CHU KWOK FAI v. TANG FAI

DCCJ 3768/2015
[2018] HKDC 92

IN THE DSTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3768 OF 2015

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DECISION

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1.  This is the hearing of the Defendant’s following applications under 2 summonses both of 9 June 2017:

i) Leave to appeal to the Court of Appeal (“CA”) from my judgment (in Chinese) handed down on 12 May 2017; and

ii) Stay of execution of the said judgment pending appeal conditional upon the Defendant paying into Court a sum of HK$126,000 within 14 days from the date of order to be made.

2.  On 12 May 2017, after a 2-day trial which took place on 18-19 April 2017, this Court handed down the said written judgment ordering the Defendant to repay the Plaintiff a sum of RMB100,000 (or the Hong Kong dollar equivalent) together with costs[1].  

3.  The said judgment was written in Chinese because the Defendant was acting in person at the time of the trial, and the proceedings were conducted in Chinese. He is now represented. The proceedings were in English and thus this decision. If it is necessary for me to refer to certain parts of the said Chinese judgment, this Court will, as far as possible, state their meanings and effect herein.

4.  All facts of the case have already been set out in the said judgment. This Court does not intend to repeat the same here. Suffice to say that this Court found that the Defendant was in breach of an oral investment agreement whereby he promised to develop the capability in the production of “openable fire resistant windows” in consideration of the Plaintiff investing RMB100,000 into his factory in the PRC. This Court ordered that the Defendant to repay the said sum as damage.

Applicable Legal Principles in Granting Leave to Appeal

5.  Section 63A of the District Court Ordinance (“DCO”) is the provision governing leave to appeal against a decision of this Court. Section 63A(2) stipulates: -

“(2) Leave to appeal shall not be granted unless the judge, the master or the Court of Appeal hearing the application for leave is satisfied that—

(a) the appeal has a reasonable prospect of success; or

(b) appeal should be heard.”

6.  The relevant test of whether an appeal has a reasonable prospect of success under section 63A of the DCO is whether the applicant can show that he has an arguable case with reasonable chances of success on appeal. It means an appeal with prospect that are more than “fanciful” but which do not need to be shown to be “probable”: see the Court of Appeal (“CA”) decision in KNM v HTF per Fok JA (as he then was) at [9] [2]. The same test is consistently applied by the CA: see [9] of Yuen Oi Yee Lisa v Charoen Sirivadhanabhakdi & Others[3] in which Hon Poon JA stated:

“It is well established that leave to appeal under section 63A(2) is not lightly granted. Reasonable prospects of success involve the notion that the prospects of succeeding must be reasonable and therefore more than fanciful, without having to be probable: see SMSE v KL [2009] 4 HKLRD 125, per Le Pichon JA at [17].”

Ground of Appeal

7.  Miss Sabrina Ho, counsel for the Defendant, basically advanced 2 broad grounds of appeal. They are:

i) Ground 1: this Court erred in law in that there is no pleaded basis for this Court to order repayment of RMB100,000 or its Hong Kong dollar equivalent as damages for breach of the oral investment agreement;

ii) Ground 2: this Court erred in law and fact in that there is no “total” failure of consideration and in any event, the Defendant was never unjustly “enriched”.

Ground 1

8.  By the said judgment, this Court concluded there is a breach of the oral investment agreement: see [40] of the said judgment. In [44] of the said judgment, this Court held that a party in breach of contract is liable to pay damages, the purpose of which is to put the innocent party in the same position as he would be in if the contract was not breached. Since the Plaintiff was no longer pursuing damages arising from loss of business or an opportunity, this Court awarded a sum of RMB100,000 which is the amount he had invested as damage.

9.  The gist of Miss Ho’s submission under this ground is that a claim for damages for breach of contract is legally distinct and separate from a claim for restitution based upon principles of unjust enrichment. It is her submission that breach of contract was never the Plaintiff’s pleaded cause of action upon which he asked for repayment of RMB100,000. According to her analysis of the Plaintiff’s statement of claim, there is no averment to the effect that as a result of the Defendant’s breach, the Plaintiff suffered loss and damages in terms of losing its investment of RMB100,000 in its entirety. Miss Ho submitted, according to the Plaintiff’s pleadings, the only basis for repayment of RMB100,000 was restitution on the ground of total failure of consideration.

10.  With due respect to Miss Ho, this Court cannot accept her submission. In [19] and [20] of the statement of claim, the Plaintiff pleaded:

“19. In light of the matters pleaded in paragraphs 16 to 18 above, the Defendant committed a repudiatory breach of the Oral Investment Agreement and/or evinced an intention not to perform the terms of the Oral Investment Agreement, entitling the Plaintiff to accept the Defendant’s repudiation and terminate the Oral Investment Agreement.

20. In about March 2014, the Plaintiff went to Fu Kin’s office to find the Defendant. The Plaintiff accepted the Defendant’s repudiation   of the Oral Investment Agreement by orally informing the Defendant that …”   

11.  The Plaintiff asked for damages as one of the reliefs sought. It is a fair construction that he did not limit the scope of damage to only those arising out of loss of business or an opportunity which he had subsequently dropped. The damages he was asking comprise those arising out of breach of the oral investment contract and damage caused by loss of business opportunity.

12.  Further, according to the skeleton submission of Mr Chan, counsel for the Plaintiff, dated 3 April 2017, he identified one of the issues for the trial being whether there is repudiatory breach and/or anticipatory breach, and if so whether the Defendant is liable to be repaid under the law of contract and/or law of restitution: see [7][4] of Mr Chan’s said skeleton.

13.  Accordingly, it is not correct to say that the Plaintiff did not found his case on breach of contract. He did plead his case along breach of contract and has not abandoned it.

14.  This Court came to a conclusion that there was a breach of contract, and award a damage based on the amount the Plaintiff had invested: see [44] of the said judgment.  

15.  At the hearing of the leave to appeal, Mr Chan, counsel for the Plaintiff, appeared to accept that the Plaintiff’s case was premised on restitution only. In light of what has been set out in the preceding paragraphs, this Court considered as a matter of fact it is not. The Plaintiff should not be allowed to retracted from a basis on which the Court was invited to consider and did come to a decision.

Ground 2

16.  It is Miss Ho’s submission that in order for a claim for total failure of consideration to succeed, the failure must be “total”. The crucial term of the agreement between the parties is the Defendant would “develop” the capability of the new factory in Mainland China to test and manufacture openable fire-resistant windows. There is no requirement for the Defendant to achieve certain level of progress, let alone success. And as a matter of fact the Defendant’s factory did come up with a prototype.

17.  This Court considers Ground 2 cannot help the Defendant.

18.  Firstly, it was the findings of this Court that the Defendant, though being the person in control of the PRC factory, had done nothing[5] in respect of the “development” of the openable fire resistant window. It was the finding of this Court that it was the Plaintiff, not the Defendant, who asked Mr Xu (徐先生) to make the prototype. The Defendant did not do any follow-up thereafter. As such in this Court’s judgment, the one-off prototype is of no value to the overall development promised by the Plaintiff. In the Court’s judgement there is a total failure of consideration.

19.  Secondly, even if this Court were wrong in the total failure of consideration point for the consideration not being “total”, Ground 2 still could not help the Defendant. It is because the damage awarded in the said judgment was primarily based on breach of contract, not total failure of consideration. The reason why the Defendant was found liable to pay damages was that he had breached the investment contract as pleaded. A sum of RMB100,000 (or the Hong Kong Dollar equivalent) which equals to the amount he had invested was awarded. This is a basis pleaded and pursued.

20.  For the above reasons, this Court does not consider the Defendant having a reasonable chance of success in the appeal. The summons for leave to appeal should be dismissed.

21.  That being my decision in respect of the leave to appeal, this Court considers the Defendant lacks the merit to pursue its stay of execution pending appeal summons. There is simply no reason to deprive a successful Plaintiff of the fruit of his judgment particularly when the Defendant has been assessed having no reasonable chance of success in his intended appeal. The Defendant’s said summons for stay of execution pending appeal should be dismissed.

Conclusion and Orders

22.  The Defendant’s two summonses both of 9 June 2017 be dismissed. The Defendant do pay the Plaintiff’s costs of these 2 summonses, with certificate for counsel and on District Court scale, such costs being an order nisi and be made absolute if no application is made to have it varied in 14 days.