CHEUNG CHI PO v. KE JUN XIANG

HCA1168/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1168 OF 2009

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BETWEEN

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J U D G M E N T

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1.  This is an application for leave to appeal from my judgment dated 30 June 2011 given by me ex tempore after the argument on that date, whereby I dismissed the Plaintiff’s appeal from the master who set aside a judgment entered against the Defendant in default of filing of acknowledgement of service and, obviously, in default of the filing of any defence. The judgment entered was a regular default judgment.

2.  Ms Audrey Eu, Senior Counsel, leading Miss Doris Ho, neither of whom appeared on the substantive argument before me leading to my decision of 30 June, advanced four grounds for the proposed appeal, being that:

(1) I erred in ruling that the proposed defence had any real prospect of success when I had also found that the defence lacked commercial sense;

(2) I erred in reversing the burden of proof in requiring the Plaintiff to adduce incontrovertible evidence to negate the defendant’s case;

(3) I ought to have ruled that the Defendant’s case carried no conviction as it was inherently improbable and did not have any commercial sense and therefore has no real prospect of success; and

(4) I failed to consider the Plaintiff’s submissions on imposing terms on the Defendant upon granting leave to the Defendant to serve his defence.

Although listed individually, the first three grounds plainly have some degree of overlap. 

3.  There is no dispute between the parties as to the applicable legal principles, albeit that some slight different emphasis is placed upon those principles by Ms Eu and by Ms Lee who appears again for the Defendant.

4.  Under section 14AA(4), leave to appeal for the purpose of subsection (1) shall not be granted unless the court hearing the application for leave is satisfied that (a) the appeal has a reasonable prospect of success, or (b) there is some other reason in the interests of justice why the appeal should be heard.  It is now well settled that the section requires that the court should be satisfied that the appeal has a reasonable prospect of success, or there is some other reason, in the interests of justice, why the appeal should be heard before granting leave, where reasonable prospects of success involves the notion that the prospects of succeeding must be reasonable and, therefore, more than fanciful, without having to be probable.  It is, of course, fair to say that it is not enough to show that the appeal is arguable; there must be reasonable prospects of success. 

5.  The first ground put forward by Ms Eu is that I erred because, in short, where I had seen force in a submission made by then counsel on behalf of the Plaintiff that the explanation offered by the Defendant does not make much commercial sense and that there were inherent improbabilities in the story, it was effectively impossible for the Defendant then to have established at least a real prospect of success. 

6.  There is no dispute between the parties that I identified the correct test to be applied but it is said that I did not in fact apply it.  Ms Eu suggests that when I found that the arrangements identified by the Defendant did not make much commercial sense, I should have borne in mind that the Defendant is a businessman of some experience.  But it seems to me that that point might cut both ways.  Plainly, the Plaintiff is a businessman of some experience and in the light of that fact, one might have thought that the promissory note would have been drafted on terms which are at least clearer as regards the case that he puts forward on affidavit and that he would have given clearer instructions to his solicitors in the drafting of the writ upon which the default judgment was subsequently entered.  Similarly, when the defence that was put forward was that no money had ever been received by the Defendant from the Plaintiff by way of any loan, one might think that a businessman with some ordinary business sense would quickly have adduced evidence to show at least some payment.

7.  The second ground of appeal was that I erred in reversing the burden of proof, but with respect to the submission, I do not think I reversed the burden of proof.  I certainly did not require the Plaintiff to adduce incontrovertible evidence to negate the Defendant’s case.  I simply pointed out that where the Defendant’s case was that he had received no money from the Plaintiff by way of a loan, one might have expected evidence to have been adduced of payment of at least some money which would have gainsaid the defence put forward.  I tried to assess the Defendant’s evidence against the other evidence as well as the evidence that I would have expected readily to have been available and put forward but which was, apparently, not. 

8.  As to the third ground of appeal, the submission is that this is not the kind of rare case that was described by Keith J in the Guangdong International Trust and Investment Corp Hong Kong (Holdings) Limited v Yuet Wah (Hong Kong) Wah Fat Limited & Another case to which I made reference in my judgment.  The point that I made in my judgment was that I thought that questions arose on both sides of this case and that those questions did not seem to me to be able to be resolved without the matter going to a trial.

9.  In respect of all three of those grounds, at bottom, I was balancing, as I saw them, the inherent improbabilities on one side against the totality of the evidence, or what evidence I would have expected to have been available, which was not, in deciding whether or not there were sufficient merits to allow this matter to go to a trial. 

10.  I did bear in mind the way in which the case had been originally formulated on the pleading, but I do not think it fair to say that that was simply a pleading point and I understand Ms Lee to have been putting it forward on a slightly different basis, namely, that there was an apparent shift in the way in which the case was put forward by the Plaintiff between the manner in which it was pleaded and the manner in which it was described in the affidavit which was filed after the Defendant had identified that his case was that, notwithstanding that he signed the promissory note and that it contained the acknowledgement of having personally received the sum of $25 million correctly and having made the agreement, he had in fact received no part of that sum.

11.  Nevertheless, at the end of the day, I accept that Ms Eu does not have to show that she will succeed on the appeal and whilst I do not think that I made the errors that she has described, I accept that a court of appeal might take a different view and I cannot say that there are no reasonable prospects of success on this appeal. 

12.  That being the case, it is probably unnecessary for me to deal with the fourth ground, which suggests that I simply failed to exercise my discretion in that I did not, in my judgment, refer to or deal with the arguments about the possible imposition of terms upon the setting aside of the default judgment. 

13.  I can say, of course, that I had well in mind the argument that had just been put forward as regards the possible imposition of terms shortly before I gave judgment and, in particular, had in mind the tension that was described by Ribeiro J in the L & M Specialist Construction Ltd case between a court deciding that the defendant has real prospects of succeeding in his defence and the court considering, at the same time, that the defence is in shadowy realms. 

14.  But that is a point that would remain live on the appeal for which I now grant leave.  I suppose the costs would be in the appeal.

(Submissions on costs)

15.  There is a significant amount of money at stake, I suppose, on both sides, but for the purposes of the leave application, I am not minded to grant a certificate for two counsel which, in practical terms, I suspect means Ms Ho’s fee would likely be taxed off rather than Ms Eu’s.