HERAEUS LTD v. CHAN YUN MUI AND ANOTHER

CACV 169/2022 & CACV 170/2022
(Heard together)

[2022] HKCA 1913

CACV 169/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 169 OF 2022

(ON AN APPEAL FROM HCA NO 878 OF 2011)

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CACV 170/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 170 OF 2022

(ON AN APPEAL FROM HCA NO 878 OF 2011)

____________

____________

(Heard together)

_____________________________________

REASONS  FOR  JUDGMENT

_____________________________________

Hon G Lam JA (giving the Reasons for Judgment of the Court):

1.  These are the appeals brought by the 1^st and 2^nd defendants against the judgment of K Yeung J dated 25 March 2022 in the action after an 11-day trial (“Judgment”).[1] By the Judgment, the 1^st and 2^nd defendants were adjudged to be jointly and severally liable to the plaintiff for $8,321,486.94 on the basis of two written guarantees for the indebtedness of Sing Kwong Jewellery & Gold Co Ltd (“Sing Kwong”).

2.  On 18 November 2022, Chu VP and G Lam JA made an order lifting the statutory stay of proceedings consequent upon the 1^st defendant’s application for legal aid, with reasons to be given later. Those reasons are set out below at §§15-25.

3.  At the conclusion of the hearing of the defendants’ summonses for leave to amend the Notices of Appeal (referred to below) and of the appeals on 25 November 2022, we dismissed the summonses and the appeals, with reasons to be handed down. We also ordered the defendants to pay the plaintiff’s costs, including the costs relating to the application to lift the stay, on an indemnity basis. These are the reasons for our judgement.

Background

4.  The plaintiff is a company incorporated in Hong Kong carrying on business in the manufacturing and trading of precious metals and products.

5.  The 1^st and 2^nd defendants are wife and husband. They initially ran an unincorporated business in the trading of gold products in the name of “Sing Kwong Jewellery & Gold Co” in the 1970s. The company Sing Kwong was subsequently incorporated in 1987 and thereafter became the business vehicle of the couple, carrying on the business of trading in precious metal products and of manufacturing ornamental and jewellery products. The two defendants were at all material times shareholders and directors of Sing Kwong.

6.  It was common ground that from sometime in the 1990s until the late 2000s, the plaintiff was a supplier of precious metal products, including gold kilo bars, bullions or grains, and potassium gold cyanide, to Sing Kwong.

7.  The plaintiff’s case was that the two guarantees in question (“Subject Guarantees”) were given by the defendants in November 2002 in consideration of the plaintiff granting credit facilities to Sing Kwong, and that pursuant thereto, the plaintiff did grant credit facilities to Sing Kwong, the unpaid balance of which totalled $8,321,486.94 as at 11 May 2011. That amount, as particularised in §4 of the re-amended statement of claim, comprised of a number of debits and credits contained in invoices, debit notes, vouchers and account ledgers dated from 18 May 2006 to 29 May 2008, and a final invoice dated 1 August 2010 covering interest for the period from 1 September 2007 to 30 November 2008 (collectively, the “Subject Invoices”). The claimed items all related to the trading of potassium gold cyanide, recorded as having been sold to Sing Kwong during the period from May 2006 to February 2007.

8.  Sing Kwong was wound up on 1 December 2008. The plaintiff brought the action below against the two defendants on 25 May 2011.

9.  The 1^st defendant’s case as pleaded was that Mr Ho Kin Chung (“Ho”) of the plaintiff told her that the guarantee in question (“D1 Subject Guarantee”) was confined to such part of the outstanding liabilities of Sing Kwong to the plaintiff as were in excess of $20 million, up to a limit of $10 million. Based on this, she contended that there was a collateral contract to that effect, or that she was entitled to rescind the D1 Subject Guarantee for misrepresentation, or that the plaintiff was estopped from asserting to the contrary. She also relied on the doctrine of non est factum. In relation to the existence and amount of Sing Kwong’s indebtedness to the plaintiff, it was pleaded in her re-amended defence and counterclaim at §20 that:

“ Save that it is admitted that the total outstanding liabilities of Sing Kwong to the Plaintiff amounts to not more than HK$8,321,486.94, paragraph 4 of the Statement of Claim is not admitted.”

10.  The 2^nd defendant’s case was that his relationship with the 1^st defendant had become strained since early 1990s and that he had no longer participated in the management of Sing Kwong since around 1992/93. He accepted that the guarantee in question (“D2 Subject Guarantee”) bore his signature, but he questioned whether the notice page was presented to him and signed by him as a document separate from the rest of the D2 Subject Guarantee, and the sequence of their execution, and whether the D2 Subject Guarantee was as a result forged. He claimed that he agreed to sign a personal guarantee on condition that it must be in Chinese and a lawyer had explained the contents to him. He also relied on the doctrine of non est factum, and contended that he was induced by a misrepresentation (that the document was simply one of the company documents of Sing Kwong or its branch business) to sign the document, and that there was material non-disclosure by the plaintiff. He also relied on the 1^st defendant’s allegation that the Subject Guarantees were confined to that part of Sing Kwong’s liabilities exceeding $20 million. He denied the alleged credit facilities granted to Sing Kwong.

The Judgment below

11.  In relation to the 1^st defendant, the judge held in his Judgment as follows:

(1)  The judge rejected the 1^st defendant’s allegation that trade credits had by early 1999 been provided by the plaintiff to Sing Kwong in the region of $20 million.[2] He also rejected the allegation that the plaintiff, through Ho, represented to the 1^st defendant that she would only be liable for Sing Kwong’s liabilities in excess of $20 million, up to a limit of $10 million. Accordingly, he rejected the 1^st defendant’s case of collateral contract, misrepresentation, and estoppel.[3]

(2)  The judge rejected the 1^st defendant’s case that she signed the D1 Subject Guarantee without understanding its nature and content. Accordingly, her plea of non est factum was also rejected.[4]

(3)  As far as the quantum of the plaintiff’s claim is concerned, the judge noted the admission in the 1^st defendant’s re-amended defence and counterclaim at §20 (see §9 above), and that her witness statement also stated that the debt owed to the plaintiff by the time Sing Kwong was wound up in December 2008 was around HK$8 million.[5] The 1^st defendant’s attempt at trial to lead evidence on the amount of the indebtedness of Sing Kwong was rejected by the judge.[6]

12.  In relation to the 2^nd defendant, the judge held in his Judgment as follows:

(1)  The judge accepted the evidence of Mr Kupka (“Kupka”), the plaintiff’s president at the time, that he had reviewed the D2 Subject Guarantee containing the notice page, before it was put in an envelope and passed on to the 2^nd defendant for signature. The judge rejected the evidence of the defendants and Eric Chu (one of the sons of the defendants) that the notice page was signed by the 2^nd defendant separately. The judge inferred that the notice page and the remainder of the D2 Subject Guarantee were sent to and signed by the 2^nd defendant at the same time and found that the D2 Subject Guarantee was not a forgery.[7]

(2)  The judge rejected the evidence of the 2^nd defendant and Eric Chu that the 2^nd defendant had agreed to sign a guarantee subject to two conditions, namely, that it must be in Chinese and a lawyer had explained the contents to him.[8]

(3)  The judge found that the 2^nd defendant would have been aware of the nature of the D2 Subject Guarantee when he read it. In any event, the plea of non est factum could not be invoked by someone who did not take the trouble to find out at least the general effect of the document. Accordingly, the judge rejected the 2^nd defendant’s plea of non est factum.[9]

(4)  The judge rejected the 2^nd defendant’s allegation that he was induced by misrepresentation (that the document was simply one of the company documents of Sing Kwong or its branch business) to sign the D2 Subject Guarantee, on the ground that there was nothing to show that Eric Chu was the agent of the plaintiff or had its authority when making the alleged representation to the 2^nd defendant and also that there was no case advanced by the 2^nd defendant that he had been misled by the alleged misrepresentation.[10]

(5)  On material non-disclosure, the judge held that there was nothing that showed the plaintiff owed the 2^nd defendant a duty of disclosure or had breached it.[11]

(6)  The judge also rejected the 2^nd defendant’s allegation that his liability under the D2 Subject Guarantee was confined to any excess liability of Sing Kwong beyond $20 million.[12]

13.  On quantum, the judge noted that the 1^st defendant had admitted the total outstanding indebtedness of Sing Kwong to the plaintiff. Insofar as the claim against the 2^nd defendant was concerned, the judge found that the plaintiff had, on the balance of probabilities, established the amount of Sing Kwong’s indebtedness for which he was liable under the D2 Subject Guarantee.[13]

14.  Accordingly, the judge entered judgment against the defendants jointly and severally for $8,321,486.94, and dismissed their counterclaims for declarations and rescission. He also ordered, on a provisional basis, that interest shall run from 28 April 2011 (being 7 days from the letters of demand) at the rate of prime +1% per annum to the date of judgment, and that the defendants pay the costs of the action and the counterclaims on an indemnity basis.

The 2^nd defendant’s application for legal aid and the plaintiff’s application to lift the statutory stay

15.  The defendants were separately represented by solicitors and counsel at trial. On 21 April 2022, they each filed a Notice of Appeal, acting in person. The grounds raised were very similar. On 4 July, each of the defendants filed an application for a date to be fixed for hearing his or her appeal. On 6 July, the Registrar of Civil Appeals gave directions for the appeals to be listed for hearing. On 25 July, notice of the hearing of the appeals, fixed for 25 November 2022, was issued by the court to the parties.

16.  The defendants did not lodge any skeleton argument for their appeals within the time prescribed by Practice Direction 4.2 and by the Registrar of Civil Appeals (i.e. by 28 October 2022). On 3 November, their present solicitors came on record, filing a Notice to Act in both appeals. On or shortly before 4 November, however, the 1^st defendant made an application for legal aid in her appeal (CACV 169/2022). The memorandum of notification of that application was filed by the Director of Legal Aid with the court on 8 November.

17.  Notwithstanding the legal aid application, the defendants’ solicitors wrote to the court on 8 November, stating that the defendants intended to seek leave to amend their Notices of Appeal and seeking an extension of time to lodge their skeleton arguments for the applications for leave to amend. On 11 November, the plaintiff applied under section 15 of the Legal Aid Ordinance (Cap 91) for an order lifting the statutory stay in the 1^st defendant’s appeal that was triggered by her legal aid application. On 16 November, the 1^st defendant filed an affirmation to oppose the application for lifting the stay, exhibiting, inter alia, a draft Amended Notice of Appeal, prepared by counsel, on which she said she had been advised to apply for leave to rely.

18.  On 18 November, Chu VP and G Lam JA, having considered the parties’ written submissions, made an order lifting the stay. The reasons are as follows.

19.  It is plain that the application for legal aid was made very late, just three weeks before the hearing of the appeal. The 1^st defendant said that after filing her Notice of Appeal in person, a new solicitor instructed by the 2^nd defendant advised that the defendants could consider criminal prosecution against the plaintiff. They then obtained a copy of the audio recording of the trial and engaged RSM Advisory (Hong Kong) Ltd (“RSM”) to listen to it and investigate the plaintiff’s claim. She said that RSM were only able to produce some preliminary findings at the end of October 2022, which indicated that they believed that it was unlikely for any of the plaintiff’s invoices to have been left unpaid by Sing Kwong or that most of the invoices on which the plaintiff’s claim was based would have already been paid, and that they were highly concerned that the plaintiff’s claim might be fraudulent. The 1^st defendant said that she immediately acted upon such preliminary advice by borrowing money from a friend to engage another group of solicitors and barristers to assist in her appeal, who advised that she should apply for leave to amend her Notice of Appeal. She said borrowing money would be “unsustainable” if she were to instruct counsel and solicitors to appear at her appeal, and she therefore applied for legal aid in early November.

20.  We do not accept the explanation. From 25 July 2022, the 1^st defendant had known the hearing date of her appeal. There is no valid reason why she should not and could not have applied for legal aid much earlier. Even if, as she claimed, she wanted to have the views of RSM to support her application, she could have applied to the Legal Aid Department and explained to them the situation.

21.  Further, as pointed out by the plaintiff’s counsel, RSM’s engagement letter was dated 30 June 2022. There is no explanation of when RSM were first instructed after obtaining the audio recording on 10 May 2022. Nor is there any explanation why RSM could not have reached their preliminary findings earlier, especially given that the defendants knew in July that the appeals would be heard on 25 November 2022, or why, when dates were being fixed, the defendants did not try to seek a hearing date that would give more time to RSM.

22.  The 1^st defendant’s claim that she had borrowed money to engage lawyers to assist her with the appeal but that borrowing money for instructing them to appear at the appeal would be “unsustainable”, cannot be taken at face value. The defendants’ solicitors’ letter of 8 November 2022 stated that instructions to counsel to appear for the “Defendants” at the hearing of the appeals were “confirmed” on 4 November 2022. Not a word was mentioned about the legal aid application in that letter, the purport of which was instead to inform the court of how the defendants wished to conduct their appeals with the legal representatives now on board.

23.  Further, at the hearing, Mr Johnny Ma SC confirmed that briefs to counsel were delivered on behalf of the 1^st defendant (and presumably also the 2^nd defendant) on 10 November. In light of that, we regret to say that the 1^st defendant’s claim in her affirmation dated 16 November 2022 that lifting the stay “could in effect force me to conduct the appeal by myself in person” is most surprising and is misleading.

24.  In any event, the 2^nd defendant’s appeal is a separate proceeding in this court and, though listed to be heard together with the 1^st defendant’s appeal, is not subject to the statutory stay under section 15. The 2^nd defendant has since 3 November 2022 been represented by the same solicitors as the 1^st defendant, and has filed a summons for leave to amend his Notice of Appeal to advance the same ground as that advanced by the 1^st defendant in her draft Amended Notice of Appeal. There was no application from the 2^nd defendant for his appeal to be stayed or adjourned. This meant in practical terms that this court would, as in fact it did at the scheduled hearing, hear from counsel in relation to the matters that the 1^st defendant wished to advance.

25.  For these reasons, Chu VP and G Lam JA made an order lifting the stay consequent upon the legal aid application.

The defendants’ applications to amend their Notices of Appeal

26.  On 17 and 21 November 2022 respectively, the 2^nd and 1^st defendants filed their summonses for leave to amend their Notices of Appeal. The proposed amendments were materially identical and involved deleting all the grounds previously set out and substituting a challenge against the judge’s conclusion that the plaintiff had established the amount of Sing Kwong’s outstanding indebtedness. This ground is in turn based on the following sub-grounds:

(1)  The judge failed to take into account and address the 2^nd defendant’s contention that if there were outstanding payments, there should have been no further delivery. It is said that the contention was supported by the evidence of Poon Dick Wah (“Poon”), a product manager and from 2003 the division manager of the plaintiff, that if the customer had defaulted in payment, the plaintiff would not accept new orders from it unless and until it had settled the outstanding payment; that if a customer defaulted frequently and/or for a long time, the plaintiff would cancel the credit line and ceased trading with it; and that the plaintiff had a growing concern over Sing Kwong’s deteriorating financial situation from around the end of 2002. It is said that, given that the plaintiff’s business unit of chemical products continued to trade with Sing Kwong, it was inherently improbable that Sing Kwong had defaulted in paying all the Subject Invoices since May 2006.

(2)  The judge failed to consider whether any of the Subject Invoices were or might have been issued in the scenario where Sing Kwong had fixed the metal price with the plaintiff but not paid the plaintiff yet and the plaintiff had likewise not delivered the product or gold to Sing Kwong (“Undelivered Goods Scenario”), which was one of the three scenarios in which, according to the evidence of Kupka and Poon, a positive accounts receivable entry would be booked by the plaintiff. There was evidence that the plaintiff would issue an invoice when the price was agreed, even under the Undelivered Goods Scenario, but it would not constitute a debt unless the products in question had in fact been delivered. The judge ought to have drawn an adverse inference against the plaintiff for failing to produce the delivery notes in respect of the Subject Invoices.

(3)  In addition, the judge erred in finding the indebtedness proved in relation to 6 of the Subject Invoices which on their face made no reference to any delivery notes.

(4)  The judge failed to take into account that (i) the last of the Subject Invoices (dated 1 August 2010) for interest of $396,261.28 from September 2007 to November 2008 translated into an average monthly interest of $26,417.42; but (ii) the plaintiff charged interest in the sum of $78,260.88 for the month of August 2007 on the outstanding balance of $7,930,610. The different levels of interest amounts suggest that after August 2007, the outstanding principal had been reduced, thus casting doubt on the alleged indebtedness.

(5)  The judge erred in giving undue weight to the defendants’ failure to reply to the plaintiff’s letters of demand. The failure by the defendants to reply to the letters of demand did not remedy the judge’s failure to take into account the Undelivered Goods Scenario. Further, the judge erred in giving undue weight to the 1^st defendant’s admission in §20 of her re-amended defence and counterclaim, as she did not admit the specific amount of indebtedness but only that the indebtedness was “not more than” $8,321,486.94, and this in any event did not affect the 2^nd defendant who had on his pleadings denied the alleged indebtedness.

27.  The plaintiff opposed the applications for leave to amend the Notices of Appeal. The applications were directed to be heard at the same time as the appeals. At the hearing we heard arguments on the amended grounds de bene esse, and concluded at the end that the amendments should not be allowed.

The 1^st defendant’s application and appeal

28.  We deal with the 1^st defendant’s case first. Her application to amend her Notice of Appeal must not be approached in a vacuum, but in light of the procedural history relevant to the quantum of the alleged indebtedness of Sing Kwong, in which the 1^st defendant had been held to have admitted the amount owed by Sing Kwong to the plaintiff. Thus assessed, the application is in our view misconceived and devoid of merits.

29.  As set out in Deputy Judge Douglas Lam SC’s Reasons for Decision dated 12 April 2017 (see §33 below), at §32, in the second half of 2007, the 1^st defendant was closely involved in negotiating with the plaintiff in connection with Sing Kwong’s outstanding indebtedness, in the course of which she admitted in correspondence that Sing Kwong was indebted to the plaintiff for amounts in the region of HK$8 million. That paragraph set out the available documentary evidence as follows:

“ 32. In the latter half of 2007, the 1^st defendant was closely involved in negotiations with the plaintiff concerning Sing Kwong’s outstanding indebtedness, as evidenced by the following correspondence:

(1) By an undated letter signed by the 1^st defendant on behalf of Sing Kwong and likely to have been sent shortly before 13 July 2007, she stated inter alia that:

‘ I am writing to follow up on our meeting last Friday regarding the issues of our old and overdue payments (approx. HK$7.5 million and $0.58 million respectively); and any proposal that [the plaintiff], with our over ten years of long standing business relations, could support Sing Kwong on its journey to restructuring and rebuilding the business.’

The 1^st defendant then proposed a repayment schedule by way of monthly instalments and further credit from the plaintiff.

(2) By a letter in reply dated 13 July 2007, the plaintiff rejected Sing Kwong’s proposal and counter-proposed terms;

(3) By a letter dated 24 July 2007 and signed by the 1^st defendant, she stated that Sing Kwong would do its best to meet some of the terms in the plaintiff’s counter-proposal and further indicated that it was considering offering a flat in Tuen Mun as collateral for the further credit. The caption of the letter was ‘Re: Outstanding Amounts HK$8,051,169.72 since April 2006’;

(4) On 7 September 2007, the plaintiff’s then solicitors wrote to Sing Kwong (for the 1^st defendant’s attention) stating that Sing Kwong had failed to make the previously agreed instalments and demanded repayment of HK$7,930,610.38, being the outstanding balance as at 31 August 2007;

(5) By a facsimile letter signed by the 1^st defendant and sent on 10 October 2007, she apologised for Sing Kwong’s failure to abide by the repayment plan and offered a further proposal for repayment. The caption of the letter was ‘Re: Outstanding Amounts HK$7,930,610.38 since April 2006’;

(6) By a facsimile letter in Chinese signed by the 1^st defendant and sent on 7 November 2007, she acknowledged that some HK$7 million odd remained outstanding to the plaintiff, ‘…至今虧欠貴司的信貸額已減至港幣七百餘萬’ and sought further indulgence from the plaintiff.”

30.  After those negotiations, as the trial judge recorded in his Judgment, pre-action letters of demand were sent to the defendants, up to 21 April 2011. The defendants did not reply, whether to dispute the amount of indebtedness or otherwise.[14]

31.  After the action was instituted, in response to the statement of claim, the 1^st defendant made an admission in §20 of her defence filed on 10 August 2011 (as mentioned in §9 above). That admission was maintained despite the pleading was amended on 3 December 2014 and re-amended on 21 January 2015. In the 1^st defendant’s first witness statement filed on 13 June 2014, the 1^st defendant also stated:

“ Due to the shrinking business of Sing Kwong, Sing Kwong had endeavoured to repay the Plaintiff the debts owed to the Plaintiff. By December 2008 when Sing Kwong was wound up compulsorily by the Court of Hong Kong, the debt owed to Plaintiff was at around HK$8 million.”

As explained in the 1^st defendant’s second witness statement filed on 14 January 2015, there was a Chinese translation of her first witness statement available which was fully explained to her by her solicitors before she signed it. The translation of the above-quoted paragraph read as follows:

“ 由於星光業務萎縮，星光致力償還欠原告人之債務。至2008年12月，星光被法院強制清盤，欠原告人之債務大約為八百萬。”

32.  By summons dated 8 April 2016, the 1^st defendant applied for leave to re-re-amend her defence and counterclaim at §20 as follows:

“ Save that it is admitted that the invoices referred to in paragraph 4 of the Statement of Claim were issued to Sing Kwong for the cyanide compounds delivered to Sing Kwong on the dates stated therein total outstanding liabilities of Sing Kwong to the Plaintiff amounts to not more than HK$8,321,486.94, paragraph 4 of the Statement of Claim is not admitted denied. It is averred that the outstanding amounts due to the Plaintiff, if any, can only be calculated after reconciling the “cash account” between the Plaintiff and Sing Kwong with the amount of gold and other precious metal bars or bullions delivered to Sing Kwong (for which the price had not been fixed at the time of delivery) in the “metal account” between the Plaintiff and Sing Kwong.”

33.  The application was refused by Registrar K W Lung with detailed reasons on 9 December 2016. The 1^st defendant’s appeal to a judge was dismissed by Deputy Judge Douglas Lam SC on 23 March 2017 (with reasons handed down on 12 April 2017). It is of note that, although §20 of the defence admitted that the liability amounted to “not more than” $8,321,486.94, both Registrar K W Lung and Deputy Judge Lam SC found that in all the circumstances it was an admission that Sing Kwong owed the amount claimed by the plaintiff, but not more.[15] It is also notable that even the proposed re-re-amendment admitted that the cyanide compounds were delivered to Sing Kwong on the dates stated in the Subject Invoices. The 1^st defendant did not appeal from the decision of Deputy Judge Lam SC.

34.  At trial, the 1^st defendant attempted to raise the issue of how much up to $8,321,486.94 Sing Kwong did actually owe the plaintiff, and to lead evidence on the amount of the indebtedness. Having regard to the decisions of the Registrar and Deputy Judge Lam SC referred to above, the judge rejected that attempt on day 1 of the trial, as he considered that the plaintiff was entitled to rely on what had been held to be an admission of the amount owed by Sing Kwong to the plaintiff, and that to allow the 1^st defendant to resile from it and lead contrary evidence would be unfair to the plaintiff.[16] Accordingly, the trial proceeded thereafter on the basis that, as between the plaintiff and the 1^st defendant, the quantum of Sing Kwong’s indebtedness was not in issue.[17] The 1^st defendant has not sought to impugn that ruling or the judge’s reasons therefor.

35.  Accordingly, for the purposes of the action as against the 1^st defendant, the judge did not need to make and did not in fact make any finding on the quantum of Sing Kwong’s indebtedness, which was not an issue. There was simply no finding for the 1^st defendant to attack. It follows that the proposed amendments to her Notice of Appeal, seeking, as they do, to vitiate the judge’s “holding” that the plaintiff had established the amount of Sing Kwong’s indebtedness, are misconceived.

36.  For this reason alone, the 1^st defendant’s proposed amendments should be rejected. This conclusion is fortified by the reasons given below in the context of the 2^nd defendant’s application. As the original grounds of appeal (which had been answered by the plaintiff in its written submissions dated 3 November 2022) had effectively been abandoned with no submissions having been made in support of them at all, the 1^st defendant’s appeal was also dismissed.

The 2^nd defendant’s application and appeal

37.  It is also necessary, in the case of the 2^nd defendant, to have regard to the procedural history. In his original defence and counterclaim filed on 11 August 2011, the 2^nd defendant pleaded that: “Insofar as the 2^nd Defendant is concerned, paragraphs 2, 3 and 4 [of the statement of claim] are denied.” (Paragraph 4 is the one where the plaintiff averred that the credit facilities granted to Sing Kwong amounted to $8,321,486.94, with particulars of the Subject Invoices set out.) The defence and counterclaim retained this bare denial through the amendment in July 2014 and the re-amendment in January 2015.

38.  By a summons filed in February 2017 (and a summons filed in October 2017 to amend that summons), the 2^nd defendant sought leave to re-re-amend his defence and counterclaim. The proposed amendments averred that in the trading practice between the plaintiff and Sing Kwong, there would be frequent consignment deliveries of goods by the plaintiff to Sing Kwong before the transaction price was fixed, and the parties would record the provisional amounts payable with reference to the prevailing market price of gold, and Sing Kwong would issue post-dated cheques covering those amounts. The deliveries and provisional amounts of payment were recorded in the parties’ metal accounts and cash accounts respectively. The actual price would be fixed by Sing Kwong with reference to the prevailing market price at a later time. The plaintiff would then issue an invoice, which in reality would simply call for an accounting exercise.

39.  The 2^nd defendant’s amendment application was dismissed by Registrar K W Lung on 13 October 2017, and the appeal therefrom was dismissed by Deputy High Court Judge Marlene Ng on 17 December 2018.[18] The Deputy Judge refused leave to appeal on 26 April 2019 (on the basis that leave was not required),[19] and a further application to the Court of Appeal for leave to appeal or alternatively extension of time to appeal was dismissed on 2 August 2019.[20]

40.  Subsequently, on 5 September 2019, the 2^nd defendant, with leave of the court, added a sentence to the denial as follows: “The alleged credit facilities allegedly granted to Sing Kwong … is denied.” But this does not alter the fact that the 2^nd defendant was barred from advancing the positive case he wished to run on quantum.

41.  At trial, the 2^nd defendant sought to call one of his sons, Thomas Chu, as an additional witness, in order to adduce his two affirmations, which were made in 2017 in support of the 2^nd defendant’s application for leave to amend his defence and counterclaim referred to above. The judge viewed this as an attempt to bypass the previous decisions of the court refusing leave to amend, and rejected the 2^nd defendant’s application.[21] The 2^nd defendant has not sought to impugn this ruling of the judge. There is, accordingly, no room on his appeal for him to advance any positive case that the Subject Invoices had been paid or were not due. This needs to be borne in mind in approaching the 2^nd defendant’s contention that the judge was wrong to find that the plaintiff had discharged its burden of proof.

42.  The judge’s conclusion (so far as the 2^nd defendant was concerned) that the plaintiff had established the alleged indebtedness was a finding of fact made after an 11-day trial on the basis of all the evidence including the witnesses’ oral evidence, including Kupka and Poon from the plaintiff whom the judge found to be “honest and reliable witnesses”,[22] as well as the 1^st defendant who adopted her witness statement, including the admission referred to in §31 above, as her evidence-in-chief.[23]

43.  There is a high threshold for challenging such a finding. The Court of Appeal will not intervene in or disturb such a finding unless it is shown to be plainly wrong: Ting Kwok Keung v Tam Dick Yuen & Ors (2002) 5 HKCFAR 336; China Gold Finance Ltd v CIL Holdings Ltd & Ors (unrep, CACV 11/2015, 27 November 2015); Yu Man Fung Alice v Chiau Sing Chi Stephen [2021] HKCA 1456 at §§6-8. Having considered them both individually and cumulatively, we are not satisfied that the five points raised by the defendants’ counsel referred to in §26 above show that the finding was plainly wrong or demonstrate some other errors vitiating the finding.

The plaintiff’s credit control

44.  First, the point described in §26(1) above that the plaintiff would have cancelled Sing Kwong’s credit line or ceased trading with it had it been so substantially in default of payment, was noted by the judge.[24] The judge did not specifically deal with it in his Judgment, but this is not necessarily an error. As has been repeatedly emphasised, there is no duty on a judge, in giving reasons, to deal with each and every argument advanced by a party in support of his case: LWH v NKWS [2018] HKCA 260, §9; Eagil Trust Co Ltd v Pigott-Brown [1985] 3 All ER 119, 122. To put the matter in context, it was the arguments on liability that loomed large in the trial, which were painstakingly dealt with by the judge in the first 81 pages of the Judgment. At §§142 to 149, the judge briefly described the attacks on the plaintiff’s case on quantum made by the 2^nd defendant’s counsel Mr Fong, dealt with a specific argument based on returned cheques, recorded that he had considered the totality of the evidence, set out a number of points he regarded as important, and concluded that, “despite Mr Fong’s challenges”, the plaintiff had successfully established the amount of indebtedness.[25] Clearly the judge had taken account of the 2^nd defendant’s arguments in reaching his finding.

45.  Viewed in the relevant context, we do not think that the Judge’s finding can be impugned by the fact that he did not deal in detail in his Judgment with the point now highlighted by the 2^nd defendant. As counsel recognised, Poon’s evidence now relied on concerned the pre-2003 period. It is not evidence of how the plaintiff would have dealt with Sing Kwong in relation to the Subject Invoices which were all several years post-2003. During cross-examination, Poon specifically declined to comment on the implications of applying the mechanism he had mentioned to the Subject Invoices. He made it clear that he could not comment on the practice relating to potassium gold cyanide after 2003, and said that the question should be put to Kupka. For reasons that are not clear, however, this line of questioning had not been put to Kupka, a matter that, as can be seen from the transcript, also troubled the judge. As such, the point on credit control has no solid evidential basis and could have but little weight. The judge cannot be faulted for not dealing with it specifically in his Judgment.

The Undelivered Goods Scenario

46.  As to the second point about the Undelivered Goods Scenario and the non-production of delivery notes (see §26(2) above), the evidence of Kupka was that the Undelivered Goods Scenario did not apply to the trading in potassium gold cyanide.

47.  The 2^nd defendant now complains that the judge was wrong in refusing to draw an adverse inference against the plaintiff for failing to produce the delivery notes. It is said that the judge should have inferred that either the delivery notes did not exist, or even if they existed, they do not support the alleged indebtedness.

48.  In our view this is not a justifiable complaint when the 2^nd defendant’s trial counsel had not invited the judge to draw any such adverse inference. The 1^st defendant’s trial counsel did submit that the court should draw an adverse inference, but the inference suggested was that the plaintiff’s purpose in not disclosing the delivery notes was to prevent the 1^st defendant from showing that the credit limit was over $20 million.

49.  The drawing of adverse inference is not an automatic exercise but one that calls for a nuanced judgment based on all the relevant circumstances of the case. As was made clear in Tjang Siu Thu v Profield Construction Engineering Ltd [2015] 5 HKC 22 at §33, there is no presumption for an adverse inference to be drawn from the mere absence of a witness or documents. Before drawing any adverse inference, the court must be satisfied that it is appropriate to do so. In a case such as the present, it is an exercise that the appellate court will be slow to interfere with.

50.  There was an affirmation made by Kupka in 2015 at the interlocutory stage stating that the delivery notes were not in the plaintiff’s possession, custody or power. If this was true, it explained why they were not produced. Kupka admitted in cross-examination that in 2011, when the action was commenced, it should have been possible to reprint the delivery notes from the plaintiff’s computer system. But, as the judge pointed out, Kupka was never asked whether it was possible to re-generate the delivery notes in 2015 and, if not, what had happened between 2011 and 2015. Nor was he taken to his 2015 affirmation and challenged as having lied in making it. Mr Ma did not contend that the judge was wrong in rejecting the defendants’ submission that Kupka lied in his 2015 affirmation. In these circumstances, the Judge was, in our view, fully entitled not to draw any adverse inference against the plaintiff from the mere non-production of the delivery notes.

The 6 invoices

51.  Mr Ma submitted that 6 of the Subject Invoices did not on their face refer to any delivery note in the upper right-hand side of the document under “Your reference”. But in each of them there was a reference to a delivery number in the upper left-hand side of the document. These 6 invoices were not singled out at trial, nor was it submitted that it should be inferred that no goods were delivered because there was no delivery note number in the right-hand side (as opposed to the left-hand side) of the document. The significance of the absence of a number in the right-hand side was not investigated at trial. In these circumstances the judge cannot be criticised for not dealing with these invoices specifically. Nor can this speculative point tilt the balance in light of the other evidence which supported the judge’s finding.

Average monthly interest

52.  Mr Ma submits that the judge erred in failing to take into account that by comparing the finance charge in the Subject Invoice dated 1 September 2007 and in the final Subject Invoice dated 1 August 2010, one can see that the average monthly interest had been reduced, and that this suggests the outstanding principal had been reduced.

53.  This point had not been raised by either defendant’s counsel at trial. The judge cannot fairly be criticised for not taking it into account. Had it been raised by the 2^nd defendant below (assuming he was permitted to do so), there might well have been more factual investigation. Such a point cannot be raised for the first time on appeal: Flywin Co Ltd v Strong & Associates Ltd (2002) 5 HKCFAR 356, §38.

The defendants’ silence to the demand letters, and the 1^st defendant’s admission

54.  The defendants’ fifth point is a complaint about the weight given by the judge to two matters, and suffers from the obvious problem that the question of weight to be placed on particular items of evidence is pre-eminently a matter for the trial judge. Mr Ma submits that the 1^st defendant’s admission, qualified by the words “not more than”, was not an admission of the specific sum. We have explained above why the judge was entitled to take a different view.

55.  Mr Ma further submits that the 1^st defendant’s admission is irrelevant to the 2^nd defendant who had denied the indebtedness in his pleadings. The 1^st defendant’s admission is, of course, not binding on the 2^nd defendant as an admission, but there is nothing wrong for the judge to place weight on it as a matter of evidence. After all, on the 2^nd defendant’s own case, it was the 1^st defendant who had been operating Sing Kwong’s business and who would therefore have had much better knowledge of its financial position.[26]

56.  It follows from the above that, in our judgment, none of the points now advanced to challenge the judge’s finding on Sing Kwong’s indebtedness has any merit. Furthermore, the amendments had been put forward at a very late stage, together with certain selected excerpts from the transcript of the evidence. The plaintiff did not have a fair opportunity of ascertaining whether other parts of the evidence should be transcribed and placed before this court. For these reasons, we also refused to grant leave for the 2^nd defendant to amend his Notice of Appeal. Since the original grounds were not pursued, his appeal was also dismissed.

Conclusion

57.  For the above reasons, the plaintiff’s summons to lift the stay consequent upon the 1^st defendant’s application for legal aid was granted on 18 November 2022, and the defendants’ summonses for leave to amend and the defendants’ appeals were dismissed at the hearing on 25 November 2022.

58.  As mentioned above, costs were awarded to the plaintiff on an indemnity basis. We are prepared to assess the costs summarily but the statement of costs lodged by the plaintiff is a composite one covering both appeals. We direct the plaintiff within 14 days to lodge a separate statement of costs for each appeal, and each defendant to lodge his or her statement of objections (if any) within 14 days thereafter.