FOURWAY (HK) LTD v. CHINA NANTONG HARBOUR LOGISTICS LTD

HCA 1618/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1618 OF 2009

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

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

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

D E C I S I O N

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

Introduction

1. This is an application for summary judgment by the Plaintiff.

Background

2. On 20 July 2009, the Plaintiff commenced the present proceedings against the Defendant to recover 2 advancements totalling USD4,042,800 (USD2,912,800 + USD1,130,000), interest and costs.

3. The Defendant contested the proceedings and filed a Defence.  Counsel for the Plaintiff, Mr. Jat, S.C., summed up it succinctly in the followings:

“5.  ……

(1)    There is no record of any liability to Fourway (the Plaintiff) in the audited accounts of CNHL for the year 2006 ……

(2)    Mr Zhu Ming, a former director of both Fourway (the Plaintiff) and CNHL (the Defendant), was the de facto controller of both companies at the time the Advances were made ……

(3)    Fourway (the Plaintiff) refused to provide proper and full answers to CNHL’s (the Defendant’s) requests for Further and Better Particulars ……”

(Mr. Jat’s skeleton dated 12 November 2009)

4. Regarding the lack of Further and Better Particulars, later, by consent, on 14 September 2009, the Plaintiff provided them to the Defendant.  In short, the Plaintiff answered that the advancements were loans made to the Defendant.  The Plaintiff did transfer the sums to the Defendant who then used them to settle its debts to a bank.  No interest was charged on the advancements but they were repayable on demand.  On the same date, the Plaintiff also issued the present application for summary judgment.

5. The Defendant was not satisfied with the Answers and sought a stay of the proceedings, including the Plaintiff’s Order 14 application, pending the Further and Better Particulars it had asked.  On 2 October 2009, Madam Registrar Au-Yeung ordered, inter alia, a dismissal of the Defendant’s application for Further and Better Particulars.  She further adjourned the Order 14 application for argument with 2 hours reserved, together with usual directions for filing and serving of affidavit evidence.  The learned Registrar also directed that no further affidavit was to be filed without leave of the Court.

6. There has been no appeal of the order of Madam Registrar.

7. Regarding the Order 14 application, the following evidence were filed and served:

(a)  Affirmation of Chen Ye (support) 14 September 2009

(b) Affirmation of Leung Ping Herman (opposition) 30 September 2009

(c)  2^nd Affirmation of Chen Ye (reply) 4 November 2009

Briefly, in the said affirmation of opposition, the Defendant repeated the above summing up by Mr. Jat, S.C. as per paragraph 3 herein.  It further complained that the Plaintiff had not sufficiently dealt with its Request for Further and Better Particulars.  Nonetheless, apparently, Madam Registrar had rejected such argument when she dismissed the Defendant’s application as aforesaid.

8. I heard the Order 14 application on 17 November 2009.

Late application to adduce evidence

9. 5 days before the substantive hearing, the Defendant issued a summons seeking to adduce a supplemental affirmation in opposition.  Having heard from both Counsel, I refused the same and agreed to give reasons later.  Here are them.

(a)   To avoid last-minute evidence, the new Order 32 rule 11(4) RHC states that:

“Where the determination of the application is adjourned for the hearing of the summons, no further evidence may be adduced unless it appears to the Court that there are exceptional circumstances (emphasis added) making it desirable that further evidence should be adduced.”

(b)   Mr. Wou, Counsel for the Defendant, has not been able to satisfy me that there are exceptional circumstances herein.  The main argument of the Defendant lied on the complaint that the Plaintiff had failed to make full and frank disclosure to the Court.  Without the Particulars the Defendant wanted, it was not difficult, if not impossible, to deal with the case.  However, upon the dismissal by Madam Registrar Au-Yeung of the Request for Further and Better Particulars, the Defendant could no longer rely on such argument.

(c)   Further, as suggested by Mr. Jat, S.C., it was:

“7. Now, for the first time, various allegations of wrongdoing are made, including that:

(1)  The Advances on which Fourway (the Plaintiff) is claiming were in fact part of a scheme to overcome PRC foreign exchange restrictions;

(2)  Zhu Ming and Chong misappropriated funds from the Xinda Group;

(3)  Zhu Ming has removed unlawfully the accounts and books of CNHL (the Defendant).

……

8.  ……

9.  CNHL (the Defendant) had every opportunity to raise the matters in Leung 2^nd either in Leung 1^st or the Directions Hearings on 2 October 2009.”

(Mr. Jat’s supplemental skeleton dated 6 November 2009)

(d)   While I need not go so far to the extent, as suggested by Mr. Jat, S.C., that the late application is to ambush the Plaintiff, it clearly will delay the proceedings so that the case is not dealt with as expeditiously as is reasonably practicable.

(e)   Last, but not least, the Defendant has not satisfied me of any ground as laid down in Ladd v Marshall [1954] 1 W.L.R. 1489, including that the new evidence could not have been adduced with reasonable diligence (para. 32/11/3, HKCP 2010, at page 676).

The Plaintiff’s application for summary judgment

10. With the above in mind, including the dismissal of the Defendant’s application for Further and Better Particulars on the Statement of Claim, the case of the Defendant left is a denial of the Plaintiff’s claim.  Should summary judgment be entered for the Plaintiff as prayed?

11. At this juncture, I remind myself of the general principles relating to summary judgment.  The underlying policy of Order 14 application is to prevent the defendant from delaying the plaintiff to obtain judgment in a case where the defendant clearly has no defence.  Facing such application, the Court asks 2 questions.

(a)   Factually, is what the defendant says believable in light of the undisputed or indisputable circumstances?  In so doing, the Court is entitled to take into account the commercial reality as well as contemporaneous documents.  However, mini-trial on affidavit evidence shall not be embarked.  Bare assertion is sufficient and the defendant must condescend upon particulars.

(b)   Legally, if what the defendant says is believable, does it amount to an arguable defence in law?

In the end, the burden lies on the defendant to show triable issue or some other reasons for a trial.

12. Upon consideration of the evidence, authorities and submissions before me, I have decided to allow the Plaintiff’s application in the circumstances.

(a)   It is not disputed or undisputable that the Plaintiff did transfer the 2 advancements to the Defendant who then used them to repay its bank.

(b)   The documents are presumed to be a loan repayable on demand, unless proven otherwise (Seldon v Davidson [1968] 1 WLR 1083 and Mak Ka Hing v Pang Ming Chung CACV 215/2002, unreported, 28 November 2003, at paragraph 23).

(c)   The Defendant simply denied that they were not loans.  Bare denial is clearly not good enough to raise triable issue or some other reason for trial.

(d)   I also agree with Mr. Jat, S.C. that:

“11.   A closer look at the matters relied on by CNHL sheds no light on what defence it is relying on.  The matters raised by CNHL, even if true, do not go to show that the Advances were not a loan.

(1)  Whether Mr Zhu was the “de facto controller” of both Fourway and CNHL at the time does not show that the Advances were not a loan.

(2)  As to CNHL’s audited accounts for the year 2006, this of itself shows nothing.  There is no evidence as to how the accounts were prepared, what information were provided to the auditors, or whether the Advances have been reflected in the items appearing in the accounts.”

(Skeleton of Mr. Jat dated 12 November 2009)

Conclusion

13. To conclude, I will make the following orders.

(a)   As to the Defendant’s summons filed on 12 November 2009, the application to adduce new evidence is dismissed with an order nisi that the Defendant shall bear costs of the Plaintiff, to be taxed if not agreed.

(b)   Regarding the Plaintiff’s summons filed on 14 September 2009, summary judgment is allowed with an order nisi that the Plaintiff will have costs thereof as well as the whole action, including all costs reserved and Certificate for one Counsel for hearing on 17 November 2009, to be taxed if not agreed.

(c)   The Defendant’s application for leave to file and serve an Amended Defence as contained in the summons filed on 28 September 2009 is dismissed with a costs order nisi for the Plaintiff, including all costs reserved, to be taxed if not agreed.