LAW SHU KEUNG STEPHEN t/a GOOD FORTUNE FINANCE CO v. CHAN YIM WAI AND ANOTHER

DCCJ 5436/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5436 OF 2007

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BETWEEN

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DECISION

Application

1.  The Defendants here seek leave to appeal against my decision on the 8 June 2011 whereby I dismissed their appeal, refusing the application of the Defendants to rescind the Order of Registrar C. Lee dated 11 March 2011 and also to set aside the Default Judgment dated 12 November 2009, the Charging Order: Notice to Show Cause herein dated 9 December 2009 and the Charging Order Absolute dated 6 January 2010.

The relevant test for leave

2.  I agree, as submitted by Mr. Tony Ko, Counsel for the Defendants that as prescribed by section 63A(2) of the District Court Ordinance (Cap. 336), leave to appeal shall not be granted unless this 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.

3.  As Fok JA said in the case of Wing Tat Haberdashery Company Limited v. Elegance Development & Industrial Co Ltd HCMP 357/2011:

The test of whether an appeal has a reasonable prospect of success under the new statutory provision is the same test as applied before the amendment to Cap. 336, namely whether the applicant for leave can show that he has an arguable case with reasonable chances of success on appeal (see per Leong JA in Ma Bik Yung v Ko Chuen [2009] 3 HKC 359 at §5).  We agree with the view expressed by Her Honour Judge Marlene Ng in Commissioner of Inland Revenue v Nam Tai Trading Co Ltd [2009] 3 HKC 421 at §10 that the new section 63A of Cap. 336 merely codifies the pre-existing threshold test of a realistic or reasonable prospect of success as applied in cases such as Ma Bik Yung. A reasonable prospect of success therefore means an appeal with prospects that are more than “fanciful” but which do not need to be shown to be “probable”.

4.  In Ho Yuen Ki Winnie v. Ho Hung Sun Stanley HCMP1009/2009 the Court of Appeal on 24 Aug. 2009 considered an application for leave to appeal under section 14AA(4) of the High Court Ordinance, Cap.4, which contains basically the same wording as that of section 63A(2) of the District Court Ordinance. Le Pichon JA stated the following:-

“16. … For leave to be granted, this court must be satisfied that the appeal has ‘reasonable prospects of success’. Merely showing that the appeals is ‘arguable’ and ‘not fanciful’ would not be sufficient. In my view ‘reasonable prospects’ requires something more and, in that regard, some assistance may be derived from the test applied when setting aside a default judgment”.

(emphasis added)

Decision of 8 June 2011

5.  The hearing which results in the decision of 8 June 2011 concerning an application by the Defendants, in essence, to set aside a regular judgment.

6.  The Plaintiff have neatly categorized the Defendants’ intended grounds of appeal as follows:-

(a)   the Court was wrong in reaching an opinion on the Defendants’ credibility or trying to resolve factual disputes on affirmation evidence only (without a full trial hearing);

(b)   the Court was wrong in rejecting the Defendant’s case on the ground that there was no supporting documentary evidence or that there was no evidence suggesting that the Plaintiff had knowledge of the illegality of the Defendants’ Prior Loan Agreement,      i.e. the one made with Fu Tat, whilst the Defendants’ case may be established after discovery or cross-examination of witnesses;

(c)   the Court had misunderstood the Defendants’ case as to the effective interest rate (49.35% rather than over 100%) of the Prior Loan Agreement;

(d)   the Court was wrong in holding that it is highly unlikely that Court would reopen the case.

(a) the Court was wrong in reaching an opinion on the Defendants’ credibility or trying to resolve factual disputes on affirmation evidence only (without a full trial hearing)

7.  As said in paragraph 5 of my judgment, the burden lies on the Defendants to show a meritorious defence with a real prospect of success.  As Godfey JA said in Premier Fashion Wears Ltd v. Li Hing Chung [1994] 1 HKC 213:-

“…… for the purpose of O13 r9, it is generally not sufficient for a defendant merely to show an arguable defence although that alone justify leave to defend being given under O14. A defendant who seeks to set aside a regular judgment must at least show that his case has a real prospect of success. To do so, he must satisfy the court that his case and the evidence he has adduced in support of it carries some degree of conviction. It seems to me that unless potentially credible affidavit evidence from the defendant has demonstrated a real likelihood that he will succeed on fact, he cannot have shown that he has a real prospect of success.”

8.  The Court must thereby assess the application of the Defendants in setting aside a regular judgment having regard to the Defendants’ case and on evidence adduced.

9.  In reaching the conclusion on whether the Defendants have adduced potentially credible affidavit evidence demonstrating a real likelihood that he will succeed on fact, this Court has to consider the evidence adduced by the Defendants, i.e. whether they are potentially credible. 

10.  The Defendants are therefore totally misconceived to allege that the Court had tried to resolve factual disputes or conduct a trial of the parties’ credibility on affirmations.  What the Court did was simply to assess the potential credibility of the Defendants’ case, which purportedly set out the defence, with the view to form a provisional view of the probable outcome of the action; in other words, considering the merits of the defence.

(b) the Court was wrong in rejecting the Defendant’s case on the ground that there was no supporting documentary evidence or that there was no evidence suggesting that the Plaintiff had knowledge of the illegality of the Defendants’ Prior Loan Agreement, i.e. the one made with Fu Tat, whilst the Defendants’ case may be established after discovery or cross-examination of witnesses

11.  Mr. Koo, counsel for the Plaintiff submitted that the Defendants are arguing also that though there is no evidence suggesting that the Plaintiff had knowledge of the illegality of the Defendants’ Prior Loan Agreement, the Defendants should be permitted to proceed with the action because the Plaintiff’s knowledge of illegality may be unveiled after discovery, interrogatory and cross-examination of witnesses or it may be inferred from other evidence to be disclosed.

12.  It is submitted by Mr. Koo, which I agree that it is pure speculation as well as fanciful to expect that there will be evidence of knowledge after discovery, interrogatory and cross-examination of witnesses.  In any event, this Court has to consider the Defendants’ case based on evidence adduced.

13.  In effect, the Defendants in their intended grounds of appeal were asking this Court not to follow the established legal principle in the Premier Fashion Wears Ltd case.

14.  The Defendants say that the Court wrongly rejected the Defendants’ case as there was no supporting documentary evidence and they say that the lack of documentary evidence of the Defendants at time of application to set aside does not carry much weight.

15.  On this issue of the Plaintiff’s knowledge of the legality of Prior Loan Agreement, this Court has previously in paragraphs 29 to 50 of the Judgment stated why this Court concluded that it does not find there is real chance of the Court accepting the Plaintiff did have knowledge.

(c) the Court had misunderstood the Defendants’ case as to the effective interest rate (49.35% rather than over 100%) of the Prior Loan Agreement

16.  As for Ground 5 of the Application, even if the Court had misunderstood the effective rate of interest of the Prior Loan Agreement, it does not affect the issue of whether Plaintiff has knowledge of the illegality of the Prior Loan Agreement.  In the circumstances of this case,   this Court failed to find the allegation by the Defendants of the payment of $10,000 service fee potentially credible, reasons therefore has been set out in paragraphs 22 to 27 of the Judgment.

17.  There simply is no real likelihood the Defendants will succeed on these issues of fact.

(d) the Court was wrong in holding that it is highly unlikely that Court would reopen the case

18.  Given that this Court has not found the bare assertion by the Defendants of the payment of $10,000 service fee potentially credible, the issue of ‘reopening’ will not arise.

19.  In any event, as submitted by Mr. Koo, for a regular default judgment to be set aside, the Court needs to be satisfied that the Defendants have shown a defence which has a real prospect of success.  In respect of the Defendants’ purported defence of ‘re-opening the loan agreement’, the Court had to consider all the circumstances relating to the agreement.  Accordingly, there was nothing wrong for the Court, in order to form a provisional view of the probable outcome of the action, to have considered all the circumstances, including inter alia the Defendants’ conduct after entering into the loan agreement, and thereby concluded that it is unlikely (in other words, there is no reasonable chance of success) that the trial court will re-open the loan agreement as in the present circumstances that the Defendants had failed to make any repayment after entering into the loan agreement and simply moved without leaving any forwarding address.

Conclusion

20.  In summary, I do not find any reasonable prospect of success in the intended appeal and there are no other reason which in the interests of the justice, the appeal should be heard.

21.  In the circumstances and applying S.63A(2) of the District Court Ordinance, I refused this application for leave to appeal.  The Summons is dismissed.

Costs

22.  As costs normally follow the event, I rule that the Defendants shall pay costs of and incidental to this application to the Plaintiff, the same to be taxed if not agreed, with certificate for Counsel.