CHAN PING CHE v. GAO GUNTER

HCMP3043/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 3043 OF 2014

(ON AN INTENDED APPEAL FROM HCA NO 2134 OF 2013)

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REASONS FOR JUDGMENT

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Hon Barma JA (giving the Reasons for Judgment of the Court):

1. There were two applications before the court. The first was an application for leave to appeal against two orders of Deputy High Court Judge Seagroatt made on 17 October 2014 and 17 November 2014 respectively. The first order gave the defendant conditional leave to defend the plaintiff’s claims in these proceedings, and the second order involved a refusal to vary the conditions imposed. The second application before us was an application for a stay of the order dated 17 October 2014 pending the hearing and determination of the substantive appeal (assuming that leave to appeal is given).

2. The underlying proceedings concern dishonoured cheques totalling HK$270 million provided by the defendant to the plaintiff, by way of repayment of a loan (and interest on it) advanced by the plaintiff to the defendant.  The plaintiff applied for summary judgment, in response to which the defendant contended that the loans were unenforceable for two main reasons.  First, that they were in fact rollovers of an earlier loan made by a company called Dadra Inc. which was alleged to be controlled by the plaintiff, which was itself unenforceable by reason of illegality.  In other words, the loan the repayment of which underlay the cheques in this case was tainted by reason of its connection to the earlier loan.  Second, it was contended that the loan in respect of which the cheques were given by way of repayment was itself illegal and unenforceable as the plaintiff was an unlicensed moneylender, and also because the rate of interest charged exceeded 60% per annum.

3. The judge concluded that the first ground was not capable of belief, but accepted that the defendant was an unlicensed moneylender.  However, he took the view that the court would exercise its discretion under the Moneylenders Ordinance to allow the loan to be recovered, and decided that the defendant should only be given conditional leave to defend.  The condition imposed required the defendant to make a payment into court within 28 days of the net outstanding principal amount of the loan, some HK$124 million.

4. Mr Aiken SC, for the defendant, contends that the judge erred in rejecting the defendant’s first line of defence, which raised factual issues which (Mr Aiken submitted) should not have been determined on the basis of affidavit evidence alone.  He further contends that the judge erred in his view that the court would be very likely to allow the loan to be recovered, notwithstanding the contravention of the Moneylenders Ordinance, and also that it was at least arguable that the rate of interest on the loan was such that the court would have no discretion to allow recovery.  He suggests that unconditional leave to defend should have been given.  Alternatively, he submits that if only conditional leave to defend were to be granted, the conditions imposed should not be such as to be effectively impossible of performance, as the condition imposed here was, requiring as it did the payment of a very substantial amount of money into court, which the defendant did not have the means to raise at all, let alone in the limited time afforded him to do so.

5. For the plaintiff, Mr Chan submitted that the judge was right to reject the defences put forward, and perfectly entitled to impose the condition that he did in giving conditional leave to defend.  He pointed out that the defendant had suggested that he would be able to make a substantial payment in, and levelled a range of criticisms at the defendant’s evidence as to his financial position.

6. In our view, the proposed appeal is one which has some prospects of success, although we would not at this stage go so far as to say that it is a very strong one.  It is neither necessary nor appropriate for us to go into further detail in relation to the merits at this stage.  That being the case, we give the defendant leave to appeal.

7. So far as the question of a stay of the order pending appeal is concerned, Mr Chan opposed this on the basis that it could not be said that the refusal of a stay would have the effect of rendering the appeal nugatory, or that it would have other serious deleterious effects for the defendant.  Mr Aiken submitted it clearly would have these effects, and that in any event the appeal was a strong one.

8. As we have indicated, we are not prepared to say that the appeal is a strong one so as to justify a stay without more.  However, it does seem to us that the evidence which the defendant has now put forward does indicate that the condition imposed is not one with which he is able to comply.  That being the case, the consequence will be that absent a stay, judgment will be entered against the defendant.  While such judgment could of course be reversed if the appeal were successful, it seems to us that absent a stay, it would be open to the plaintiff to seek to enforce it and that this would have serious consequences for the defendant, including possible bankruptcy, which would impede his ability to prosecute his appeal and defend the proceedings if his appeal should succeed.

9. On the other hand, it does not appear that the plaintiff will suffer any prejudice beyond delay in receiving payment if a stay is granted.

10. The defendant has, however, recently indicated that he is in a position to put up HK$30 million by way of security within 14 days.  That being the case, it seems to us that the fairest course to take would be to grant the stay sought on condition that this amount be paid into court within 14 days, and we so order.

11. So far as costs are concerned, we order that the costs of both applications be costs in the appeal.