LI NANFENG v. WONG CHUN HONG

HCA 3447/2016

[2019] HKCFI 2816

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3447 OF 2016

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JUDGMENT

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1.  In the present action, the plaintiff (“Li”) pleaded a contractual claim against the defendant (“Wong”), and now applies for summary judgment of the principal sum claimed.

Background

2.  The present application is the aftermath of the previous proceedings in this action, namely the interpleader application taken out by Wong in respect of the principal sum and interest claimed.  With the same set out in detail in those court decisions referred to below, the background may be briefly summarized as follows with the corporate bodies involved referred to as defined in those decisions.

3.  Li’s contractual claim is for the proceeds of sale of his indirect 4.1% beneficial interest in the shareholdings of SZITIC Property and its former subsidiary, Shanghai Feng Dan, as well as interest.  The indirect interest in the two companies were held through another company, Sheng Feng.  The shares in Sheng Feng were held by two persons, Chen and Yu.  In other words, the claim as pleaded is that Chen and Yu held the indirect beneficial interest in the two companies ultimately for Li.

4.  Li’s case is that he and Wong agreed that the latter would receive the proceeds of sale of the former’s indirect interest in the two companies, namely the SZITIC Property proceeds and Shanghai Feng Dan proceeds, and would pay to Li the same with interest upon the occurrence of certain events^[1] that had materialized by the commencement of the present action.  As mentioned, the present application extends to the principal sum of RMB88,265,737 (“the Sum”), leaving out the claim for interest.

5.  By summons filed on 24 May 2017 (“the Interpleader Summons”), Wong sought to interplead the Sum pursuant to O 17 of the Rules of the High Court (“RHC”) on the basis that he was prepared to return the Sum to Li but was concerned about the possible claim by Chen and Yu for the same against him.  In support of the Interpleader Summons, Wong at his own initiative deposited the Sum with his solicitors together with an undertaking not to remove or release the Sum without the approval of the court.

6.  On 6 November 2017, the Interpleader Summons was heard before DHCJ Yee.  For such purpose, Wong further proposed, and as set out in a draft consent order submitted to the court then, that the Sum should be paid out to Li from his solicitors in the event that he was allowed to interplead and upon Chen and Yu not appearing and thus debarred from prosecuting against him in respect of the Sum.

7.  On 11 December 2017, DHCJ Yee handed down his decision whereby the Interpleader Summons was dismissed.  The major reasoning, which I shall adopt the summary of it by Leading Counsel for Li in the present application, was as follows:

(1)  Wong failed to bring his application within O 17 for want of a real foundation for his alleged expectation to be sued by Chen or Yu, the alleged rival claimants to the Sum.

(2)  Wong failed to identify the legal basis for any possible adverse claim that Chen and Yu could reasonably make against him, or to provide any evidence to support his suggestion that he would or could be accountable to Chen or Yu.

(3)  It is indisputable, despite Wong’s explanation, that it is his pleaded case in the related HCA 2611/2015 (commenced by Li’s wife against Wong) that he had to pay Li for the acquisition of the 4.1% shareholdings in SZITIC Property and had made partial payment to Li’s wife.  By affirmation, Wong had confirmed that all the facts so pleaded there were true. By then, Wong had not raised any issue as to Li’s case that Chen and Yu were his nominees.

(4)  There was on the evidence hardly any legal basis of any possible adverse claim that Chen and Yu could reasonably make against Wong in respect of the Sum.

8.  Before DHCJ Yee, Leading Counsel for Li invited the court to make an order that Wong should pay the Sum to Li forthwith, upon summary determination that Chen and Yu had no adverse claim to the same at all.  The court did not accede to the request on the basis that there is no jurisdiction under O 17 to do so, when Wong could not bring himself within that Order and there was no separate application for summary determination of the claim.

9.  That brought Li to take out the present application for judgment in respect of the Sum (but, as mentioned, not interest) by summons filed on 7 March 2018.

10.  Affirmation evidence for the purpose of the present application closed in April 2018.

11.  One of the grounds in opposition raised by Wong in his affirmations was his pending application for leave to appeal against the decision of DHCJ Yee mentioned above, and, in the event leave was refused, his intended renewed application for leave to appeal before the Court of Appeal.  That ground no longer sustains.  Wong’s application for leave to appeal was dismissed by DHCJ Yee on 31 May 2018. His renewed application for leave to appeal was further dismissed by the Court of Appeal on 3 August 2018 on the basis that the proposed appeal was hopeless.

12.  One month prior to the present hearing, on 16 November 2018, Wong took out his summons for leave to file a further affirmation in opposition of the summary judgment application. Upon Leading Counsel for Li indicating no objection to that, I now record my leave to Wong to do so with costs to Li.

The principles

13.  Whilst it the plaintiff’s burden of proof of his claim, it is the burden of the defendant to show that there are issues to be tried or alternatively that the action ought for some other reason proceed to trial: O 14, r 3(1) of the RHC.  In resisting the application for judgment, the defendant has to condescend upon particulars in addressing the claim, and to show that he has a credible defence: Hong Kong Civil Procedure 2020 (Vol 1) at §§14/4/4.

14.  In opposition of the present application, the arguments advanced on behalf of Wong seek to raise triable issues concerning: (i) Chen and Yu; and (ii) Wong himself.

Concerning Chen and Yu

15.  Insofar as Chen and Yu are concerned, the decisions of DHCJ Yee and the Court of Appeal should put the argument to rest.

16.  For the purpose of the interpleader application, Wong has failed all the way up to the Court of Appeal level to establish a real foundation for expecting that Chen or Yu would and could have a claim against him in respect of the Sum.  As a matter between Li and Wong, the substance of the rulings of the court in this respect constituted an issue estoppel: see Halsbury’s Laws of Hong Kong, Vol 26 at §170.027.

17.  Whilst it has been held that the rules relating to res judicata in interlocutory matters are less stringent than those generally applicable, the real test is a matter of the nature and substance of the ruling: see Buildtech Ltd v Hung Wan Construction Co Ltd, HCMP 154/2012 (16 February 2012) at §13; Re Chime Corporation Limited (No 2) [2003] 2 HKLRD 945 at §23.

18.  It will not be unjust and unreasonable for the issue to be litigated afresh, if (i) the ruling in the first application was not based on merits of the issue but on a technical objection; (ii) upon the first application, the applicant had failed to prove essential facts from mistake or inadvertence; (iii) there is new evidence that seriously justifies reconsideration of the issue; or (iv) there is material change in circumstances of a non-evidentiary nature: see Chu Hung Ching v Chan Kam Ming & Ors [2001] 1 HKC 396 at 402A-D; 403C.

19.  By his most recent affirmation filed more than three months after the Court of Appeal’s decision, which this court allowed as mentioned, Wong added that the service of his interpleader summons had finally been effected on Yu but not Chen.  In my view, that does not amount to any change in circumstances that would have justified reconsideration of the merits of his allegations in respect of the likelihood of any adverse claim by Chen or Yu against him for the Sum.  The fact that even now, according to Wong, there remains no response from either Chen or Yu reinforces the lack of material change.  So does the fact that with or without being alerted by the Interpleader Summons, neither Chen nor Yu has ever indicated to either party to the present action action an intention to claim the Sum.

Concerning Wong

20.  Insofar as Wong himself is concerned, the question is whether he personally has a bona fide and credible defence to the claim.

21.  Wong’s stance in the interpleader proceedings remains relevant to determining the bona fide of his defence.  In support of the Interpleader Summons, Wong’s stance, as expressed at his own initiative and through his legal representatives, was unmistakably that he claims no interest in the Sum and he is prepared to return the same^[2] to Li or Chen/Yu.  This was equally the observation of the Court of Appeal^[3].  The whole point of the Interpleader Summons was, as it had to be, merely to ensure that Wong could absolve himself from the contest for the Sum but not the liability to pay it.  This was followed by the conduct of depositing the Sum with his solicitors subject to the undertaking not to release the same without the court’s approval.  This was reinforced by the draft consent order submitted to the court at the hearing before DHCJ Yee mentioned above.  Effectively, had the Interpleader Summons turned out to be granted and the suggested possible contest in respect of the Sum from Chen or Yu been out of the question, there would have been no basis for Wong to refuse to pay the Sum to Li.  That was the unequivocal stance of Wong.

22.  By seeking to raise defence in dispute of his liability to pay the Sum to Li, Wong effectively attempts to resile from his stance mentioned above.  In terms of substance and merits of such attempt, the major argument of Wong is that: (i) he should be entitled to put Li to strict proof of his entitlement to the Sum as opposed to that of Chen and Yu; (ii) he should be allowed to dispute the quantum.

23.  The application under O 17, r 1(1)(a) of RHC had to be based on the liability of Wong to pay, only that he was allegedly uncertain as to whom he should pay.  He claimed no interest in the Sum, and the contest that he projected was expected to be that between Li and Chen/Yu.  Had his stance been that he is not liable to Li, as he is now contending, Wong should have defended instead of interpleaded by reference to the prospect of claim by Chen and Yu.  Wong is precluded from disputing these as a matter between him and Li.

24.  Viewing the argument advanced on behalf of Wong as independently raised for the purpose of the present application, I still cannot accept it.

25.  It is the burden of Wong to condescend upon particulars in addressing the claim so as to raise triable issues.  His alleged suspicion about Li’s claim that Chen and Yu were his nominees holding the shareholdings in question, and thus the proceeds of sale and ultimately the Sum, has no real evidential foundation on the basis of the same set of facts before the court in the interpleader proceedings.  There has never been any allegation by Wong whereby, absent the alleged entitlement of Chen and Yu and independently, Li would somehow not be entitled as the beneficial owner of the shares in question and thus the proceeds of sale of the shares and the Sum.  Even after the present application has been taken out, Wong, by way of open letter from his solicitors, proposed that upon Li obtaining confirmation that Chen and Yi would have no claim or objection, he would consent to summary judgment being entered against him in terms of Li’s summons.

26.  The suggestion that there might be “someone else” who would be entitled to the Sum is totally unfounded in terms of particulars and evidence.  This also contradicts the previous stance of Wong, by way of the draft consent order submitted to the court during the hearing of the Interpleader Summons, that in the event of Chen and Yu being debarred from claiming in respect of the Sum, the same should be paid out to Li.

27.  Wong’s claim of entitlement to call Chen and Yu as witnesses, if this action proceeds to trial is effectively putting the cart before the horse.  The claim that the circumstances warrants investigation or the prospect of things coming up in oral evidence per se cannot put his case under the “some other reason” limb of O 14, r 3 to justify a trial, if ultimately he does not have a credible basis for suggesting the existence of such “some other reason” to resist the claim: see HKCP (above) at §14/4/10.

28.  Wong fails to show a bona fide defence on his liability to the claim.

29.  Wong seeks to dispute quantum by reference to (i) his dispute in respect of the Shanghai Feng Dan proceeds; and (ii) his entitlement to set-off by what he had allegedly paid to the wife of Li in the sums of SGD120,000 and HK$20,000,000 in part payment of the Sum.

30.  Wong now says that the amount of the Shanghai Feng Dan proceeds should be RMB18,077,728 instead of RMB26,740,000 alleged by Li.  In his words, Wong was “generous” in not taking issue as to quantum, because he adopted a “let’s not quarrel on triviality” approach in respect of the amount for the purpose of the Interpleader Summons.  Now that he was not allowed to interplead, he decided to retract from his then stance and to dispute the quantum.  Wong referred to his affirmation filed for the Interpleader Summons in this respect, but the same did no more than repeating what he says should be the amount of the Shanghai Feng Dan proceeds as he now does.  In other words, there has not been and still is no evidence adduced in support of such assertion.  Objectively, the alleged waiver on triviality when the difference was a sum in excess of RMB8,000,000 is simply incredible for any purpose.

31.  As to the set-off against the amount of alleged payments in part payment of the Sum to Li’s wife, it is unclear from his affirmation in opposition of the present application whether Wong is relying on the same explanation of “let’s not quarrel on triviality” approach before.  Again, objectively, the alleged waiver on triviality when the alleged difference was so significant is simply incredible for any purpose.

32.  Wong has failed to show a bona fide dispute as to quantum.

Disposition

33.  For the record, I give leave to Wong to file his further affirmation as per his summons filed on 16 November 2018 with costs to Li in any event.  Notwithstanding that, final judgment is entered against Wong for the sum of RMB88,265,737 (or its equivalent amount in Hong Kong dollar).  The judgment sum shall be paid by Wong to Li by way of payment out of the deposit made by Wong to its solicitors, Michael Cheuk Wong & Kee (“MCWK”) (and subject to undertakings to the court as contained in the letter from MCWK to Li’s solicitors, Hastings & Co, dated 17 October 2017) within 14 days.

34.  Following the above event, I make a nisi order that Wong shall pay to Li costs of the present action, including any costs reserved, to be taxed, if not agreed, with certificate for two counsel.  In the absence of application within 14 days to vary, this nisi costs order shall become absolute without further order.

35.  The claim for interest is left out of the present application. Pursuant to the request of Leading Counsel for Li, I give the following directions:

(1)  Wong shall file and serve his defence in respect of the rest of the claim in the present action, namely the claim for interest, within 28 days;

(2)  Li shall file and serve his reply to the like extent within 28 days thereafter;

(3)  The parties do proceed in accordance with O 25 of the RHC upon close of pleadings.