DELCO PARTICIPATION B.V. v. CHIHO ENVIRONMENTAL GROUP LTD (formerly known as CHIHO TIANDE GROUP LTD) AND ANOTHER

HCA 3040/2015

[2020] HKCFI 1643

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3040 OF 2015

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AND

HCA 2939/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2939 OF 2016

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(Heard together)

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D E C I S I O N

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A. Introduction

1.  By two summonses dated 5 May 2020 (“Summonses”), the plaintiff (“Delco”) in each action HCA 3040/2015 (“A3040”) and HCA 2939/2016 (“A2939”) applies for summary judgment, or alternatively interim payment, against Fang An Kong (“Fang”), the 2^nd defendant in A3040 and 4^th defendant in A2939:

(1)  in A3040, summary judgment or alternatively interim payment is sought in the sum of HK$47,446,079, alternatively HK$53,698,079;

(2)  in A2939, and on the basis that Fang is only ordered to pay the sum of HK$47,446,079 in A3040, summary judgment or alternatively interim payment is sought in the sum making up the difference being HK$6,252,000.

2.  A3040 and A2939 are two actions generally heard together with a third action HCA 2943/2015 (“A2943”), in which Delco is also the plaintiff and where the defendant is HWH Holdings Ltd (“HWH”), the 3^rd defendant in A2939.

3.  As the action numbers identify, the various proceedings were commenced in 2015 and 2016.  There have been numerous court hearings, leading to numerous decisions of at least four judges.  In each decision, the complexity of the proceedings has been acknowledged.  Just the pleadings in the three actions comprise almost 270 pages.  There is an extant appeal relating to proposed amendments of pleadings in each action, refused by me at first instance.  The filed witness statements of fact (without annexures) comprise almost 200 pages.  The documents are legion.  The three actions have been fixed for a trial of 15 days, commencing 12 July 2021.

4.  Therefore, it must immediately be remarked that this does not seem to be typically fertile ground for an application for summary judgment.

5.  But Mr Victor Dawes SC, leading Mr James Man, submits – as he must – that the application is straightforward and leads inexorably to the grant of the (partial) judgment in favour of Delco which is sought by the Summonses.

6.  Of course, on the other side, Mr William Wong SC, leading Mr Norman Nip and Mr Roger Phang, seeks to identify that matters are rather more complicated than Mr Dawes would have it, and that there are numerous insuperable barriers to the relief sought by the Summonses.

B.   Background and Claims

7.  The general background to the three actions has been summarised, at least at a high level, in §§3-10 of the Decision of G Lam J dated 26 July 2019, [2019] HKCFI 1853 (“Lam Decision”) and §§7-14 of the Decision of DHCJ Hall-Jones dated 30 October 2019, [2019] HKCFI 2646.

8.  In my own previous Judgment, [2019] HKCFI 3136 (“Coleman Judgment”), refusing Fang’s and HWH’s application for leave to amend their pleadings, I stated that I did not think it would be profitable to attempt another high-level summary, and that reference could instead be made generally to the summaries in those two Decisions, which I gratefully accepted as fair and appropriate summaries. I again accept and adopt those high-level summaries (including the definitions used in them) for present purposes.

9.  Of course, it is helpful to identify broadly the nature of each action, as I did in the Coleman Judgment as follows – focus for present purposes being on A3040 and A2939:

(1)  In A2943, Delco claims against HWH for the sum of approximately HK$46.8 million, being the alleged outstanding consideration for the transfer of shares under an agreement dated 17 January 2012.  Subject to an argument about a 10% discount, which would reduce the claim to approximately HK$41.9 million, HWH’s defence is one of set-off.  There is a corresponding counterclaim.

(2)  In A3040, Delco claims against the 1^st defendant (“CT”) alternatively Fang the undercapitalised portion of shareholders loans in the sum of approximately HK$57.8 million under a capitalisation agreement.  Subject to an argument about an adjusted figure, where Fang says the adjusted figure should be approximately HK$55.5 million, Fang’s defence is one of set-off.  There is a corresponding counterclaim.

(3)  In A2939, Delco claims, amongst other things, approximately HK$6.25 million being the first half yearly interest payment of certain convertible bonds due on 1 September 2012. Fang’s and HWH’s defence is one of set-off.  In this action, there is no corresponding counterclaim.

10.  It is also necessary to point out some detail of the claimed defence of set-off, and Delco’s response to the claimed defence of set-off.

11.  On the current pleadings, Fang and HWH rely on only two alleged debts for the purpose of set-off, together totalling approximately HK$104 million. Both debts are alleged to be with no fixed term, interest-free and repayable upon demand.  They are:

(1)  monies allegedly advanced by Fang to Delco Asia Co Ltd (“Delco Asia”), from which company Delco acquired all its assets and liabilities as of 31 December 2010.  The sums are alleged to have been advanced from 2002 to 2005 and 2010, and after taking into account partial payment are said to amount to HK$31,772,969 (“Fang Debt”); and

(2)  monies allegedly advanced by HKM Metal Ltd (“HKM”, a company wholly owned by Fang) to Delco Asia on 11 different dates between 27 September 2007 and 3 September 2008 in the total sum of US$9.275 million, equivalent to HK$72,345,000 (“HKM Debt”).

12.  The proposed amendment, which I disallowed by the Coleman Judgment but which is subject to the extant appeal, is to plead a further alleged debt as a further set-off in the sum of approximately HK$65,730,897, said to be owed by Delco Asia to a Mr Chern (as an alleged nominee of Fang) (“Chern Debt”).  The three debts collectively total HK$169,848,866 and have together been defined in the proposed amended pleadings as the “Debts”.

13.  The first reference to the sum of money which constitutes the alleged Chern Debt was made in Delco’s pleadings.  Essentially, as part of Delco’s pleading to Fang/HWH’s allegations based upon the Fang Debt and the HKM Debt, Delco pleaded the existence of a Scheme, on the basis of which Delco denied that those two debts (and the Chern Debt) were genuine or in fact existed.

14.  The Scheme is the explanation as to how the Debts found their way into the books of account of Delco Asia.  Delco specifically pleads that (a) the alleged Debts were not genuine debts with repayment obligations, and (b) the entries of the alleged Debts as booked in Delco Asia’s accounts were a sham.

15.  The actions also materially plead Fang/HWH’s averment as to (1) the “2010 Agreement”, and (2) the “Convention”.

16.  The 2010 Agreement is alleged to have been an agreement concluded between Fang (on behalf of himself and HKM) and Delco Asia in around late June 2010, whereby it was agreed that the Debts should be repaid by Delco Asia (a) as and when Fang demands, whatever the form of payments along as the payment is in satisfaction of the needs of Fang and/or his wholly-owned subsidiaries, or (b) when Delco Asia has sufficient funds.

17.  The Convention alleged to have been adopted by Fang’s Group and Delco’s Group since July/August 2011 is the alleged conventional practice that their mutual receivables and payables would not be immediately offset against each other, but would instead be recorded as receivables or payables (as the case may be) in the accounts, such that if either party were to demand payment of its debts at any time, the receivables and payables would be immediately set off against each other and only the net balance would be payable.

18.  In A2943, HWH avers that pursuant to the 2010 Agreement and/or the Convention, Delco is estopped from demanding the sum claimed in the action without first setting off the amounts payable by Delco’s Group to Fang’s Group against the amounts payable in the other direction.  It is averred that after setting off, the net result is that Delco owes Fang and Fang’s Group approximately $17.25 million.  That sum is also the subject of at least one alternative form of the counterclaim.

19.  In A3040 and A2939 – the two actions directly relevant to the current summonses – Fang and HWH also plead reliance on the 2010 Agreement.

C.   Applicable Principles

20.  The main principles applicable on applications for summary judgment pursuant to the provisions of RHC Order 14 are well-settled, and need not be rehearsed at any great length or by reference to authority.

21.  The burden is on the defendant to show that there is a triable issue or an arguable defence.  Summary judgment is for clear cases, and it is not appropriate where there is any serious dispute as to matters of fact or any difficult questions of law.  As it is sometimes put, summary judgment under Order 14 ought not to be applied for, unless it is obvious that the defence put forward by the defendant is frivolous and practically moonshine.

22.  Where the application for summary judgment is met by a preliminary or technical objection, such as that the case is not within Order 14, and that objection is held to be fatal, then the court will dismiss the application. Where the court is satisfied not only that there is no defence but no fairly arguable point to be argued on behalf of the defendant, the court’s duty is to give judgment for the plaintiff.  Where an arguable defence is shown, the court will ordinarily order leave to defend.  Where a defence, though arguable, can be described as shadowy, the court may order conditional leave to defend.

23.  It is generally undesirable for litigants to fragment their cases into parts, and to advance individual parts.  Where there are unexplained features of both the claim and defence which are disturbing because they bear the appearance of falsity and disreputable business dealings and questionable conduct, the court should not make tentative assessment of their respective chances of success of the parties or the relative strengths of their good or bad faith.

24.  Order 14 has no application to an action which includes a claim by the plaintiff based on an allegation of fraud.  This is the “fraud exception”, for which the Hong Kong courts have adopted a wide or liberal interpretation.

25.  The relevant principles have been summarised by the Court of Appeal, in Zimmer Sweden AB v KPN Hong Kong Ltd [2016] 1 HKLRD 1016 at §18, as including the following:

(1)  The court should determine whether the “fraud exception” applies at the time when the application for summary judgment is heard.  Therefore, the court should not be restricted to a consideration of the statement of claim only, but should examine all relevant materials existing at the time of the hearing, including subsequent pleadings and affidavits

(2)  Having regard to all the relevant materials, the question to be asked by the court is “does this action include a claim for which an allegation of fraud would have to be made by the plaintiff in order to establish or maintain that claim?”  If the answer is affirmative, the “fraud exception” is engaged and the court has no jurisdiction to hear the summary judgment application, even if the plaintiff seeks to hive off that claim from another claim for which summary judgment would have been available.  That consequence follows from the wording of the “fraud exception”.

(3)  In considering whether an allegation of fraud would have to be made to establish or maintain a claim, one must look at the substance, and not the mere form, of the plaintiff’s case. If all the factual constituents of fraud are alleged and relied upon, it does not matter whether the actual word “fraud” has or has not been used.

(4)  The court must consider whether those factual constituents of fraud are relied upon in order to establish or maintain a claim.

(5)  It may be that originally a claim may be established without the plaintiff having to make an allegation of fraud.  But the nature of the defence (whether disclosed in a pleading or an affidavit) may be such that in rebuttal (whether in a Reply or in an affidavit in reply), the plaintiff would have to allege fraud, in which case the “fraud exception” would be engaged.

26.  Nevertheless, the fraud alleged must be fraud against the plaintiff: see Menford Electronic Art & Computer Design Co Ltd v Wong Wang Tat Victor [2013] 2 HKC 259 at §52(2), as upheld on appeal (unreported, CACV 18/2013, 14 May 2014) at §§20, 21 and 23.

27.  In the context of the scope of argument between Mr Dawes and Mr Wong in this case, it is also helpful to look at the discussion as to the Order 14 procedure, canvassed by Recorder Stewart Wong SC in Chu Wen Jing Jennifer v Sin Hon Wai (unreported, HCA 6/2016, HCA 10/2016, & HCA 121/2016, 14 November 2016) at §§20-31.

28.  In that case, the Recorder had to answer the question as to whether the summary application procedure under Order 14 was appropriate in a case where the plaintiff was not seeking judgment on facts which she pleaded or verified, but on facts which the defendant pleaded and which she denied.  The particular case concerned transfers, the objective facts of which were not in issue, but the true legal character and thus the legal rights and obligations of the parties in relation to those transfers was to be decided primarily by the intention or state of mind of the plaintiff at the time of each transfer.  That was a question of fact and the respective cases of the plaintiff and the defendant were totally inconsistent in that respect.

29.  The Recorder stated that:

22.       The court can only give judgment to a plaintiff based on facts which entitle the plaintiff to judgment in law. Except in the case of default judgements, such facts have to be established by way of admissions, affidavits (in cases where judgment is applied for or obtained by way of application before trial), or by evidence at trial. Even in cases of default judgements, the facts have to be properly set out in a writ or a statement of claim which are then assumed to be true because no effective challenge is made by way of a notice of intention to defend or a defence. But the point is that the court must have a set of facts based on which it can then give judgment. What it cannot do is to ask to give judgment on a set of facts which the party asking for judgment is itself saying to be untrue.

30.  Having set out the material provisions of Order 14, the Recorder continued:

25.       It is clear from the above provisions that a summary judgment can only be granted on the basis of facts as verified by the plaintiff in the affidavit in support, and, the case being defined and bound by the statement of claim, such facts must be confined to those facts as pleaded therein. If no triable issue or other reasons for trial are shown by the defendant, then the court is entitled to accept those facts which have been pleaded, and verified on oath, as proven facts as between the parties, and to give summary judgment thereon.

26.       But where the application for summary judgment is based not on facts pleaded in a statement of claim and verified on oath by or on the half of the plaintiff, the application falls outside the requirements of the provisions in Order 14 and cannot be granted thereunder. In particular, I do not see how an application for summary judgment can properly be made based on facts not only not pleaded or verified by the plaintiff (as required by Order 14, rule 2(1)) but in fact the plaintiff still insists is untrue …

27.       Further, if summary judgment is granted in such circumstances, it is not a judgment based on proven facts but based on facts which the beneficiary of the judgment (ie the plaintiff herself) denies to be true. I cannot see how I can or should do that. Judgment would have been given at a time when what the truth is on a most crucial part of the case is not resolved. Unless I can now, at this stage, reject this denial, which I cannot (and the plaintiff is not asking me to), I do not see how it would be just to give judgment.

28.       Where a defendant has made admissions of fact, in pleadings or otherwise, which are sufficient to support a judgment, it may well be that the plaintiff can apply for and be granted judgment on admission under Order 27, rule 3, rather than go via the summary judgment route which focuses on the facts pleaded in the statement of claim. This is not a route open to the plaintiff here because there is no admission by the defendant on the question of the state of mind of the plaintiff.

29.       [Counsel] for the defendant refers me to §14/2/5 of Hong Kong civil procedure 2017 which states as follows:

“… where there is a material deviation between the statement of claim and the plaintiff’s affirmation, summary judgment ought not to be granted.”

30.       The deviation in this case is not so much between the statement of claim and the plaintiff’s fifth affirmation, which does not resile from the allegations made in the statement of claim, but is between the statement of claim (pleading trusts) and the factual basis (namely mistaken gifts) on which I am asked to give summary judgment. However, the position must in my view be a fortiori, and, as I said above, this latter inconsistency is one which takes the matter outside the requirements of Order 14. …

31.       For this reason, in my judgment the application must be dismissed as not taken out properly (rather than for me to give leave to defend (unconditional or otherwise)). However, and in any event, apart from this procedural difficulty, for reasons stated in the next section, I do not think the grant of summary judgment is appropriate.

31.  As to an application for interim payment under Order 29 rule 10, whether to order interim payment is an exercise of the court’s discretion.  There is some overlap with the test for granting conditional leave to defend, namely whether the defences and/or counterclaims raised can be said to be shadowy.  But, essentially, the burden is on the plaintiff to show on the balance of probabilities that it would, and not merely that it is likely to, succeed at trial.  The standard of proof required is high.

32.  Where unconditional leave to defend is granted, it is at least unlikely that the plaintiff will be able to satisfy the burden of proof required to make an order for interim payment.  But that may depend in each case on the nature of the claim and the defence put forward.

D.  Delco’s Assertion that Fang has No Defence

33.  In A3040, Delco is prepared to proceed, albeit solely for the purpose of this application, on the assumed basis that the relevant claim to the uncapitalised portion payment obligation is in the adjusted sum of HK$55,501,079.  Delco’s claim in A2939 is to HK$6,252,000. Together, those claims total HK$61,753,079.

34.  Mr Dawes points out that Fang does not deny the existence of those payment obligations.  His defence is one of set-off, which (on the current pleadings) is by reference to the Fang Debt of approximately HK$31 million and the HKM Debt of approximately HK$72 million, together totalling approximately HK$104 million.

35.  In relation to the HKM Debt, Fang pleads that in around June 2013 HKM assigned all its rights in respect of that debt to himself.  He also pleads that subsequently in 2017 he assigned to HWH HK$47,117,969.19 of the debts owed by Delco to Fang, following which the remainder of HK$57 million was owed to Fang personally by Delco.

36.  Delco does not accept the validity of the alleged Debts, or of those two alleged assignments in 2013 and 2017.  But, Mr Dawes says that on the assumption that the debts and assignment are valid, their effect is as follows – all figures denominated in Hong Kong dollars:

	Original amount allegedly owed by Delco	Amount allegedly owed by Delco after the alleged 2013 assignment	Amount allegedly owed by Delco after the alleged 2017 assignment
Fang	31,772,969.19	104,117,969.19	57,000,000
HKM	72,345,000	0	0
HWH	0	0	47,117,969.19

37.  Then, says Mr Dawes, Fang has no defence to part of Delco’s claim because – even on Fang’s own case – the alleged HK$72 million HKM Debt has been partly extinguished.  This is because (a) it was partly comprised of the sum of US$6,275,000 (approximately HK$48,945,000), but (b) Fang has deposed at §64 of his 5^th affirmation in A3040 that when Delco transferred 4 CT Shares to Green Elite in 2010, “it was agreed that Delco would be released from all its obligations arising from the debt of USD6,275,000”.

38.  So, says Mr Dawes, it follows that the sum of HK$48,945,000 should not have been treated as an amount due from Delco to HKM Metal and should be deducted from the HK$72 million HKM Debt, reducing it to HK$23,000,400.  The consequential impact on the alleged 2013 and 2017 assignments is, therefore, reflected in the following table:

	Original amount allegedly owed by Delco	Amount allegedly owed by Delco after the alleged 2013 assignment	Amount allegedly owed by Delco after the alleged 2017 assignment
Fang	31,772,969.19	55,172,969.19	8,055,000
HKM	23,400,000	0	0
HWH	0	0	47,117,969.19

39.  Hence, says Mr Dawes, even taking Fang’s case at its highest, the total amount of the alleged Debts owed by Delco to Fang which could be applied to offset the otherwise undisputed payment obligations would only be HK$8,055,000.  It follows, he says, that Fang has no defence in respect of the amount of HK$53,968,079 (“Excess Amount”) in excess of the alleged Debts owed to Fang (ie. HK$61,753,079 – HK$8,055,000).

E.   Fang’s Assertions

40.  In Fang’s 7^th affirmation, filed in A3040 to oppose the current applications, Fang identified four grounds to argue that there are triable issues and arguable defences in relation to the Excess Amount.  They were:

(1)  the summary judgment procedure is inapplicable as the actions include a claim based on an allegation of fraud;

(2)  there are triable issues relating to the 2010 Agreement and the Convention;

(3)  since the appeal against the Coleman Judgment is still pending and the outcome may significantly affect the merits and/or quantum of Delco’s claims, it would be inappropriate to ignore the Chern Debt;

(4)  without admitting that it had received the US$6,275,000 consideration for the 4 CT Shares transferred to Green Elite, Delco cannot ask for summary judgment.

41.  These points were slightly recast in Mr Wong’s skeleton.  In addition to the point about the fraud exception, Mr Wong identified that Delco is playing a ‘game of numbers’ with three fatal problems:

(1)  Fang did not make the alleged admission that the sum of US$6,275,000 (equivalent to HK$48,945,000) should be deducted from the HKM Debt;

(2)  no account has been taken of the Chern Debt, which would form part of the Debts if Fang/HWH’s appeal against the Coleman Judgment is successful; and

(3)  it overlooks the fact that the claim in A2939 is against Fang and HWH, so that HWH may use what remains of the amount of HK$47,117,969.19 after HWH’s set-off in A2943 to set off against Delco’s claim for the interest in A2939.

42.  So, says Mr Wong, the respective consequence of these problems is that (1) Delco’s application does not even have any basis to begin with, (2) it may transpire after trial that Delco’s claims are actually entirely extinguished by the Debts and summary judgment or interim judgment was wrongly granted, and (3) Delco simply cannot prove on a balance of probabilities that it would obtain HK$53,698,079 at trial without taking into account the merits of the claims, counterclaims and defences in A2943, which can only be resolved at trial.

43.  Agreements about the 2010 Agreement took a backseat.  But, Mr Wong also relies on the incongruity in Delco’s seeking judgment on the basis of facts it denies.

F.   Fraud Exception

44.  Mr Dawes first makes the point that the fraud exception is not applicable to the interim payment procedure under Order 29 rules 10-12. I accept that is correct, in the sense that – unlike in Order 14 – there is no specific provision identifying a “fraud exception”.  But, if the case is in fact one which falls within the fraud exception for the purposes of Order 14, it must at least make it significantly less likely that I would be able to find the necessary merits to make any order for interim payment.

45.  In any event, says Mr Dawes, the fraud exception does not apply in this case.  First, whilst it is accepted that Delco has pleaded and alleged fraud, Mr Dawes says that there is no allegation of fraud perpetrated against Delco.  He says the fraud relied upon by Delco is one committed against the Mainland authorities.  He also relies upon what was said in the Lam Decision, where G Lam J identified in §29 that (emphasis added):

It can be seen from the summary above that, overall, the Scheme is being pleaded not as the basis of any legal claim by Delco or anyone for relief in itself, but for the purpose of explaining away certain accounting entries in Delco Ager’s accounts and audit confirmations that are relied upon by the defendants as a defence to the otherwise largely undisputed claims of Delco.  The Scheme advanced did involve questionable practices such as double-invoicing, but the plea does not charge Fang with any fraud practised on or damaging Delco Asia.  In fact, Delco’s suggestion is that those practices were done with the knowledge of both sides.  The issue that the Scheme goes to is whether or not the Debts in fact existed.  The Scheme is not, however, and ultimate issue in itself, in the sense that whether or not the Scheme is eventually proved, the court still has to decide, separately, whether or not the Debts in fact existed, as to which the burden of proof lies on the defendants.  Whether or not there is sufficient particularity pleaded has to be seen in this context.

46.  Secondly, Mr Dawes says that neither A3040 nor A2939 include a claim for which an allegation of fraud would have to be made by the plaintiff in order to establish or maintain that claim.  Mr Dawes says that in applying for summary judgment, Delco does not rely on the Scheme pleaded in the Replies at all, but rather proceeds solely on the basis of Fang’s case as pleaded in the Defence and Counterclaim.  Further, Mr Dawes says that the Scheme is not something that Delco would have to allege in order to defeat the Alleged Debts said to constitute the set-off.

47.  I disagree with both points.  G Lam J was obviously not looking at pleadings in the case for the same purpose as I am now.  But anyway it can be seen that, immediately after stating that the claim does not assert a fraud by Fang against Delco Asia, G Lam J also went on to point out that was because Delco’s suggestion is that the practices were done with the knowledge of both sides.  Whether it was done with the knowledge of both sides is a matter for trial.  But I think a fraud on Delco Asia’s accounts was a fraud against it (and on the basis of which Delco now asserts its case as an answer to the claimed set-off).  The core point for present purposes is that it is Delco’s answer to the claimed defence of set-off that there was a Scheme in which the Debts were booked in Delco Asia’s accounts, but that was a sham.  In other words, in order to maintain its claims, Delco has pleaded the Scheme in which Delco relies on fictitious debts which it says Fang had a part in creating.

48.  For these reasons, it seems to me that there are allegations of dishonesty made against Fang and directly impacting Delco which are relevant to the question of whether the claim can succeed, and to what extent.  Whether that is regarded as strictly falling within the fraud exception or not (and I think it does), this is certainly not the kind of case in which a court would think it appropriate to grant any summary resolution.

49.  That is determinative of these applications.  It leads to the dismissal of the Summonses.  But, I shall also go on to consider the other aspects of the arguments.

G.  Delco’s Inconsistent Stance

50.  This point raises the question dealt with in the Jennifer Chu case (see above).  Mr Wong says that it is frankly “ridiculous” to seek Order 14 judgment on the basis of a transaction which the plaintiff says it is going to prove incorrect at trial.

51.  But Mr Dawes puts the analysis as follows.  The burden is on Fang as defendant to make good that he has an arguable case on his defence of set-off. Therefore, Fang bears the burden of substantiating the sums which he says he is entitled to set-off.  That requires looking at the sum which Fang puts forward and the basis and evidence for it.  Previously, as part of the HKM Debt, Fang was seeking to rely on the US$6.275 million.  But, in the light of §64 of his 5^th affirmation he can no longer do so. That is the end of the analysis.

52.  Mr Dawes goes on to say that it is only in circumstances where Fang can show a sufficiently arguable case that he can rely on the US$6,275,000 that it would be necessary to look at Delco’s evidence offered in rebuttal to Fang’s evidence.  That is, says Mr Dawes, the area Mr Wong has jumped on in submission.

53.  But, for the purposes of the summary judgment application, Mr Dawes says it is clear that Delco has proceeded on its claim as pleaded in the statement of claim, which it has verified on oath.  There is nothing wrong in principle for the court to say that there is no defence except for set-off, so that Delco is entitled to judgment except the amount properly shown to be an arguable set-off.  Mr Dawes says that it does not matter whose case is accepted at trial, the status of the US$6,275,000 is the same, namely that it is not repayable.  Properly understood, says Mr Dawes, that is not to seek a judgment on the basis of any admission.

54.  Whilst the submission has apparent simplicity and superficial attraction, I think it is flawed.  That is because it ignores the totality of the parties’ pleaded cases.  The full analysis seems to me to be as follows.  Delco pleads a claim, the facts of which it has verified.  Fang has pleaded the defence of set-off.  Delco has sought to rebut that defence by its pleaded Reply, in which it specifically denies the facts upon which Fang places reliance for his defence of set-off.  Therefore, the whole of the basis for setting off, and not just the individual amounts, is a matter of factual dispute between the parties.  That factual dispute is not capable of resolution on affidavit.  In practical terms, Delco is asking for judgment on a set of facts – or on the basis of assumed facts – which Delco says are not true.  It says those facts are not true for the entirety of the set-off, and it does not seem to me to be appropriate to seek to hive off some element.

55.  Put another way, I am unable to accept the facts pleaded by Delco in its Claim and Reply as proven facts between the parties, in light of the matters raised by Fang in his Defence.  Indeed, as I have recorded above, the argument put forward in support of the application for summary judgment starts from the position of assuming as true facts which Delco, in the same breath, expressly denies to be correct.  Delco first does not accept the validity of the alleged Debts or of the two alleged assignments in 2013 and 2017 which underpin its calculations in the two tables, but then seeks judgment on the assumption that the debts and assignment are valid.  It may be that there is no resiling from the allegations made in the Statement of Claim, but there is an inconsistency between the facts pleaded in the Claim and Reply (on the one hand) and the factual basis on which I am invited to give summary judgment.

56.  That is the kind of inconsistency which seems to me to take this matter outside the provisions of Order 14 permitting summary judgment to be entered.

H.  Dispute as to Admission

57.  As identified above, Mr Wong says that the application must fail because it depends on an alleged admission by Fang which was not in fact made.  Mr Wong complains that Delco looks only at §64 of Fang’s 5^th affirmation in A3040, but fails to read it in the context of the surrounding paragraphs.  Mr Wong says the proper reading of the affirmation is that Fang explained that Delco had received US$6,275,000 as full consideration for its transfer of 4 CT Shares to Green Elite, but did not go on to say or admit that the US$6,275,000 should therefore be deducted from the HKM Debt.  He did not do so, says Mr Wong, for the specific reason that Delco continues to be ambivalent about the nature of the US$6,275,000.

58.  Perhaps unusually, and probably inappropriately, for a summary judgment application, there has been reference to the witness statements of fact filed.  Those witness statements are not evidence, and the contents of them may never become evidence.  For them to become evidence, the maker of the statement will have to attend trial, to adopt the content of the witness statement as part of his evidence, and to do so without making any material amendments to the content of the statement.  I do not think the requirement that the witness statements have a statement of truth attached changes that analysis.

59.  But, in so far as it is relevant, I think I can properly take account of the documents referred to in witness statements, the contents of which frequently speak for themselves even if repeated in the witness statement.  I agree that on the various materials available for consideration on this application, there are significant factual disputes surrounding, and going to the nature of, the US$6,275,000.  Those matters seem to me to make entering summary judgment inappropriate.

60.  I do not think Mr Dawes’ answering submission changes that.  He suggests that, for the purpose of the present application for summary judgment, even assuming Fang’s contention is true and that an alleged debt of US$6,275,000 was created upon the transfer of the 4 CT Shares, that sum has already been extinguished on Fang’s own case and cannot be used to set-off the payment obligations.  But I think that does not remove the significant dispute surrounding and about that sum.  Contrary to Mr Dawes’ submission, I do not think it is absurd that there should at least be common ground between the parties about the US$6,275,000 before Delco can rely upon what it now says Fang has admitted. Essentially, the parties are at least at cross-purposes.

61.  This area of dispute is in any event part of the overall complexity in the case.  The degree of complexity makes it no surprise that there has been no previous application for any summary disposal.  I do not think the degree of complexity has suddenly been removed as regards the disputed set-off and the heavily disputed answer to the set-off, whether to the extent of the US$6,275,000 or any other extent.

62.  If this were the only area of dispute between the parties on this application, I would give unconditional leave to defend.

I.     Pending Appeal and Case Management

63.  Mr Dawes stands on the pleadings as they are currently, in light of my refusal of leave to amend, as per the Coleman Judgment.  Therefore, he says, even though there is a pending appeal from the Coleman Judgment (but with no date even fixed), there is nothing premature in the application for summary judgment which ought to be dealt with on the parties’ existing legal positions.

64.  From the case management point of view, Mr Dawes says that I should grant summary judgment or interim payment, and it would then be open to Fang to appeal that decision and ask the Court of Appeal to hear the two appeals together.

65.  Shortly put, Mr Wong’s submission is that I granted leave to appeal from the Coleman Judgment, so must have considered there to have been reasonable prospects of success on the appeal.  It would, therefore, be inconsistent for me now to assume on the application for summary judgment that there are no prospects of success on that appeal and the plea as might be allowed in.

66.  On the basis that the Chern Debt may yet fall to be taken into account, it would potentially invalidate the entire amount as is sought by way of summary judgment or interim payment.  So, says Mr Wong, it is not only inimical to the interests of procedural economy, it is simply inappropriate to “jump the gun” (as he put it) to award any summary judgment or interim payment before the Court of Appeal has heard the appeal.

67.  I am not sure this point alone would have defeated the application for summary judgment.  But, insofar is the exercise of any discretion would be appropriate, this seems to me to be a strong point against the grant of summary judgment.  Again, I have in mind the overall procedural history and future timetable, with proceedings which began four or five years ago and which are less than a year from the fixed dates for the 15-day trial.

68.  Mr Wong made submissions on various other discretionary points, but I do not think I need to canvass them.

J.    Result

69.  The two applications for summary judgment are dismissed.  In the heavily disputed factual circumstances I have identified, I also do not think the case is suitable for any order of interim payment.

70.  Therefore, the two Summonses are dismissed in their entirety.

71.  At present, I see no reason why costs should not follow that event.  The proper order on a dismissal of an application under Order 14 (rather than the grant of unconditional leave) is that the plaintiff should pay the costs of the defendant.  A failure to obtain an interim payment would ordinarily have the same consequences.  Therefore, I order that the costs of the two summonses shall be payable by Delco to Fang, to be taxed if not agreed, with certificate for two Counsel.

72.  However, as I have not heard argument on costs, I shall make that order an order nisi in the first instance.  It will become absolute if no application for variation is made within 14 days.