LIU KIN CHENG v. CHENG YEE MAN

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R U L I N G

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Sir Derek Cons, V.P.:

1. This is an application to adduce further evidence in furtherance of the appeal. The intended evidence is of two kinds:

1.    to contradict evidence contained in the 3rd affirmation filed below by the defendant, an affirmation filed so shortly before the actual hearing that the plaintiff, being in Japan at the time, had no opportunity to answer it;

2.    to show that the plaintiff had in fact asked for an adjournment below, in order to introduce evidence then to contradict that 3rd affirmation.

2. Whether or not any application was made for an adjournment is a moot point. There are letters in the appeal bundle from the defendant's solicitor which are adamant to the effect that no adjournment was asked for. It is common ground between counsel, as I understand it, that although the judge's notes record that he intended, having read that affirmation, to put little weight upon it, at the time he was understood by them to say that he would place no weight upon it; in that circumstance it would seem pointless to have asked for an adjournment. The affirmation which it is sought to introduce now, which naturally we have read de bene esse, merely says that the plaintiff has been told by his solicitor that an adjournment was asked for but refused. The judge's notes, which are before us, make no mention of any application and there is no unanimity between counsel as to exactly what was said or asked for at the time.

3. The only view I can take in these circumstances is that no application was in fact made to the judge. It follows that it is impossible to find that the plaintiff acted then with reasonable diligence, because the natural course would be to ask for an adjournment in order to obtain the answers to the 3rd affirmation that the plaintiff wished to put before the judge below.

4. If the application had been made, and had been refused, the picture would be quite different. But our decision has to be made on the picture as we see it. I have explained the picture as I see it and for that reason I would for my part refuse the application.

Kempster, J.A.:

5. I also would refuse this application for the reasons given by my Lord.

Clough, J.A.:

6. I agree that this application should be refused for the reasons which have just been delivered.

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J U D G M E N T

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Sir Derek Cons, V.P.;

7. The case of the plaintiff in these proceedings is that the defendant, who was a seller of Chinese medicines, was in financial difficulty and that he, a Mr. Tasaka and the defendant came to an agreement that they would enter into a joint venture, to which the plaintiff and Mr. Tasaka would each contribute $600,000 and the defendant would contribute an amount of a particular medicine called "Imperial Pellets". At the same time the plaintiff lent to the defendant sums of money totalling $870,000 which would be repaid not directly to the Plaintiff but into the joint venture and rank as the plaintiff's contribution. That agreement was in March 1990.

8. The defendant did not pay the $870,000 into the partnership business. On 13th December the plaintiff issued a writ, followed on 9th January 1991 by a statement of claim, seeking to recover the $870,000. I do not propose to go into the details of those two documents which have given rise to a considerable amount of discussion during the course of this appeal. It is sufficient to say that no defence was filed.

9. On 26th February Master Woolley made an "unless" order for the defence to be filed on or before 19th March. The defendant still did not comply and on 8th May judgment was entered against him. It was wrongly drawn up as to date but that matter has been put right below.

10. On 17 September Master Woolley refused an application to set aside the judgment. But on appeal on 15th November Keith, J., albeit as he said himself with some hesitation, acceded to the application, set aside the order and gave directions for the filing of the defence which was accordingly filed, with a counterclaim, on 28th November. This appeal is against the judgment of Keith, J.

11. The criterion as to merits in an application to set aside a judgment entered in default, suggested by this court in Graham Harry Fountain v. Bank of America National Trust And Savings Association [1990] 2 HKLR 158, relying upon the House of Lords' authority of Evans v. Bartlam [1937] AC 473, is that the defendant should have "a reasonable prospect of success". That criterion was adopted below, the judge saying:

"The issue between the parties is primarily one of fact. What he (i.e. the defendant) has to do is to show that there is a reasonable prospect that his version of the facts will he accepted."

It is suggested that he departed from that criterion when he used the words following:

"i.e. that he has some realistic chance (not a fanciful chance) that his evidence will be accepted."

I am unable to accept that argument which, with respect,depends upon semantic niceties of no substance.

12. The gravamen of the appeal is that even on the application of the proper test the evidence of the defendant failed to pass it. The defendant's case is that his contribution was not to supply a stock of the "Imperial Pellets" but was the licence to sell those pellets which, until then at least, had been made by him. Further, that the $870,000 was not a loan but payment for the medicine which he was to supply to the partnership; and that the documents at pages 100 and 103 of the appeal bundle, which in terms appear to be loans, were not such but were given by way of security.

13. The judge entertained doubts as to the cases put by either side. He set them out in his judgment. They are to be found at page 14 of the appeal bundle. So far as they related to the plaintiff's case he was concerned that invoices were issued by the defendant, and accepted by the plaintiff, after the date of the agreement in question; and that there were discrepancies in the.amounts as to the loans expressed in various and different documents. So far as the doubts related to the defendant's case the judge noted that the documents at pages l00 and 103 of the appeal bundle were much more consistent with the plaintiff's claim than with the defendant's; and he noted also inconsistencies between the.defendant's 1st and 2nd affirmations as to the reason why the plaintiff handed over the monies.

14. In order to succeed in the appeal Mr. Wong, who appears for the plaintiff as he did below, accepts that he has to show that the judge was plainly wrong. His approaches to that end, as I see them although not expressed in exactly these terms, are principally:

1. in reliance upon the case of Bhagwandas Kewaleram Murjani and Others v. Bank of India [1990] 1 HKLR 586, that the contemporaneous documents show the defendant's affidavit defence to be untrue. He has taken us with enthusiasm through various documents and parts of the affidavits but, with respect, I am not prepared to accept that the documents are as conclusively in his favour as he would like them to be.

2. that the defendant has changed his case during the course of his three affirmations, the last of which was filed only shortly before the hearing below. Again, with respect, I am unable to accept that argument. Although perhaps it is expressed more clearly in the last affirmation, when the defendant had legal assistance, which may indeed have contributed to the way in which the judge actually formulated his description of the defendant's case in the course of his judgment - I mention that with regard to ground (5) of the appeal - in my view the defence is sufficiently made out in the 1st affirmation, in particular in paragraphs 10 to 12 which appear at pages 53 and 54 of the appeal bundle.

15. In the course of his submissions today Mr. Wong has made several good points which may stand the plaintiff in good stead at the trial, but the judge's eventual conclusion, that he could not say that the defendant had no reasonable prospect of establishing that his version of events was true, does not come to me, having looked at all the matters to which our attention has been drawn today, as unduly surprising. I cannot say that in my view the judge was plainly wrong.

16. It is for these reasons that I would dismiss the appeal.

Kempster, J.A.:

17. I agree and have nothing to add.

Clough, J.A.:

18. I also agree.