LEE YIU KWAN v. TING YIN WAH

CACV 311/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

civil appeal no. 311 of 2002

_______________________ 

(ON APPEAL FROM NO. DCCJ 15275/2000)

CACV 312/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

civil appeal no. 312 of 2002

_______________________ 

(ON APPEAL FROM NO. DCCJ 15281/2000)

BETWEEN

CACV 28/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

civil appeal no. 28 of 2003

_______________________ 

(ON APPEAL FROM NO. DCCJ 15275 of 2000)

BETWEEN

AND

(ON APPEAL FROM NO. DCCJ 15281 of 2000)

BETWEEN

CACV 31/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

civil appeal no. 31 of 2003

_______________________

(ON APPEAL FROM NO. DCCJ 15275 of 2000)

BETWEEN

(ON APPEAL FROM NO. DCCJ 15281 of 2000)

AND

BETWEEN

__________________

___________________________

REASONS FOR JUDGMENT

___________________________

Hon Yeung JA (giving reasons for judgment of the Court):

1.  On 1 April 2004, we allowed the plaintiff’s appeals. We set aside the orders of the trial judge and remitted the cases to the District Court for a re-trial. We indicated that we would give our reasons in writing. These are the reasons.

2.  Hong Kong Association for Democracy and People’s Livelihood (HKDPL) is a political body registered under the Societies Ordinance on 26 August 1986.  Part of HKDPL’s function is the sponsoring of candidates in elections of members of the District Boards, the Urban Council, the Regional Council and the Legislative Council.

3.  Ting Yin Wah (Ting) and Leung Kwong Cheong (Leung) were at the material times members of HKDPL. They withdrew from HKDPL in March/April 1996.

4.  Ting was elected a District Board member (Tsing Yi) for the term 1994 – 1998 and a Regional Council member (South Tsing Yi and Lower Kwai Chung) for the term 1995 – 1999.

5.  Leung was elected a District Board member (Kwai Shing East) for the term 1994 – 1998 and a Regional Council member (Mid Kwai Chung) for the term 1995 – 1999.

6.  As District Board and Regional Council members, Ting and Leung were entitled to significant monthly honoraria from the Government of the Hong Kong Special Administrative Region (HKSAR).

7.  Under the Constitution of HKDPL (“the Constitution”) and its Manual for Councillors and Board Members (“the Manual”), members of HKDPL who have been elected Regional Council members and District Board members are obliged to contribute respectively one-third and 7% of their monthly honoraria from HKSAR to HKDPL to support other members to run their local community services.

8.  HKDPL suggested that Ting and Leung failed to make full contribution of their honoraria to HKDPL, leaving the respective balance of $26,812.50 and $55,660.50.

9.  As against Ting, HKDPL suggested that an advancement of $100,000 as fund for running the election of Legislative Coucillor in 1995 and a loan of $4,845 (in connection with a trip to Beijing) were paid to him and Ting undertook to repay the advancement if he withdrew from HKDPL without its consent.

10.  Ting did withdraw from HKDPL without consent but failed to repay the advancement of $100,000, in breach of his undertaking. He also failed and/or refused to repay the loan of $4,845.

11.  As against Leung, HKDPL suggested that he was given $200,000 (10 monthly payments of $20,000 each) as funds for running activities and providing community service as a District Board member subject to his undertaking to repay the money should he withdraw from HKDPL without its consent. He also received $20,000 from HKDPL as fund to run for District Board member and had agreed to repay it upon leaving HKDPL and subsequently by instalments, the last being on 31 December 1994.

12.  Leung did not fulfill his undertaking to repay the $200,000 and did not keep his promise to repay the $20,000.

13.  In May 1997, HKDPL in the name of one of its members-Lee Yiu Kwan (Lee)- commenced proceedings in the High Court against Ting (Action No. A3835 of 1997) and against Leung (Action No. A3834 of 1997) for the return of the aforesaid sums.

14.  The two actions were transferred to the District Court as a result of the increase in the District Court’s jurisdiction and were designated respectively DCCJ 15275 of 2000 (against Ting) and DCCJ 15281 of 2000 (against Leung).

15.  Ting raised in his amended defence, the following issues:

“1.        Prior to joining HKDPL, he had already became District Board member and Regional Councillor and HKDPL agreed that he need not contribute any part of his honorariums. Hence the terms of the Constitution and the Manual had no contractual effect and did not bind him;

2.         The $100,000 was part of the non-refundable payment of $200,000 promised by the chairman of HKDPL as his campaign expenses for the 1995 Legislative Council election;

3.         Alternatively, as he withdrew from HKDPL pursuant to an agreement with HKDPL, the undertaking he gave did not oblige him to repay the $100,000;

4.         The undertaking signed by him was part of an agreement to induce him to run for the Legislative Council election in 1995. It contravened section 8(A) of the “Elections (Corrupt And Illegal Practice) Ordinance” and thus was unenforceable;

5.         Ting admitted liability for the $4,845 but claimed to set off the sum from the balance of the non-refundable payment; or

6.         Alternatively, the $4,845 was incurred in a trip to Beijing in order to present a petition to the Chinese Officials regarding a jailed Ming Pao reporter. The petition was prohibited by the Chinese Law and was contrary to the conditions of their entry to the Mainland. In the circumstances, any agreement concerning the trip to Beijing was unenforceable and void as being contrary to public policy and international comity.”

16.  Leung raised in his amended defence, the following issues:

“1.          That the account rendered by HKDPL was inaccurate and he put it to strict proof;

2.         That the $200,000 was the reimbursement of the expenses for the Kwai Tsing Community Service Centre set up by HKDPL, and its members who were either District Board members or Regional Councillors and not in connection with his District Board Member’s office; or

3.         Alternatively, the undertaking to repay was only signed after the payments were made and hence unsupported by consideration; or

4.         Alternatively, the undertaking only applied if he was successfully elected as a Legislative Councillor; or

5.         Alternatively, the undertaking was part of an agreement to induce him to run for the Legislative Council election in 1995. It contravened section 8(A) of the “Elections (Corrupt and Illegal Practice) Ordinance" and was thus unenforceable:

6.         That HKDPL had agreed to sponsor him by paying three quarters of his campaign expenses in the 1995 Legislative Council election and he had incurred $32,000, HKDPL was liable to him for $24,000 and the $20,000 should be set off from the $24,000; or

7.         Alternatively, the agreement relating to the $20,000 was an agreement to induce him to stand as a candidate for the 1995 Legislative Council Election and hence also contravened section 8(A) of the “Election (Corrupt and Illegal Practice) Ordinance” and was illegal and unenforceable.”

17.  By its replies, HKDPL joined issues with Ting and Leung on their defence.

18.  There had been two pre-trial hearings when the late HH Judge Li (the judge) in the District Court showed concern on the status of Lee (suing on her own behalf and on behalf of all other members of the HKDPL except for Ting/Leung). The judge also raised the issues of the enforceability of the obligation to contribute part of the honoraria and the legality of the advancement to assist Ting/Leung to run for election of public office.

19.  The suggestion then was that the contribution of the honoraria might be contrary to public policy and the advancement might contravene the provisions of the Corrupt and Illegal Practices Ordinance.

20.  At the end of the second pre-trial hearing on 21 May 2001 and on his own motion, the judge ordered that the trial of the actions “shall be on legal issues only, i.e. validity of arrangement”.

21.  Neither the judge nor the parties specifically formulated the “legal issues”.

22.  After two days’ hearing on 11 and 12 June 2001, the judge handed down his judgment on 26 November 2001, ruling against HKDPL on the preliminary legal issues.

23.  In respect of HKDPL’s claim against Ting, the judge ruled:

“1.          That the sum of $100,000 received by Ting from HKDPL as loans for running for the 1995 Legislative Council Election were illegal and hence irrecoverable; and

2.           That the balance of the monthly contribution from Ting’s honoraria as a District Board member and a Regional Councillor was not supported by consideration and hence unenforceable.”

24.  In respect of HKDPL’s claim against Leung, the judge ruled:

“1.          That the sum of $20,000 received by Leung from HKDPL as a loan for running for the 1994 District Board Election was illegal and thus irrecoverable;

2.         That the $200,000 received by Leung from HKDPL was irrecoverable because it contravened the Money Lenders Ordinance as HKDPL did not possess a valid money lender’s licence; and

3.         That the balance of the monthly contribution from Leung’s honoraria as a District Board member and a Regional Councillor was not supported by consideration and thus unenforceable.”

25.  On 10 April 2002, the judge dismissed HKDPL’s claims against Ting and Leung as on the basis of his determination on the preliminary legal issues, none of the outstanding claims against them was a valid cause of action except the claim for $4,845 against Ting which was, subsequent to the decision of the judge, withdrawn by consent.

26.  The judge further ordered that each party bear his own costs in the actions except otherwise ordered before.

27.  On 19 July 2002, this court granted leave to HKDPL to appeal against the judge’s order on the trial of the preliminary legal issues dated 21 May 2001 and his rulings on those issues made on 26 November 2001 (CACV 311 of 2002 and CACV 312 of 2002).

28.  On 22 January 2003, Judge Lok granted leave to HKDPL to appeal against the judge’s order dated 10 April 2002 dismissing its claims against Ting and Leung (CACV 31 of 2003).

29.  CACV 311 of 2002, CACV 312 of 2002 and CACV 31 of 2003 are collectively referred to as “the main appeals”.

30.  On 22 January 2003, Judge Lok also granted leave to Ting and Leung to appeal against the judge’s costs order (CACV 28 of 2003-“the costs appeals”).

31.  The positions of Ting and Leung were that as HKDPL’s claims against them had been dismissed, they should be entitled to costs of the actions.

32.  Ms. Audrey Eu SC, on behalf of HKDPL made four simple points in support of the appeals, namely:

“1.        That the judge should not have ordered the trial on the preliminary legal issues only in the absence of any application by the parties and without properly framing the legal issues to be determined;

2.         That the judge wrongly applied the repealed version of the Corrupt and Illegal Practices Ordinance;

3.         That HKDPL had not been given a fair hearing on the issues arising out of the Money Lenders Ordinance as the judge did not invite submission on the issue. It is suggested that the judge had not sufficiently considered the nature of HKDPL’s business and the effect of s. 23 of the Money Lenders Ordinance; and

4.         That the judge was wrong to find that the agreement to make monthly contributions of part of the honoraria were unsupported by consideration and in any event, HKDPL had not been invited to make submissions on the issues.”

33.  Ms Queenie WS Ng, on behalf of Ting, made no submission to challenge Ms Eu’s argument. Ms. Ng in fact sought leave to withdraw the costs appeal.

34.  Ms. Ng suggested that the costs of the appeal and of the hearing before the judge should be in the cause of the new trial.

35.  Leung, acting in person, did not make any submission. He associated himself with Ms Ng on the issues of costs.

36.  As the judge had dealt with the case in a rather elaborated manner and the appeals also involve points of some importance, we would, despite the positions taken by Ms Ng and Leung, say a few words about the merits of the appeals.

37.  A party may by his pleading raise any point of law under Order 18 rule 11 of the Rules of the District Court. The power of the District Court to deal with preliminary issues of law can also be found in Order 14A Rule 1 and Order 33 Rules 3 and 4(2) of the Rules of the District Court, which are reproduced herein for easy reference.

Order 14A, Rule 1:

“(1)      The Court may upon the application of a party or of its own motion determine any question of law or construction of any document arising in any cause or matter at any stage of the proceedings where it appears to the Court that-

(a)        such question is suitable for determination without a full trial of the action; and

(b)        such determination will finally determine (subject only to any possible appeal) the entire cause or matter or any claim or issue therein.

(2)        Upon such determination the Court may dismiss the cause or matter or make such order or judgment as it thinks just.

(3)        The Court shall not determine any question under this Order unless the parties have either-

(a)        had an opportunity of being heard on the question; or

(b)        consented to any order or judgment on such determination.”

Order 33 Rules 3 and 4(2)

“3.        The Court may order any question or issue arising in a cause  or matter, whether of fact or law or partly of fact and partly of law, and whether raised by the pleadings or otherwise, to be tried before, at or after the trial of the cause or matter, and may give directions as to the manner in which the question or issue shall be stated.

4(2).     In any such action different questions or issues may be ordered to be tried at different places and one or more questions or issues may be ordered to tried before the others.”

38.  Order 14A and Order 33 do give discretion to the court to deal with preliminary issues of law without application from any of the parties whether raised by pleadings or otherwise. However the exercise of the discretion is still subject to well-established principles.

39.  We propose to set out some of those principles referred to in Hong Kong Civil Procedure 2004:

“The question of law or construction to be determined by the court under the Order should be stated or formulated in clear, careful and precise terms, so that there should be no difficulty or obscurity, still less any ambiguity, about what is the question that has to be determined.” (page 188)

“Where the issues of fact are interwoven with the legal issues raised, it will be undesirable for the court to split the legal and factual determination, for to do so would in effect be to give legal rulings in vacuo or on a hypothetical ruling, which the court will not do.” (page 188)

“An order for the separate trial of separate issues is a departure from the general rule that all disputes should be tried together, and therefore, generally speaking, such an order should only be made in exceptional circumstances or on special grounds.” (page 557)

“Where costs can be saved by obtaining a ruling on a point of law which requires serious argument and consideration being disposed of before trial, the point should be raised in the pleading and application should be made under O.33, rr3 and 4(2) for the trial of this point as a preliminary issue….

The order, as a rule, will only be made if the objection raises a serious question of law, which, if decided in favour of the party objecting, would dispense with any further trial, or at any rate with the trial of some substantial issue in the action. … The order should not be made in respect of matters which by reason of the obscurity either of the facts or the law ought to be decided at the trial..

The order for the trial of a preliminary point of law should not be made where there are facts in dispute, and if made may be set aside at the hearing…

A point of law may in special circumstances be ordered to be set down and argued before the trial, although it is not raised on the pleadings..

The order should make clear what is the precise point of law to be decided.” (pages 295-296)

“Only such questions of law can properly be raised as preliminary issues as must necessarily arise in the action and the court will not decide fictitious questions or questions in which those who are interested, or are likely to be, are not present or are not in esse…

The House of Lords has strongly protested against the practice of the Court of First Instance allowing preliminary points of law to be tried before and instead of first finding the facts, since this course frequently adds to the difficulties of the Courts of Appeal and tends to increase the cost and time of legal proceedings.

Where for the purposes of deciding questions of law it is necessary or desirable to ascertain the facts beyond those that appear in the pleadings, the court should not order the trial of those questions as a preliminary point of law, especially where the law is itself unsettled or obscure.

An ‘issue’ which involves dealing with the whole subject-matter of the action without any evidence is not a preliminary point and should not be ordered to be tried as such.” (Page 555)

40.  In Netwell Properties Ltd v JCG Finance Co Ltd [2003] 4 HKC 566, Rogers VP reaffirmed the position at p. 568 of the judgment:

“The first observation which should be made is that the O14A procedure is one to determine a question of law or construction of a document which arises in an action where the question is suitable for determination without a full trial of the action and the determination would finally determine the entire cause or matter of the claim. If there is a dispute as to the facts, it is difficult to see how judgment can be entered in favour of a claimant. Where a claimant seeks judgment under O14A the facts would have to be based on either established facts or agreed facts. As set out in Hong Kong Civil Procedure 2002 at para. 14A/2/4, there should be no hypothetical facts and where the issues of fact are interwoven with the legal issues raised, it will be undesirable for the court to split the legal and factual determination, for to do so would in effect be to give legal rulings in vacuo or on a hypothetical ruling, which the court will not do.”

41.  With respect, the approach adopted by the judge and his rulings were objectionable on a number of grounds.

42.  In the amended defence of Ting and Leung, it was said that the agreement to contribute part of the honoraria was not supported by consideration.

43.  In one of the pre-trial hearings, the judge had mentioned that the contribution of honoraria was contrary to public policy and that the advancement might contravene the provisions of the Corrupt and Illegal Practices Ordinance.

44.  However, the exact questions of law to be decided were not framed or formulated at all let alone carefully and precisely.

45.  The issue relating to the moneylender’s licence had not been raised at any stage. Leung did not plead it in his amended defence. Neither counsel nor the judge made reference to it in the pre-trial hearings. No submission by counsel was made at the hearing.

46.  The judge sought to justify the approach he adopted by referring to paragraph 17-196 of Chitty on Contracts, General Principles, 28^th Edition to the effect that “Where a contract is ex facie illegal, the court will not enforce it, whether the illegality is pleaded or not; …”

47.  It is highly arguable that HKDPL in fact does not fall within the definition of a money lender under the Money Lenders Ordinance, Cap. 163.

48.  Ms. Eu must also be right in her suggestion that the judge had completely over-looked the proviso to section 23 of the Money Lenders Ordinance, Cap. 163.

49.  Under such proviso, even if HKDPL was an unlicensed money lender, it could still recover the $200,000 or part of it from Leung if “the court is satisfied that in all the circumstances it would be inequitable if a money lender who did not satisfy it that he was licensed at the relevant time was thereby not entitled to recover such money or interest or to enforce such agreement or security…”.

50.  Whether it would be inequitable to recover a loan or part of it by a unlicensed money lender depends on the relationship of the parties and the circumstances in which the loan was made and would invariably involve substantial disputes as to facts.

51.  In the circumstances, the recovery or otherwise of a loan by an unlicensed moneylender is simply not an issue that should be dealt with by way of a preliminary issue of law. There would invariably be interwoven factual and legal issues. A hearing on a preliminary issue of law would not dispose of the case.

52.  Further, whether the judge was right or wrong is perhaps beside the point. The fact remains that neither party had been alerted to the issue and they had not therefore been given the opportunity to address the court on the issue.

53.  In finding that the loans to Ting and Leung were illegal, the judge relied on the Corrupt and Illegal Practices Ordinance (revised edition 1987) which was repealed in 2000 after having had certain sections amended after 1987. 

54.  Section 8A of the repealed 1987 Ordinance provided:

“(1)        No person shall directly or indirectly by himself or by any other person on his behalf bribe or intimidate another person-

(a)        to stand;

(b)        to refrain from standing; or

(c)        having been nominated as a candidate, to withdraw as a candidate at an election.

(2)       For the purposes of this section-

(a)        a person bribes another if he does any of those activities referred to in section 5 in relation to a person standing as a candidate;

(b)        a person intimidates another if he does any of those activities referred to in section 8 in relation to a person standing as a candidate.”

55.  Section 5 of the 1987 Ordinance referred to a range of activities, including the making of any gift or loan and it provided that “No person shall directly or indirectly by himself or by any other person on his behalf” engage in any such activities.

56.  However, the Corrupt and Illegal Practices (Amendment) Ordinance (Ordinance No.54 of 1994) had amended section 5 of the 1987 Ordinance such that it would be illegal to engage in similar activities only if there was no lawful authority or reasonable excuse (emphasis added).

57.  Clearly whether there is lawful authority or reasonable excuse depends on the entire background of the case and it is simply not an issue that could be decided as a preliminary legal issue either.

58.  In deciding as he did that there was no consideration for the agreement to contribute part of the monthly honoraria, the judge rejected the suggestion that the facilities or services provided by HKDPL to Ting and Leung constituted consideration as those facilities or services were also available to all other members.

59.  It is not at all clear what were the evidential bases upon which the judge reached such decision. The transcripts of the hearing make no reference to such matters. In any event, this is again an issue that depends on the evidence to be adduced by the parties and therefore not a suitable issue to be decided as a preliminary legal issue.

60.  We were persuaded that the issues involved in the disputes between HKDPL and Ting/Leung should not be determined without a full hearing.

61.  The issues depend on facts and even if there were also legal issues involved, the determination of such legal issues would not finally determine the entire cause or matter of the case.

62.  The judge should not have ordered the cases to be tried on legal issues only, particularly when such legal issues had not been properly formulated.

63.  We also doubted the correctness of the conclusion reached by the judge on the “legal issues”.

64.  In the circumstances, the main appeals must be allowed. We set aside the judge’s orders dated 21 May 2001, 26 November 2001 and 10 April 2002.

65.  We ordered that the cases be remitted to the District Court for a re-trial except on the claim of $4,845 against Ting as such claim had been withdrawn by consent.

66.  On the question of costs, we further made the following orders.

67.  Costs of the hearings before the judge to be in the cause of the re-trial. Costs of and occasioned by the appeals to be borne by Ting and Leung in any event, such costs to be taxed if not agreed.

68.  The costs appeal is also dismissed with costs, such costs to be taxed if not agreed.

69.  Ting’s own costs to be taxed according to the Legal Aid Regulations.