LI YIZHOU v. CHINA ZENITH CHEMICAL GROUP LTD

HCA 1790/2023

[2025] HKCFI 2443

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 1790 OF 2023

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D E C I S I O N

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1.  On 20 December 2024, I handed down a 40-page decision (“the Decision”) on an appeal brought by the defendant (“D”) against a master’s order dated 3 June 2024 whereby the master entered summary judgment against D. I upheld the master’s decision and ordered D to pay the judgment sum as well as the costs of the appeal and the costs before the master.

2.  D now seeks leave to appeal against the Decision.

3.  At the appeal against the master’s decision hearing before me in October 2024, D was represented by Mr John Scott SC and the plaintiff (“P”) was represented by Mr Jeffrey Chau.

4.  On the present application for leave to appeal, Mr Lim Han Sheng of counsel represents D and Ms Nicole Liu of counsel represents P.

5.  The case originally was scheduled to be heard by me on 11 February 2025.  Subsequently, I gave directions that this matter shall be dealt with by way of paper disposal upon the application made by the parties.

6.  On 13 February 2025, D lodged its written submission with the court. On 20 February 2025, P lodged his written submission.  On 27 February 2025, D lodged its reply submission.

(A)   D’s Leave Application

(i)   Whether leave is necessary?

7.  It has been held that where a final judgment includes an order refusing leave to adduce supplemental affidavit evidence, and an application has filed a notice of appeal against the said final judgment, it is not required to separately seek leave against the order of refusing leave to adduce the affidavit evidence: R Stahl Inc v AJ Development Ltd [2020] 4 HKLRD 666, as per Kwan VP §§ 7-9.

8.  D has filed a summons on 3 January 2025 to apply for leave to appeal against this court’s dismissal of D’s appeal of the master’s decision to grant summary judgment.  Ms Liu for P submits that the leave application is procedurally unnecessary and therefore erroneous.  In other words, D does not need leave from this court and should not have made this application in the first place.

9.  In R Stahl Inc, supra, which is almost on all fours with the present case, P issued a summons against D for final judgment under Order 14 and/or Order 27 rule 3 of the Rules of the High Court (“RHC”).  D sought leave to file a supplementary affirmation of its director in opposition. The judge dismissed the application for summary judgment but ordered final judgment to be against D for part of the amount claimed on the basis of judgment on admissions.  The judge also refused to give leave to file the director’s affirmation.  D filed a notice of appeal seeking to set aside the judgment on admissions and sought an order that is it be allowed to rely on the director’s affirmation on appeal for the opposing P’s application for final judgment.  The registrar took the view that the order refusing leave to file the director’s affirmation was interlocutory in nature, and so leave to appeal was required.

10.  The Court of Appeal (“CA”) disagreed with the finding made by the registrar.  It held that although the order refusing leave to adduce affidavit evidence was interlocutory in nature, it was made in a judgment in respect of which D had a right of appeal and D had exercised that right by filing the notice of appeal.  CA found that the application to adduce the director’s supplementary affirmation was made in the course of opposing P’s application for final judgment.  It further found that the refusal to allow the admission of the affirmation was part of the hearing of P’s application. Thus, once D lodged an appeal against the judgment of P’s application as of right, it opened up the question of the evidence that should have been been admitted or excluded in the application.  It held that D was not required to apply for leave separately in such situation.

11.  Mr Lim for D in his reply submission stated that if this court is of the view that leave to appeal is not required, D will proceed with its Order 14 appeal and would not trouble this court further.

12.  However, Mr Lim submits that P’s position is wrong in law in that R Stahl Inc was a case involving an application to adduce further evidence at the first instance hearing at the Order 14 application, it is not applicable to a case involving an application to adduce further evidence on appeal. [emphasis supplied]

13.  Mr Lim relies on the case of Wang Yuexian v Xinyang Maojian Group Ltd [2024] HKCA 660 which involves an application to adduce further evidence on appeal to a judge in chambers.  The defendant subsequently sought leave to appeal in respect of that application alongside a substantive Order 14 appeal to the CA (see §§1-3).  He submits that as the CA saw fit to determine whether leave to appeal should be granted, it is implicit that leave to appeal was required in those circumstances as well as those in the present case.

14.  I agree with Ms Liu for P that as this is an Order 14 appeal where the Court of First Instance has affirmed the master’s decision to enter final judgment against a defendant, D has a right of appeal, it is not necessary for D to seek separate leave to appeal against my decision for refusing leave to adduce further evidence which was made by Mr Scott SC during the appeal hearing against the final judgment entered by the master.     

15.  In my view, as it was a hearing de novo and I had effectively confirmed the master’s decision to enter final judgment in favour of P, D as of right can appeal against my decision without having to seek leave from me.  I therefore consider that the leave application was unnecessary and the application has been misconceived.

16.  I would dismiss D’s application on this ground alone.

(ii)   D’s application for leave to appeal

17.  In case I am wrong on the above, I shall proceed to consider D’s application on the basis that leave is required.

18.  The law on an application for leave to appeal is trite.  Leave to appeal shall not be granted unless the court is satisfied that the intended appeal has a reasonable prospect of success or there is some other reason in the interests of justice to hear the appeal.  Reasonable prospects of success involves the notion that the prospects of succeeding must be ‘reasonable’ and therefore more than ‘fanciful’, without having to be ‘probable’: see §59/2A/4 of the Hong Kong Civil Procedure 2025 (“HKCP”).

(B)   D’s draft grounds of appeal

19.  In my judgment, none of the draft grounds of appeal put forward by D has any reasonable prospect of success nor there exists any other reason why the appeal should be heard in the interests of justice.  In my view, none of the grounds enjoy reasonable prospect of success as  satisfying each of the 3 limbs laid down in Ladd v Marshall [1954] 1 WLR 1489 at 1491.

20.  I shall deal with each of those 3 limbs contains in the draft grounds of appeal below.

(i)   1^st Limb of Ladd v Marshall (Grounds 1-3 of the Draft Notice of Appeal)

21.  D contends in Grounds 1-3 of the draft notice of appeal that it could not discover the Refund Letter earlier with reasonable diligence because none of the documents kept in D’s file referred to the Refund Letter.

22.  I have already considered this matter and given due weight to the relevant factors in the Decision (See §§30-31 and 83 of the Decision).  I do not see how D can now assert that D would not be reasonably expected to notice the Refund Letter’s absence.  Since D’s other transactions involved written instruction from ZIL, there was no explanation why D’s file for this case did not have payment instructions, particularly when the sum was at HK$9.5 million.  In my view, there was a dire lack of evidence contained in D’s affirmations that D even tried to look for the Refund Letter.

23.  In the premises, I do not see how it could be said that I was wrong to grant leave to adduce the new evidence based on the 1^st limb of Ladd v Marshall.

(ii)   2^nd Limb of Ladd v Marshall (Grounds 4-8 of the Draft Notice of Appeal)

24.  Under these grounds, D tries to raise the issue that P was an undisclosed principal of ZIL for all matters relating to the Bond (including the HK$9.5 million refund). Ms Liu submits that this claim was not raised prior to D filing its skeleton submission for the leave application. 

25.  I have no hesitation to reject D’s argument for the following reasons:-

(a)  The point based on undisclosed principal was never raised;

(b)  It was raised for the first time in D’s submission for the leave application (see §6 of D’s submission).  Such argument was not even contained in the draft notice of appeal.  It shows that this is a belated attempt to try to improve D’s case after the fact;

(c)  There were simply no evidence to show that P was an undisclosed principal;

(d)  I have specifically considered and rejected the existence of the alleged unlawful scheme in the Decision: (see §§72 and 112 of the Decision);

(e)  Clause 2.3 of the Sale and Purchase Agreement (“SPA”) between P and ZIL now relies on by D which stated that P authorized ZIL to be solely responsible for handling all the relevant transactions pertaining to the relevant bonds (“一切有關的交易處理，買方授權賣方全權負責處理”) (cf Ground 5(b) in the draft notice of appeal and D’s submission at §6(3)(c), was also never previously relied on by D at the hearing before me;

(f)  As Ms Liu has noted, the SPA purpose was for P to purchase the Bond.  Read in its proper context, Clause 2.3 only authorised ZIL to handle all relevant transactions set out in Clauses 2.1-2.8 of the SPA.  Therefore, ZIL was not P’s agent.  Otherwise, as Mr Liu submits, Zip could cancel the bond at any time on P’s behalf, even years later.  I agree with Ms Liu that this is plainly absurd and contrary to the purpose of the SPA; and

(g)  There is plainly nothing to suggest ZIL was acting as P’s principal at all.

26.  Besides, I have already considered D’s claims of collateral agreement and estoppel: (See §§61, 62, 66 and 67 of the Decision), as held, I do not consider that the Refund Letter would have an important influence on the outcome of the dispute.  Therefore, in my judgment, D has failed to prove that the 2^nd limb of Ladd v Marshall applies.

27.  Hence, in so far as D proposed appeal is relied on the 2^nd limb of Ladd v Marshall, the application is refused also.

(iii)3^rd   Limb of Ladd v Marshall (Grounds 9-11 of the Draft Notice of Appeal)

28.  Under this limb, D contends the Refund Letter is apparently credible as the Refund Letter is consistent with other evidence, including date of the ZIL Bond, and payment instructions for an unrelated transaction.

29.  I have already dealt with this matter in the Decision and given due weight to the alleged deficiencies of the Refund Letter raised by senior counsel at the appeal hearing before me.  I concluded that the 3^rd limb of Ladd v Marshall had not been satisfied: (§§34, 35, 89 and 90 of the Decision).  I do not see why I have to reconsider this matter in the light of the matter raised by Mr Lim in his draft grounds of appeal.

30.  In my view, D has no reasonable prospect in establishing the 3^rd limb of Ladd v Marshall.

31.  Hence, in so far as D is relying on the above grounds for leave to appeal, they would be rejected also.

Conclusion

32.  In conclusion:

(a)  I do not consider that leave is necessary for appealing against the Decision which effectively was a final judgment entered against D;

(b)  I am of the view that none of the draft grounds of appeal based on Ladd v Marshall containing any merits at all; and

(c)  There are no other reason in the interests of justice which warrants the court to hear the appeal.

33.  In my judgment, it is quite clear that D is using this application as a delaying tactic in paying the judgment debt owed to P.  I have no hesitation to dismiss the application with costs to be paid by D on an indemnity basis which is summarily assessed at HK$100,000 to be paid by D forthwith.