WING LUNG FINANCE LTD v. CHENG HO YIN AND OTHERS

HCA1494/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1494 OF 2008

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

BETWEEN

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

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

DECISION

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

1.   On 14 April 2009, I handed down judgment on the plaintiff’s application for summary judgment against the 1^st defendant. I held that the defence advanced by the 1^st defendant is shadowy that that leave to defend should only be granted on terms. Upon the 1^st defendant’s request made through counsel, I granted the 1^st defendant leave to file evidence on his means before deciding on the condition to be imposed.

2.   The 1^st defendant had on 21 April 2009 filed his 4^th affirmation. The plaintiff had also on 28 April 2009 filed the 5^th affirmation of Lau Chung Cheung by way of reply.

3.   The 1^st defendant at this hearing seeks to introduce a further affirmation – the Affirmation of Wong Kam Mun, who is an assistant solicitor of his solicitors. The affirmation sought to state that the 1^st defendant was unlikely to be able to raise finance from his friends. It explained that the 1^st defendant is currently in Kuala Lumpur and unable to make the affirmation himself. The plaintiff objects to the affirmation.

4.   This is no doubt a very late affirmation. The time for the 1^st defendant to file evidence on his means expired in April 2009. There is no reason given for the lateness. As Mr Shum pointed out, the 1^st defendant appears to be in the habit of introducing affirmation whether shortly before or at the hearings throughout the entire Order 14 proceedings.

5.   Mr Poon had not relied heavily on this affirmation. Nevertheless, I am of the view that this affirmation should not be received. Principally, this Order 14 application has taken a very long course, due largely to the 1^st defendant’s request to introduce further affirmation at the last minute in the hearings before the Master. With the Civil Justice Reform and its underlying objectives, such conduct is no longer to be tolerated. In any event, the matters stated in this affirmation should have been deposed to by the 1^st defendant and not by his solicitor on his behalf. There is no explanation why he could not have deposed to them in his 4^th affirmation. It seems this is very much an afterthought, probably in light of the criticism levelled against the 1^st defendant’s case in Mr Shum’s written submission.

6.   I turn to deal with the subject matter of this hearing. This is the resumed hearing to determine the condition to be imposed before leave to defend is given to the 1^st defendant.

7.   The relevant legal principles on imposing terms on a defendant when giving leave to defend are set out in Hong Kong Civil Procedure 2009, vol. 1, para.14/4/16. For the present purpose, it is important to note the following points:

(1) The power to impose condition for giving leave to defend is discretionary and the court has a wide discretion in this regard.

(2) The court should not impose a financial condition that is impossible for the defendant to fulfil and that impossibility was known or should have been known to the court by reason of the evidence placed before it.

(3) A defendant who wishes to avoid or limit a financial condition by reason of his impecuniosity is under a duty to put sufficient and proper evidence before the court and to make full and frank disclosure.

(4) The fact that the defendant has no capital of his own does not mean that he cannot raise any capital. His ability to raise capital from relatives, friends or business associates is also a relevant consideration.

See also M V Yorke Motors (a firm) v. Edwards [1982] 1 All ER 1024 applied in Wu Cho Mei (t/a Mui Far Chung Restaurant) v. Wang Siau Yu [1994] 1 HKC 188; and Hwang Yiou Kwa Victor v. Morgan Guaranty Trust Co of New York [1985] 1 HKC 294.

8.   In the present case, the 1^st defendant’s affirmation shows that by 21 March 2009, he had about $196,600 in his bank account. He owns a property in Tung Chung, which by 1 April 2009 had an outstanding mortgage liability of $3,058,000. His net monthly income is stated to be $33,000. He also owns a second-hand car, which is said to have a negligible value of $20,000. He estimated his monthly expenditure, including the monthly mortgage payment of about $11,800, to be about $26,000. The 1^st defendant estimated the market value of his property to be $3.2 million, with therefore a net equity of about $150,000. The plaintiff, on the other hand, had adduced evidence of on-line valuations by Hang Seng Bank and Bank of China. The two banks assessed the property to have a market value of $3.56 million in April 2009 and a higher value of $ 3.78 million to $3.88 million in August 2009. The 1^st defendant does not challenge these valuations.

9.   The 1^st defendant’s position in a nutshell is that he is only able to make a payment into court in the sum of HK$30,000. This is because he wishes to make provision for his future legal costs and also (according to his affirmation) to cater for any possibility of unemployment or any unexpected expenses. At this hearing, he through Mr Poon offers to create a charge on his Tung Chung property in favour of the plaintiff as a condition to defend. The plaintiff does not agree to this.

10.   The primary position of the plaintiff is that the 1^st defendant should be ordered to make payment into court of the entire sum claimed, being HK$1,217,377.68 together with interest. Alternatively, there should be payment in of a substantial part of the amount claimed.

11.   I do not find the 1^st defendant’s suggestion of creating a charge in favour of the plaintiff over his Tung Chung property attractive. This is rather cumbersome and does not provide any effective immediate security to or enforcement of any judgment that may be awarded to the plaintiff.

12.   On the evidence before the court, it is clear that the 1^st defendant has ability to make payment into court of a substantial part of the amount claimed. He has a monthly surplus of over $6,000. This is reflected in the credit balance of some $196,000 in his bank accounts in March 2009. In the normal course, between March 2009 and now, he would have accumulated a further saving of over $300,000. At the same time, his Tung Chung property has a net equity of some $700,000 to $800,000.

13.   Mr Shum is correct in submitting that the court’s only concern is what is the financial condition that the 1^st defendant can meet on the evidence presented. It is not the business of the court or of the plaintiff to assist the 1^st defendant to arrange the finance for meeting the condition. It is entirely a matter for him as to how he manages his finance or deals with his assets so as to meet the condition imposed.

14.   Having regard to the materials available, I am of the view that an appropriate condition is to require the 1^st defendant to make payment into court in the sum of $600,000.

15.   Mr Poon asked for two months to make the payment in, stating that instruction on this aspect had not been sought before the hearing. This is too long, considering the evidence of the 1^st defendant’s means and also that this is merely an estimate of his legal representatives. I will grant 28 days for making the payment into court.

16.   As to costs, the usual costs order will be for costs in the cause. In this case, I consider that the costs of this hearing should be treated differently. This hearing would not have been necessary had the 1^st defendant prepared evidence on his means at the last hearing in April 2009. Mr Poon referred to the judgment of Kempster JA in Hwang Yiou Kwa Victor v. Morgan Guaranty Trust Co of New York (at 296B), which stated that it is not a general rule that a defendant seeking leave to defend should be advised to prepare evidence of his financial resources prior to an intimation from the court that condition will be imposed. He submitted that the 1^st defendant should therefore not be held liable for the costs of this adjourned hearing. However, in Muhammad Ibrahim v. Asmat A.M. Khan [1986] HKLR 581, 585I-586A, it was pointed out that on an Order 14 application, while the principal issue was whether there was an arguable defence, there was always the subsidiary issue of whether leave to defend should be conditional and, if so, what the condition(s) should be. And after referring to the passage of Kempster JA’s judgment in Hwang Yiou Kwa Victor, Huggins VP pointed out that if the defendant does not come prepared with the evidence, it will be incumbent upon him at least to indicate a wish to adduce evidence of his financial resources. In my view, this highlights the duty of a defendant in an Order 14 application to be ready to argue the conditions to be imposed for leave to defend. This is consistent with his duty to present proper and sufficient evidence if he seeks to limit or avoid financial condition to be imposed. Hence, if an adjournment is occasioned by reason of his not being ready at the hearing of the Order 14 application, there is no reason why the plaintiff should not be compensated by costs for the inconvenience caused.

17.   Accordingly, if the 1^st defendant were ready at the last hearing to argue the conditions to be imposed, this adjourned hearing would not have been necessary. The additional costs of this hearing ought therefore to be made the plaintiff’s costs in the cause in any event.

18.   As to the directions for the further conduct of the action, parties are in agreement in relation to the timetable for discovery and exchange of witness statement. I will order in terms and also fix a date for the Case Management Conference before Master.

19.   In conclusion, I make the following order:

(1) Leave to the 1^st defendant to defend the action on condition that he pays into court the sum of HK$600,000 within 28 days from the date of this order.

(2) Upon the 1^st defendant complying with the condition in (1) above,

(a) The parties shall within 14 days after the defendant making payment into court, exchange list of documents.

(b) There shall be inspection of documents within 7 days thereafter.

(c) The parties shall within 28 days after the defendant making payment into court, exchange witness statements.

(d) The case is listed for a case management conference before the Master at 9:30 am on Wednesday, 28 October 2009.

(3) In the event the 1^st defendant fails to comply with the condition in (1) above, the plaintiff is at liberty to enter final judgment against the 1^st defendant as claimed together with costs of the action, including the costs of the summary judgment application.

(4) The costs of this hearing be the plaintiff’s costs in the cause in any event. Otherwise, costs of the application for summary judgment shall be costs in the cause, to be taxed if not agreed.