in his said affirmation in gist said these. He suffered a stroke on 27 February 2021, which affected his work and social activities. He was declared bankrupt on 7 July 2021, around which time Uncle Hou had been pressurizing him. He did not know that P sued Ng. Had he known, he would have contacted Ng to be his witness. He was diagnosed with cancer in July 2024. He undergone an operation in October 2024 and chemotherapy and targeted therapy from January to September 2025. In October 2025, the bone-setter called him to tell him that Ng was looking for him.

40.  I would note at this juncture that while these sickness and ailments caused challenges to Ng, Ng did not say that he was therefore rendered uncontactable or out of reach by D in whole or any of the periods from February 2021 until October 2025.

41.  For reasons expressed below, I take the view that D has failed to demonstrate that it is reasonably arguable that the first condition has been met.

42.  First, I readily accept Miss Chan’s point that from the very start of this action, D must have known that Ng could be an important witness for D’s case. Indeed, according to D’s pleaded case, the loan was taken out by Ng and the loan amount if received was received by Ng, and thus Ng was liable to P, but Ng “forced” and “coerced” D to sign the Written Agreement as borrower, making him (and not Ng) now being sued by P. Though Ng had been declared bankrupt, it seems to me that one would still expect D to be eager to do his best to locate Ng as the person truly responsible to P so as to make Ng, and not D himself, answerable to P.

43.  Second and however, there has been no mention whatsoever by D, during the progress of this action that he intended to call Ng as a witness and was making efforts to locate Ng. In the answer to Question F3 in the first Timetabling Questionnaire filed by D’s solicitors on 19 September 2023, D indicated that he only intended to call himself as the only witness. In all subsequent Timetabling Questionnaires or case management occasions, D never indicated that he was trying to locate Ng with a view to calling him as a witness. In the Timetabling Questionnaire filed by D on 5 December 2024, D informed the court that this case was ready for trial and proposed this action be set down for trial.

44.  Third, as can readily be picked up from D’s account, there was a complete lacuna of evidence concerning D’s personal phone, in that whether D retained contacting information of Ng and his other clients or mutual friends of his and Ng in his personal phone, whether he has another WhatsApp or WeChat account in his personal phone through which he has had contacts with Ng or other clients or mutual friends. It is rather unbelievable that D would not have a personal phone. In view of D’s own evidence that he and Ng have been friends since 2018 that he had worked with Ng in a number of projects since, it is most inherently improbable that D has not contacted Ng by his personal phone (and hence retained Ng’s contact therein). In my view, this conspicuous lacuna strongly militates against the credibility of D’s present claim that he has completely lost contact with Ng from late 2020 to October 2025.

45.  Fourth, also pointed out by Miss Chan, in cross-examination D said that he first got to know Ng because Ng’s wife was in the same insurance team as he was, thus:

“Miss Chan: 澄清一下先。你證人陳述書第3段就講到，你2018年開始認識吳先生嘅。

D: 唔。

Miss Chan: 你點識㗎？

D: 佢太太係我哋保險同一條team。”[8]

Thus and evidently, it was very likely that D could have reached Ng through contacting Ng’s wife. While that would evidently have been the easiest means to contact Ng, D never even mentioned trying this in his affirmation, but instead, and according to him, he attempted physically visits to Jockey Club and the office.

46.  Fifth, as further pointed out by Miss Chan, that at trial when D was asked at some length as to whether he still retained the WeChat messages he exchanged with Ng relating to the subject dealings and why he has not produced them. D’s answers essentially were to the effect that he had been informed by his solicitors that he had to discover all relevant documents, but he considered that the messages exchanged between him and Ng were not relevant to this case[9]. Amidst those questions and answers, D said this:

“官: 即係而家都有响度㗎啦喎？

D: 個WeChat …

官: 响你嘅電話度喇，如果你有個紀錄，係唔記得交畀法庭啫，响你個電話度㗎啦喎？

D: 我應該可以揾到嘅”

There, D never mentioned that he only contacted Ng through his insurance phone, nor did he mention that he has lost his phone (insurance one or personal), instead, he confirmed that he should be able to find the record of WeChat messages he exchanged with Ng.

47.  Lastly and further still, in this information age, there are emails, various popular social media accounts through which people can be contacted (not just of Ng, but D’s client and mutual friends through whom Ng can be contacted), automatic backup of information and data from one’s phone to one form or another of cloud storage, and such, that could provide means for anyone who has lost his phone to retrieve data or re-established contacts. However, there is yet another complete lacuna of evidence regarding any effort on D’s part by way of these digital means to try to re-establish contact with Ng. On my part, I do not find it believable that D would not have known of these means, and if in good faith and exercising reasonable diligence to try to contact Ng in all these years, that he would not have tried these means and deposed to his such efforts in his affirmation.

48.  As I hold that it is not reasonably arguable that D could satisfy the Ladd v Marshall conditions, I would disregard the new evidence in this application.

49.  In the premises, D’s proposed grounds of appeal have no reasonable prospect of success and I refuse to grant leave to appeal.

STAY PENDING APPEAL

50.  As I find that D’s intended appeal has no reasonable prospect of success, it follows that I would also refuse to grant the stay.

DISPOSAL

51.  In the premises, I dismiss both of D’s summonses with costs, on nisi basis, to be paid by D to P, to be summarily assessed on papers. This costs order nisi will be made absolute within 14 days unless any party applies to vary within that period. Unless an application to vary is made, P is to lodge and serve his Statement of Costs within 14 days after the nisi costs order has become absolute, D is to lodge and serve his List of Objections within 14 days thereafter, and P to lodge and serve his Reply, if any, 7 days thereafter.

52.  I thank Mr Cheung, Mr Poon and Miss Chan for their assistance.