TIN LIK v. DEUTCHE BANK AG AND OTHERS

CACV 145/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 145 OF 2016

(ON APPEAL FROM HCCL NO 17 OF 2011)

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J U D G M E N T

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Hon Kwan JA (giving the judgment of the Court):

1.  This is the plaintiff’s application (the plaintiff is hereafter referred to as “Tin”) for leave to appeal to the Court of Final Appeal from our judgment handed down on 23 June 2017 (“the CA Judgment”). The notice of motion was issued on 21 July 2017. For convenience, we adopt the nomenclature in the CA Judgment.

2.  By the CA Judgment, this court dismissed the plaintiff’s appeal from the judgment of Bharwaney J on 15 February 2016 (“the CFI Judgment”), in which he dismissed Tin’s claims[1] save as to $10,899,727 (“the judgment sum”).  The judgment sum was arrived at after the judge found various sums had been properly set off against the amounts due to Tin[2].  Judgment in the judgment sum plus interest was entered against the Manager and the Trustee (collectively referred to as “the defendants”).  We allowed the cross-appeal of the Manager and set aside that part of the judgment awarding the judgment sum as against the Manager.

3.  In Tin’s notice of motion seeking leave to appeal to the Court of Final Appeal, he raised two questions said to be of great general and public importance (“GPI”).  He also sought leave to appeal on the “or otherwise” limb.

4.  Written submissions were lodged in accordance with Practice Direction 2.1 by the parties.  We have read the same and there was no request for oral hearing.  We are of the view that the application can be processed on paper.

5.  The two questions of GPI concern arguments on set‑off (discussed in Sections E, E.1 and E.2 of the CA Judgment) and the requirements for a document to constitute a certificate pursuant to a certification clause (discussed in Section F of the CA Judgment).

Question 1

6.  Question 1 relates to the set‑off arguments.  It is a long question divided into three parts[3]. The question was formulated on the premise that the CA Judgment had held that because (1) the defendants had exercised equitable set‑offs unilaterally prior to Tin commencing this action, (2) equitable set‑off is a self-help remedy, and (3) equitable set‑offs should be equated with calculation of damages, the defendants are absolved from pleading and proving the set‑offs, and the onus shifts to Tin to invalidate the set‑offs.

7.  Tin’s counsel in this application, Mr John Hui and Ms Sharon Yuen, were not the trial counsel and did not appear for him on appeal[4]. They would seem to acknowledge in their reply submission that the Court of Appeal did not hold in the manner as contended in their first submission, as it was submitted in reply that the holdings contended were the “necessary implication” of this court’s decision.

8.  The relevant passages in the CA Judgment now sought to be attacked must be read in context.  They were to address specifically the arguments made by Tin’s former leading counsel on his objections to pleadings and evidence generally regarding set‑off.  And before we addressed his arguments, we endeavoured to put matters in the proper context with regard to non-controversial facts and/or facts as found by the judge[5].  Counsel’s arguments were summarised[6] before we went on to give reasons why they should be rejected[7].

9.  It is wholly unacceptable to read into our judgment by implication or by inference legal propositions that were neither advanced nor considered by us, let alone decided by us.

10.  The objections raised by Tin’s former counsel as to the insufficiency in pleadings and evidence were based on his assertion that “the set‑offs relied on by the defendants were in the nature of legal set‑offs”[8].  Having considered the full factual context and the pleadings and applying the law, we held that the set‑offs were not in the nature of legal set‑offs and rejected his objections.  The paragraph now sought to be attacked (§99) was merely a description of the characteristics of the set‑offs under consideration, to show why they were not legal set‑offs as asserted on Tin’s behalf.  To read general and unqualified legal principles in a different context from this description by implication or inference is a distortion of the court’s statements.

11.  According to Tin’s submission, the three parts of Question 1 revolved around this court’s conclusions on equitable set‑off.  Although it had been made clear in the CA Judgment that this case concerned equitable set‑offs as opposed to legal set‑offs, inexplicably there were still references to legal set‑off in the formulation of this question.

12.  As to Question (1)(a), the Court of Appeal did not hold “where a defendant seeks to rely on a cross-claim or counterclaim as legal/equitable set‑off … prior to the commencement of the action by the plaintiff ”, there is any alleged general unqualified legal principle that the defendant is absolved from the onus of adequately pleading, proving the set‑offs, and establishing close connection between the claim and cross-claim and that it would be manifestly unjust to enforce the claim without taking into account the cross-claim (i.e. the matters set out in §§6 and 7 of Tin’s submission).  Further, contrary to §3(b) of Tin’s submission, this court did not hold that the requirements as to pleadings and proving a defence in set‑off “only apply to legal set‑offs but not equitable set‑offs”, whether in §§95 or 99 or elsewhere.

13.  As to Question (1)(b), the Court of Appeal did not hold because equitable set‑off has the status of a “self‑help remedy”, the defendants are absolved from pleading or proving the set‑offs if exercised unilaterally prior to Tin commencing this action (i.e. the matters set out in §§6 and 7 of Tin’s submission), or that the onus shifted to Tin to invalidate the set‑off.  Nor did this court hold that a pre-action unilateral assertion of set‑off by a defendant would have the legal effect of automatically extinguishing the plaintiff’s claim (for which Tin cited the dicta of Lord Wilberforce in Aries Tanker Corporation v Total Transport Ltd [1977] 1 WLR 185 at 188H to 189B).

14.  Tin seized on this court’s references to “the set‑offs already made” (§§90 and 101) and “the sums were all set off ” (§99) to contend that this is “tantamount to acknowledging an automatic extinction of P’s claim to the extent of Ds’ alleged pre-action set‑off ”. This is another distortion of the court’s statements which merely set out the events to put things in the proper context in addressing the particular arguments of counsel.  Nowhere in our judgment did we say that Tin was barred from challenging the equitable set‑offs.  It should be clear from §§84 to 93 of the CA Judgment that we accepted it was permissible for Tin to challenge the set‑offs.

15.  As to the dicta of Lord Wilberforce relied on by Tin (that the deduction of $30,000, unaccepted by the respondents, conferred no legal rights and could not alter the legal position), that must be read in the legal and factual context of that case.  There, the charterers of a vessel were sued for unpaid freight and raised the defence they were entitled to deduct $30,000 for short delivery.  The House of Lords rejected that defence on two grounds, as can be seen from the head note.  The first was based on a long established rule of law that a claim in respect of cargo could not be asserted by deduction from freight.  The second and primary ground was that article III r 6 of the Hague Rules operated as a time bar created by contract, and as no suit was commenced by the charterers within time despite their withholding $30,000, their claim had ceased to exist as distinct from being merely unenforceable.  It was in that context that Lord Wilberforce said a claim which had ceased to exist could not be introduced into the legal proceedings as a set‑off.  The fact that the charterers had asserted their claim within the limitation period and purported to make a deduction did not affect his lordship’s view (at 188C to G; see also Derham on the Law of Set‑off (4^th ed) at §4.32).

16.  There is no inconsistency between our judgment and the dicta of Lord Wilberforce sought to be relied on, if both are properly understood.

17.  As to Question (1)(c), the Court of Appeal did not, in the description given in §99, equate equitable set‑off generally with the calculation of the true measure of damages as a matter of law.  Nor did we hold, on the premise as alleged that equitable set‑off is equated with ‘set‑off ’ in a loose sense, that the burden is shifted to the plaintiff to impugn or invalidate the set‑offs which were raised before the commencement of the action.

18.  We reiterate there is no hard and fast rule as to which side should bear the burden of pleading and proving equitable set‑off (or impugning the exercise of the same).  Here, the set‑offs had been exercised a long time ago and Tin was aware of the same and took no step in that regard.  Under such circumstances, as submitted by the defendants on appeal and in this application and repeated more particularly by Mr Eugene Fung, SC for the Trustee, we found the following to be the relevant context to determine that question in the present appeal:

(1)  it was Tin who sought to impugn the set‑offs in the pleadings;

(2)  it was not Tin’s pleaded case that any of the set‑offs was not incurred, or that the amount set off was unreasonable or wrong in fact or in law;

(3)  the set‑offs pleaded by the defendants were adequate given the circumstances of the case.

19.  Further, at §§102 to 104 of the CA Judgment, we explained why there was no unfairness to Tin as the trial judge had accommodated his challenge to the set‑offs notwithstanding the inadequacy in his own pleadings.

20.  We do not see any reasonable prospect of success in the Plaintiff’s intended appeal based on Question 1 for all the above reasons.

21.  In any event, we agree with the Manager and the Trustee that Question 1 is academic and cannot be regarded as a question of GPI, and leave should also be refused for those reasons.

22.  We have dismissed Tin’s appeal on the ground that the set‑offs as pleaded by the defendants were adequate[9].  The judge had proceeded on the basis as contended by Tin’s former counsel that the defendants should have the onus of proving the set‑offs and concluded that the onus was discharged[10]. We have upheld the judge on this.  We have further upheld the judge’s findings that the nine categories of set‑off had been proved sufficiently by the defendants[11]. Given the findings of the judge and of this court that the defendants had discharged the onus of proving the set‑offs, even if Question 1 were arguable and were answered in the way as contended by Tin, the outcome would not have been different.  The questions raised in Question 1 are wholly academic and would not have affected the dismissal of Tin’s appeal.

23.  The holdings of this court sought to be attacked in Question 1 (even assuming they were made) were reached in the light of the particular factual context, which included the history of the parties’ dealings and the proceedings, the manner in which the set‑offs were exercised to the full knowledge of Tin, the reaction and stance adopted by Tin, and the pleadings of the parties.  The holdings arrived at were fact-sensitive, and cannot give rise to questions of GPI.  And insofar as Tin sought to challenge the judge’s assessment of the evidence on the set‑offs and this court’s affirmation of the same, this cannot amount to a question of GPI.

24.  It was contended in §22 of Tin’s submission that the judge below had erroneously absolved the defendants from satisfying the matters raised in §§6 and 7 of his submission.  On appeal, Tin did not read the CFI Judgment in that light, nor was this advanced as a ground of appeal.  We adhere to the practice of not granting leave to appeal for new points not canvassed in the hearing of the appeal before us (Flywin Co Ltd v Strong & Associates Ltd (2002) 5 HKCFAR 356 at §39; Ageas Insurance Co (Asia) Ltd v Lam Hau Wah Inneo, CACV 65/2014, §§7 to 9; The Law Society of Hong Kong v A Solicitor, CACV 78/2014, 10 July 2015, §§4 to 7).

25.  For all the above reasons, we decline to grant leave to appeal on Question 1.

Question 2

26.  Tin took no issue with the law as stated by Lord Sumption in the Privy Council in Fairfield Sentry Ltd v Migani [2014] 1 CLC 611 at §§25 to 27, quoted in the CA Judgment at §149.

27.  The contention in Questions 2(a) is that one of the requirements in Fairfield Sentry (that the statement “is communicated by whatever method to a recipient or class of recipients intended to rely on it”) should be modified in that the statement must be communicated to the recipient in such manner which would enable the recipient to reasonably know, appreciate and/or understand that it is to be relied upon as a certificate pursuant to the certification clause.  In support of this, reliance was placed on Token Construction Co Ltd v Charlton Estates Ltd (1973) 1 BLR 48 at 59, which related to an architect’s certificate for delay.

28.  The documents held to constitute certificates were the public announcements of 10 September 2007 and 28 October 2007 issued by order of the Board of the Manager[12] and under the name of the chairman of the Manager, and the Final Results Announcement up to 31 December 2007 signed by the chairman of the Manager.

29.  Assuming for present purpose that the requirement in Fairfield Sentry should be modified in the manner as contended by Tin, we do not think a question of GPI can arise.  As stated in Fairfield Sentry at §25, “what constitutes a certificate is dependent on the commercial or legal context in which the certification clause appears”.  The manner in which any document was communicated, and whether the recipients would reasonably know, appreciate and understand such document was intended as conclusive evidence certificates, are clearly fact-sensitive and peculiar to the particular circumstances of the case.

30.  Tin did not argue on appeal that any of the requirements in Fairfield Sentry should be modified.  Notwithstanding that, in addressing the argument of his former counsel that the public announcements did not constitute a “contractually-compliant record” of the certifying agent’s conclusion, this court had fully considered the commercial or legal context in which they were made and concluded that the use of a public announcement was a “perfectly legitimate vehicle to communicate to [Tin] the amount he owed to the REIT under the Letter Agreement”[13].  And applying the same analysis, we were satisfied that the judge was also correct in concluding that the Final Results Announcement was a certificate for the purposes of clause (e) of the Letter Agreement[14]. We do not think the different context of an architect’s certificate in a building contract would take the debate any further or that the new arguments advanced are reasonably arguable.

31.  The contention in Question 2(b) is that the documents held by the judge and affirmed by this court to constitute certificates did not satisfy another of the requirements in Fairfield Sentry in that it must be “in a form or context which shows that it is intended to be definitive”.  It was sought to argue that this court did not take into account the effect of the subsequent reversal of the original figure in the Final Results Announcement to “align provisioned investigation costs with actual investigation costs”, to which the trial judge nonetheless considered the Announcement constituted a certificate because the revised figure is within the amount originally set out[15].

32.  As rightly submitted by Mr Wong Yan Lung, SC and Mr Mike Lui for the Manager, this is a new argument not raised in the appeal before us, nor did it feature as a ground in the notice of appeal.  We decline to grant leave to appeal for this new ground.

33.  In any event, whether the set‑off of investigation costs as stated in the Final Results Announcement was intended to be definitive to meet the requirements in Fairfield Sentry, despite the subsequent reversal, is fact-sensitive and cannot give rise to a question of GPI.

34.  We also agree with the Manager there is no merit in the new contention and Fairfield Sentry does not support the proposition that definitive for this purpose would require a statement to be final in the sense that there cannot even be a possibility that the matters sought to be certified may be changed or revised.  And this court has addressed the requirement that the document must be “in a form or context which shows that it is intended to be definitive”, albeit in dealing with a different objection made by Tin’s former counsel as to the definitiveness of the public announcements of 10 September 2007 and 28 October 2007[16].

35.  For all the above reasons, we refuse to give leave to appeal on Question 2.

“Or otherwise” limb

36.  It was stated in the notice of motion that Tin will seek leave to appeal on the “or otherwise” limb.  In Dr Leung Shu Piu v Medical Council of Hong Kong (2014) 17 HKCFAR 356 at §14, Bokhary NPJ stated that the decision whether or not to adopt this further or alternative course “should be approached with some circumspection”; that if pursued, “care should be taken to state with clarity why it is suggested that the matters in question may support leave to appeal under the “or otherwise” limb even if they fail to do so under the “question of great and general importance” limb”; and “that should be addressed in the written Application itself”.

37.  Contrary to the above statements, it was not addressed in the notice of motion why it is suggested that the matters in question may support leave to appeal under the “or otherwise” limb even if they fail to do so under the GPI limb, nor was this dealt with in the first submission of Tin. When it was pointed out in the submissions of the Manager and the Trustee that the practice advised in Dr Leung Shu Piu was completely ignored and leave to appeal on this limb should be refused, Tin stated in his reply submission that as the practice is for the Appeal Committee to consider whether leave should be granted under this limb, submissions in that respect would not be made to the Court of Appeal.

38.  We regard it as unacceptable that the basis for invoking this limb was not even addressed in the notice of motion.

39.  We refuse to give leave to appeal on the “or otherwise” limb.

Orders

40.  We dismiss Tin’s notice of motion for leave to appeal.  We order him to pay the costs of the Manager and the Trustee of this application and make a gross sum assessment.

41.  In light of the fact that new arguments were raised by the new legal team of Tin on all the questions set out in the notice of motion, we think it appropriate to grant a certificate for two counsel in the case of the Manager.

42.  The Manager’s statement of costs is for $501,580, the bulk of which is the fees of two counsel.  The Trustee’s statement of costs is for $121,601.20.  We will allow in full the Trustee’s costs.  For the Manager’s costs, we will allow $318,780 as reasonable fees.

43.  The costs order and summary assessment are orders nisi.  Any party wishing to vary the orders nisi shall lodge a written submission within seven days hereof, failing which the orders shall become absolute.