FUNG YEE WAN v. LUI FU SING

          HCMP 2805/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 2805 OF 2005

(On an intended appeal from DCCJ No. 2042 of 2005)

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D E C I S I O N

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1.  The defendant who is acting in person applies for leave to appeal from the judgment of Deputy District Judge J Ko giving summary judgment against the defendant on the ground that the defence was incredible.

2.  The plaintiff’s claim is for the return of $1 million for total failure of consideration.  It was her case that she paid the defendant $1 million by cheque dated 17 September 2002 against the defendant’s agreement to transfer to her 4% of the shares in Weld-Tech Electrical Supplies Co. Ltd. (“Weld-Tech”).  It is clear from the documents produced below that Weld-Tech had a paid up capital divided into 500,000 shares of $1 each and that until 15 August 2002 those shares were registered in the names of the defendant as to 300,000 shares and Chan Chung Yuen (“Mr Chan”) as to 200,000 shares.  It is clear that on 15 August 2002, the defendant transferred 299,999 shares to the Wesco Lightning Technologies Inc., a BVI Company (“Wesco”), and Mr Chan transferred 200,000 shares.  On the same day, the defendant declared that he held the remaining share in trust for Wesco.

3.  It is the defendant’s case that the plaintiff was acting for and on behalf of her husband Mr Clint Wong Wai Leung, and that on or about 20 September 2002, 20,008 shares in Wesco (4% of the issued shares) were transferred from Mr Chan to Mr Clint Wong and that the Weld-Tech shares had been transferred to Wesco because it was planned that Wesco should be listed.  The fact that 20,008 Wesco shares had been transferred to Clint Wong is not disputed.  However, it is the plaintiff’s case that those shares were transferred to Mr Clint Wong pursuant to a share benefit scheme because he was an consultant to Wesco.

4.  It is against such background that the judge came to the conclusion that the defence was incredible.

5.  As the commentary in the Hong Kong Civil Procedure 2006 (para. 14/4/9) shows, the court must not embark on a mini trial on affidavits and that the test is whether the defence is credible.  I am of the view that the defendant has a reasonably arguable ground of appeal that the judge has conducted a mini trial on affidavits.  Moreover it is reasonably arguable that the defendant has shown a good defence on the merits.  Basically the judge was of the view that documents in support of the defence should have been forthcoming.  For example in para. 31, the judge said:

“First, there is nothing in the evidence to confirm that 4% of Wesco shares is equivalent to 20,008 shares.  The defendant has failed to adduce evidence on the total number of Wesco shares issued.”

6.  In my opinion, the absence of such evidence on an application for summary judgment is not such as should lead to the conclusion that the defence is unbelievable.  The total issued share capital of Wesco is a matter of public record.  So, if it was the plaintiff’s case that 20,008 shares were not 4%, the plaintiff could have said so.  Nor has it been asserted by the plaintiff on affidavit that 20,008 shares were not equivalent to 4% of the issued share capital of Wesco.  Thus, it is difficult to see why the judge should disbelieve the evidence of the defendant to that effect.  In this regard, I have ignored the additional evidence produced by the defendant for the purpose of the appeal.  The admissibility of such additional evidence on appeal is doubtful and I would not have granted leave if the success of the appeal would depend on the admission of the additional evidence.

7.  As for the listing plan, the judge was of the view that it was incredible because no documentary proof was produced.

8.  The defendant also seeks leave to adduce additional evidence on this topic.  Again, the admissibility of such additional evidence is highly doubtful and I would not have granted leave if the appeal depended on them.  However, I am of the view that the defence could not be said to be incredible or unarguably bad.  I also note that Mr Clint Wong had not clearly denied that there were listing plans.

9.  The judge also relied on a letter dated 23 July 2002 from the defendant to the plaintiff where it was said:

“Further to our discussion, I am pleased to confirm the above transfer of old shares of (Weld-Tech) from (the defendant) to (the plaintiff).”

No shares in Weld-Tech was ever transferred.  Instead, all but one of the Weld-Tech shares were transferred to Wesco.  It is also noted that the letter referred to “old shares”.  The language is obscure but it is arguable that by causing the transfer of 20,008 Wesco shares to Mr Clint Wong the defendant had caused to be transferred to Mr Clint Wong what was equivalent to 4% of the old shares.  Whether that was in fact the case can only be resolved at trial.

10.  In all the circumstances, I grant leave to appeal.