HUANG LIDONG v. KWONG WING CHUNG

CAMP 345/2023, [2024] HKCA 465

On Appeal From [2023] HKDC 461

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 345 OF 2023

(ON AN INTENDED APPEAL FROM DCCJ NO 70 OF 2021)

____________________

____________________

________________

J U D G M E N T

________________

Hon Anthony Chan J (giving the judgment of the court) :

1.  There is before the Court a Summons filed on 15 November 2023 (“Summons”) by which the Defendant makes a renewed application for leave out of time to appeal the Decision of Deputy District Judge Frances Lok (“Judge”) dated 21 April 2023 and the Judgment entered on 29 September 2022 pursuant to an order made by District Court Master Maurice Lam (“Master”). In addition, the Defendant seeks an interim stay of execution of the Judgment pending the disposal of this Summons.

Procedural history

2.  On 15 August 2022, pursuant to the Plaintiff’s summary judgment application the Master granted the Defendant leave to defend the action below on condition of payment of HK$600,000 into court by 5 September 2022 (“Condition”). It was ordered that failing compliance with the Condition, the Plaintiff be at liberty to enter final judgment against the Defendant.

3.  On 29 August 2022, the Defendant filed her notice of appeal, pursuant to O 58, r 1 of the Rules of the District Court (“RDC”), to appeal the Order of the Master to a judge in chambers (“O58 Appeal”).

4.  The Defendant failed to make payment into court to fulfil the Condition. Consequently, judgment was entered in favour of the Plaintiff against the Defendant on 29 September 2022 for the sum of HK$800,000 with interest and costs (“Judgment”).

5.  The O58 Appeal was heard by the Judge on 31 March 2023. By a Decision dated 21 April 2023 (“1^st Decision”), the appeal was dismissed on the grounds that the Court had no jurisdiction to entertain the O58 Appeal after the Judgment was sealed and perfected. Alternatively, if the Court had jurisdiction, the defence was shadowy, and only conditional leave to defend would be given. The Judge took the view that the entire sum claimed by the Plaintiff, namely, HK$800,000 should be paid into court as the condition. For the present purpose, we do not believe that anything turns on the difference in the terms of the condition. It follows from the dismissal of the O58 Appeal that the Judgment stands.

6.  The Defendant applied for leave to appeal against the 1^st Decision and the Judgment by a Summons filed on 13 July 2023 (with a draft notice of appeal annexed thereto) (“Leave Application”). The Leave Application was out of time by 55 days (more than 7 weeks).

7.  By a Decision dated 2 November 2023 (“2^nd Decision”), the Judge refused the Leave Application because of the lack of merits in the proposed appeal, lack of good reason for the substantial delay and prejudice to the Plaintiff.

8.  Having considered the parties’ written submissions, we decided that the Summons should be disposed of on paper without an oral hearing pursuant to O 59, r 14A(1) of the Rules of the High Court (“RHC”).

This action

9.  The Plaintiff’s case was quite simple. It was based on an oral agreement by which the Defendant promised to arrange the issuance of a standby letter of credit for the Plaintiff with a face value of €100 million. In return, the Plaintiff agreed to pay, and he did pay, HK$800,000 for the service as “handling charge”.

10.  The defence was that of mistaken identity. The Defendant said that the agreement was not made with her, but with her common law husband, Mr Liu. As for the HK$800,000, the money was paid over to Mr Liu by the Defendant.

Grounds of appeal

11.  In the Defendant’s draft notice of appeal that was annexed to the Summons, four grounds of appeal are advanced. They are identical to those considered in the 2^nd Decision :

(1)  The Judge erred in law in holding that because the Judgment had been sealed or otherwise perfected, the Court was functus officio and had no jurisdiction to hear the O58 Appeal (“Ground 1”);

(2)  The Judge erred in law in failing to hold that as the Statement of Claim (“SOC”) was defective the Plaintiff’s summary judgment application ought to have been dismissed or the Defendant ought to have been granted unconditional leave to defend (“Ground 2”);

(3)  The Judge erred in law in failing to consider or take into account material discrepancies between the SOC and the supporting affirmation of the Plaintiff and material discrepancies between the allegations within the supporting affirmation casting doubt or suspicion on the validity of the Plaintiff’s case which would detract from the right to summary judgment or lead to the result that the supporting affirmation had failed to verify the facts as pleaded in the SOC (“Ground 3”);

(4)  The Judge erred in law in failing to consider or take into account the various features of the Plaintiff’s claim and evidence which clearly showed that there were triable issues on the evidence as to the identity of the contracting party (“Ground 4”).

Applicable principles

12.  It is trite that an appeal court would defer to the judge’s exercise of discretion and would not interfere with it merely on the ground that it would have exercised the discretion differently. The function of the appeal court is initially one of review. It only interferes in three instances[1] :

(1)  where the judge has misdirected himself with regard to the principles in accordance with which his discretion had to be exercised;

(2)  where the judge, in exercising his discretion, has taken into account matters which he ought not to have done or failed to take into account matters which he ought to have done; or

(3)  where his decision is plainly wrong.

It is only if and after the appeal court has reached the conclusion that the judge’s exercise of discretion must be set aside for one or more of these reasons that it becomes entitled to exercise an original discretion of its own.

13.  When determining an application for leave to appeal out of time, this Court will consider (1) the length of the delay; (2) the reasons for the delay; (3) whether the intended appeal has reasonable prospects of success; and (4) the prejudice to other parties if leave to appeal out of time is granted[2].

Lateness of the Leave Application

14.  The Defendant does not seek to suggest that the Judge was incorrect to have taken the view that the delay of 55 days for the Leave Application was substantial. As noted by the Judge, about 9 months had elapsed from the date of the Judgment.

15.  As for the Defendant’s explanation for the delay[3], we agree with the Judge that, assuming to be true, the Defendant’s evidence that she was not informed by her solicitors about the dismissal of the O58 Appeal and she only knew about it after having been served with the Plaintiff’s application for the sale of her property reflected dereliction on her part in the conduct of the litigation. We would add that there was no explanation by the Defendant on whether she was aware of the Plaintiff’s application for a charging order against her property, and if not, why not.

16.  As the reasons given for the delay are not satisfactory, the Defendant must show “real prospects of success” (a strongly arguable case) on the merits of her proposed appeal before this Court will exercise its discretion to grant an extension of time[4].

17.  We shall consider Grounds 2 to 4 first because if these grounds fail, Ground 1 will be rendered academic.

Ground 2

18.  Ground 2 is underpinned by the principle that in an application for summary judgment the statement of claim must be good and complete in itself, and any defect or omission cannot be corrected or supplemented by the supporting affidavit[5].

19.  The Defendant says that the two “odd features” identified by the Judge in the 1^st Decision, [6], amounted to material defects, and the Judge erred in failing to give the Defendant unconditional leave to defend in light of the same. Those features were :

(1)  the Plaintiff’s claim was based on a breach of contract and not a debt as pleaded; and

(2)  the SOC incorrectly referred to the Defendant as a male and a staff in a finance company, whereas the Defendant is a female and the Chairman of two finance companies.

20.  We are unable to agree that the Judge had erred in law. The Judge, having fully considered the pleadings and the evidence, did not grant summary judgment. The reason for not doing so was attributable to the above two aspects of the SOC (1^st Decision, [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.”

21.  However, having found that the defence was shadowy, and the SOC could be cured by amendment, the Judged considered it just and appropriate to give the Defendant conditional leave to defend[6].

22.  The Judge’s analysis of the shadowy nature of the defence cannot be faulted[7]. We see no reason to interfere with the Judge’s exercise of discretion in granting conditional leave to defend.

Grounds 3 and 4

23.  These grounds are considered and dealt with in conjunction in the Defendant’s Written Statement. They are based on alleged discrepancies in the Plaintiff’s case and/or his evidence. The Judge dealt with these grounds in the 2^nd Decision, [20] :

“I do not see reasonable (let alone real) prospect of success in either of the above grounds, for the following reasons. (1) The “material discrepancies” or “disturbing features” are regurgitation of the defendant’s arguments in the Appeal Hearing. The court had considered all matters in the round in coming to the conclusions in the Decision. (2) There was no jurisdiction to entertain the Appeal against the Master’s Order after final Judgment was perfected (there was no appeal from the Judgment). (3) No summary judgment was ever granted.”

24.  It is evident from the 1^st Decision that the Judge was well aware of the parties’ case, the evidence and the fragilities in their cases. There was no obligation on the Court to deal with every “discrepancy” regardless of its significance. It is clear from the 1^st Decision that the Judge expressly dealt with the important issues, including the inconsistencies in the Plaintiff’s case and the inherent probabilities of the parties’ respective case: see 1^st Decision, [31] and [32].

25.  There are a number of alleged discrepancies which were not referred to in the 1^st or 2^nd Decision :

(1)  the 30 November 2015 email from the Defendant (“Email”) was incorrectly referred to in the SOC as having been received on 2 November 2015[8];

(2)  the Email was sent by “symond for [Mr Liu]”;

(3)  the Plaintiff’s friend contacted the wrong bank when he helped the Plaintiff to verify the letter of credit enclosed with the Email; and

(4)  the letter of credit contained Mr Liu’s signature on the bottom of each page.

26.  However, none of these alleged discrepancies materially impact on the Plaintiff’s claim. As held by the Judge :

(1)  the terms of the oral agreement (save the time when the letter of credit should become available) were agreed;

(2)  it was agreed that the HK$800,000 was paid to the Defendant; and

(3)  no letter of credit was ever made available to the Plaintiff.

27.  Nor do the alleged discrepancies impact on the Judge’s view that the defence was shadowy. There is no adequate reason to challenge the Judge on this finding.

28.  In the premises, Grounds 2 to 4 are not reasonably arguable, let alone having real prospects of success. Given the lack of merits in the proposed appeal, leave to appeal out of time should be refused.

Ground 1

29.  Notwithstanding that Ground 1 has been rendered academic, we consider it is necessary to briefly deal with two matters of principle arising from it, namely, (1) the common law doctrine of functus officio; and (2) whether a judge in chambers has jurisdiction to hear an appeal from a master when a conditional leave order has been overtaken by a judgement granted due to the failure to meet the condition.

Functus officio

30.  The history and development of the functus officio doctrine were helpfully set out by Baroness Hale in In re L (Children) [2013] 1 WLR 634, [16]-[19].

31.  The rationale or purpose of the functus officio doctrine is essentially threefold[9]:

(1)  It is the only doctrine that is directed at the decision-maker, rather than the parties, or in the case of res judicata, the parties and their privies. The doctrine operates like an injunction pointed at every judge, every arbitrator, and every tribunal. It kicks in when a final and valid decision is made. Upon the rendering of a final and valid decision, the decision-maker is enjoined from reconsidering the decided matter and rescinding or varying the decision in any manner. With finality comes legal certainty, which is essential for the administration of justice and the rule of law.

(2)  It lends finality to the conduct of proceedings by marking a definitive endpoint to it. It is essential to the administration of justice to have a clear stopping place, a point of no turning back; otherwise, there would be no end to the case, nor any beginning of enforcement.

(3)  It also enables an effective appeal and judicial review. Preclusion from changing a decision is necessary to ensure a stable basis for appeal and judicial review. But for a rule like functus officio that dictates finality and forbids decisions from being easily undone, decision-makers could change their decisions as they like, as many times as they like. With a record for appeal (or judicial review, as the case may be) that could shift like shifting sand, it is hard to imagine how there could be effective review. Indeed, the appeal process itself could drag on indefinitely. Every time that the decision under appeal is adjusted or supplemented, the appeal may need to be reconsidered, and the appeal decision revisited, assuming that appellate reconsideration is not itself barred by functus officio. The appellate process itself will become a never-closing door through which appellants have indefinite entry, coming through whenever the underlying decision is changed.

32.  Once an order has been drawn up, entered or otherwise perfected, the court will be functus officio as regards that order and cannot reverse it[10]. In Adayani v Chan Oi Ling [2000] 4 HKC 233, Keith JA held at [7] :

“There must, of course, come a time in any proceedings when the court must be regarded as having completed its task. When that time is reached, the court is said to be functus officio. Once that stage has arrived, the court has no further jurisdiction over the case. But when does that stage arrive? The answer given by the common law is when the judge’s order has been drawn up, entered or otherwise perfected. As Slesser LJ said in Millensted v Grosvenor House (Park Lane) Ltd [1937] 1 KB 717 at p 722:

‘It was not sought to be disputed... that it is within the power of a judge at any time before judgment is entered and perfected to alter its terms. This is the effect of two judgments, the case of In re St Nazaire Company (1879) 12 Ch D 88, in which case it was held, following In re Australian Direct Steam Navigation Co, Millers’ case (1876) 3 Ch D 661, that a judge can always reconsider his decision until the order has been drawn up, and the case of In re Suffield & Watts ex parte Brown (1888) 20 QB D 693, to the effect that ‘so long as the order has not been perfected the judge has a power of reconsidering the matter, but, when once the order has been completed, the jurisdiction of the judge over it has come to an end’... ”

33.  Before a judgment or order is perfected, the court has power on the application of any party or even of its own motion to review the matter and correct the judgment or order[11], if necessary, by hearing further evidence[12]. However, in cases where an order does not need to be perfected, once the order is made, the court is functus officio and cannot reverse it[13].

34.  The power to re-open or re-consider a judgment or order must be exercised judiciously, not capriciously and only where exceptional or strong circumstances demand recourse to it in the interests of justice. In considering whether the power should be exercised, the court has to balance the need for certainty and finality in a court’s decision with the duty of the court to do justice between the parties and avert an unnecessary appeal[14]. The court should be guided by its overriding objective of dealing with the case before it justly, although every case will depend upon its particular circumstances[15].

35.  When a judgment or order is perfected it cannot be corrected or re-opened, save under the “slip rule”[16], or where there is liberty to apply, or where statutory rules otherwise apply[17], although it may be set aside on grounds of fraud or misrepresentation. The court, however, has inherent jurisdiction to make supplemental orders after trial in appropriate circumstances[18], and to deal with reserved costs[19].

36.  Finally, if an order as drawn up is ambiguous, the court (at all levels) has an inherent or implied discretionary power to clarify the original order if its intention appearing from the body of the judgment is manifest. In the absence of any prejudice to the other party (in which event discretionary considerations may come into play), it matters not that an application for such clarification is made after the court’s order has been sealed since it operates to make plain what the court has in fact already decided. It does not involve the court acting when functus officio[20].

Was the Judge functus officio?

37.  In our view, a judge in chambers exercising the court’s appellate jurisdiction is not functus officio when the condition for leave to defend had lapsed and resulted in a perfected judgment. In his appellate capacity, the judge may set aside the order and judgment granted below. It is the function with which the judge is vested. In a case where the court below gave summary judgment, the judge may on appeal set aside the judgment after it had been perfected. We see no valid distinction to be drawn in this case. As an example, in circumstances similar to the present case L Chan J in Hotung Investment (China) Ltd v Eric Shea Kim Hotung, unrep, HCA 77/2012, 24 Mar 2017, [5], [8] and [59] to [60], set aside a judgment granted in default of compliance of the condition for leave to defend and ordered a fresh condition in its place.

38.  In Chan Ping Che v Gao Gunter, unrep, HCMP 3043/2014, 15 December 2014, which involved an application for leave to appeal against an order giving the defendant conditional leave to defend, Barma JA held at [8] :

“As we have indicated, we are not prepared to say that the appeal is a strong one so as to justify a stay without more. However, it does seem to us that the evidence which the defendant has now put forward does indicate that the condition imposed is not one with which he is able to comply. That being the case, the consequence will be that absent a stay, judgment will be entered against the defendant. While such judgment could of course be reversed if the appeal were successful, it seems to us that absent a stay, it would be open to the plaintiff to seek to enforce it and that this would have serious consequences for the defendant, including possible bankruptcy, which would impede his ability to prosecute his appeal and defend the proceedings if his appeal should succeed.” [emphasis added]

39.  If an appellate judge could not hear an appeal in the face of a judgment granted due to non-fulfilment of condition, it would result in a situation where the defendant may lose his right to appeal unless (1) he satisfied the condition or (2) obtained a stay of execution or (3) obtained an extension of time for compliance with the condition. There is no warrant for so restricting a defendant’s right to appeal or hampering the court’s power on appeal.

40.  In short, we are of the view that a judge in chambers has jurisdiction to hear and determine an appeal against an order for conditional leave to defend despite the fact that the condition had lapsed and resulted in a perfected judgment. We are unable to agree with the Judge on this issue.

Stay of execution application

41.  As we do not grant leave to appeal out of time, the stay of execution application falls away.

Disposition

42.  For the above reasons, the Summons is dismissed.

43.  We see no reason not to apply the normal rule where costs follow the event. The Defendant is to pay the Plaintiff the costs of the Summons. Having considered the Statement of Costs filed by the Plaintiff and taking a broad brush approach, we assess the Plaintiff’s costs at HK$120,000.

44.  As the Defendant’s application is wholly without merits, we also make an order that neither party may request this determination to be reconsidered at an oral hearing pursuant to O 59, r 2A(8) of the RHC.