LU YONGLIANG v. BANK OF CHINA LTD, DONGGUAN BRANCH AND ANOTHER

CACV 512/2019

[2022] HKCA 245

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 512 OF 2019

(ON APPEAL FROM HCSD 3/2018)

------------------------

------------------------

___________________

J U D G M E N T

___________________

Hon Barma JA (giving the Judgment of the Court):

1.  On 25 February 2021, this court (Lam VP (as he then was) and Barma JA) dismissed the applicant’s appeal against the decision of Marlene Ng J given on 9 October 2019 by which she dismissed the applicant’s application to set aside a statutory demand served on him by the 1^st and 2^nd respondents. The reasons for our judgment were handed down subsequently, in Reasons for Judgment dated 22 July 2021 (“Reasons”) (see [2021] HKCA 1048).

2.  The facts and issues in the substantive appeal, as well as the court’s reasons for dismissing it, are fully set out in the Reasons, and need not be repeated here.

3.  The applicant subsequently applied, by an Amended Notice of Motion dated 15 September 2021, for leave to appeal to the Court of Final Appeal.  The application for leave is opposed by the both respondents.

4.  The applicant lodged skeleton submissions in support of the application on 18 November 2021, after which the respondents lodged their skeleton submissions on 2 December 2021, followed by reply submissions from the applicant on 13 December 2021.

5.  Having considered the Amended Notice of Motion and the parties’ written submissions, we see no reason to depart from the usual practice of determining an application of this kind on the papers.  We have, therefore, determined the applicant’s application on the basis of the documents filed.

Preliminary objection by the respondents

6.  At the outset, Mr Yuen SC for the respondents submitted that the applicant should not be allowed to pursue the present application by reason of his conduct in taking a “neutral” stance at the hearing of the bankruptcy petition presented against him, resulting in his being adjudged bankrupt on 20 September 2021.

7.  Mr Yuen contended that by not actively opposing the bankruptcy petition when it came on for hearing, the applicant had elected not to challenge the making of the bankruptcy order against him so that he is now estopped from taking the allegedly inconsistent step of seeking to appeal against refusal to set aside the statutory demand which underpins the bankruptcy petition and order.

8.  In our view, the stance adopted by the applicant at the hearing of the bankruptcy petition was merely one to remain neutral and make no submissions (and not to an acceptance that a bankruptcy order should be made). Moreover, the applicant took out the present application by way of the Amended Notice of Motion less than a week before the hearing of the petition, which clearly suggests that he did not accept that the statutory demand, and thus the petition against him, had a proper basis.

9.  Further, the applicant has also explained (through submissions made on his behalf) that the reasons for his absence and lack of representation at the hearing of the bankruptcy petition was due to, among other things, lack of available funding.

10.  It is well-established in order to establish a waiver by election there must be an unequivocal act, representation or communication that the right that is said to have been waived has been (or is being) waived.  In our view, in all the circumstances of this case, the applicant cannot be said to have elected to waive his right to pursue the intended appeal by reason of his “neutral” stance taken by him at the hearing of the bankruptcy petition, particularly when that is juxtaposed with his filing of the Amended Notice of Motion very shortly before, that being a step that clearly indicated his intention to continue to contest the propriety of the statutory demand.

11.  Accordingly, we do not consider that the applicant is debarred from bringing the present application with a view to pursuing his intended appeal.

The present application

12.  The Amended Notice of Motion sets out the following questions of great general or public importance:

(1)     Question 5:  Whether a statutory demand based on a debt in respect of which a favourable Mainland judgment has been obtained can be set aside on the ground that the statutory demand, or the subsequent bankruptcy petition to which the statutory demand would lead, contravene section 5(1) of the Foreign Judgements (Restriction on Recognition and Enforcement) Ordinance, Cap 46 (“FJRREO”) and section 22(2) of the Mainland Judgments (Reciprocal Enforcement) Ordinance, Cap 597 (“MJREO”);

(2)     Question 6:  Whether a defence based on a point of law noted in the evidence, in particular section 5(1) of the FJRREO and section 22(2) of the MJREO, is waived by reason of a party’s failure to rely (or even abandonment on any reliance) on that point of law at the first instance hearing, after all the evidence had been filed, where there is no indication that the party appreciated that he had waived a legal right, and if so, what are the circumstances under which such waiver occurs.

Question 5

13.  The gist of the applicant’s arguments in relation to Question 5, as set out in his written submissions, is as follows:

(1)     where a party has obtained a favourable Mainland judgment on a debt, there is at least a bona fide dispute on substantial grounds as to whether he is barred from relying on the underlying cause of action to issue a statutory demand or present a bankruptcy petition in Hong Kong;

(2)     the underlying policy objectives behind section 5(1) of FJRREO and section 22(2) of MJREO are (i) that a party should not be vexed twice by the same substantive issues; (ii) that parallel proceedings on the same claim should not generally be permitted when the foreign judgment is subject to a pending appeal; (iii) to avoid the risk of inconsistent findings; and (iv) to preclude a plaintiff who had won only an unsatisfying victory to sue again for a better result;

(3)     having regard to the said policy objectives, the word “proceedings” in these provisions must be understood as extending to a bankruptcy petition and the ancillary process of a statutory demand.  If this were not the case, there would be risks of double vexing, inconsistent findings and parallel proceedings;

(4)     the class right nature of bankruptcy proceedings does not make them any the less “proceedings” for the purposes of these provisions;

(5)     the Limitation Ordinance (Cap 347) definition of “action” as any proceedings in a court of law, which has been held to include bankruptcy proceedings, should inform the interpretation of section 5(1) of the FJRREO and section 22(2) of the MJREO, and there is further no basis for construing the FJRREO as being qualified by the MJREO.

14.  The respondents, for their part, adopted and supported the reasoning of this court regarding the construction and applicability of section 5(1) of the FJRREO and section 22(2) of the MJREO.  Mr Yuen submitted that having regard to the class right nature of bankruptcy proceedings, a petitioner does not seek the order for his sole benefit but for that of all creditors, and the bankruptcy process is not a remedy to enforce payment of the petitioner’s debt.  Thus, bankruptcy proceedings are not “proceedings” as contemplated by these provisions.

15.  The applicant’s reply submissions dated 13 December 2021 essentially repeated his first round submissions (and those put forward in the appeal before this court) regarding the applicability and construction of the relevant provisions in the FJRREO and MJREO, as well as the relevance of the Limitation Ordinance in construing these provisions.

16.  In Ho Sin Ying v Chan Yui Ling (administratrix) & anor (CACV 221/2013, 14 November 2014, at [2]-[3]), this court (Cheung CJHC, Lam VP and Kwan JA, as they then were) laid down the following principles concerning applications for leave to appeal to the Court of Final Appeal:

(1)     the Court of Appeal will not allow such applications to be deployed as an occasion for re-running the substantive arguments (whether reformulated or run in the same way as the arguments already canvassed in the substantive appeal). This applies to both written and oral submissions;

(2)     extensive regurgitation of arguments already canvassed in the substantive appeal hearing is unnecessary. The focus should be whether the requirements for granting leave under section 22 of the Hong Kong Court of Final Appeal Ordinance, Cap 484 (“HKCFAO”) are satisfied;

(3)     parties should focus on how it is contended that leave should or should not be given in accordance with the relevant criteria in the HKCFAO and whether those points actually arise in the context of the case before the court.

17.  With respect, Mr Man SC’s submissions for the applicant, in his initial written submissions and reply submissions, as well as in the Amended Notice of Appeal, were simply repetitions of arguments already canvassed before this court at the substantive hearing of the appeal.

18.  The main arguments of the applicant, such as those in relation to the risk of double vexing, whether bankruptcy proceedings are “proceedings” within the meaning of section 5(1) of FJRREO and section 22(2) of MJREO and the relevance of the limitation legislation, have been comprehensively discussed and dealt with by this court in the Reasons at [43]-[59].  It is unhelpful for the applicant simply to seek to re-argue them through the Amended Notice of Motion and written submissions, and this will not assist his application for leave to appeal to the Court of Final Appeal.

19.  The only submission made by Mr Man in his skeleton submissions dated 18 November 2021 which engages the requirements under section 22 of the HKCFAO was at [12], wherein he stated that Question 5 is of great general or public importance because it raises an important issue concerning the proper means to enforce a foreign (Mainland) judgment under the Hong Kong bankruptcy regime and also raises a question as to whether there is any principled difference between bankruptcy/insolvency proceedings and other enforcement proceedings based on a foreign/Mainland judgment.

20.  While we would accept that there is at present no extensive line of authority on point in respect of the application of section 5(1) of the FJRREO and section 22(2) of the MJREO in the context of bankruptcy proceedings, and there is certainly no Court of Final Appeal authority on the point, this court has discussed and analysed in some detail the issues raised by the applicant at the hearing of the substantive appeal (see Reasons at [17]‑[59]).

21.  While we would accept that the issuance of statutory demands and the presentation of bankruptcy petitions in Hong Kong are likely to be common steps taken by judgment creditors under a Mainland or other foreign judgment where the judgment debtor has defaulted in payment of the judgment, and other attempts at enforcement (if taken) have been unsuccessful, so that Question 5 could be said to involve an element of great general or public importance, it is firmly established that leave to appeal to the Court of Final Appeal will not be granted where the question being put forward is not reasonably arguable.

22.  In this respect, we are unable to see any issue or argument advanced in the Amended Notice of Motion or in the applicant’s written submissions which has not already been comprehensively considered by this court in its judgment on the substantive appeal.  Having regard to the Reasons, we do not consider Question 5 to be reasonably arguable before the Court of Final Appeal, and accordingly refuse to give leave to appeal on Question 5.

Question 6

23.  In his submissions, Mr Man contended that a party’s failure to rely on a point of law at first instance does not imply that he had waived any defence based upon it.  He also cited various authorities (see [14]-[15] of the applicant’s written submission of 18 November 2021) to illustrate the principles concerning waiver by election and to contend that the issue of waiver should not be determined summarily in the absence of evidence.

24.  However, as submitted by Mr Yuen SC (at [20] of his written submissions dated 2 December 2021) this court did not decide this point, stating only that it was “highly arguable” that the applicant had waived the supposed defences based on section 5(1) of the FJRREO and section 22(2) of the MJREO (see [42] of the Reasons). This court did not express any definitive view on this issue, and in fact went on to consider the merits of such defences (see [43]-[46] of Reasons).

25.  In any event, the principles governing whether an argument conceded in the court below may be raised on appeal are well established (and were referred to in some detail by Mr Man in his submissions), and whether or not such permission will be granted in a given case depends on consideration of case-specific factors.

26.  We are of the view that there is no great general or public importance in Question 6 which merits the grant of leave to appeal, particularly on a question which was not actually decided by this court.

“Or otherwise” ground

27.  In [17] of the applicant’s skeleton submissions dated 18 November 2021, it was accepted that it is this court’s practice not to grant leave under the “or otherwise” limb of section 22(1)(b).  The applicant thus did not ask this court to grant leave on this basis, and we have accordingly not dealt with the application under this limb.

Conclusion and costs

28.  The applicant has thus failed to identify any question of great general or public importance which is reasonably arguable for the Court of Final Appeal to determine, as required by section 22(1)(b) of the HKCFAO, and accordingly we dismiss the Amended Notice of Motion dated 15 September 2021.

29.  Costs should follow the event, and we therefore order that the costs of this application (inclusive of the costs of the parties’ correspondence between 30 September 2021 and 19 October 2021) be paid by the applicant to the respondents.

30.  We have considered the statements of costs lodged by the respondents.  In our view, it was excessive to have employed three solicitors to deal with this leave application, and we will therefore disallow the costs of the first of the junior solicitors.  Having also considered the overall time spent on the matter by the solicitors (after such disallowance), we find this to still be on the high side.  Accordingly, we assess such costs on a gross sum basis in the amount of HK$475,000.