LEE SING LEUNG, ROBIN v. LUK WING KWONG, QUINTIN

HCA 1890/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1890 OF 2010

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AND

HCA 1023/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1023 OF 2011

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BETWEEN

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REASONS FOR DECISION

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The applications

1.  There are 2 summonses in respect of two Actions for today’s hearing.  One is for the plaintiff’s application for summary judgment under HCA 1023/2011 (this Action).  The other summons was taken out by the defendant in this Action for an order that this Action and another Action HCA1890/2010 are to be heard by the same Judge one after the other as if HCA1890/2010 were a third party proceedings in this Action.

2.  Both summonses are contested.

3.  Senior Counsel J. Mok and Counsel R. Ho act for the Plaintiff and Counsel B. Chain and Counsel A. Lo act for the defendant.

Summary of the fact

4.  As the defendant has made some concession[1], it is not necessary to set out the full facts in the matter.  The facts set out below are the summary relevant to the present applications only.

5.  For the plaintiff’s application for summary judgment, the plaintiff claims against the defendant for indemnity and damage under a Deed of Indemnity made between the plaintiff and the defendant whereby the plaintiff had provided certain Convertible Bonds (CBs) with face value of HK 90 million dollars as a security for the defendant’s loan under a Loan Agreement (the Loan Agreement) from a Mr. Luk for the sum of HK$19.5 million. The CBs was held in an escrow account.  However, it was released to Mr. Luk because the defendant had been in breach of the Loan Agreement.  Mr. Luk had disposed of the CBs.

6.  The parties had attempted negotiation, pursuant to which, the defendant had issued 3 post-dated checks each for $6 million to the plaintiff for partial settlement.  However, those checks were bounced and the plaintiff took out an action against the defendant.  The plaintiff obtained summary judgment on those checks.  The defendant appealed.  But before the appeal hearing, the plaintiff and the defendant had reached another agreement whereby the defendant had paid $16,350,000.00 to the plaintiff for settlement of the action for dishonoured checks.

7.  The plaintiff now claims against the defendant for the remaining value of the CBs, for which the plaintiff has claimed HK$72 million.  The plaintiff says that the defendant has no defence to the claim.  Alternatively, the plaintiff says that interlocutory judgment with damages to be assessed should be given against the defendant.[2]

8.  The defendant had defended the claims and counterclaimed against the plaintiff for the return of HK$16,350,000.00 on the ground, as the defendant himself said, that “the money was paid to the plaintiff in good faith to accommodate the plaintiff pending resolution of the matter, given it is a fact that the plaintiff was doing me a favour by charging the CBs to Luk.”[3]

The issues of dispute

9.  The defendant concedes that the plaintiff has a prima facie face.[4]  Mr. Chain has gone further this afternoon to say that the plaintiff has established liability and he submits that he will not go so far to say that there will not be any damage suffered by the plaintiff.  He agrees that paragraph 16 of the Counterclaim can be struck out as he will not rely upon it.  But he says that the matter has still to go for trial of the quantum because if the quantum of the damages, after trial, is below $16 million, the plaintiff would have no claim and the claim should be dismissed.

10.  Also, the defendant has raised the following issues as triable issues:

a.;  Whether the plaintiff is entitled to claim the “face value” of the CBs,

b.;  If not, what is the basis for assessing the damages, and

c.;   Has it been shown that it must be over $16 million?

11.  The defendant agrees that the plaintiff’s claim should be for damages only. But the plaintiff has not pleaded what damage it has suffered. The plaintiff admitted that it had received HK$16,350,000.00 from the defendant, for which it should set off any damage that it may have suffered. Since the plaintiff has not been able to plead the amount of damages, the court is not in a position to say whether its loss is more, or less than $16 million.^[5]

12.  The defendant further argues that the plaintiff’s claim can only be for damages.  But the plaintiff is unable to set out its basis of claim/assessment (including the relevant date) and the court is in no position to speculate whether its loss is more or less than $16 million.  On that basis, the defendant asks the court to dismiss the plaintiff’s summons for summary judgment.

13.  Mr. J. Mok S.C. agrees that the plaintiff may not be entitled to claim the face value of the CBs and he only asks the court to give interlocutory judgment for damages to be assessed. He says that this will be the answer for Mr. Chain’s three questions in paragraph 10.

14.  I consider that for the claims here, there are basically two issues for the court: the first is the liability and the second, the quantum.

15.  Liability arises from the provisions in the agreement made between the parties; in this case, the Deed of indemnity.  Mr. Chain admits that the plaintiff has established liability against the defendant, in which case, the court will not explore this issue further. Once liability has been established, the plaintiff is entitled to damage to be assessed. It is only a fact of reality that with commodities such as the stocks and shares, the CBs and even the landed property in Hong Kong, the prices are fluctuating very quickly from time to time. It will be unfair not to allow the plaintiff to have the right of assessment of damages that it has suffered simply because the amount of damages cannot be ascertained at the time the writ was filed or even at the trial.  Interlocutory judgments are provided for such situations.

16.  Mr. Chain submits that the trial will be the trial on the damages. It the damages found by the court is below the $16 million paid by the defendant, the plaintiff has no claim and its action will be dismissed.  This may not be right.  Even if the damages are assessed to be below $16 million, which the plaintiff agrees to be taken into account, the plaintiff has no damages to be awarded.  The Action will not be dismissed because the question of costs will come into consideration.  If the damages were found to be subject drastic change of the market condition, unforeseen by any parties, I consider that the court may not penalize the plaintiff for taking out the action with costs.  It may even order the defendant to pay the costs to the plaintiff.

17.  Mr. Chain goes further to say that if the amount of damages were found to be below $16 million, the plaintiff may have to return the balance to the defendant for money had and received. I agree with Mr. J. Mok S.C. that the defendant may not have the right to claim back the money from the plaintiff because the HK$16 million was paid by the defendant to the plaintiff for settlement of the 3 dishonored checks^[6]. The fact that the plaintiff agrees to take into account of the HK$16 million for the overall damage under the Deed of Indemnity is one thing.  That the defendant says that he has the right to claim back the money he had paid for the dishonored checks is another matter.

18.  The law on Order 14 is trite.  The burden is on the defendant to show to this court triable issues.  The purpose is clear – to save time and costs. If the defendant does not have reasonable issue to try, the matter should be dealt with summarily.

19.  Having considered the above argument, I consider that the defendant has failed to show any reasonable triable issue for the trial.  It is only a separate proceeding for assessment of damages.

20.  As to the Counterclaim, for the reasons above, I do not consider the defendant can establish reasonable ground to show that he has the right of action against the plaintiff if the damage is below $16 million, which, on the evidence before me today, is too remote a possibility.  The Counterclaim should therefore be struck out.

21.  Now we can come to consider the other summons for HCA1890/2010.

22.  Since summary judgment has been entered in favour of the plaintiff, the matter will not go to trial.  It will be for the plaintiff to proceed to assess the damages only.  Obviously, the defendant’s action against Mr. Luk will depend the result of the plaintiff’s assessment of the damages.  For this reason, I do not think that I have to make any order for the defendant’s summons.

23.  If the defendant in the Action against Mr. Luk wants the same Judge, who has done the assessment to deal with the action, he may make the appropriate application.

24.  As to the question of costs for the summary judgment application as well as for the Action, Mr. Chain argues that the amount of damages is still at large, and therefore the costs should be in the cause of the assessment of damages.  I do not agree this is the correct approach.  For the action, the plaintiff has already obtained judgment and there is no reason for the costs not following the event. As to the costs of the assessment of damages, such as if the amount is below HK$16 million, that will be another set of costs for the assessment of damages.  Up to this stage, there is simply no evidence before me that it was unreasonable for the plaintiff to take out the action against the defendant.  As I have said earlier, the possibility that the plaintiff’s damage is below $16 million is too remote for my consideration.  I hold that the costs of this Action, including the costs for today, with certificate for two counsel, be to the plaintiff, to be taxed if not agreed.