THE HONG KONG AND SHANGHAI BANKING CORPORATION LTD. v. LEUNG CHI KIT t/a LEUNG PUI FORM MOULD WORKS

CACV 261/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 261 OF 1999

(ON APPEAL FROM HCA 5363/1999)

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J U D G M E N T

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Rogers JA:

1. This is an appeal from a judgment of Godfrey JA, sitting as an additional judge of the Court of First Instance on 19 August 1999 whereby he ordered that judgment be given to the plaintiff in respect of part of its claim in the sum of HK$1,500,000.00 together with interest at the rate of 10% per annum from 1 April 1998 to the date of the judgment and thereafter at judgment rate and that the defendant should be given unconditional leave to defend as to the balance of the plaintiff's claim.

The background

2. The plaintiff claimed payment of debts said to be due as a result of a Factoring Agreement which it had made with one of its clients, Hing Shing Timber Company o/b Hing Shing Timber Factory Limited. That company is now in liquidation. The plaintiff's claim in the action is for HK$5,470,490.63. The claim is in respect of a total of 98 invoices which were issued by Hing Shing over the period from 17 November 1997 until 19 March 1998.

3. The invoices related to timber which had been supplied to the defendant and had been used by the defendant in the course of concrete construction at various building sites. It was the defendant's case that the timber supplied was defective and as a result, the concrete formed was itself defective. Amongst other defences which were raised, the defendant claimed to have negotiated a settlement between itself and Hing Shing whereby the amount payable to Hing Shing was reduced. The defendant claimed to have paid the reduced amount to Hing Shing and as a result there was no debt owing in respect of which the invoices had been raised. That defence failed for the reason that the plaintiff had not been party to the agreement.

4. In support of the allegation that the defendant had negotiated with Hing Shing, evidence was filed in respect of loss which was said to have been caused by reason of the defective work occasioned because of the use of the substandard timber. On the basis of that evidence, the judge below considered that the defendant had quantified a claim in the sum of HK$4,512,027.00, that the claim was a genuine claim about which there was a legitimate dispute which the defendant was entitled to have tried. The judge, however, went on:

"I am not able, at this stage, accurately to evaluate the quantum of the defendant's claim. I propose in these circumstances to give judgment for the plaintiff for part of its claim, namely, $1.5m, and to give the defendant unconditional leave to defend as to the balance of the plaintiff's claim ...."

5. It is not apparent, and counsel were not able to assist, as to where the figure of $1.5m came from. There is one reference to such a figure in the evidence but it is in relation to 1 January 1998 which, of course, is prior to the date of many of the invoices. Whereas, therefore, it may have been in order for leave to defend to be conditional upon payment of a sum into court to represent an amount in respect of which there was no dispute, it is difficult to understand why final judgment was entered for a sum greater than the difference between (a) the sum claimed by the plaintiff, i.e. $5,470,490.63 and (b) the sum which the judge treated as being the counterclaim by the defendant, i.e. $4,512,027.00.

6. At the hearing of the appeal, the defendant sought to introduce further evidence to show that the quantum of his claim arising out of the allegedly defective timber would exceed the plaintiff's claim. This was opposed on the basis of the principles set out in the judgment in Ladd v. Marshall [1954] 1 WLR 1489. Denning LJ said at p.1491:

"... first, it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial; secondly, the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; thirdly, the evidence must be such which is presumably to be believed, or in other words it must be apparently credible, though it need not be incontrovertible."

7. Sir John Donaldson MR in R. v. Home Secretary, ex p. Momin Ali [1984] 1 WLR 663 at p.670 referred to the principles being subject always to the discretion of the court to depart from them if the wider interests of justice so require.

8. It has been held in the House of Lords in the case of Langdale v. Danby [1982] 1 W.L.R. 1123 that a summary judgment, in that case under Order 86, was a judgment after hearing a cause on the merits and therefore on appeal, further evidence should only be admitted if there were "special grounds" as referred to in the principles set out in Ladd v. Marshall. In doing so, Lord Bridge, with whom all the other law lords agreed, expressly disapproved statements indicating that evidence was commonly received on appeal in matters of summary judgment. However, he did go on to say at page 1133D :

"In the situation arising on an appeal to the Court of Appeal from a summary judgment, the application of these conditions and perhaps the conditions themselves will require some modification. It may well be that the standard of diligence required of a defendant preparing his case in opposition to a summons for summary judgment, especially if under pressure of time, will not be so high as that required in preparing for trial. ... But I can see no injustice at all in requiring a defendant to use such diligence as is reasonable in the circumstances to put before the judge on the hearing of the summons, albeit in summary form, all the evidence he relies on in defence, whereas it would be a great injustice to the plaintiff to allow the defendant to introduce for the first time on appeal evidence which was readily available at the hearing of the summons but was not produced."

9. In my view, the evidence sought to be adduced by the defendant should be permitted. The issues in this action have been involved but it would seem that at the hearing in the court below the judge himself was instrumental in raising the defence which eventually proved, at least partially, applicable. The defendant had given the evidence upon which the judge relied, mostly for the purpose of substantiating the veracity of his claim to be able to negotiate with the party with whom he originally contracted, and not for the purpose of substantiating the veracity of the claim for which leave to defend was granted.

10. In view of the fact that the evidence has now been used for a different, albeit akin, purpose from that which was originally intended, I consider that in the circumstances of this case, it would be justified to depart from strict appliance of the principles set out in Ladd v. Marshall because the wider interest of justice require the exercise of the court's discretion and the admission of the evidence. It has been established that the defendant has an unquantified legitimate claim which can operate as a defence arising in a manner which had not been previously anticipated. In those circumstances, I consider that in this case, this court can and should admit the evidence.

11. We were not addressed by the defendant as to the merits of the new evidence on behalf of the defendant and in my view, the correct course would be to set aside the judgment below and give the defendant unconditional leave to defend this action.

12. In the circumstances I propose that that an order should be made admitting the further evidence, allowing the appeal and setting aside the judgment below and giving the defendant unconditional leave to appeal. Further that an Order Nisi be made that the costs of this appeal be made costs in the Action.

Keith JA :

13. I agree with the judgment of Rogers JA. There is nothing which I wish to add.

Rogers JA :

14. In view of the judgment of Keith JA, the order will be made accordingly.