HUANG YU HUI v. ZHENG SHIZHI (ALSO KNOWN AS ZHENG SHIZHI)

HCA 646/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 646 OF 2015

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R U L I N G

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INTRODUCTION

1.  This is the application by the plaintiff (P) for leave to appeal against the interlocutory judgment (“the Judgment”) of this court handed down on 13 January 2017 setting aside the summary judgment granted in his favour by the master[1] and giving conditional leave[2] for the defendant (D) to defence.

2.  The background of the case was outlined at §§2‑4 of the Judgment which I reproduced as follows:

“2.  Shortly stated, D was the sole owner of a residential property on Pokfulam Road (“Property”).  The case is about the alleged sale of the Property by D to P at the price of $21.2 million.  P paid a total of $2.12 million as the initial and further deposits respectively upon the execution of the Preliminary Sale and Purchase Agreement (PSPA) and the formal Sale and Purchase Agreement (SPA).  However, D then failed to complete the transaction or to return the deposits.

3.  As a result, P took out proceedings against D for specific performance of the transaction and also damages.  D responded by filing a defence asserting that he had been forced to sign documents on the Mainland under threats of personal safety by a Mr Sze with whom he had a commercial dispute.  D said that he had not engaged any estate agent or solicitors and had not received any of the deposits paid by P, those monies being first paid to a firm of solicitors purporting to be acting for D (“the Solicitors”) and then to a Mr Ng who was said to be a business partner of Mr Sze and a relative of P.  D alleges that Mr Ng (on Mr Sze’s instruction) had without D’s authority and consent sold the Property to P.  D claims that the transaction was voidable because of P’s knowledge of the relevant improper and unlawful acts.  D also counterclaims for declaration, damages and other reliefs.

4.  D replied to P’s request for further and better particulars of the defence.  After that, P took out a summons pursuant to O 86, Rules of the High Court (“RHC”) for specific performance and striking out of D’s counterclaim.  The orders sought were granted by the master and D filed a notice of appeal against the master’s decision.”

3.  This court granted D conditional leave to defence on the basis that:

(i) there is just sufficient foundation for the contention that the estate agent had constructive knowledge of the alleged impropriety in the sale of the Property which should not be dismissed offhandedly and warrants further examination;[3] and

(ii) D has by a narrow margin managed to raise a triable issue as to whether P has constructive knowledge (through his estate agent) that the sale of the Property was tainted with impropriety.[4]

4.  In arriving at the above, this Court relied on a letter written by D (who was not in Hong Kong) dated 30 March 2016 (“the Letter”) which was not covered by a proper affirmation.[5]  Reference was made to O 86 r 4(1), RHC which provides that,

“A defendant may show cause against an application under rule 1 by affidavit or otherwise to the satisfaction of the Court.” (Emphasis supplied)

This Court was of the view that the phrase “or otherwise” is wide to enable the court to have regard to the Letter in the present case.

PROPOSED GROUNDS OF APPEAL

5.  P’s proposed grounds of appeal can be summarised as the following complaints:

(i) this Court erred in law in holding that D could rely on the Letter;

(ii) this Court erred in giving any weight to the Letter when there were ample opportunities for D to make an affidavit verifying the contents of the Letter;

(iii) this Court erred in holding that P had “imputed knowledge” of the “constructive notice” by the estate agent of the alleged undue influence; and

(iv) this Court erred in holding that the estate agent had constructive knowledge of the alleged misconduct of Mr Sze.

RELEVANT LEGAL PRINCIPLES

6.  The legal principles governing the granting of a summary judgment have already been stated at §§7‑8 of the Judgment and are not in dispute.

7.  The test for granting leave to appeal is well settled and not in dispute.  Leave to appeal shall not be granted unless (a) the appeal has a reasonable prospect of success; or (b) there is some other reason in the interests of justice why the appeal should be heard: s 14AA(4), the High Court Ordinance (Cap 4).   It is well‑established that reasonable prospect for this purpose involves the notion that the prospects of succeeding must be reasonable, and therefore more than fanciful, without having to be probable: Wynn Resorts (Macau) SA v Mong Henry.[6]

8.  In case a ground of appeal is levelled at the exercise of the court’s discretion, the well‑known principles in Hadmor Productions Ltd v Hamilton[7] would apply.  See also Wong Luen Hang & Anor v Chan Yuk Lung & Ors.[8]

9.  It is rare for a party to appeal against a decision of granting leave to defend. In Strong Base Services Ltd v Geroma Electronic Ltd & Anr,[9] the Court of Appeal cited with approval the following passage from European Asian Bank AG v Punjab & Sind Bank (No 2),[10]

“If the judge has already decided, on the evidence, that there is a triable issue on a question of fact, it must in the very nature of things be unlikely that this court will interfere with his decision and decide that no trial should take place; because, where such a conclusion has already been reached by a judge, this court will be very reluctant to hold that there is no issue or question which ought to be tried.”

In RG Carter Ltd v Clarke,[11] which is also cited with approval in Strong Base, Lord Donaldson of Lymington, MR, explained why an appellant court would be reluctant to interfere with the dismissal of an application for summary judgment as follows:

"By contrast, the dismissal of an application for summary judgment or, which is the same thing, the making of an order giving unconditional leave to defend leaves the rights of both parties wholly intact and the parties with everything to play for.  All that has happened is that the court has declined to take a short cut."

CONSIDERATION

As to Ground (1): “or otherwise”

10.  Ms Wong, counsel for P, submits that this Court erred in saying the following at §13(i) of the Judgment:

“I note the remarks at §14/4/3, HKCP that the use of the term “or otherwise” is not intended to open wide the door for giving leave to a defendant who has no real defence and that in exceptional and obvious cases a letter from a defendant raising a genuine issue may be sufficient. In other words, the phrase “or otherwise” allows the court to look at the substance of the materials relied upon by a defendant in case they are not covered by a proper affidavit.”

Ms Wong relies on Chinakong Manufactory Ltd v Uniden Hong Kong Ltd,[12] where Kaplan J (as he then was) stated that there are four methods by which a defendant may show cause under O 14 r 1, RHC against an application for summary judgment, namely:

(i) to file an affidavit(s) deposing to the fact that there is a defence on the merits and setting out the matters which give rise to the defence;

(ii) in addition to this narrative, to exhibit to the affidavit a draft defence which it is proposed to file;

(iii) to exhibit a defence and verify its truth and content by affidavit; and

(iv) to show on the face of the Statement of Claim itself that there is no cause of action against him.

11.  As O 14 r 4(1) is similar to O 86 r 4(1), Ms Wong submits therefore that the phrase “or otherwise” in the latter also refers to (iv) above where an affidavit is not necessary, like where the defects of the Statement of Claim alone would be sufficient in discharging the application for summary judgement and it does not encompass the situation where an affidavit is necessary but the defendant fails to file one.  Reference is also made to Cheung Tai Hong Holdings (Technology) Limited v Cheng Yuk Kuen[13] in which Chinakong’s case was followed.  Lastly, Ms Wong submits that even if it is accepted that in some cases the court has discretion to consider unsworn evidence filed in opposition to an application for summary judgment, this Court erred in fact that this is a proper case to do so.

12.  With respect, I am unable to accept Ms Wong’s above submissions.  My reasons are as follows:

(i) Kaplan J referred to the previous edition of the White Book and his Lordship did not disagree with the following comments made there that:

“In practice the Masters will generally require an affidavit from the defendant before they will feel “satisfied” that the defendant is entitled to leave to defend save in exceptional or obvious cases, e.g. in a small claim, a letter from the defendant acting in person living a long way from the Court raising a genuine issue may be sufficient.”

This Court relied on a similar paragraph in the Hong Kong Civil Procedure 2017 which contains the same comment.

(ii) There is in fact no inconsistency in approach between Chinakong’s case and the approach adopted by this Court.  Kaplan J said,[14]

“the practice of the court, save in these unusual cases, is to require an affidavit before it can be satisfied.”

In a similar vein, this Court said that “in exceptional and obvious cases a letter from a defendant raising a genuine issue may be sufficient.”  The difference between the two is only one of emphasis.

(iii) I note that the concern expressed by Kaplan J that:

“There may be many reasons why a defendant wishes not to go on affidavit, the most obvious being that he is fearful of being caught out in a lie with all the consequences that may entail.”[15]

It is pertinent to note that in both Chinakong’s case and in the case Cheung Tai Hong Holdings (Technology) Ltd, the defence had filed no evidence whatsoever in opposition to the application for summary judgment.  In the present case, however, D had caused his brother to exhibit the Letter.  Moreover, this Court had in fact considered and addressed the concern of Kaplan J at §13(iv) of the Judgment:

“Mr Tang submits that if D is allowed to rely on his letter instead of a proper affidavit, then even if D deliberately lied in what he said in the letter, he could not be caught for perjury, as the letter was not made under oath. That may be correct. However, if D1 deliberately caused a document to be placed before the court for the purpose of court proceedings which he knew contain false information, then there would remain a possibility of charging him with the offence of doing an act tending and intended to pervert the course of public justice.”

(iv) I agree with the submission of Mr Lai, counsel for D, that neither Chinakong’s case nor the case Cheung Tai Hong Holdings (Technology) Ltd supports the very narrow interpretation of the phrase “or otherwise” in O 86 r 4(1), RHC that it can only cover situations where the Statement of Claim under consideration is on its face defective so that no opposing affidavit would be necessary and that it cannot cover a letter made by the defendant even in case of exceptional circumstances.

(v) As regards the exercise of discretion, I have regard to what Ms Wong has said in her written submission.  However, D had in the Letter explained why he was not able to come to Hong Kong to make an opposing affidavit.  The fact that D was able to put his signature on the statements of truth of the Defence and the Amended Defence does not mean that he would also have been able to come to Hong Kong to make an affirmation to oppose the application for summary judgment.  This contention of Ms Wong, with respect, is to impermissibly ask the Court of Appeal to exercise an independent discretion of its own: see also Excel Courage Holdings Ltd v Wong Sin Lai.[16]

13.  Based on the above, I can see no merits in this ground.

As to Ground (2): weight given to the Letter

14.  The complaint is mainly that D had ample opportunities to make an opposing affirmation but failed to do so.  In the circumstances, it is submitted by Ms Wong that the Court erred in giving any weight to the Letter.  I note, however, that very little was said in Ms Wong’s written and oral submissions in support of this ground.

15.  The point raised had been considered at §§ 14‑15 of the Judgment where this Court said,

“14. Mr Tang went on to submit that before the defendant can rely on the words “or otherwise” in O 86 r 4(1), RHC, there has to be affidavit evidence showing the existence of exceptional circumstances justifying D’s reliance on just his letter instead of a proper affidavit.

15. I am unable to accept Mr Tang’s submission above.  With respect, that is to put a stricture on the provision which is not supported by its wording.  It is also to put the cart before the horse, as D would not rely on a letter if he could adduce affidavit evidence.  The absence of a proper affidavit from a defendant, in my view, goes only to the question of weight.  That said, depending on the nature and contents of the materials in question, the absence of a proper covering affidavit may cause the court not to attach any weight to them.  Whether or not that is the case is a fact‑specific question.  In the present case, the document in question is D’s own letter which contains what he is supposed to give evidence about.  D had also given some reasons as to why he could not come to Hong Kong to make an affirmation.  In the circumstances, I simply cannot see why D should not be allowed to rely on the contents of that letter, simply because the letter is not a proper covering affidavit.  Of course, if D would not come to Hong Kong to give evidence in case of a trial, then the situation would be different.”

16.  With respect, the question of weight rarely affords a ground of appeal.As regards the present case, I can see no reasonable prospect of success in this ground. 

As to Ground (3): imputed knowledge through estate agent

17.  The complaint is that this Court erred in law and in fact in finding that P was capable of having constructive knowledge of any impropriety of the sale of the subject Property through his estate agent.  Ms Wong relies heavily on Mo Ying v Brillex Development Ltd & Anor[17] and the case authorities referred to in that judgment for the proposition that estates agents in Hong Kong are different from those in England and Wales, that in Hong Kong that they usually act as brokers or introducers of the relevant property and that in law they are not a true agent of the principal but only a middle man.  It is submitted therefore that the knowledge of the estate agent, if any, cannot in law be reputed to P.

18.  With respect, I agree with Mr Lai that there are obvious difficulties with P relying on the above law point as a ground of appeal. First, the point that the estate agent was not a true agent in law had never been raised before the master or this court at the substantive hearing.  It is only raised for the first time now.  Before the master and before this court at the substantive hearing, the sole argument raised by P on constructive or imputed knowledge was the “fraud exception” which, P said, would have the effect of avoiding the estate agent’s knowledge being imputed to him.  That was the reason why this Court focused on that issue: see §24 of the Judgment.

19.  Ms Wong fairly accepts that the point based on Mo Ying’s case had not been argued in this case before.  Nevertheless, she submits that it is appropriate to grant leave as this is “a new argument based on the same matter if the whole matter was before the court”: see §59/10/7, HKCP.

20.  With respect, I accept Mr Lai’s submission that it would be procedurally unfair for this court to grant leave to appeal on the new point.  As said by the Court of Appeal in Lehman Brown Ltd v Union Trade Holdings Inc & Others,[18]

“10. Whilst the Court of Appeal obviously has power to entertain new points in an appeal, it is also clearly and firmly established that new points which are fact sensitive or otherwise affect the course of evidence or conduct of the case at the hearing below should not be allowed.  Though this principle is usually applied in situations where the new points necessitate further evidence to be adduced, it is not confined to such scenarios.  Very often, the raising of new point by one party may lead to the other party raising counter arguments and the consideration of such counter arguments may involve factual assessment in a different light from that undertaken by the court below. Sometimes, it may involve a different weighing of factors in the exercise of discretion.  Alternatively, the other party may embark on a different course of forensic conduct if the new point were taken earlier.  The appellate court, in considering whether the new point would be entertained, is entitled to take these matters into account in order to avoid unfairness to the other party.

11. Bearing in mind the broad discretion under section 14AA of the High Court Ordinance, this court should apply the same approach when leave to appeal is sought on the basis of some new points which had not been canvassed at the substantive hearing below.  There is no point in granting leave on a new ground which the Court of Appeal would not entertain on the hearing of the appeal proper.”

21.  In the present case, there would have no need to invoke the “fraud exception” at all if (i) an estate agent in Hong Kong cannot in law be an agent properly so-called; and (ii) there is not a triable issue that the estate agent in question was in fact acting as P’s agent.  Therefore, I accept Mr Lai’s submission that the way P had argued its case led D to believe that there was a tacit acceptance on P’s part, at least for the purpose of the application for summary judgment before the master and the substantive hearing before this court, that there were triable issues on both (i) and (ii).  Had it be otherwise, the conduct of the defence may well have been different.  Moreover, this Court responded to the contentions of the parties at the time and focused its attention accordingly in the Judgment.

22.  Secondly, neither Mo Ying’s case nor the case authorities to which it referred has laid down any general rule of law that an estate agent in Hong Kong can never be an agent in the strict legal sense.  For example, in Yili Concepts (HKG) Ltd v Lee Wai Chuen,[19] DHCJ Susan Kwan (as she then was) held that:

“It is a question of fact in each case whether an estate agent is authorised by and therefore acting for a particular party in providing information relating to a property to another party. Although an estate agent in Hong Kong usually acts as a broker taking commission from both sides, he may assume different roles at different stages of the negotiation leading to the transaction.

...

I do not think Godfrey J [in Cheng Kwok Fai] was laying down any proposition of law that is generally applicable in that part of his judgment. As I have stated, it is a question of fact whether an estate agent was acting for a particular party at a particular stage of the negotiating process.” (Emphasis supplied)

23.  I have taken into account Ms Wong’s argument that in view of Mo Ying’s case, the mere fact that P had engaged an estate agent does not mean that he would automatically be imputed with the knowledge of that estate agent and more would be required.  However, in view of the way in which P had conducted his argument before the master and this court at the substantive hearing which Ms Wong describes as “unfortunate”, in my view it would not be right to blame D for the present lacuna of evidence about the scope of the authority of the estate agent and then to deny him of his day in court.  As I have said, had the point been raised before, the conduct of the defence may well have been different.  In my view, the issue of whether imputed knowledge, which entails a question of fact depending on the evidence, should be left to the trial judge.

As to Ground (4): constructive knowledge of the estate agent

24.  There are three points involved: (i) whether there is a sufficient factual basis to raise a trial issue of duress; (ii) whether there is a sufficient factual basis to raise a trial issue that the estate agent had at least constructive knowledge; and (iii) whether it is necessary for the constructive knowledge to relate to the risk of duress in particular or a risk of some kind of wrongdoing in general which may vitiate the transaction.

25.  All of the above issues have been dealt with at some length in the Judgement: as regards (i), at §§18‑19; as regards (ii), at §§ 22‑23; and as regards (iii), at §§33‑34. 

26.  I note that very little was said by Ms Wong in her written and oral submission in support of this ground.  With respect, I am unable to see a reasonable prospect of success in this ground.

CONCLUSION

27.  Having considered submissions of counsel, with respect the grounds of appeal, whether taken individually or as a whole, do not in my view have a reasonable prospect of success.  In the circumstances, I refuse leave to appeal.

28.  I make an order nisi that D has the costs of this application, with certificate of counsel, to be taxed if not agreed.