SIN YUK HUNG v. SIN TUNG SAN

HCA 474/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 474 OF 2013

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D E C I S I O N

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I. INTRODUCTION

1.  On 18 December 2013, I handed down my decision in this action in respect of three summonses heard before me on 24 September 2013 (“Decision”). Those three summonses are what I have described in the Decision as the Continuation Summons, the O14 Summons and the Discharge Summons.  For the sake of convenience, I shall adopt the abbreviations in the Decision.

2.  In the Decision, I granted the following orders:

(a) in respect the O14 Summons, (i) such summons be dismissed, (ii) the plaintiff shall within 14 days file and serve a case management summons, failing which the defendant shall within 7 days thereafter file and serve a case management summons, and (iii) there be a costs order nisi that the plaintiff shall pay the defendant costs of the summons (including all costs reserved if any) to be taxed if not agreed (“O14 Order”);

(b) in respect of the Discharge Summons, (i) the Ex Parte Order as varied by the Chan Order be discharged, and (ii) there be a costs order nisi that the plaintiff shall pay the defendant costs of the summons (including all costs reserved if any) to be taxed if not agreed;

(c) in respect of the Continuation Summons, (i) such summons be dismissed, and (ii) there be a costs order nisi that the plaintiff shall pay the defendant costs of the summons (including all costs reserved if any) to be taxed forthwith if not agreed.

3.  There was no application by either party to vary the above costs orders nisi, so they had been made absolute.

4.  On 31 December 2013, the plaintiff filed a summons for leave to appeal against the O14 Order (“Leave Summons”) with a draft Notice of Appeal (“Draft Notice”) annexed thereto. According to the Leave Summons, the plaintiff claimed that if leave were granted for her to appeal against the O14 Order, she would seek an order that unconditional leave to defend be granted to the defendant with costs of the O14 Summons to be in the cause and costs of the appeal be to her to be taxed if not agreed. The hearing of the Leave Summons came before me on 14 February 2014 (“Leave Hearing”).

5.  There is no application for leave to appeal against the orders I made in respect of the Discharge and Continuation Summonses.

6.  By a letter to the court dated 12 February 2014, the defendant’s solicitors advised they no longer had instructions to act for the defendant in the present action, and they had taken steps to remove themselves from the court’s record.  But pending finalisation of that process, Mr Lam, solicitor for the defendant, appeared at the Leave Hearing despite the lack of instructions.

II. LEGAL PRINCIPLES

7.  The O14 Order is plainly an interlocutory order, and it is incumbent upon the plaintiff to persuade this court to grant leave to appeal.

8.  Under section 14AA(4) of the High Court Ordinance Cap 4, leave to appeal shall not be granted unless the court is satisfied that the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard.  In SMSE v KL,[1] Le Pichon JA pointed out that such leave to appeal is not lightly granted. Reasonable prospect of success involves the notion that the prospect of succeeding must be “reasonable” and therefore more than “fanciful”, without having to be “probable”.[2]  Furthermore, it is pertinent to bear in mind that even if there is a reasonable prospect of success on appeal, the court still retains a discretion whether to grant leave to appeal, although the fact that there is, ex hypothesi, a reasonable prospect of success would heavily influence the court’s exercise of discretion.[3]

III. PLAINTIFF’S INTENDED GROUNDS OF APPEAL

9.  As evident from the Draft Notice and the written submissions by Mr Chong (and Mr Leung with him), counsel for the plaintiff, the gravamen of the plaintiff’s challenge against the O14 Order is as follows:

(a) I erred in law in granting the O14 Order despite my findings in the Decision that the defendant had only raised “triable issues” and “arguable defences” “which need to be resolved at trial”;

(b) the O14 Order was wrong because I failed to properly apply Order 14 rule 7 of the RHC which provides that the court may only dismiss an Order 14 application and order the plaintiff to pay costs either where (i) the case is not within the order or (ii) the plaintiff knew before the issue of the O14 Summons that the defendant was relying on an arguable defence;

(c) in the absence of any finding in the Decision that (i) the present case is not within the order and (ii) before the issue of the O14 Summons the plaintiff knew the defendant was relying on a contention which would entitle him to unconditional leave to defend, the only and proper order that I should have made in respect of the O14 Summons would be to grant unconditional leave to defend and order costs to be in the cause (as opposed to dismissal of the O14 Summons with costs).

10.  In short, Mr Chong argued that since my findings in the Decision were that the defendant merely raised “triable issues” and “arguable defences” “which need to be resolved at trial”, and failed to make any finding or conclusion that the O14 Summons fell outside the ambit of Order 14 of the RHC or that the plaintiff actually knew of the substance of the defence to be raised prior to the O14 Summons that would provide the justification for the court to dismiss suchsummons with costs against the plaintiff, the only proper order that should have been made was to grant unconditional leave to defend pursuant to Order 14 rule 3 of the RHC with costs of the O14 Summons to be costs in the cause.

IV.  ORDER 24 RULE 7 OF THE RHC

11.  Order 14 rule 7(1) of the RHC provides as follows:

“If the plaintiff makes an application under rule 1 where the case is not within this Order or if it appears to the Court that the plaintiff knew that the defendant relied on a contention which would entitle him to unconditional leave to defend, then, without prejudice to Order 62 and in particular to rule 4(1) thereof, the Court may dismiss the application with costs and may require the costs to be paid by him forthwith.”

12.  Mr Chong submitted that for the court to invoke Order 14 rule 7 of the RHC, there must be a finding in the written judgment of the court hearing the summary judgment application that the court was satisfied that the plaintiff knew the substance of the defendant’s defence before the former took out such application. He cited Sterling Services Ltd v Tan Kee Cheang and Ko Siu Shing (third party)[4] and Welltime Hong Kong Ltd v Cosmic Insurance Group Ltd[5] in support.

13.  In Sterling Services Ltd, the plaintiff sued the defendant on two guarantees. The defendant’s defence was that the guarantees had been released.  The plaintiff sought summary judgment under Order 14 of the RHC, submitting that no arguable defence had been disclosed and that it consisted of no more than incredible and inconsistent allegations unsupported by contemporaneous documentation. The defendant opposed the application. Stone J held that on the limited evidence before the court, it was abundantly clear there was a question in dispute that ought to be tried, and the case cried out for full discovery. The learned judge said as follows:[6]

“After reflecting further on the evidence, I have concluded that this indeed is a case wherein dismissal of the application is justified, with the attendant costs consequences. There is no doubt that in embarking upon this application the plaintiff knew the substance of the principal defence raised, given that the pleaded defence antedated the institution of the summary judgment application by almost four months. As such, therefore, Mr Harris was entitled to invoke the provisions of O.14 r.7(1) of the Rules of High Court (Cap.4, Sub.Leg.).”

14.  In Welltime Hong Kong Ltd, the defendant insurance company executed a performance bond as surety in favour of the plaintiff to guarantee performance of the contractual obligations of the main contractor for the construction of a residential development.  Subsequently, the contract sum and completion date were revised, and new terms were added to the construction contract.  Although a new performance bond was required, none was executed.  Dispute arose between the plaintiff and the main contractor during the construction works and was referred to arbitration.  The arbitrator rejected the main contractor’s assertions, and awarded the plaintiff damages.  The plaintiff commenced proceedings against the defendant under the bond, and applied for inter alia summary judgment. DHCJ Poon (as he then was) dismissed the application, and said as follows:[7]

“20. For these reasons, the plaintiff's application for summary judgment must fail. In the affidavit filed by So Yui Chit, solicitor acting for the defendant, on 8 October 2002 in support of its application for specific discovery of documents, the defendant had already stated its case that it was not bound by the Award. The plaintiff had since been made aware of this line of defence, which is clearly arguable in the circumstances. In my view, the plaintiff should not have proceeded with the summary judgment application. The application is thus dismissed: see Hong Kong Civil Procedure 2002 Vol 1 para 14/7/3. The application for interim payment must also fail because the plaintiff has failed to demonstrate that it has met the requisite threshold laid down in O 29 r 11(1)(c): see Hong Kong Civil Procedure 2002 Vol 1 para.29/11/1 at pp 507-508.

21. On costs, I will make an order nisi that the defendant shall have the costs of the plaintiff's summons from 8 October 2002 up to and including the hearing before me and the costs incurred before 8 October 2002 be in the cause.”

15.  Whilst the above two authorities demonstrated situations in which Order 14 rule 7(1) of the RHC was invoked, it begs the question whether as a matter of principle the court’s power is so circumscribed that, as suggested in the Draft Notice and Mr Chong’s submissions, it may only dismiss an application for summary judgment on either of the two circumstances set out in such rule.  For the present purpose, I agree with Mr Chong that we can ignore one of the two circumstances set out in Order 14 rule 7(1) of the RHC, ie the case is not within Order 14 of the RHC, as being irrelevant.

16.  At the Leave Hearing, Mr Chong agreed that the court would have inherent power to dismiss an application for summary judgment for abuse of process.  But other than such inherent power exercisable in those limited circumstances, he submitted that the power of dismissal in the Order 14 context is circumscribed by Order 14 rule 7 of the RHC.  He further submitted that although Order 14 rule 3(1) of the RHC made no specific reference to rule 7, the reference therein to dismissal of an application for summary judgment must necessarily be premised on rule 7.  For easy reference, I set out Order 14 rule 3(1) of the RHC as follows:

“Unless on the hearing of an application under rule 1 either the Court dismisses the application or the defendant satisfies the Court with respect to the claim, or the part of a claim, to which the application relates that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial of that claim or part, the Court may give such judgment for the plaintiff against that defendant on that claim or part as may be just having regard to the nature of the remedy or relief claimed.” (my emphasis)

17.  Mr Chong did not cite any authority in support of his propositions apart from the rules.  However, I note that the court does not have to rely the express power in Order 14 rule 7 of the RHC to dismiss an application for summary judgment for either of the two circumstances set out the rule, which implicitly suggested that the court has broader powers of dismissal than just prevention of abuse of process. The learned editors of Hong Kong Civil Procedure 2014 Vol 1 recognised that the court has such power even without the rule as follows:[8]

“Effect of rule – [Order 14 rule 7 of the RHC] confers express powers on the court which, even without the rule, the court would have had:

1. To dismiss any application under O.14 either

(a) where the case is not within the Order; or

(b) where the plaintiff knew, before the issue of the summons, that the defendant was relying on an arguable defence (see also r.3(1)); and

2. to order the plaintiff to pay the costs of the application, and to do so forthwith.

Those powers are salutary and their express statement in this rule is intended to discourage the misuse of O.14 proceedings. ……” (my emphasis) (para 14/7/1 at p 275)

“…… Sometimes, a plaintiff resorts to O.14, not with any expectation of success, but in order to compel or induce the defendant to disclose on oath the nature of his defence; this is not legitimate, but is an abuse of the process of the court, and in such case the application should be dismissed. ……

There are certain cases which are plainly not appropriate for the summary procedure and in such cases the summons should be dismissed. ……” (para 14/7/3 at p 276)

18.  In Worldcap Investment Ltd v Bosswell Estates Ltd,[9] which was referred to in Hong Kong Civil Procedure 2014,[10] an appeal was brought from a refusal by the first instance judge to grant the plaintiff the summary judgment it was seeking, namely, a mandatory order and damages.  Hunter JA found there were considerable ambiguities in the Statement of Claim with no averment of facts to support the allegation that the defendant was in wrongful breach of the agreement/assignment between the parties.  There was difficulty in understanding the plaintiff’s claim for trespass, and there were inherent problems that arose from the factual situation under the plaintiff’s own case.  The learned judge went on to say as follows:[11]

“When the matter came before Nazareth J, the defendants exhibited a draft defence which they said gave rise to triable issues. They have since in fact filed a defence. The defence raises a number of points. ……

…… it seems to me self-evident, that this is not a case where this court is in any circumstances under O 14 going to arrive at what it conceives to be the true construction of an interlocking group of documents starting with the contract, going through construction plans to a deed of mutual covenant and ending up with an assignment …… This seems to me to be a hopeless case as far as O 14 is concerned, and that stood out on the face of the documents from the outset. I do not dispute that the terms of O 14 r 1 are now so wide, that this is a case which is within its ambit. But one only has to look at the nature of the problem in a case like this to see it cries out for a trial, and full elucidation of the facts, before you can decide on the meaning of the documents.

……

          …… [The judge] dismissed the summons with costs and granted unconditional leave to defend. To the purist that is not right. If a summons is dismissed the court need say nothing more. If it grants unconditional leave to defend that is different because it is not dismissing a summons it is making an order upon it. In those circumstances it may or may not be proper to go on and give directions. But that is really semantic criticism. As I read the judgment, the judge came to the same conclusion I have reached, that this was not a case which justified O 14 proceedings and that this claim advanced under O 14 was bound to fail. In those circumstances, in my judgment a judge should have no hesitation not simply to grant unconditional leave to defend, but to dismiss the summons with costs.”

19.  It was obvious in Worldcap Investment Ltd that the defendant’s defence contentions were made known to the plaintiff only after the application for summary judgment had been issued (and as such the situation did not fall within the two circumstances identified in Order 14 rule 7 of the RHC).  Also the court found the defendant raised triable issues and arguable defences by virtue of the draft defence placed before the judge hearing the application. But the court went further to find that the plaintiff’s own case had ambiguities and inherent concerns such that it “cries out for a trial” and was a “hopeless case as far as Order 14 is concerned”. It was on such basis that the judge (as upheld by the Court of Appeal) dismissed the Order 14 summons with costs.

20.  More recently, in Simba-Toys (Hong Kong) Limited v Fullmore Corporation Limited,[12] a case not cited by Mr Chong, the plaintiff’s claim against the defendant was for (a) delivery up of various moulds for toys and (b) damages for unlawful conversion of the moulds.  They applied inter alia for summary judgment under Order 14 of the RHC.  The only positive defence put forward by the defendantwas that they had not at any time received, obtained or otherwise possessed the moulds. But at the hearing of inter alia the Order 14 application, question was raised as to whether the plaintiff had locus to sue given that the cause of action rested with their affiliated company in Germany, and there was no assignment of any such cause of action to the plaintiff.  DHCJ A Chow SC considered that in such circumstances it would not be proper for the court “to enter judgment in the Plaintiff’s favour under Order 14 of the RHC even if the evidence before the court would otherwise justify giving judgment for the Plaintiff ……” [13]

21.  It appears from the Decision on Costs[14] in that action that the plaintiff subsequently made an application for a re-consideration of the learned judge’s decision to dismiss the summary judgment application. DHCJ A Chow SC said as follows:

“2. …… The Plaintiff submits that the appropriate order should be to grant leave to the Defendant to defend, unconditionally or subject to conditions, and that the costs of the application should be costs in the cause, being the usual order where unconditional leave to defend is given. The Plaintiff has also made an application to vary the costs order nisi in respect of the application for inspection of the Moulds such that the Defendant should pay the costs of the Plaintiff or, in the alternative, there should be no order as to costs. ……

The Plaintiff’s applications

4. In respect of the costs of the Order 14 application, essentially, the Plaintiff’s application is based on the fact that the ground of my decision to dismiss the summary judgment application, namely, that the Plaintiff has no locus standi to sue, was not a contention relied on by the Defendant (either before the application was issued or at all). It is also said that this case does not come within Order 14 Rule 7 of the Rules of the High Court. That rule applies where the case is not within the order or where the plaintiff knew that the defendant relied on a contention which would entitle him to unconditional leave to defend.

5. I accept that Order 14 Rule 7 of the Rules of the High Court does not apply to the present case. However, I do not believe that the court has no power to dismiss an Order 14 application where it is plain that the plaintiff has no locus to sue (as I believe it to be the case here). The fact of the matter is that the Plaintiff has no cause of action against the Defendant in this action.

6. It is correct that the issue of locus standi was never raised by the Defendant. However, I consider that, prima facie, the duty was on the Plaintiff to ensure that it had proper standing to sue before it made an application for summary judgment against the Defendant. In all the circumstances, I am not persuaded that the costs order nisi should be varied as sought by the Plaintiff.” (my emphasis)

22.  The learned deputy judge made clear that the power to dismiss an application for summary judgment is not limited to the two circumstances set out in Order 14 rule 7 of the RHC. Indeed, what is apparent from Worldcap Investment Ltd and Simba-Toys (Hong Kong) Limited is that quite apart from Order 14 rule 7 of the RHC and irrespective of any triable issues or arguable defences that the defendant may raise, if there are inherent concerns in respect of the plaintiff’s own case (and the plaintiff must know his own case) sufficient to demonstrate that the plaintiff’s case itself is unfit for any Order 14 application, such application is liable to be dismissed with costs. But whether and how a plaintiff’s case will meet such threshold will depend on the particular circumstances of each case.

V. DECISION ON ORDER 14 SUMMONS

23.  Mr Chong suggested that in the Decision I only made findings as to “triable issues” and “arguable defences” “which need to be resolved at trial” without making any finding as to whether the plaintiff knew that the defendant relied on a contention which would entitle him to unconditional leave to defend.  

24.  Whilst I accept that I did find that the defendant (supported by the DQ Aff) demonstrated real and bona fide defences to the plaintiff’s claim, I also concluded that “given the inherent inconsistencies within the plaintiff’s own case, I dismiss the O14 Summons”.[15]

25.  On the plaintiff’s own case, she claimed that the consideration for the Cheque was the outstanding balance of the Alleged Loan and the outstanding interest thereon, and that she had express authority from the defendant through Don-qi to fill out the Cheque for repayment of “the outstanding balance of [the Alleged Loan] and interest” (ie the express instruction and agreement was not to pay herself the Sum).[16]  Hence, as pointed out in paragraph 31 of the Decision, the crux of the matter turns on the existence of the Alleged Loan otherwise there would be no indebtedness due to the plaintiff and no consideration to support the Cheque whereupon any knowing act by the plaintiff to fill out and pay herself the Sum under the Cheque might arguably be dishonest and/or wrongful, and any argument on forbearance to sue would fall by the wayside as well.[17]

26.  I note in the Decision that the plaintiff had never (a) identified the BOC Account (into which she claimed she deposited part of the Alleged Loan), (b) particularised the dates, amounts, sources/manner of payment and the corresponding recipient amounts of the “several deposits” and/or the 1^st and Other Tranches she purportedly made into the HSBC and BOC Accounts and/or (c) provided any documentary support (whether from her own papers/records or from her bankers) despite the size and recent nature of the Alleged Loan.[18]  The plaintiff’s explanation as to the 1^st and Other Tranches that she claimed made up the Alleged Loan raised more questions than answers. Inherent concerns over her allegations as to the 1^st Tranche of HK$1,700,000 said to have been advanced on 17 June 2012[19] have been set out in paragraphs 39-43 of the Decision, and as to the Other Tranches in the aggregate sum of HK$12,000,000 said to have been advanced after 17 June 2012 and until 17 September 2012[20] and as to the Alleged Loan generally have been set out in paragraphs 44 and 46-48 of the Decision.

27.  The plaintiff’s own case in respect of the IOU also raised questions. She did not explain why Don-qi was named as “borrower” in the IOU although she alleged it was the defendant and not Don-qi who owed her the money (ie the Alleged Loan), and why the repayment specified under the IOU by Don-qi and not the defendant as “borrower” was to be partly by cash and partly by the Huili shares.[21]  There was also inherent contradiction in the plaintiff’s own case as to whether the Huili shares had been sold or not.[22]  There was also no explanation by the plaintiff why on her own case and notwithstanding the IOU the parties changed their minds about a week later to make full cash repayment instead.[23]

28.  But more significantly, even assuming the existence of the Alleged Loan, the plaintiff on her own case claimed she was expressly authorised to fill out Cheque for the outstanding balance of the Alleged Loan and interest. But when she conceded in P’s 5th Aff (and she must have known of her own case including such matter in March 2013, ie before the commencement of the present action let alone the O14 Summons) that the outstanding balance of the Alleged Loan was HK$4,100,000[24] (and not the sum of HK$4,700,000 which she adopted in addition to the alleged outstanding interest sum of HK$2,468,300 to make up the Sum she inserted in the Cheque), it must be plain (and I have found it is “highly arguable even on the plaintiff’s own case) that her filling out and presenting the Cheque for payment of the Sum was not strictly in accordance with the authority given as required under section 20(2) of the Ordinance, which would render the Cheque unenforceable against the defendant”.[25] Other inherent problems on the plaintiff’s own case arising out of this are set out in paragraphs 90-92 of the Decision, and I have concluded that “[such] inherent discrepancies in respect of the plaintiff’s own case raise triable issue as to whether she was entitled to insert the Sum in the Cheque to present it for payment”.

29.  I made it quite clear that the plaintiff’s case on the Alleged Loan was inherently inconsistent and contradictory,[26] which cried out for trial and also for elucidation from documents which the plaintiff did not disclose. I have also found that the plaintiff’s own case on the alleged outstanding interest sum of HK$2,468,300 to be questionable; indeed, I considered the plaintiff’s own explanation in this respect to have sailed “perilously close” to the defendant counsel’s suggestion that she was making up her case as she went along.[27]  I have therefore concluded that where the plaintiff’s own case on the Alleged Loan and the outstanding interest was suspect, “then the plaintiff’s contention that the defendant instructed her to fill out and present the Cheque for payment for the purpose of repaying the Alleged Loan and interest thereon necessarily becomes questionable”.[28]

30.  It is therefore plain and clear from the above that in dismissing the O14 Summons I did not do so only on the basis that the defendant raised triable issues and arguable defences that required resolution at trial.  Rather I rested a substantial part of my conclusion on the inherent contradictions and inconsistencies in the plaintiff’s own case that at the outset cried out for elucidation at trial, and on her questionable authority to fill out the Cheque as she did even on the basis of her own case.  I have also spelled out this was why the O14 Summons was dismissed.

31.  I am unable to see how such approach is different in principle from the approach adopted in Worldcap Investment Ltd and Simba-Toys (Hong Kong) Limited although each case must turn on its own facts.

VI.  CONCLUSION

32.  I have reviewed again the plaintiff’s draft grounds of appeal which I have set out in paragraph 9 above. For the reasons set out above, none of the grounds have any reasonable prospect of success. I further note that Mr Chong did not on an alternative basis seek to challenge my reasons for concluding that the plaintiff’s own case was inherently wanting.

33.  Lastly, even though Mr Chong did not raise such argument, I find that the plaintiff has failed to demonstrate the existence of some other reason in the interests of justice why the appeal should be heard. Leave to appeal is refused.

34.  I therefore order that the Leave Summons be dismissed. Since Mr Lam had no further instructions from the defendant even though his firm has not formally ceased to represent him, it would be inappropriate to award costs in the defendant’s favour. I grant a costs order nisi that there be no order as to costs of and occasioned by the Leave Summons.