HUANG LIDONG v. KWONG WING CHUNG

DCCJ 70/2021

[2023] HKDC 461

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 70 OF 2021

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BETWEEN

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DECISION

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Background and issues

1.  I have before me an unusual application. A question which calls for determination is whether this Court has jurisdiction to hear an appeal from Master after final judgment has been sealed and perfected.

2.  This is the Defendant’s appeal from Master Maurice Lam’s Order dated 15 August 2022 refusing the Plaintiff’s application for summary judgment. The learned Master found the defence shadowy and gave conditional leave to defend, the condition being payment into Court of HK$600,000 (75% of the claimed sum) on or before 5 September 2022 (“Condition”). Paragraph 3 of the learned Master’s order provided:

“If the defendant fails to comply with the said condition… and upon the filing of a certificate of non-compliance by the plaintiff:

(a) The plaintiff be at liberty to enter a final judgment against the defendant as per the reliefs stated in the statement of claim …”

3.  The Plaintiff was content with that result; the Defendant took the view that unconditional leave to defend ought to be given. This appeal was thus commenced by the Defendant’s Notice of Appeal dated 29 August 2022 pursuant to RDC Ord. 58, r.1, which was supposed to come before me on 31 March 2023 on a de novo hearing.

4.  However, the Defendant failed to comply with the Condition. Upon the Plaintiff’s filing of a Certificate of Non-Compliance dated 9 September 2022, on 29 September 2022 the Plaintiff obtained final Judgment, being the claimed sum of HK$800,000 with interest and costs. The Judgment has been sealed and perfected.

The Claim and the Defence

5.  In the Writ of Summons dated 8 January 2021, the Plaintiff pleaded that he made an oral agreement with the Defendant on 5 October 2015 (“Oral Agreement”) under which the Defendant agreed to arrange for him the issuance of a standby letter of credit with a face value of Euro 100 million (“SBLC”). In return, the Plaintiff agreed to pay, and did pay, the Defendant HK$800,000 “handling charge” for that service. The Defendant failed to arrange the SBLC, hence the Plaintiff terminated the Oral Agreement. The Plaintiff demanded the Defendant for the return of HK$800,000, which the Defendant failed and/or refused to do.

6.  Aside from typographical errors, there are two particularly odd features about the Statement of Claim (which was not pleaded by the Plaintiff’s present solicitors and Counsel) that will become relevant. First, although the first part of the pleading set out the Oral Agreement and its termination, and that the Plaintiff suffered substantial loss and damage, etc., the cause of action relied on is not breach of contract, but debt. Secondly, the Statement of Claim (verified by a Statement of Truth signed by the Plaintiff) referred to the Defendant as a male, and a staff in a finance company. The Defendant is in fact female and the Chairman of two finance companies.

7.  In the Defence filed on 17 November 2021, the Defendant denies being a party to the Oral Agreement. She pleaded that it was Mr Liu Po Shing, also known as Peter Liu, who contracted with the Plaintiff. Mr Liu filed two affirmations confirming that to be the case. In the Agreed Dramatis Personae prepared by the parties for this hearing, Mr Liu was described as the Defendant’s “common law husband/ friend”.

8.  It is not disputed that on 5 October 2015 the Plaintiff transferred HK$800,000 (being the “handling charge” for the SBLC) from his Bank of China account to the Defendant’s Bank of China account. The Defendant says that she gave all the money to Mr Liu.

Effect of the sealed Judgment on the appeal

9.  A curious feature of this appeal is that it is being pursued by the Defendant when final Judgment has already been sealed and perfected.

10.  The Defendant’s present appeal is made pursuant to RDC Ord. 58, r.1 (Cap. 336H). RDC Ord. 58, r.3 provides:

“… except so far as the Court may otherwise direct, an appeal under this Order shall not operate as a stay of the proceedings in which the appeal is brought.”

11.  Hence it was for the Defendant to apply for a stay had it been her case that she has prospects of success in the appeal but is unable to comply with the Condition. The Court may grant a stay on any appropriate terms. 2023 White Book (Vol. 1) 14/4/44, citing the Court of Appeal decision Chan Ping Che v Gao Gunter [2014] HKEC 2097 [7] – [10], is directly on point.

“Where the defendant has prospects of success in appealing a decision granting conditional leave to defend, but is unable to comply with the condition imposed, so that judgment would be entered and the consequences would be so serious as to impede the defendant’s ability to prosecute the appeal and (if successful) to continue defending the proceedings, the court may also grant a stay (on terms, if appropriate) ...”

12.  The Defendant could also apply for extension of time to comply with the Condition, pursuant to RDC Ord. 3, r.5.

13.  For completeness, I note that in Quentin Keith Hills v Marlene Rita Wittman HCMP 340/2008 (22 May 2008), [18] – [23], the Court of Appeal took the view that an order granting conditional leave to defend is not an unless order, hence the provisions of relief from sanctions pursuant to Ord. 2, r.5 are not applicable. This is to be contrasted with DP Properties Limited v E Cube Club (Tsuen Wan) Limited (formerly known as Play House (Tsuen Wan) Limited & Anor [2020] HKCFI 1252 and Charm Master Enterprises Limited v Grand T G Gold Holdings Limited & Anor [2021] HKCFI 326 [23], wherein Quentin Keith Hills was not cited nor considered. As the Defendant herein has not applied for relief from sanctions, I say no more on this subject.

14.  The Defendant did not apply for a stay or extension of time; she simply failed to comply with the Condition and let Judgment be entered. Nor did she appeal the Judgment. No reason is given for this behaviour. Moreover, Counsel for the Defendant confirmed (upon this Court’s specific question raised at the hearing) that the Defendant had not and would not make any application for retrospective extension of time.

15.  In the circumstances, it seems to me obvious that the Court is functus officio upon the final Judgment being sealed and perfected, whereupon the Defendant’s Notice of Appeal became spent. Otherwise, the resultant irregularity will be fundamental. For example, if this Court finds for the Plaintiff and gives summary judgment, there will be two final judgments in the same action; if this Court dismisses the application, the previous final Judgment oddly still stands.

16.  In Quentin Keith Hills v Marlene Rita Wittman HCA 2149/2006 (6 February 2008), the plaintiff obtained summary judgment from Master J Wong. On appeal, the Hon Suffiad J granted conditional leave to defend (the condition being payment of the claimed amount into Court within 21 days). The defendant made an application for extension of time before the deadline, which was withdrawn and dismissed. Upon the defendant’s failure to comply with the condition; judgment was sealed and perfected. The defendant then applied to set aside the sealed judgment and for retrospective extension of time to comply with the condition, pursuant to RHC Ord. 13, r. 9 alternatively the Court’s inherent jurisdiction.

17.  The Hon Suffiad J dismissed the defendant’s application, holding that (1) Ord. 13, r.9 was entirely irrelevant [21] – [22]; (2) upon the judgment being sealed and perfected, the Court was functus officio and had no further jurisdiction to set aside that judgment [23] – [24]; (3) in any event, there was no substantive merits in the defendant’s application [26], [35]-[37]. The defendant’s application for extension of time to appeal Suffiad J’s decision was dismissed by Rogers VP, whose decision was affirmed by the Court of Appeal: Quentin Keith Hills v Marlene Rita Wittman HCMP 340/2008 (22 May 2008).

18.  In this case, the Defendant offered no answer to the issue regarding lack of jurisdiction, but advanced two main arguments.

19.  First, relying on §15-049 of Handley’s Estoppel by Conduct and Election (2^nd Ed), the Defendant said that she did not abandon her right to appeal. That passage discussed Meng Leong Development Pte. Ltd. v JIP Hong Trading Co. Pte. Ltd [1985] AC 511, the issue being whether a purchaser who recovered damages in lieu of specific performance (option to purchase a house) lost the right to claim specific performance on appeal when he enforced payment of the damages into Court. The Privy Council answered in the affirmative, holding that the purchaser had elected to take the benefit of the award of damages thereby relinquishing the right to seek specific performance on appeal; the vendor altered its position detrimentally, whereby the purchaser was estopped by his election. The learned author queried the Privy Council’s reasoning process but agreed with the conclusion.

20.  Apart from not addressing the real issue of lack of jurisdiction at all, I do not think this passage supports what the Defendant argues. If one must (though it is not necessary) examine the present case through the prism of estoppel by election, the Defendant certainly acted inconsistently by failing to comply with the Condition on the one hand and pursuing this appeal on the other hand. By letting the final Judgment to be sealed and perfected, the Defendant had elected to relinquish her right to appeal. The prejudice to the Plaintiff caused by the Defendant’s failure to comply with the Condition is obvious.

21.  Secondly, the Defendant cited Fok Hing (HK) Trading Limited & Anor v Gunawan-Indra t/a Bumipala Dhanadwipa (aka TOKO Indonesia Gajahmada) CACV 74/2014 (4 July 2014) [28] – [30] to argue that the sealed Judgment does not affect her right to appeal. In Fok Hing, the plaintiffs applied to strike out the defendant’s notice of appeal against a default judgment, on the ground that (1) s.14AA of the High Court Ordinance (Cap. 4) and RHC Ord. 59, r.2B were not complied with, in that the default judgment was an interlocutory judgment hence leave to appeal must first be obtained before an appeal could be brought against it; (2) RHC Ord. 19, r.9 was not complied with, in that the defendant failed to make any application to set aside the default judgment at the first instance Court, which amounted to abuse of process.

22.  The Court of Appeal allowed the plaintiffs’ application to strike out the notice of appeal, holding that: (1) a default judgment is not a final judgment for the purpose of s.14AA of the High Court Ordinance (Cap. 4) and RHC Ord. 59, r.2B [20], hence leave to appeal must first be obtained by the defendant which he failed to do [24]. The Court of Appeal refused to extend time under RHC Ord. 59, r.2A for the application for leave to appeal [25] – [26]. (2) It was not necessary to deal with the plaintiffs’ argument concerning the defendant’s failure to comply with RHC Ord. 19, r.9; the Court of Appeal declined to express any view on it [28] – [30]. It is quite clear that the Fok Hing decision does not advance the Defendant’s present argument.

23.  Insofar as the Defendant relies on the argument summarized in Fok Hing [29] (being the plaintiffs’ contentions on which the Court of Appeal declined to express any view), I do not think it advances the Defendant’s case. In Bank of Scotland plc v Pereira [2011] 1 WLR 2391, the English Court of Appeal was concerned with the scope and application of CPR r.39.3 (setting aside of judgment in default of appearance) and its interaction with CPR Part 52 (general right of appeal). The English Court of Appeal held that the existence of the remedy under CPR r.39.3(3) (“Where a party does not attend and the court gives judgment or makes an order against him, the party who failed to attend may apply for the judgment or order to be set aside”) does not affect that party’s right to appeal directly against the order. Pereira and those rules under the CPR regime have no application on the present case.

24.  Default judgment is by its nature different from summary judgment. The Court gives default judgment according to the pleading alone without evidence in support; the defendant would not be present. Pursuant to RDC Ord. 13, r.9, the Court may, on such terms as it thinks just, set aside or vary any judgment entered in pursuance of Ord. 13; whereas pursuant to RDC Ord. 14, r.11, a summary judgment may be set aside or varied by the Court on such terms as it thinks just if the judgment is given against a party who does not appear at the hearing. There is no provision to set aside a conditional leave to defend. The Defendant has not provided any argument or authority to support her contention that an analogy between (1) default judgment, (2) summary judgment and (3) a conditional leave to defend (the latter two being given after an inter partes substantive hearing) is apposite, or even appropriate, in the circumstances.

25.  For the reasons stated above, I come to the firm view that the Defendant’s appeal ought to be dismissed.

26.  Assuming that I am wrong on the question of jurisdiction, I will go on to consider the merits of the Defendant’s appeal.

Summary judgment - principles

27.  The applicable principles regarding summary judgment have recently been summarized by DHCJ H. Au Yeung in River Plate Company Limited v Tang Tung Sang & Anor [2023] HKCFI 611 [6] – [8].

(1) The plaintiff must in the first place demonstrate that the defendant has no defence. The defendant shoulders the burden to satisfy the Court that he has a real or bona fide defence (triable issues) or that there ought for some reason to be a trial. A complete defence need not be shown.

(2) The mere assertion in an affidavit does not ipso facto provide leave to defend. The defendant must condescend to give particulars.

(3) The test is not whether the defendant’s assertions are to be believed, rather, it is whether those assertions are believable. The Court will not take the defence on its face value but test it against the evidence disclosed in the affidavit including matters such as contemporaneous documents, whether the alleged defence is inconsistent with the defence previously put forward or whether the defence is only recently raised despite opportunity being given to the defendant to respond earlier. The Court will also consider the inherent probability of the defence, without going into a mini trial on paper on complicated factual issues.

28.  The Notice of Appeal stated that appeal was “only limited to the variation of the condition of payment in court” (which is repeated in §3 and §5 of the Defendant’s written submissions). This is plainly wrong because once the appeal is made to a Judge in chambers, the Court exercises its discretion afresh, unfettered by the previous decision by the Master: Ng Ting Kwok v Ng On Kwok & Anor [2018] HKCFI 2438 [51]. As summarized in 2023 White Book (Vol. 1) 14/4/42:

“On the hearing of a defendant’s appeal against a master’s order giving conditional leave to defend, if the judge is satisfied that there is no defence to the action, he has power to accede to a plaintiff’s request for judgment to be entered. There is no provision for any formal notice of cross-appeal to be given under O.58 … but the better practice is for the plaintiff to give such notice, however informally…”

29.  At the hearing, Counsel for the Defendant does not dispute these well-established principles.

Merits

30.  The gist of the defence is that the Plaintiff sued the wrong party; it was Mr Peter Liu, not the Defendant, who contracted to procure the SBLC for the Plaintiff at the service fee of HK$800,000.

31.  Having considered the evidence before me and taking into account the inherent probability or improbability of the parties’ respective case, I find the defence shadowy, for the following reasons.

(1) Subject to the question whether Mr Liu or the Defendant was a party, it is agreed that the Oral Agreement existed. Its key terms are not in dispute either, except as to whether the Plaintiff was to obtain the SBLC within 7 days or 1 month. But that ceased to be relevant as the Plaintiff never got any SBLC even after 1 month of the Oral Agreement, despite having paid for the service.

(2) The Plaintiff’s case is inherently probable and supported by contemporaneous records such as the Defendant’s name card, showing that she was Chairman of “Gold Chief Group Limited” and “Tristate Finance and Management Limited”, as well as the email correspondence that existed between the Plaintiff and a 鄺小姐 (Ms Kwong). The Plaintiff’s possession of the Defendant’s name card and those correspondence also contradicts the Defendant’s bare denial of having dealt with the Plaintiff (Defence §4).

(3) The Plaintiff’s case is further supported by the undisputed fact that on 5 October 2015, the Plaintiff transferred the agreed HK$800,000 handling charge to the Defendant. Despite the length of the affirmations filed, the Defendant’s allegation that she passed the monies to Mr Liu remains a bare allegation.

(4) The Defendant’s allegation that Mr Liu “instructed the Plaintiff to transfer the handing charge … into the Defendant’s account at Bank of China … as LIU had no account at BOC for the transfer from the Plaintiff’s account at BOC” is practically moonshine. I find it unbelievable that, in this day and age, the transferor and the transferee must both have an account in the same bank in order to make a transfer. Apart from this moonshine, the Defendant offered no explanation as to why she would receive HK$800,000 from the Plaintiff had there not been the Oral Agreement of which she was a party.

32.  Despite the above, I come to the view that I should not give summary judgment, but give conditional leave to defend instead, due to the two odd aspects of the Statement of Claim I have pointed out in paragraph 6 of this Decision.

(1) To date, the Plaintiff has offered no explanation on affidavit as to why the Defendant was referred to as a male and a staff in the Statement of Claim (which clearly gives force to the Defendant’s allegation that the contracting party was not her, but Mr Liu). Nor has the Plaintiff applied to amend the Statement of Claim despite having known that defence for long.

(2) It is unclear on what legal basis the Plaintiff has a claim against the Defendant in debt (a primary obligation to pay a sum of money pursuant to a contract). Even Counsel’s submissions made on behalf of the Plaintiff are premised upon a claim in breach of contract which remedies lie in damages. A large part of the Statement of Claim set out the Oral Agreement and its termination, etc., but confusingly prayed for the repayment of a debt instead of damages.

33.  Given that the Defence is shadowy, and the Statement of Claim can be cured by amendment, I consider it just and appropriate that in giving the Defendant leave to defend, a condition be imposed that the Defendant shall pay the entire claimed sum (HK$800,000) into Court within 14 days.

Disposition

34.  Judgment having been sealed and perfected, the Defendant’s Notice of Appeal has become spent. The appeal should be dismissed on this ground alone.

35.  If I am wrong regarding jurisdiction, in exercising my discretion afresh I will give the Defendant conditional leave to defend upon her payment of HK$800,000 into Court within 14 days, failing which upon the filing of a certificate of non-compliance the Plaintiff be at liberty to enter final judgment against the Defendant.

36.  Had final Judgment not been sealed and perfected, case management directions would have to be made regarding the amendment of the Statement of Claim as well as the joinder of Mr Liu as a party. However, it is not necessary for me to make these directions now as the Defendant’s appeal is dismissed.

Costs

37.  There is no reason why costs should not follow the event. Counsel for the Defendant fairly accepted that an order for indemnity costs is appropriate in the circumstances in the event that I reject the Defendant’s arguments and dismiss the appeal. I will so order, subject to one proviso.

38.  During the hearing, I observed that the hearing bundles contained many repetitions and irrelevant materials. Pages and pages of previous affirmations filed in the same action were included in the bundles, but again reproduced as “exhibits” in later affirmations. These previous affirmations were, together with the exact same “exhibits within exhibits”, indiscriminately repeated in the bundles. No explanation was given for the unsatisfactory way which the bundles were compiled (at first instance, by the Plaintiff’s solicitors). Counsel for the Plaintiff agreed that it is appropriate to disallow part of the costs of the bundles, meaning that such disallowed costs are not recoverable from the paying party as well as the client.

39.  In the circumstances, I make the following order:

(1) The Defendant’s appeal be dismissed.

(2) Costs of and occasioned by the Defendant’s appeal including all costs reserved be paid by the Defendant to the Plaintiff on an indemnity basis, to be taxed if not agreed, with certificate for one counsel, save and except that 30% of the Plaintiff’s costs of the compilation of the hearing bundles be disallowed.