LEUNG SO HUNG SIEM v. CARSON WEN

CACV357/2018

[2019] HKCA 678

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 357 OF 2018

(ON APPEAL FROM HCSD 15/2018)

-----------------------

-----------------------

______________

JUDGMENT

______________

Hon Chu JA (giving the judgment of the court):

1.  This is the applicant’s appeal against the decision of Deputy High Court Judge Simon Leung (“the Judge”) made on 29 June 2018 dismissing her application to set aside a statutory demand dated 2 May 2018 (“the Statutory Demand”) served on her by the respondent.

HCA 121/2017

2.  The facts leading to the Statutory Demand can be briefly stated as follows.

3.  The applicant is the plaintiff in HCA 121/2017 (“the Action”).  She brought the Action against the respondent as the 1^st defendant and five other defendants for HK$ 2.5 billion said to be outstanding fee for introducing certain investors to the respondent. 

4.  On 8 May 2017, upon the application of the respondent and the 5^th defendant in the Action, Master Hui ordered the applicant to give discovery and to provide further and better particulars of her statement of claim.  Master Hui also ordered the applicant to pay the costs of the application in the sum of $20,000 forthwith (“1^st Costs Order”).

5.  On 7 June 2017, the applicant served a set of further and better particulars in purported compliance with Master Hui’s order.  The applicant subsequently sought to appeal against Master Hui’s order, but it was dismissed by Deputy High Court Judge Yee on 21 December 2017. 

6.  On 26 June 2017, the applicant paid to the respondent a sum of $10,500 in partial payment of the 1^st Costs Order, leaving an unpaid balance of $9,500.

7.  On 17 November 2017, upon the application of the respondent and the 2^nd, 4^th to 6^th defendants in the Action, Master Hui ordered the applicant to provide further and better particulars of the further and better particulars served on 7 June 2017.  Master Hui further ordered the applicant to pay the costs of the application in the sum of $37,000 within 28 days from the date of the order (“2^nd Costs Order”).

8.  The applicant appealed Master Hui’s order of 17 November 2017.  On 29 March 2018[1], Deputy High Court Judge Keith Yeung SC allowed the appeal insofar as it related to the 2^nd and 6^th defendants on the ground that they were not legal entities and had no capacity to join in the application for further and better particulars, and varied the 2^nd Costs Order to the amount of $22,200 (“Varied 2^nd Costs Order”).  In respect of the appeal against the respondent and the 4^th and 5^th defendants, Deputy High Court Judge Yeung SC dismissed the appeal and ordered the applicant to pay their costs of the appeal in the sum of $45,000 (“3^rd Costs Order”).  The total costs of $67,200 (i.e. $45,000 + $22,200) were ordered to be paid within 28 days from the date of the order.

The Statutory Demand

9.  On 2 May 2018, the respondent issued the Statutory Demand which was served on the applicant. 

10.  The Statutory Demand demanded the applicant to pay to the respondent within 21 days the total sum of $77,646.34 (“the Debt”), which was made up of the unpaid balance of the 1^st Costs Order ($9,500, see [6] above), the Varied 2^nd Costs Order ($22,200), the 3^rd Costs Order ($45,000) and the interest on the 1^st Costs Order, the Varied 2^nd Costs Order and the 3^rd Costs Order accrued up to 2 May 2018[2].     

The Judge’s decision        

11.  On 23 May 2018, the applicant applied to set aside the Statutory Demand.

12.  By his decision handed down on 29 June 2018, the Judge dismissed the application and ordered the applicant to pay the respondent’s costs summarily assessed at $24,000.  The Judge’s reasons are encapsulated in [5] to [7] of the decision as follows:

“5. The respondent described the applicant’s grounds for this application to be unclear and convoluted. I share that observation, and hence the fixing of this hearing. The applicant now had her chance of ventilating her arguments. However, despite my reminder during the hearing, the applicant was only keen at going into the merits of her case in the dispute underlying HCA 121/2017 and the rights and wrongs in the various interlocutory matters which led to the above costs orders. Her reference to the written decision of DHCJ Yeung SC mentioned above³ reflected her lack of accurate understanding of the decision. She asked the court to do precisely what it will not do in principle and practice in an application like the present one. She also put forward a counterclaim, which exceeds the ambit of the present application as defined by the statute.

6. The applicant also referred to the previous statutory demand served by the respondent in respect of the costs order mentioned in §2(1) and (2) above, which formed the subject matter of the costs order mentioned in HCSD 1/2018. On 17 April 2018, DHCJ Yee set aside the statutory demand with an order hat the parties should bear their own costs. The learned Deputy Judge did so, upon the respondent’s indication of intention to withdraw the demand on the ground of material change in circumstances, being the variation of the costs order mentioned in §2(2) above by DHCJ Yeung SC as mentioned in §2(3) above. Due to the change, the very basis for proceeding with the original statutory demand ceased to exist. In my view, nothing turns on that episode, as it has no material bearing on the consideration of the present application.

7. Devoid of merit, this application to set aside the statutory demand must be dismissed. The respondent may present a bankruptcy petition against the applicant.

________

³ §§20 – 21 of the decision.”

The appeal

13.  The applicant filed a notice of appeal on 31 July 2018 to appeal against the Judge’s decision.  It is not easy to comprehend the precise grounds of appeal that the applicant is trying to argue.  Doing the best we can, it would appear that the main thrust of the applicant’s arguments is that the Debt stemmed from legal costs in respect of applications for further and better particulars and information that are within the knowledge and possession of the defendants in the Action, and the Judge was therefore wrong to disregard the merits of the applicant’s case in the Action and also her counterclaim. 

14.  The applicant lodged a skeleton submission on 14 May 2019.  The bulk of the content is devoted to explaining the basis of the applicant’s claim in the Action.  It is said that the cause of action is the enforcement of a legal contract, and that the defendants had breached the terms of the contract and had made misrepresentations.  It is also said that the defendants had lied in an affirmation.  The applicant further refers to certain pages in the “non-approved appeal bundle”, and complains that certain evidence and new evidence have not been included in the approved appeal bundle.

15.  In her oral submissions, the applicant said that her application to set aside the Statutory Demand was made under Rule 48(5)(b) of the Bankruptcy Rules, Cap. 6A, namely, the debt is disputed on grounds which appear to the court to be substantial.  She stated her grounds for the application and this appeal to be:

(1) The respondent had not responded or admitted the documents in the “non-approved appeal bundle”.

(2) The defendants in the Action, including the respondent, owed her introduction fees on account of a contract signed on 29 April 2015.

(3) The several costs orders underlying the Debt were wrongly made because the contract signed on 29 April 2015 contained confidentiality provision such that disclosure of documents could only be made under a court order and with the costs to be paid by the requesting party.

(4) Deputy High Judge Yeung SC was wrong to hold that “the Group” (which we take to be a reference to the 2^nd and 6^th defendants in the Action) could not be sued because it is being sued in the BV.

(5) The respondent had been found by judges to have lied in an affirmation.

Discussion 

16.  The Debt, which forms the subject matter of the Statutory Demand, stems from summary costs orders made by the court in HCA 121/2017.  The applicant’s liabilities under these costs orders were owed to the respondent and the several defendants in the Action jointly and severally; hence, any one of them, and the respondent alone, can make a demand: see Cheung Sun Lam v. Lai Kam Man & Ors (unreported) CACV 148/2011, 18 March 2013, at [29].     

17.  The various costs orders underlying the Debt were valid and subsisting at the time the Statutory Demand was issued and served on the applicant.  They remain valid as of today.  The applicant is not disputing she has not paid the Debt.

18.  It is well established principle of law that in an application to set aside a statutory demand based on a judgment or order, the court will not go behind the judgment or order to examine, for example, whether the judgment or order should have been made or the merits of the dispute giving rise to the costs order: see the Court of Appeal’s judgment in Cheung Sun Lam v. Lai Kam Man & Ors, supra, at [36] to [38], and Leung Kwok Chun v. Seavi Advent Asia Investments (IV) Ltd (unreported) HCSD 16/2016, 29 November 2016 at [22] to [26] and the authorities cited in [23] and [24].

19.  It is evident from the notice of appeal and her written and oral submissions that the applicant’s primary ground for setting aside the Statutory Demand is her belief that she has a meritorious claim in the Action.  However, in view of the clear law (see [18] above), this cannot be a viable ground to set aside the Statutory Demand. 

20.  Mr Chan, who appeared for the respondent, further drew our attention to the fact that the applicant’s claim in the Action had already been struck out on 26 April 2018.  Leave to appeal out of time was refused by Mr Recorder Houghton SC[3] and the appeal against the Recorder’s decision was struck out by the Court of Appeal[4].  This being the case, it is not open to the applicant to rely on her claim in the Action to contend that the Statutory Demand should be set aside under rule 48(5)(b) of the Bankruptcy Rules, Cap. 6A.

21.  For the same reason, the applicant’s arguments that the applications for further and better particulars should not have been granted, the costs orders underlying the Debt should not have been made, or whether the 2^nd and 6^th defendants could sue or be sued do not amount to viable grounds for setting aside the Statutory Demand.  It follows that the Judge did not err in not having regard to the arguments on the merits of the applicant’s claim in the Action or the evidence relating to the Action that the applicant had sought to introduce. 

22.  As for the counterclaim that the applicant sought to put forward[5], it is in respect of three sums, namely, (a) US$ 1.71 million, being the applicant’s costs for preparing the hearings for the applications for further and better particulars, and discovery and inspection of documents; (b) HK$10,500 that was paid to creditors prior to the applicant’s “discovery of the ‘Contractual Terms’”; and (c) HK$114,945, being “legal costs on all hearings with Defendants No. 3 inclusive of all documents for inspection and discovery being served”.  We agree with the Judge that there is no permissible basis for this counterclaim.

23.  With regard to the various documents in the “non-approved appeal bundle” that were referred to in the applicant’s skeleton submission, they are mostly documents filed in the Action, and bear no appreciable relevance to the appeal or the applicant’s application to set aside the Statutory Demand.  Further, as the documents in this “non-approved appeal bundle” were put in by the applicant without approval of the Registrar of Civil Appeal, the respondent is under no obligation to respond or deal with any of them.  

24.  As to the applicant’s assertion that the defendants in the Action had lied in an affirmation and committed perjury, this is based on a misreading of [20] of Deputy High Court Judge Yeung SC’s decision.  The judge was only summarizing the applicant’s arguments made to him; he is not endorsing or confirming the correctness of the arguments.  The judge certainly did not find any of the defendants to have lied in any affirmation.  The applicant also referred to the orders of Ng J[6] given respectively on 10 January 2019 in HCSD 40/2018 and on 2 April 2019 in HCSD 7/2019 and contended that they show Ng J accepted that the defendants in the Action had lied on oath.   However, in these orders, Ng J only gave directions for filing of evidence and adjourned the applications for argument.  They do not have the effect contended by the applicant.      

25.  The applicant has also made references to the Theft Ordinance, Cap. 210, Crime Ordinance, Cap. 200 and Misrepresentation Ordinance, Cap. 284 in the skeleton submission.  We are, however, not able to understand the points that she seeks to advance or the relevance of these legislations.

26.  For the reasons set out above, the appeal has no merits and should be dismissed.

Applicant’s summary judgment application

27.  We would finally deal with the summons issued by the applicant on 15 November 2018 whereby she applied for summary judgment under Order 14 rule 1 of the Rules of the High Court, Cap. 4A.  In our view, this summons must be dismissed. Firstly, this is procedurally wrong.  Secondly, it is entirely unclear on what grounds or basis is the application made.     

Costs

28.  Applying the normal rule of costs follows event, the applicant having failed in her appeal and the summons for summary judgment, must pay the costs of the respondent.  Having considered the respondent’s statement of costs, we would summarily assess the costs at HK$ 50,000.

Disposition

29.  Accordingly, we make the following orders:

(1)  The appeal is dismissed

(2)  The summons filed on 15 November 2018 is dismissed.

(3)  The applicant pays the respondent the costs of the appeal and the summons, summarily assessed at HK$ 50,000.