LI NGAN KWAN AND OTHERS v. GAO LI HUI AND OTHERS

HCA 933/2007

[2022] HKCFI 171

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 933 OF 2007

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BETWEEN

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D E C I S I O N

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Introduction

1.  By a decision dated 29 September 2021 (“Decision”), this Court refused to grant leave to the Plaintiffs to amend the statement of claim. This is the Plaintiffs’ application for leave to appeal against that Decision, insofar as it relates to the Plaintiffs’ claims against D1 (Gao) and D5 (Excel Gainer). The abbreviations used in the Decision will be adopted in this decision.

Legal principles for granting leave to appeal

2.  Leave will be granted if the appeal has a reasonable prospect of success, meaning that prospects of succeeding must be reasonable and more than fanciful, without having to be probable; or there is some other reason in the interests of justice as to why the appeal should be heard. Hong Kong Civil Procedure 2022, Vol 1, §59/2A/4.

3.  Where the intended appeal is an appeal against the exercise of discretion of the judge below, the applicant would have to show that he has an arguable case with reasonable chances of success that the relevant decision exceeds the generous ambit within which reasonable disagreement is possible, and is in fact plainly wrong, and not merely the appellate court would prefer a solution which the judge had not chosen: Hong Kong Civil Procedure 2022, Vol 1, §59/2A/4.

4.  I shall follow the categorization of the grounds by Ms Tong in her written submission.

Delay and prejudice (Section E of the Decision, §§1-5 of the draft grounds of appeal)

5.  Each case has to be decided on its own facts. “Lateness” is not just assessed by reference to the stage of action (pleadings stage in this case) but also the amount of time that has elapsed from the filing of the pleading to be amended (13 years). This would be in line with the underlying objective of ensuring that a case is dealt with as expeditiously as is reasonably practicable: Order 1A, rule 1 of RHC. The Plaintiffs have had substantial delay of 13 years in the post-CJR era.

6.  As the Plaintiffs were seeking indulgence from the Court, it would be a rare case that this would be given, even on terms as to costs, without a satisfactory explanation being given to justify the grant of the indulgence: To Pui Kui v Ng Kwok Piu [2014] 5 HKLRD 103, §8, Lam VP (as he then was).

7.  Further, regardless of whether the Court had misunderstood where and when the medical evidence was first produced or whether Gao had had the opportunity to reply to it, the Court had considered Li’s explanation and medical evidence (without challenge to its genuineness) in substance.

8.  In Section E of the Decision the Court has held that the explanations for delay were unacceptable. The attack is now effectively on the Court’s assessment of the quality of the medical evidence and the weight placed by the Court on it. There is no suggestion that the Court’s assessment was perverse or was contrary to the only reasonable conclusion on the available evidence.

9.  With a finding rejecting Li’s explanation for delay, there did not begin a need to consider prejudice to the Defendant. In any case, the prejudice to the Gao arose out of the proposed amendments, which could not be avoided even if Gao had prosecuted the action expeditiously.

10.  Once Li’s explanations premised on his medical condition were rejected, there was no reason why Sun could justify not proceeding with the claim in those 13 years.

11.  Grounds 1-4 have no reasonable prospect of success.

12.  In respect of Ground 5, it is said that the Court erred in considering that the Plaintiffs advanced allegations of fraud and dishonesty only at an advanced stage of the proceedings (§§64-66 of the Decision). The Plaintiffs say that in §§11-13 and 24-27, SOC, they have already pleaded fraud and dishonesty.

13.  This ground has failed to read §§64-66 of the Decision in the proper context. §§64-66 were directed not only at the Plaintiffs’ case against Gao, but also other Defendants. The Decision has acknowledged that the cause in fraudulent misrepresentation against Gao in §§11-13 was not new (§114 of the Decision). However, the DoT Forgery Claim and the related breach of fiduciary duty in forging or procuring the forgery of the DoT alleged against Gao were new. There were also new allegations then of dishonest assistance raised Xu and the Firm. New allegations of conspiracy were also raised against Gao, Xu and the Firm. The Plaintiffs have no bases to say that §§64-66 of the Decision were erroneous. Ground 5 has no reasonable prospect of success.

New claim on new basis (Section F of the Decision, §§7-11 of the draft grounds of appeal)

14.  The original SOC pleads that Li was the ultimate beneficial owner of BHP, which would have required proof of a chain of ownership in the BVI companies. That plea was deliberately deleted in the DASOC. The DASOC pleads that BHP was the purchaser of the premises, whereas Li was a third party funder, which would have required him to meet the test in Lo Man Yau v Chiu Sung Fai [2018] HKCA 387. There cannot be a newer basis for the claim.

15.  It is true that the locus issue was not raised by any of the Defendants but by the Court at the first hearing day on 24 February 2021, precisely because the Court took the DASOC as it stood. The deletion of beneficial interest in BHP was conspicuous. The Plaintiffs did not have the opportunity to file evidence on this issue, but it was their duty to put their pleadings in order. They came back 3 weeks later at the adjourned hearing on 18 March 2021 with the authority of Lo Man Yau.

16.  Ms Tong submits that, applying Lo Man Yau, the general rule that a company does not hold property in its name as agent or trustee for its shareholder may be rebuttable by evidence of intention that the equitable interest in the property is to be vested in the shareholder who provided the funds for purchase. She submits that this Court erred in holding that the plea was unsustainable as the DASOC did not plead certain material facts when they were matters of evidence.

17.  With respect, the fundamental rule is that a pleading must set out the material facts on which the plaintiff relies for his claim (Order 18, rule 7(1)), before he can adduce evidence to prove those material facts.

18.  Lo Man Yau was a case after trial. On appeal, the plaintiff’s counsel took the pleading point that, in asserting that a company held the property on resulting trust for D1, D1 had only pleaded that he contributed to the purchase price. The Court of Appeal disagreed with counsel and held that the pleading, in substance, pleaded more than that, but the trial judge has failed to assess the evidence in that light. A re-trial was ordered. (See §§17 and 22.) Accordingly, the holding in Lo Man Yau was consistent with the legal principle on pleading in the preceding paragraph.

19.  Without proper pleading, Li would not be able to adduce evidence of intention at the time of acquisition of the Property. Without a proper basis as to beneficial ownership over the Property, he would have no locus to assert the various claims. These grounds have no reasonable prospect of success.

DoT Forgery Claim (Section G of the Decision, §§12-15 of the draft grounds of appeal)

20.  The Court may consider whether a plea has any real prospect of success by examining the evidence: C&A Consultants Ltd v Hong Kong Airlines Ltd, HCA 279/2007, 17 August 2010, §§27-28.

21.  The DoT Forgery Claim was rejected after the Court weighed the contemporaneous documents and circumstances that directly contradicted that alternative plea. It is not said that the conclusion reached was beyond the generous ambit within which reasonable disagreement is possible, or is plainly wrong. These grounds, dressed up as the Court adopting the wrong approach, have no reasonable prospect of success.

Additional draft grounds of appeal on specific proposed amendments (Sections G-K, O-P of the Decision, §§16-38, 40-41 of the draft grounds of appeal)

22.  §69 of the Decision held that the inordinate and inexcusable delay of the Plaintiffs was sufficient to dismiss the Amendment Summons. §95 of the Decision held that Section F, in itself, was sufficient to dismiss the Amendment Summons. The rest of the analyses in the Decision were only for the sake of completeness.

23.  As the Plaintiffs are unable to show reasonable prospect of success in respect of Grounds 1-15, there is no reasonable prospect of success of their succeeding under the additional draft grounds.

No basis for rejecting Amendment Summons not relating to specific causes of action (§39 of draft grounds of appeal)

24.  The Court rejected amendments save for “clerical ones”. The term “clerical” was tracked from Mr Andrew Mak’s written submission at the hearings. “Clerical” meant what it said – typographical errors or anything such as using “Excel Gainer” instead of “3^rd Plaintiff” or “5^th Defendant”. They are things that do not affect the substance of the pleading. Sections A-I of the DASOC were not clerical amendments in nature. If there had been anything unclear, the Plaintiffs could have asked for clarification as to terms of the order. Clearly, this ground cannot form the basis for any grant of leave to appeal.

25.  For the reasons given, there are no reasonable prospect of success in any of the draft grounds of appeal nor other reason in the interests of justice as to why the appeal should be heard.

26.  Accordingly, I dismiss the application with costs to the Defendants. There shall be summary assessment of costs on the papers without an attendance. The Defendants do file and serve their costs statement within 3 days, and the Plaintiffs do file and serve their grounds of objection 7 days thereafter.

27.  I thank counsel for their assistance to the Court.