WONG LAI LING v. LAM KIN CHUNG

HCA 828/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 828 OF 2011

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J U D G M E N T

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1. This is an appeal by the defendant from an Order 14 judgment entered against him by Master Kwang on 27 January this year.  The plaintiff has sued the defendant on an agreement in writing dated 25 April 2005 by which the plaintiff says she lent the defendant the sum of $5 million.  

2. By clause 2 of the agreement the defendant was bound to repay the loan, together with agreed interest of $250,000 on or before 25 April 2006.  Suffice it to say that there are further interest provisions in the event of non payment in full by the due repayment date.

3. The loan of $5 million was advanced on 25 April 2005, but repayment was not made by 25 April 2006.  Repayments have been made in varying amounts between June 2006 and December 2009.  As at 26 April 2011 the outstanding principal on the loan was $1,176,138.20 together with interest of $498,903.86, which is a total of $1,675,042.06.

4. A writ was issued claiming this amount on 16 May 2011.  The defendant filed a defence and counterclaim which I will summarise shortly.  The plaintiff delayed in taking out an Order 14 summons until 4 October 2011, which is after the reply and the defence and counterclaim.

5. After the master entered judgment on 27 January this year, the defendant took out his notice of appeal on the 9 February and has on 7 May taken out a summons for leave to adduce further evidence in the appeal which was listed before me on 10 May.  This summons has been very vigorously opposed on behalf of the plaintiff and it is to that application that this ruling is directed.  I have adjourned the hearing of the substantive appeal to a date later this month.

6. This, therefore, is how matters stand.  I propose to begin by indicating how the issues lay on the pleadings before the master below.  I will then relate the evidence now sought to be admitted, after which I will briefly set out the principles which apply to applications such as this to admit new evidence on an appeal to the judge in chambers.  Finally, I will apply those principles to this evidence and rule on the summons. 

7. So I begin with the pleaded issues and how the matter was presented before the master.  The primary case of the defendant is that this loan agreement does not represent a genuine borrower/lender transaction.  The agreement was prepared by the plaintiff’s solicitors on instructions from the plaintiff alone.  The contents of the agreement do not reflect the true nature and extent of the transaction between the parties.  The defendant was not advised to seek independent legal advice before being asked to sign the agreement.  The main allegation, completely un-particularised, is that it was signed under duress and/or undue influence and is therefore not binding . That is paragraph 3 of the defence.

8. By paragraph 5 of the defence “it is not admitted” that the sum of $5 million was advanced to the defendant, nor that he agreed to repay this amount by 25 April 2006.  There is an admission in paragraph 7 that the defendant had paid various sums of money to the plaintiff from June 2006 to December 2009, but by paragraph 8 it is denied that the amount claimed in the writ is payable by the defendant.

9. By paragraph 9 a case is sought to be set up that in the event that the agreement is found to be a binding one, then the plaintiff is obliged to give credit for all monies paid by him to the plaintiff since 25 April 2005 and that a binding agreement, that is another one, exists between the plaintiff and the defendant that “no payment or no more payment” should be made by the defendant to the plaintiff after 2009 until a company controlled by the defendant has been publicly listed.  This further agreement is also wholly un-particularised. 

10. There is then a separate counterclaim for $428,000 being for the repayment of the amount represented by 20 separate payments between June 2009 and January 2011 made by the defendant to the plaintiff.

11. By the reply and the defence to the counterclaim the validity of the loan agreement is reiterated.  As to the payment of $428,000 the plaintiff has pleaded in great detail how these relate to tenancies of car parking spaces between Polycom Limited, a company owned by the plaintiff as tenant, and Strongman Investment Limited, a company owned by the defendant as landlord.

12. These payments totalling $428,000 are rebates on rent paid by agreement by Strongman Investment Limited to Polycom Limited and which are now the subject of dispute and are the subject matter of a separate action brought by Strongman Investment Limited against Polycom Limited. 

13. These being the pleaded cases, the Order 14 summons was taken out by the plaintiff supported by her affidavit of 4 October 2011 that is to be found at page 65 of the hearing bundle.  The defendant’s affirmation in reply is dated 21 November 2011, at page 75 of the hearing bundle.

14. The defendant draws attention to the fact that the cheque for $5 million, which is the subject matter of the loan agreement, was not paid to him personally but to a company called Zhongyang of which he is a director and shareholder.  Relying on this he says that there is, therefore, no evidence of any loan to him. 

15. That sum was then paid into the account of eBizAnywhere, of which he was also a director and shareholder.  eBizAnywhere then used this amount to issue shares to the plaintiff for a face value of $1,427,703 and the balance of $3,572,297 to a company called Eve International Enterprise Limited.  He therefore says that this $5 million was not lent to him but for the allotment of these shares paid for by the plaintiff.  As to the shareholding in Eve, the plaintiff owned 50 per cent of its shares.  40 per cent were owned by a Miss Yao San Mui, who is the wife of a Mr Loong, a gentleman with whom the defendant has business dealings.

16. Pausing here, that was the basis of his case on Order 14.  None of the other grounds raised in the defence and counterclaim were referred to.  In her second affirmation the plaintiff explains that what this was all about was that the defendant, who wished to have eBizAnywhere listed in Singapore, was short of money.  He therefore sought this loan from her and, as an incentive for her to advance the $5 million, he issued shares in eBizAnywhere to her personally, and to Eve, of which she was a 50 per cent shareholder.  It was as simple as that.

17. What then happened was that the defendant failed to get his listing in Singapore and the plaintiff says the value of her shareholding in eBizAnywhere was severely reduced.  Thereafter, the defendant made a number of repayments of the loan to the plaintiff or to her order to Mr Loong, because she says she owed Mr Loong money arising from business transactions between her and Mr Loong.

18. The matter came before Master Kwang, and having heard the submissions of the parties and on the basis of the evidence filed and having regard to the terms of the agreement itself, he held that the defendant had no defence, accordingly he entered judgment.

19. Now, let me consider what has happened since then.  After launching the appeal the defendant says that he and his solicitors have taken a second look at the evidence.  They have discovered that in the case of one cheque in particular the plaintiff has not told the truth.  It is a cheque for $600,000 upon which Mr Loong has endorsed a note to the effect that this related to a repayment by the defendant to him for a business dealing between the two of them.  It did not relate to a debt owed by the plaintiff to Mr Loong which the defendant paid by his company cheque to Mr Loong on her behalf.

20. He now says that she must therefore be lying. After anxious consideration, I think this fairly summarises his approach, he has decided to take out contempt of court proceedings against the plaintiff on the basis that she had lied before the master in respect of this cheque and, so the argument goes, if she lied about that, then this must damage her overall credibility and therefore cause me, if I admit this after discovered evidence, to hold that this matter should go to trial.

21. This, therefore, is the subject matter of his summons to have admitted basically, the committal proceedings which include all this material about the cheque for $600,000 to Mr Loong which Mr Loong has said relates to a debt owed to him by the defendant and not to a debt owed to him by the plaintiff as she has deposed to.

22. Leaving aside for the moment the fact that I have never in my experience seen a committal application made on this basis it should also be observed that the judge seized of this committal application has required to be persuaded orally. Usually ex parte leave to issue committal proceedings are sufficient and approved on paper.  What Mr Lau for the defendant is submitting is that these committal proceedings, or more accurately stated this as yet unissued and unapproved committal application, amounts to evidence that this evidence was excusably not available when the matter was before the master and if only for this reason I should allow the evidence to be admitted.

23. Let me look at the legal principles.  Prior to the CJR it was relatively commonplace for a losing party in Order 14 to appeal and to put in further evidence to improve its case, which the court would admit.  Since the CJR the rule has been markedly tightened up.  Now under Order 58, rule 2, such evidence will only be admitted on “special grounds”.  As the note at 58/13, page 1010, Hong Kong Civil Procedure 2012 makes clear, “special grounds” now bring this situation within the terms of Ladd v Marshall [1954] 1 WLR 1489.  This means that the evidence could not have been obtained with reasonable diligence for use in the court below, the evidence must be such that if given it would probably have an important influence on the result of the case, though it need not be decisive, and that the evidence must be such as is presumably to be believed.

24. But what should also be said is that Ladd v Marshall relates to evidence at the trial of an action.  In Langdale v Danby [1982] 1 WLR, 1123, a decision of the House of Lords, Lord Bridge held that in Order 14 proceedings some modification in the rigour of Ladd v Marshall might be appropriate.  This is what he said at 1133 letters B to F:

“In the situation arising on an appeal to the Court of Appeal from summary judgment, the application of these conditions and perhaps the conditions themselves will require some modification. It may well be that the standard of diligence required of a defendant preparing his case in opposing to a summons for summary judgment, especially if under pressure of time, will not be so high as that required in preparing for trial. The second and third conditions will no doubt be satisfied if the further evidence tendered is sufficient according to the ordinary principles applied on application for summary judgment to raise a triable issue. But I can see no injustice at all in requiring a defendant to use such diligence as is reasonable in the circumstances to put to the judge on the hearing of the summons, albeit in summary form, all the evidence he relies on in defence. Whereas it would be a great injustice to the plaintiff to allow the defendant to introduce for the first time on appeal evidence which was readily available at the hearing of the summons but was not produced.”

Those are the legal principles.

25. I now turn to my decision.  Firstly, I do not believe for one moment that self-created committal proceedings after an adverse Order 14 outcome for a defendant can be said to be “new evidence”.  One needs to look at the content of the committal application and look at the evidence that is being relied on in support of the committal.  It is the content that matters, not the outer wrapping of a committal application.  In this case the defendant has said that his office filing systems were not up to the mark and so it took him more time to find the endorsement about the cheque for $600,000 to Mr Loong. In judging this I need to have regard to how this evidence has evolved and the time scale over which it has evolved.  This includes a consideration of the pleading which shows the issues that were being raised, particularly by the defendant.

26. I am bound to say that what he is now saying in his affirmations in this Order 14 is quite different from his originally pleaded case, largely based on a sham agreement on the one hand and, mutually inconsistently on the other, a defence based on duress or undue influence.  The fact is that he must be taken to have known from the outset what factually his case is.  There is no doubt that over the progress of the litigation it has changed. 

27. Whilst I appreciate that the plaintiff has said fairly late in the exchange of affirmations that some of the repayments to her in respect of the loan were to her order made to Mr Loong.  I do not think that the delay by the defendant in unearthing this endorsement by Mr Loong, which purports to contradict the plaintiff on this one cheque can be said to comply with the requirements of reasonable diligence in obtaining it.

28. Secondly, in the greater scheme of things, having regard to the existing evidence as a whole, it cannot be said that it will have an important influence on the result of the Order 14 summons, even though it need not be decisive.

29. Thirdly, it needs to be evidence as is presumably to be believed.  In this regard it would have been infinitely preferable if the defendant had obtained or tried to obtain affirmation evidence from Mr Loong to confirm this endorsement.  He has not even tried to do so.

30. I am therefore satisfied that the defendant has failed to show the required special grounds as to why this after discovered evidence should be admitted in the appeal and this summons must therefore be dismissed.