XCHRX THE CHINA INVESTMENT & DEVELOPMENT FUND (NO.3) LTD. v. WONG KWONG YIU, JOHN

HCA22080/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.22080 OF 1998

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J U D G M E N T

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1. This is the Defendant's appeal against the order of Master Jones dated 1st September 1999 refusing the Defendant's application for security for costs to be given by the Plaintiff.

2. It is common ground that the Plaintiff is a company incorporated overseas and is therefore a foreign Plaintiff within the meaning of the Rules of High Court, O.23, r.1(1)(a).

3. In the course of the appeal (as was in the Court below) the main arguments of the parties centred around the merits of the parties' respective case. It is trite law, as the parties accepted, that in this kind of application, the merits of the Plaintiff's claim are not usually a major factor because more often than not the Court cannot at an interlocutory stage properly consider this aspect. The exception to this "rule" is that the Plaintiff's claim can be shown to be overwhelming, or, in the words used in Wong Kwok Mei, Sanrita v. Eversonic Incorporated [1992] 2 HKC 62, the Plaintiff's claim is "genuine and strong". I have borne this principle in mind when deciding this appeal.

4. The Plaintiff's claim against the Defendant is for the sum of about US$8.26 million. It is based on various written arguments which in substance was a guarantee contract. The original Defence alleged that the crucial document relied upon by the Plaintiff had not been signed and therefore there was no binding contract between the parties. At the beginning of the appeal hearing, Mr Law for the Defendant, asked for leave to amend the Defence. This was not opposed by Mr Lui for the Plaintiff and leave was given for the Defence to be amended. The Amended Defence raises three lines of Defence :-

(a) the "no agreement" Defence referred to earlier;

(b) the Plaintiff was at all times a money-lender and the loans in question were money-lender transactions;

(c) (in the event the guarantee contract is found to be binding and enforceable) there was no consideration in support of the guarantee contract.

5. At the appeal hearing, Mr Law indicated he would not rely on either point (a) or point (c) above (for the purpose of the appeal only). I understand him to be saying that I can consider that the Plaintiff's claim is either overwhelming or "genuine and strong" vis-à-vis these two points. I consider that he was entirely correct in taking this stance in view of the documentation before me. Even if he had not made this implied "concession", I would have no hesitation in reaching the same conclusion that the Plaintiff's claim is overwhelming or "genuine and strong" vis-à-vis these two points.

6. As a result, the only real issue between the parties is whether the Plaintiff's claim is overwhelming or "genuine and strong" in relation to the so-called "money-lender" Defence. Mr Law argued that once this Defence is raised, the Court has to investigate into the allegation. Thus, the Plaintiff cannot be said to have shown an overwhelming or "genuine and strong" case. He relied for this argument on the following cases :-

(a) Ng Shou Chun v. Hung Chee San [1994] 1 HKC 155;

(b) Nash v Layton [1911] 2 Ch 71;

(c) Cheung Chow v. Cheung Ng Sheung Steve CA No.119 of 1993.

It appears that in each of these cases, there was some evidential basis before the Court in support of the allegation that a money-lender transaction was in issue.

7. Mr Liu's answer to this argument is in short that this Defence is not a bona fide defence and was one created for the purpose of this action. He drew my attention to the following matters :-

(a) the writ was issued on 24th December 1998;

(b) the Defence was filed and served on 7th January 1999. No money-lender defence was raised therein;

(c) the Defendant applied for security for costs on 1st March 1999 but without any supporting affirmation;

(d) on 16th March 1999, that application was dismissed for want of prosecution;

(e) the Defendant issued a second summons for security for costs on 20th March 1999;

(f) the Defendant filed and served a supporting affirmation on 7th May 1999;

(g) despite a direction allowing reply evidence to be filed and served, no such evidence was adduced by the Defendant;

(h) the Defendant's second summons was dismissed by Master Jones on 1st September 1999 (the subject matter of this appeal); and

(i) on 21st October 1999 (some eight days before the appeal hearing) the Defendant took out a summons for leave to amend the Defence.

8. Mr Liu said that up to now, there is absolutely no evidence from the Defendant to support the money-lender defence. In reply, Mr Law argued that the point has been raised in the pleadings and the Court can infer from the Plaintiff's case and the documentation (that two loans were advanced by the Plaintiff) that it is at least arguable that the Plaintiff was a money-lender and that the loans were money-lender transactions.

9. In the circumstances set out above, I conclude that (at least) for the purpose of this appeal, there is no substance in the money-lender defence. I agree with Mr Liu that the way in which, and the time at which, the money-lender defence is raised entitles me to so conclude. For this reason, I find that this is one of the exceptional cases where I should have regard to the strength of the Plaintiff's claim. I find that (at least) for the purpose of this appeal, it is overwhelming or "genuine and strong".

10. In reaching that conclusion, I have not taken into account the second affirmation of Lam Miu Yin Amy dated 26th October 1999, in particular paragraph 5 thereof and exhibit LMYA4. In my view, that piece of evidence only reinforces my said conclusion.

11. It has been said that the likelihood of the Plaintiff winning the case is "... a major factor for consideration..." : see The Supreme Court Practice 1985 Vol.1 para.23/1-32 referred to inLeslie Fay Companies Incorporated v. Cheerio Ltd. [1990] 1 HKC 463, 464 B-C. I consider that this observation is applicable to the present appeal.

12. A point was made by Mr Law regarding a letter dated 4th February 1999 from the Plaintiff's Solicitors offering to give $100,000 by way of security for costs. I have taken that letter into account and consider that it is not a factor which should affect my discretion in a great way.

13. For the above reasons, I consider that my discretion should be exercised in refusing the application for giving security for costs. I agree with the Master's order and the appeal is therefore dismissed.