McDONALD'S RESTAURANTS (HONG KONG) LTD. v. LI CHIU KONG FRANKIE and Others

IN THE COURT OF APPEAL

1996, No. 103
(Civil)

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J U D G M E N T

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Liu, J.A.:

1. I do not think I need trouble you, Mr Merry.

2. This is a tenancy claim. Suffice for me to say, Seagroatt, J. ordered conditional leave on an Order 14 application. The condition was payment into court within a period of $2,911,090. The defendants felt aggrieved and appealed against that decision of the judge. In the meantime, the defendants applied to the judge for extension of time to pay the $2,911,090. When the application for extension finally came to be heard, the judge reduced it to $966,000 to be paid by 1 July 1996. The defendants felt equally aggrieved by this further order and an appeal has been lodged. The defendants now apply before me for an extension of time to pay this $966,000.

3. The principle for ordering payment into court in granting conditional leave to defend is well settled. See MV Yorke Motors (a firm) v. Edwards [1982] 1 WLR 444. That good sense principle was followed in Wu Cho Mei t/a Mui Far Chung Restaurant v. Wang Siau Yu [1994] 1 HKC 188 by our Court of Appeal. A defendant should not be, in effect, deprived of an opportunity to litigate by an imposition of a payment into court, which is beyond his means when conditional leave is granted.

4. For the purpose of this application, it would be convenient to set out what has been said by the 1st defendant on behalf of the other defendants and himself in his 3rd and the 4th affirmations. His 4th affirmation was filed subsequent to the decision of the judge reducing the payment to $966,000. This is what the 1st defendant said in his 3rd affirmation

Paragraph 4. "The defendants must however be prepared to re-tender these cheques at a moment's notice, if McDonald Corporation Inc. should so demand".

5. The said cheques had been tendered by the defendants for royalty payments. The assertion of McDonald Corporation Inc. was that the licence for which the royalty payments were made had been terminated, hence the cheques given by these defendants were returned to them. It is worthy of note that not only were the defendants said to be in a position to pay the same amounts on "these cheques" at a moment's notice to McDonald Corporation Inc. but it would seem that the defendants' assertion was that they would re-tender at a moment's notice the very same cheques to McDonald Corporation Inc.

6. Paragraph 5. "The maximum amount the defendant can pay into court is $400,000 in a month's times."

7. I turn next to the 1st defendant's 4th affirmation which was filed after the decision of the judge reducing the payment to $966,000. In paragraph 3, the 1st defendant said:

"In fact when I said under paragraph 4 of my 3rd affirmation that the defendants must be prepared to re-tender the cheques which had been rejected by McDonald Corporation Inc., I did not mean that I have (sic) those funds stashed away in a separate bank account. The funds which has (sic) been saved from not having to pay those cheques had been ploughed back into the operations of the Store."

8. In paragraph 2 of the 4th affirmation of the 1st defendant; he stated:

"As I understand from my legal advisers, at the last hearing before the learned judge on 27 May 1996, the learned judge relied on paragraph 18 of Ms Lau's affirmation and paragraph 4 of my 3rd affirmation to conclude that I must have available another HK$566,296 and he therefore added this amount to the HK$400,000 which I admitted under paragraph 5 of my 3rd affirmation and ordered that the defendants should pay the sum of HK$966,000 into court by 1 July 1996."

9. In paragraph 7, he said:

"I am advised that the above points have (sic) in fact been canvassed before the learned judge on 27th May 1996, but the judge failed to appreciate the difference or had (sic) decided to ignore it."

10. Before me today, on instructions Mr Miu states that on 24 May 1996, the $400,000 referred to in paragraph 5 of the 1st defendant's 3rd affirmation was to come from the $566,296, being the amounts on the return cheques referred to in paragraph 4 of the same affirmation.

11. From the statements set out in the 3rd affirmation of the 1st defendant, it is clear that the defendants had the amounts on the returned cheques ready for re-tender at a moment's notice. Not only did they have those amounts for re-tendering at short notice but in fact they were holding on to the very cheques so returned for the stated purpose. If that be so, it is startling for counsel to make his open-court statement on instructions today. It is difficult to understand, if that be the case, how the $400,000 said to be the maximum amount the defendants could possibly pay into court within a month's time could be expected to come out of this $966,296, being the amounts on the returned cheques. It is unsurprising that the judge took the view that the defendants were able to pay $966,000 into court. The paragraphs referred to in the 3rd affirmation of the 1st defendant could not be open to a different interpretation.

12. Further, the 1st defendant in his 3rd affirmation explained that in addition to the amounts on the returned cheques, they, the defendants, were able to pay into court $400,000 in a month's time. If that be the position, the defendants could not have "ploughed back" these amounts on the returned cheques into the operation of the Store as the 1st defendant would have this court believe on the force of paragraph 3 of his 4th affirmation.

13. The statements made on affirmations and to this court on instructions are, in order to be kind, very confused. The judge had only the affirmations placed before him for his decision. It is inconceivable that if counsel for the defendants had explained to the judge in the manner as claimed in paragraph 2 of the 1st defendant's 4th affirmation, the judge would not have sought a clarifying affirmation from the 1st defendant before he decided on the application. No case has been shown for an extension to be granted. I refuse the application. As to costs, subject to what counsel have to say, this is a case in which wholly irreconcilable statements have found their way into solemn affirmations and an open-court statement. It is a proper case in which the defendants ought to be visited by the most punishing order for costs. To be as kind to the defendants as I possibly could, I would consider ordering costs of this application to be paid by the defendants to the plaintiff on a common fund basis.

(Submission on costs made)

14. As to costs, I have listened to the submission of Mr Miu. The conduct of the defendants as reflected by the wholly inconsistent statements made in the affirmations and in the statement to this court is a matter that should not be overlooked. In the circumstances, I order that the application be dismissed with costs to the plaintiff, such costs to be taxed on a common fund basis.

(B Liu)

Justice of Appeal