HIGASHIGI INDUSTRIAL CO LTD v. LEUNG LUEN KAI AND ANOTHER

HCMP 2114/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2114 OF 2010

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D E C I S I O N

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1.  The plaintiff seeks leave to appeal against my decision (“the Decision”) declining to strike-out the defence and counterclaim. There is another application to amend the plaintiff’s summons. In the absence of opposition, I grant the application.

2.  The grounds of appeal can be broadly summarized as follows:

(i)  That I have taken mere suspicions as sufficient to support a plea of dishonesty.

(ii)  That I have descended into the arena, giving an appearance that impartiality has been compromised.

(iii)  That with regard to sufficiency of particulars in a plea of dishonesty, I have adopted a standard far below the established standard.

(iv)  That I have erred in finding the loan agreement itself as a disposition when in fact only the charge could be regarded as a “disposition” under the proper construction of section 17 of the MPPO.

The applicable principle

3.  Leave to appeal will not be granted unless the court is satisfied that the appeal has reasonable prospect of success or there is some other reason in the interests of justice why an appeal should be heard.  Reasonable prospect of success involves the notion that the prospects of succeeding must be reasonable and therefore more than fanciful, without having to be probable:  SMSE v KL [2009] 4 HKLRD 125.

Ground (i): Taking mere suspicions as sufficient to support a plea of dishonesty

Ground (iii): Adopting a standard far below the established standard for a plea of dishonesty

4.  Grounds (i) and (iii) can be taken together.

5.  Mr Butt for the plaintiff relies on 林哲民經營日昌電業公司訴特佳機器廠有限公司及另一人, CACV 122/2004, 29 November 2005, Lam J, for the proposition that a plea of dishonesty shall not be levelled against a person in the absence of sufficient evidence.  Whilst I have not referred to this authority in the Decision, I have set out in paragraphs 14-17 of the Decision the principles for striking out where dishonesty is involved.  Those principles were in line with the case of 林哲民, which Mr Butt concedes at this hearing.

6.  I have expressly stated that mere suspicion is insufficient to sustain a plea in sham transaction and that one must look at the substance rather than the label.  It was in that context that I referred to the solicitors’ letter setting out the particulars and the evidence.  I note that in Poon Lai Bing v Gold Dragon Limited t/a Club Paris & anor, CACV 136/2007, 13 December 2007, the Court of Appeal similarly considered the pleadings in the light of particulars provided by letter and came to the view that the applicant had been sufficiently informed of the nature and particularity of the allegations.

7.  It is said that it is in the interest of justice that the appeal should be heard so that the plaintiff and Mr Li may be given a chance to clear their names over the conspiracy claim.  I agree with Mr Chow, counsel for the 2^nd defendant, that this does not affect the principles to be applied to the striking out application.  The plaintiff/Mr Li will be vindicated if after trial it is found that the 2^nd defendant does not come up to proof.

Ground (ii): Descending into the arena, giving an appearance that impartiality has been compromised

8.  Mr Butt submits that I have “added my own effort to choose selectively those ‘particulars’ in favour of the 2^nd defendant” but disregarded or did not choose those evidence in favour of the plaintiff.  He also says that I put forth a case of conspiracy that the 2^nd defendant never intended to put forward.  In so doing, he submits that I have descended into the arena when I considered the 2^nd defendant’s contention of “suspicious circumstances”.  He relies on two authorities.

9.  In Yuill v Yuill [1945] 1 All ER 183, the trial judge conducted a large part of the examination of witnesses by putting more questions to witnesses than all the counsel in the case put together and to the embarrassment of trial counsel.  The Court of Appeal commented,

“A judge who observes the demeanour of the witnesses while they are being examined by counsel has from his detached position a much more favourable opportunity of forming a just appreciation than a judge who himself conducts the examination. If he takes the latter course he, so to speak, descends into the arena and is liable to have his vision clouded by the dust of the conflict. Unconsciously he deprives himself of the advantage of calm and dispassionate observation. It is further to be remarked, as everyone who has had experience of these matters knows, that the demeanour of a witness is apt to be very different when he is being questioned by the judge to what it is when he is being questioned by counsel, particularly when the judge’s examination is, as it was in the present case prolonged and covers practically the whole of the crucial matters which are in issue.” (p 189 A-C)

10.  In Jones v National Coal Board [1957] 2 All ER 155, the judge intervened in a substantial part of the examination in chief of the defence witnesses and in the course of cross-examination of the defence witnesses to the extent that the plaintiff’s counsel was unduly hampered in his task of testing their evidence.  Denning LJ (as he then was) said,

“Let the advocates one after the other put the weights into the scales – the ‘nicely calculated less or more’ – but the judge at the end decides which way the balance tilts, be it ever so slightly.” (p 159D-E)

11.  Mr Butt submits that the legal principles regarding impartiality are applicable in the instant case.

12.  I fully accept those legal principles, but I also note that those two cases were decided in the context of a trial with oral evidence from witnesses.  In a strike-out application, the court only acts on pleadings and affirmation evidence.  The most basic principle in such an application is that “there should be no trial upon affidavit. Disputed facts were to be taken in favour of the party (in this case the 2^nd defendant) sought to be struck out.”  See Hong Kong Civil Procedure 2012, para 18/19/4.

13.  In his skeleton submission in the present leave application, Mr Butt states,

“7. The husband described Mr Li as a nice person, a devoted Christian and willing to help others. The husband also mentioned that Mr Li engaged in property business and should be wealthy. Of course, it looks suspicious for someone to lend HK$2 million to others after knowing each other for a short period of time. However, one has to put the facts in context, in the husband’s affirmation, he explained that he had repeatedly requested Mr Li to help him and the life of another person was in danger. Whether HK$2 million is a substantial amount is a comparative concept. It could be very substantial to many people but not substantial at all for someone who is wealthy.”

14.  Mr Butt may be correct.  However, the credibility of such evidence and the weight to be placed on it are matters for trial.  Such evidence has no bearing on whether or not the defence and counterclaim should have been struck out.

15.  Then Mr Butt submits that I have “cited additional particulars supporting the 2^nd defendant’s contention of ‘suspicious circumstances’ ” in paragraph 26 (Fact 4) and paragraph 29 (Fact 7) of the Decision.  Further, at the hearing on 2 May 2012, I had not allegedly revealed the “overall picture” in my mind (specifically with regard to my observations in Fact 4 and Fact 7).  It is submitted that the plaintiff was given no chance to reply to the unfavourable “overall picture”.  Should such opportunity be given at the hearing, the plaintiff would have invited the court to consider “the imminent situation behind the loan and Mr Li’s good character and his financial position”, ie the matters cited in paragraph 13 above.  Mr Butt also says that the duty was on the 2^nd defendant to put forth its best case; that the judge “should sit there silent” to see if the particulars were sufficient. He complains that some facts were not put forth by the 2^nd defendant but from the bench.

16.  With respect to Mr Butt, those 7 Facts have all been taken out from the affirmations and not inventions by the court.  When considering the sustainability of those Facts, I cannot see why the court should “sit there silent” and not test them against the evidence placed before it.  Mr Butt has not suggested in what way the views I have taken of those 7 Facts or evidence were erroneous.

17.  Further, Mr Butt has not demonstrated at all how, without the “additional particulars” cited by me could have resulted in a different decision.  Even without the “additional particulars”, I have said that the defence and counterclaim could be remedied by setting out the particulars in line with the solicitors’ letter in a more succinct fashion.

Ground (iv): Error in finding that the loan agreement itself was a disposition when in fact only the charge could be regarded as a “disposition” under the proper construction of section 17 of the MPPO

18.  With respect to Mr Butt, he has misread paragraph 36 of the Decision. The “loan agreement” has always been defined in paragraph 8 of the statement of claim and paragraph 4 of the Decision as “the loan of $2,000,000 cash secured by a charge over the property”.  It was the loan agreement that the wife has always wanted to set aside.  The reference to the loan being a disposition by the plaintiff was taken from paragraph 39 of Mr Butt’s skeleton submission at the hearing of the striking-out application.  Paragraph 36 of the Decision was to distinguish the role played by the plaintiff and the husband under the loan agreement.  If, as Mr Butt submits, the wife can only set aside the charge but not the loan, then the distinction I have drawn would have been useful to his case.  There can be no complaint.  Anyway, the 2^nd defendant still has a case under section 17 of the MPPO.

19.  Mr Butt has not demonstrated how a “correct” finding by me on what constituted a “disposition” could have an impact on the result of the strike-out application.  There is no merit in this ground of appeal.

Conclusion

20.  I am not satisfied that there are reasonable prospects of success in the intended appeal.  The application is dismissed.

21.  I make an order nisi that the costs of this application shall be borne by the plaintiff to be summarily assessed on the papers on 29 June 2012 at 4:30 pm.  No attendance is required.  The 2^nd defendant shall file and serve statement of costs by 21 June 2012.  The plaintiff shall file and serve grounds in opposition by 28 June 2012.

22.  I thank counsel for their assistance.