CHAN HIN v. CHEN BAI DYI AND ANOTHER

CACV 212/2017

[2022] HKCA 793

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 212 OF 2017

(ON APPEAL FROM HCA NO 680 OF 2014)

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D E C I S I O N

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Hon G Lam JA (giving the Decision of the Court):

1.  This is the court’s decision on the defendants’ application for security for costs of the appeal, based on written submissions pursuant to Order 59 rule 14A of the Rules of the High Court (Cap 4A). The plaintiff does not deny she is impecunious, but opposes the application on the ground that there is a strong likelihood of the appeal succeeding. The other grounds mentioned in the plaintiff’s solicitor’s affirmation, namely, that the value of the plaintiff’s share in the property mentioned below is sufficient to cover the costs of the appeal and that the defendants have delayed in applying for security, are no longer pursued.

2.  This is of course not the appeal itself, and an examination of the merits for present purposes, whilst inevitable in the light of the argument raised, is necessarily a limited one.  As Ma JA said in To Kin Wah v Tuen Mun District Officer & others [2003] 1 HKC 366, at §15:

“ While the court at this stage is not required to (indeed should not) go deeply into this aspect (for that is a matter for the full appeal itself), the judge is required to form some sort of preliminary view of the prospects of success. The question that the court asks itself is simply this: What are the prospects of success on the basis of the materials before the court at this stage? I emphasise ‘at this stage’ because often, the court will not be allowed the luxury (either in terms of time or materials) to form a mature view of the matter. Nor should it be required to do so. That said, the court should be able to form a provisional or preliminary view of the merits of the appeal at the time security for costs is sought and, as I have said, it should undertake this exercise. If there is a strong likelihood of the appeal succeeding, then it may not be appropriate or right to order security for costs. On the other hand, if the appeal is merely arguable or if it can really go either way, an order for security will generally be made where other factors exist in support of such a course.”

3.  The plaintiff is the daughter of the 1^st defendant’s younger brother.  The litigation concerns a flat in a multi-storey building in Hart Avenue, Kowloon, purchased in 1991 at the price of $900,000 in the name of the plaintiff and the 1^st defendant as tenants in common in equal shares.  In 2012, the 1^st defendant assigned her half share in the property to her daughter, the 2^nd defendant, by way of gift.  In 2014, the plaintiff brought the action below against both defendants, claiming that the property wholly belonged to her beneficially, and that the half share held by the 1^st defendant and later by the 2^nd defendant was held for the plaintiff on a common intention constructive trust or resulting trust.

4.  At the trial before Anthony Chan J, the plaintiff and the 2^nd defendant gave evidence but the 1^st defendant, who was 90 years old and medically unfit, did not.  Her witness statement was admitted into evidence subject to argument about its weight.

5.  It was common ground that an initial deposit of $20,000 for the purchase of the property was paid by a cheque drawn on the account of an unincorporated fashion business called “Linotte”; a further deposit in the sum of $70,000 was paid by a personal cheque of the plaintiff; another payment of $270,000 was also paid by a cheque.  There was no direct evidence on whose cheque it was, but the receipt issued by the solicitors acting for the plaintiff and the 1^st defendant in the transaction acknowledged having received the funds from them.  The mortgage loan of $540,000 obtained from Bank of East Asia was borrowed in the name of both the plaintiff and the 1^st defendant.  The repayments of the mortgage loan were apparently made with Linotte’s funds up to its termination in 2002 and thereafter with the plaintiff’s funds up to 2012.

6.  The plaintiff’s case was that there was an express agreement reached between her and the 1^st defendant on 10 July 1991 after an inspection of the property that the 1^st defendant’s name would be added in the purchase purely for convenience and to monitor the property, and that she would have no beneficial interest whatsoever in it.  Linotte was the plaintiff’s own business, not a partnership with her aunt.

7.  The defendants’ case was that Linotte was an informal partnership between the aunt and niece, that the property was an investment made with the profits generated by Linotte, and that the property was to be used for storage purposes for Linotte’s business (and there is no dispute it was indeed so used).  The agreement between the plaintiff and the 1^st defendant was that they would own the property as tenants in common in equal shares both legally and beneficially.

8.  In his judgment dated 25 July 2017, the judge found that Linotte was a partnership between the plaintiff and the 1^st defendant.  Part of the evidence the judge accepted was a handwritten agreement dated 16 September 1990 bearing the signatures of the two partners and the plaintiff’s father as a witness.  There was at the start of the trial an issue whether the agreement was “an authentic or forged document”, but the allegation of forgery was abandoned after the close of evidence.  The judge held it was a genuine document signed by the plaintiff.  He said that the plaintiff’s version of events about the agreement with her aunt on the beneficial ownership of the property was “quite strange” and that the plaintiff’s evidence on this was “shaky” and differed materially from her pleaded case.[1]  The judge also rejected an argument that the property should belong to Linotte as a partnership, as that case had never been advanced by any party, and the profits belonged to the partners who chose to purchase the property in their own names.[2]  In the result, the judge dismissed the plaintiff’s claim and upheld the defendants’ counterclaim for their share of the rent received by the plaintiff.

9.  It is well established that this court will not interfere with a trial judge’s factual findings unless it is demonstrated that they are plainly wrong.  It is a high threshold for an appellant to show that it was impermissible for the trial judge to make the findings which he did in the face of the evidence as a whole.  Having carefully considered the submissions made to us, while there may be arguable grounds in support of the appeal, we do not think that it has been demonstrated at this stage that there is a strong likelihood of the appeal succeeding.

10.  Much has been made in the plaintiff’s submissions of the statement by the judge that “(Issue 2) is no longer advanced by the Plaintiff”.[3] Issue 2 was framed in this way: “Was the Business Agreement an authentic or forged document?”  It is submitted that the plaintiff only made clear that she did not raise any positive case of forgery, but did not admit the agreement was authentic, and that the judge took a mistaken view of her “concession”.  Without an opportunity of going through all the records that might be relevant to this point on the hearing of the appeal, we are not convinced that the judge had necessarily made a mistake, instead of simply having used a shorthand to refer to what had taken place.  We note that in their closing submissions at trial, the defendants did not treat the authenticity of the agreement as having been admitted by the plaintiff, but continued to make submissions on it and asked the court to hold that it was an authentic document.[4]  In any event, as Mr Hariman pointed out on behalf of the defendants, the judge in fact considered the issue and decided it, saying: “Regardless of the withdrawal of the issue over the authenticity of the Agreement, … I have no hesitation in holding that it is a genuine document.”[5]

11.  The plaintiff also seeks to argue that since the funds for acquiring the property had come from Linotte, if it was an equal partnership between the plaintiff and the 1^st defendant up to the end of 2002, then by virtue of section 23 of the Partnership Ordinance (Cap 38) which provides: “Unless the contrary intention appears, property bought with money belonging to the firm is deemed to have been bought on account of the firm”, the property must be deemed to be a partnership asset.  The legal consequence, according to the plaintiff, is that the defendants could not claim any share of rent as they did in the counterclaim, except by way of a claim for an account relating to the partnership, which however was time-barred.  The difficulty with this argument, as we see it at this stage, is that it was not either party’s pleaded case that the property was a partnership asset and that in any event the judge seems to have found that contrary to section 23, the partners intended themselves to be the owners, as they purchased the property in their own names.[6]  Further, on the plaintiff’s own case, this argument only goes towards the defendants’ counterclaim, and will not assist the plaintiff’s appeal against the dismissal of her claim.

12.  The plaintiff also submits that the judge failed to remind himself that the 1^st defendant had not been cross-examined on the inherent improbabilities of her case of partnership.  This point is clearly insufficient for the plaintiff’s purpose on this application.  The judge was well aware of the fact that the 1^st defendant did not give oral evidence.  He specifically stated that he had relied upon her evidence when it was uncontroversial or supported by other evidence or inherently probable.[7]

13.  There are other points in the plaintiff’s notice of appeal rehearsed in counsel’s written submissions.  It is unnecessary, and indeed undesirable, for us to express detailed views on them at this stage. Suffice it to say that after the present preliminary examination we are not satisfied that they demonstrate such a strong likelihood of success as to make it just for the plaintiff not to have to give security for costs.  There is an admission of personal impecuniosity but no suggestion or evidence that an order for security would stifle the appeal.  In these circumstances it seems to us that the just course is to order security.

14.  The defendants have asked for security in the sum of $485,150.  After deducting the costs relating to the application for security for costs which have been included in the skeleton bill, we consider the sum of $260,000 adequate security for the defendants’ costs of the appeal.

15.  We therefore order:

(1)  The plaintiff do within 35 days from the date hereof pay into court the sum of $260,000 as security for the defendants’ costs of the appeal.

(2)  Pending such payment into court, all proceedings in the appeal be stayed.

(3)  In default of such payment into court within the time aforesaid and upon the solicitors for the defendants certifying such default to the Registrar of Civil Appeals, the appeal do stand dismissed without further order, with costs to be paid by the plaintiff to the defendants, such costs to be taxed if not agreed.

16.  We also order that the plaintiff is to pay the defendants the costs of this application, summarily assessed in the amount of $91,000.

[1]  see paragraphs 48-50 of the judgment.

[2]  see paragraphs 57-59 of the judgment.

[3]  see paragraphs 2, 12 & 41 and footnote 6 on page 12 of the judgment.

[4]  Defendants’ Closing Submissions, paragraphs 3-20.

[5]  paragraph 36 of the judgment.

[6]  see paragraph 59 of the judgment.

[7]  paragraph 64 the judgment.