BOLD SHINE INVESTMENT LTD v. ZHENG DELI also known as CHEANG LEI and CHEANG TAK LEI

HCA 1867/1999

HCA 1676/2011

[2024] HKCFI 1471

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1867 OF 1999

________________________

AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1676 OF 2011

________________________

________________________

(Heard together)

________________________

D E C I S I O N

________________________

Decision

1.  This is my decision on the plaintiff’s application for leave to appeal against the ruling which I made yesterday, namely, the first day of the trial[1].

2.  My ruling was to the effect that the defendants would be allowed to raise the challenge as to the plaintiff’s authority to sue in this trial.

3.  I refuse to grant leave to the plaintiff as I consider that none of the grounds of appeal now proposed are reasonably arguable. They have no reasonable prospect of success. And there is no other reason why the proposed appeal should be heard.

4.  I shall deal with those grounds of appeal in turn.

Ground 1

5.  Under ground 1, Mr Benjamin Chain, appearing for the plaintiff with Mr Tony Chow, contends that as a matter of law, a party is not allowed to raise a challenge to the authority of the plaintiff to sue within a trial. I therefore made an error when I held that the matter was one of case management.

6.  Mr Chain’s contention is to the effect that in law, there is an absolute bar against a defendant to raise the challenge at the trial.

7.  That position is not supported by any of the authorities cited to me by Mr Chain yesterday. It also offends common sense. Mr Damian Wong, appearing with Ms Jenny Lok for the defendant, submits, and I agree, that the principle laid down in authorities such as Kammy Town is not a strict, immutable law, which deprives the court of any power to manage a case or issues arising in a case.

8.  Ground 1 is therefore not reasonably arguable.

Ground 2

9.  Under ground 2, as clarified by Mr Chain in his oral submissions just now, I made an error in interpreting what Mr Chow said at the PTR hearing. Mr Chow was the counsel appearing for the plaintiff at the PTR. He appeared on his own. I was therefore wrong in placing weight on my own misinterpretation.

10.  Towards the end of the PTR hearing, I asked Mr Chow whether he agreed to what was just being discussed. Mr Chow replied,

“Yes, yes. I don’t think I’ll take issue.”

11.  My interpretation of that answer was and remains to be that Mr Chow, on behalf of the plaintiff, agreed that the defendants would be allowed to raise the authority challenge at the trial.

12.  This morning, based on Mr Chow’s express confirmation, Mr Chain submits that that is a wrong interpretation and the correct interpretation is as follows. Mr Chow was simply agreeing that there would no longer be any time limit for the defendants to raise the authority challenge. However, in his mind, Mr Chow considers that the issue as to whether the defendants should be allowed to do so was still left hanging in the air.

13.  I disagree with that interpretation. By now, I myself have listened to the recording of the relevant parts of the PTR hearing at least six or seven times. The issue as to whether and when the defendants should be allowed to raise the challenge at the trial was thoroughly discussed. Mr Chow was physically present throughout that discussion. In the end, it is clear that an agreement was reached by the parties through counsel.

14.  Hence, ground 2 is not reasonably arguable.

Ground 3

15.  Under ground 3, the plaintiff argues that one of the orders which I made at the PTR hearing did not have the effect that the defendants were at liberty to make an application to challenge authority. The actual order read:

“Upon the confirmation of the Defendant set out in paragraph 5 of the Defendant’s solicitors’ letter dated 16^th May 2022, paragraphs 1 to 4 of the order of Madam Justice Au-Yeung dated 25^th April 2022 ceased to have effect.”

16.  That order which I made cannot and should not be looked at in complete isolation from everything else. On its face, when read alone, it may not have the effect of allowing the defendants to raise the authority challenge at the trial. However, one must not disregard what was actually discussed at the PTR hearing.

17.  At the hearing, I specifically and openly acknowledged that the order on its face would not reflect the position. And I specifically asked counsel perhaps the way to deal with it was for parties to come to an agreement and hence there would be no need to spell out everything if an agreement was reached.

18.  What happened next was that parties reached an agreement. Hence, the order did not spell out everything.

19.  Given all these, it is certainly not open for the plaintiff to now challenge or take issue with the actual wording of the order.

20.  Ground 3 is not reasonably arguable. In my view, in light of the express discussion which took place at the PTR hearing, this ground ought not to have been made in the first place.

Grounds 4 to 7

21.  Grounds 4 to 7 can be dealt with together. Under these grounds, the plaintiff mounts a challenge against my exercise of the discretion while denying that I had the discretion in the first place.

22.  It is well known that the threshold to challenge a first instance judge’s exercise of case management discretion is very high.

23.  I am prepared to accept whether the authority challenge would serve any useful purpose is potentially a factor that I should weigh in the overall exercise. This point was indeed raised by me and discussed with Mr Wong in the course of his oral submissions yesterday.

24.  In the overall scheme of things, particularly in light of the agreement reached by the parties at the PTR hearing, this utility point was not considered as a weighty factor. The weight which I gave to this factor is in my view not open to challenge at the appellate level.

25.  Hence, grounds 4 to 7 have no reasonable prospect of success.

Conclusion

26.  To conclude, I refuse to grant leave to appeal to the plaintiff.

(Discussion re costs)

27.  This is my order on costs. Costs should follow the event. The defendants do have costs of the application for leave to appeal, summarily assessed at $33,326, payable by the plaintiff within 14 days from today.

Mr Benjamin Chain and Mr Tony H H Chow, instructed by C L Chow & Macksion Chan, for the plaintiff in both actions

Mr Damian Wong and Ms Jenny Lok, instructed by Chan, Lau & Wai, for the defendants in both actions

HCA 1867/1999

HCA 1676/2011

[2024] HKCFI 1470

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1867 OF 1999

________________________

________________________

AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1676 OF 2011

________________________

________________________

(Heard together)

________________________

R U L I N G

________________________

1.  The plaintiff asks me to make a ruling today that the defendants should not be allowed to challenge the plaintiff’s authority to sue in this trial.

2.  I decline to make that ruling.

3.  It is correct, as Mr Chain submits, that any challenge to authority to sue should be raised at the earliest opportunity. That principle is well established. In my view, the principle is primarily based on case management considerations.

4.  In the present case, the question as to when the defendants could raise the challenge was discussed before Madam Justice Au-Yeung back in 2022. At that hearing, the judge imposed a 28-day time limit for the defendants to take out any application to challenge standing.

5.  But the hearing was followed by subsequent correspondence. The overall effect was that the time limit originally imposed on the defendants no longer applied.

6.  At the pre-trial review hearing in April this year, I had a lengthy and thorough discussion with the parties as to whether the defendants should be allowed to raise the challenge.

7.  The authority issue and the substantive claim made by the plaintiff both turn on substantially the same factual issue. As a matter of common sense, they can both be dealt with at the same time at the trial should the defendant wish to pursue that challenge.

8.  At the PTR hearing, a conclusion was reached with the agreement of both parties as follows:

(1)  There will be no time limit for the defendants to raise the challenge.

(2)  They may do so at the trial.

(3)  There was no need for the defendants to take out any formal application.

(4)  If the defendants wish to pursue that challenge, they should include that as an item in the agreed list of issues to be lodged with the court.

9.  The relevant discussion was contained in two parts. I will put it on record. The first part started at 9:58:07 and finished at 10:09:00. The second part started at 10:54:45 and finished at 11:00:40.

10.  Given the agreement of the parties, it is not open to the plaintiff to now say that it is impermissible for the defendants to raise this challenge in the trial.

11.  I therefore refuse to make the ruling as requested by the plaintiff.

12.  I wish to express my dissatisfaction and frustration that no one, except me, seems to pay any serious regard or attention to what was discussed and agreed at the PTR hearing. I am also very surprised that after having had the opportunity to hear the tape recording twice, Mr Chain still does not accept the agreement reached by the parties as I have just outlined. For the plaintiff, I would say, as I remarked in the course of counsel’s oral submissions, the plaintiff’s written opening submissions were made as if the discussion at the PTR hearing had not taken place.

13.  Lastly, Mr Chain’s submission is that even if the plaintiff had made the concession, the concession had been made wrongly as a matter of law and that ought to be set aside or disregarded.

14.  In my view, the rule set out or the principle set out in cases such as Kammy Town is a matter of case management. It does not impose any absolute bar on the court. The court still retains the discretion to determine whether the defendants should be allowed to run the challenge at the trial.

15.  Here, in light of the procedural history, the express agreement reached by both parties at the PTR hearing, and the overlapping factual disputes between the substantive claim and the authority issue, I would exercise my discretion to allow the defendants to run the challenge in this trial.

(Discussion re costs)

16.  This is my order on costs. I would award costs to the defendants on the authority issue, summarily assessed at $49,900, payable within 14 days from today.

17.  Given the procedural history, the plaintiff’s objection ought not to have been made in the first place. Hence the plaintiff should bear the costs of the first day of the trial which has, in my view, been wasted on a non-issue.

Mr Benjamin Chain and Mr Tony H H Chow, instructed by C L Chow & Macksion Chan, for the plaintiff in both actions

Mr Damian Wong and Ms Jenny Lok, instructed by Chan, Lau & Wai, for the defendants in both actions

HCA 1867/1999 and HCA 1676/2011
(Heard together)

[2022] HKCFI 2764

HCA 1867/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1867 OF 1999

_____________

_____________

AND

HCA 1676/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1676 OF 2011

_____________

_____________

(Heard Together)

____________________

DECISION

____________________

Introduction

1.  On the 5^th of July 2022, I dismissed the Plaintiff’s application made pursuant to O.39, r.2 of the Rules of High Court (“the Decision”) so that a letter of request shall be issued to the proper judicial authority in the mainland of the People’s Republic of China for the examination of Luo Bing Kun at a prison in the Guangdong province.

2.  That application had been determined by me on the papers and I will not repeat what I stated in my reasons.

3.  Essentially, I considered that there were two issues for me to determine: the first issue being whether or not cross examination was in fact covered by the Arrangement as defined in my decision when the Hong Kong SAR Court was the requesting party (as this goes to whether or not the Court was satisfied that the request would probably be entertained) and the second issue being whether or not the Court’s discretion should be exercised in favour of such a request.

4.  The Plaintiff now seeks leave to appeal.

5.  After the Plaintiff filed its application for leave to appeal, I gave directions to the parties for written submissions to be filed, so that the matter could be determined on the papers.

6.  I have considered the helpful and succinct written submissions filed on behalf of the Plaintiff by Mr Tony Chow and the Defendants’ submissions in reply by Mr Damian Wong.

7.  It is common ground that leave to appeal should be granted if it can be demonstrated that there are reasonable prospects of success meaning that these have to be more than “fanciful” without having to be “probable”: see SMSE v KL [2009] 4 HKLRD 125.

Analysis

8.  On the first issue, it seems to me that the Plaintiff is effectively re-running the arguments before me earlier.

9.  What is or is not allowed under the Arrangement depends on the construction of the said Arrangement. This has been explained in the decision of Au-Yeung J in Huang Yu Hui v Zheng Shizhi[2021] HKCFI 3362 at paragraphs 24 to 37 and also by me at paragraphs 23 to 27 of the Decision.

10.  I consider that it is not reasonably arguable that there is reason to suppose that a People’s Court of the Mainland would be receptive to the request made by the Plaintiff through the Hong Kong SAR Court.

11.  In any event, on the second issue, this involves an appeal against an exercise of discretion. I have already stated the matters which I considered to be relevant at paragraphs 29 to 44 of the Decision and I will therefore not repeat what I stated there.

12.  Ultimately the issue is whether the Court would be in a more advantageous position to assess Luo’s statement as a hearsay statement on the basis that he was unable, rather than unwilling to make himself available for cross-examination; or whether some form of examination in chief coupled with perhaps at most a diluted and not fully fledged cross-examination would be better.

13.  On the evidence before me I was not satisfied that it was the latter.

14.  Given that this was an exercise of discretion I do not consider that it is reasonably arguable that I exercised my discretion in such a way which would justify appellate intervention.

15.  Finally, it is suggested that I could also grant leave on the basis there are some reasons in the interest of justice why the proposed appeal should be heard, namely to allow the Court of Appeal to decide whether or not the Arrangement should be construed so as to exclude the Hong Kong SAR Court from requesting for cross examination.

16.  I would respectfully decline such an invitation.

17.  First, that would be a matter for the Court of Appeal if it were so minded to entertain the issue.

18.  Second, given that we are considering an Arrangement which is not governed by Hong Kong law but governed by Mainland Chinese law, it is not entirely clear how a determination by the appellate court would necessarily be binding in future cases. It is likely that in any given case, it would depend on the state of the evidence and in particular expert evidence before that Court. For the reasons I identified at paragraph 11 of the Decision I considered that the expert evidence in this case had much to be left to be desired.

Conclusion on leave to appeal

19.  For those reasons, I will dismiss the application for leave to appeal and order that the Defendants have the costs of the application to be assessed on a gross sum basis.

20.  Having had regard to the statements and bearing in mind this is a broad-brush exercise, I will order those costs to be in the sum of $60,000 to be paid within 28 days.

Other Matters

21.  I note from paragraph 15 of the skeleton of the Plaintiff that they are also seeking leave in so far as it is necessary for them to do so in order rely on the affirmation exhibiting the so-called expert opinion.

22.  I agree that reading paragraphs 10 and 48 of my Decision it is not entirely clear what I had decided. For the avoidance of doubt, as it is clear from the Decision, I have taken into consideration the opinion but did not think that it advanced the Plaintiff’s position further.  Formal leave was thus given although as the substantive application failed and the evidence did not take the matter further, I ordered costs of that application to also be borne by the Plaintiff as part of the overall costs.

Gross SumAssessment of the Summons

23.  Having considered the gross sum assessment schedules, the observations made by the Plaintiff, and bearing in mind this is a broad-brush exercise and that I am looking at this on a party and party basis, I consider that while counsel fees are very reasonable, the time spent by the solicitors is a perhaps on the high side.  All in all, I assess those costs at HK$340,000 to be paid within 28 days.

HCA 1867/1999 and HCA 1676/2011
(Heard together)

[2022] HKCFI 1957

HCA 1867/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1867 OF 1999

_____________

AND

HCA 1676/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1676 OF 2011

_____________

_____________

____________________

DECISION

____________________

INTRODUCTION

1.  This is the Plaintiff’s summons (“Summons”) for an application pursuant to Order 39, rule 2 of the Rules of the High Court, Cap. 4A dated 17^th of January 2022 so that:

“a letter of request shall issue to the proper judicial authority of the People’s Republic of China (“PRC”) for the examination of Luo Bing Kun (“Luo”), the Plaintiff’s factual witness on the Plaintiff’s behalf at Qingyuan prison and/or any designated places in Guangdong Province in the PRC and that the action be stayed until the return of the said letter of request and examination”.

2.  The Summons was directed to be determined on the papers by an Order of Au Yeung J.

3.  It is pleaded in the statement of claim that Luo is a director and shareholder of the Plaintiff (to the tune of 45%). In so far as it is relevant, the Plaintiff in these proceedings seeks a declaration that a property situate in Argyle Street Kowloon is held by the Defendant upon trust for the Plaintiff, and that the Defendant is to account to the Plaintiff for all sums received by the Defendant for the rental of the said property.

4.  As is apparent from the action number, these proceedings were commenced more than 10 years ago. The determination of the Summons will no doubt have an impact on the case management of these proceedings, as well as the mode and timing of the trial.

5.  Although many authorities were cited and fairly lengthy submissions were lodged, having considered them, it seems to me that the dispute between the parties fell within a fairly narrow compass.

THE ISSUES

        Issue 1: is cross-examination covered by the Arrangement when the HK Court is the requesting party

6.  The first issue is whether or not pursuant to the Arrangement on Mutual Taking of Evidence in Civil and Commercial Matters between the Courts of the Mainland and the Hong Kong Special Administrative Region (“Hong Kong SAR”), it is open to the Hong Kong SAR Courts through letters of request to request for certain witnesses to be examined and cross-examined (“the Arrangement”).  What is meant by being cross-examined this specific context will be considered below in more detail.

7.  This issue depends on the interpretation and understanding of the Arrangement.

8.  The Arrangement was recently the subject of judicial consideration by Au Yeung J in Huang Yu Hui v Zheng Shi Zi[2021] HKCFI 3362.

9.  The Plaintiff has also ‘adduced’ the opinion of Professor Zeng of the Sun Yat Sen University belatedly (on 11/4/2022).  There are some arguments over it, not least because it was adduced late.

10.  I have had regard to that evidence and will formally give leave to the Plaintiff to adduce the affirmation exhibiting it. However, for reasons which I explain below, I do not consider that it takes the Plaintiff’s case any further.

11.  I also note that^[1]:

(1)  The expert evidence is not in the form of sworn evidence^[2].

(2)  It contains no statement that the maker has read and accepted the code regarding the giving of expert evidence and his acceptance of the overriding duty owed to the court.

  Issue 2: should a letter of request be issued if it is to examine in chief only/chiefly

12.  The second issue arises in this way.

13.  Assuming that the Arrangement does not allow for cross-examination (either in the conventional sense as understood in Hong Kong SAR or only allows for a more limited or diluted form of cross-examination), should the Court nevertheless exercise its judicial discretion whether or not to grant the letter of request?

14.  I understand from the submissions filed on behalf of the Plaintiff that it accepts that the unavailability of cross-examination in the sense conventionally understood in common law systems would be one factor relevant^[3] (but on the Plaintiff’s case by no means a decisive factor) to the exercise of discretion.

DISCUSSION

          Issue 1: does the Arrangement allow for fully-fledged cross-examination

15.  The Arrangement (which I append its original version in the Chinese language to this judgment) provides in its recitals that in accordance with Article 95 of the Basic Law of the Hong Kong SAR of the People’s Republic of China and through consultation between the Supreme People’s Court and the Hong Kong SAR, the following arrangement is hereby made for the mutual taking of evidence and civil and commercial matters.

16.  There is no doubt that the present proceedings fall within civil and commercial matters and the Defendant has not contended otherwise.

17.  Article 6 is important and in my view, its wording and structure are fundamental to understanding what can and cannot be done. For reasons which are perfectly and immediately understandable, what can be requested in terms of the scope of assistance depends on whether the request is made by a People’s Court of the Mainland or a Hong Kong SAR Court:

“Article 6

The scope of assistance that may be requested by a People’s Court of the Mainland in requesting the taking of evidence by the Courts of the HKSAR under the Arrangement includes:

(1) examination of witnesses;

(2) obtaining of documents;

(3) inspection, photographing, preservation, custody or detention of any property;

(4) taking of samples of any property or carrying out of any experiments on any property;

(5) medical examination of any person.

The scope of assistance that may be requested by a court of the HKSAR in seeking the taking of evidence by the People’s Courts of the Mainland under the Arrangement includes:

(1) obtaining of statements from parties concerned and testimonies from witnesses;

(2) provision of documentary evidence, real evidence, audio-visual information and electronic data;

(3) conduct of site examination and authentication.”

(my emphasis)

18.  It can immediately be seen from the difference in wordings between the two subsections of Article 6 that whilst a People’s Court can request the Hong Kong SAR Courts for the “examination of witnesses” under the Arrangement, no such provision exists for the Hong Kong SAR Courts to make a request to the People’s Court.

19.  If examination of witnesses had been provided for under the Arrangement regardless of which party was the requester, there would have been no need for this dichotomy.

20.  As explained above, whether or not cross-examination of a witness in the Mainland Chinese Courts is within the scope of the Arrangement is a matter which had already been considered by Au Yeung J in Huang Yu Hui (supra).

21.  At paragraph 7(1) of that judgment, her Ladyship noted that the letter of request had been opposed on the basis that it would not be executed by the Mainland Chinese Courts as the examination of the defendant witness would fall outside the scope of the Arrangement.

22.  Her Ladyship analysed this issue as follows at paragraphs 24-37. I set out in full as I believe it comprehensively deals with some (indeed most) of the points made by the Plaintiff in this application at least in so far as Issue 1 is concerned:

“F. Issue 2: Whether cross-examination of a witness in the Mainland Chinese courts is within the scope of the Arrangement

24. The experts take different views as to whether it is permissible to conduct cross-examination of the Defendant under Articles 6 and 7 of the Arrangement beyond taking a statement from him (ie question 2).

25. Under Article 6 of the Arrangement, a distinction has to be made between who the requesting party is. If the requesting party is Hong Kong, only a statement can be taken from a witness; cross-examination is not provided for. If the requesting party is Mainland China, cross-examination is allowed. The difference in terminology, ie examination (訊問) and obtaining (“取得”) speaks for itself.

26. This interpretation of Article 6 is made even more apparent when compared to the parallel arrangement governing Mainland China and Macao, ie《關於内地與澳門特別行政區法院就民商事案件相互委托送達司法文書和調取證據的安排》(“Mainland-Macau Arrangement”), the amended version of which took effect on 1 March 2020.

(1) Article 18: “代為調取證據的範圍包括：代為詢問當事人、證人和鑑定人，代為進行鑑定和司法勘驗，調取其他與訴訟有關的證據”. (emphasis added)

(2) Article 20: “受委托方法院在執行委托取證據時，根據委托方法院的請求，可以允許委托方法院派司法人員出席。必要時，經受委托方允許，委托方法院的司法人員可以向證人、鑑定人等發問”. (emphasis added)

(3) Article 22: “受委托方法院可以根據委托方法院的請求，並經證人、鑑定人同意，協助安排其轄區的證人、鑑定人到對方轄區出庭作證。……本條規定的出庭作證人員，在澳門特別行政區還包括當事人”.

(4) Article 23 : “受委托方法院可以根據委托方法院的請求，並經證人、鑑定人同意，協助安排其轄區的證人、鑑定人通過視頻、音頻作證”.

27. The power to examine or cross-examine a witness in Mainland China exists under the Mainland-Macao Arrangement but not the Arrangement. According to the Defendant’s expert evidence, which I accept, Article 6 of the Arrangement provides for a unilateral way of taking evidence (“取得當事人的陳述及證人證言”) and not an interactive process (“互動的、動態的盤問/訊問程序”).

28. The Defendant has already prepared witness statements before he was jailed. What he applies for now is cross-examination, which does not fall within the scope of Article 6.

29. The Defendant’s expert, however, contends otherwise:

30.Firstly, he asserts that Article 6 of the Arrangement does not refer to “examination of witnesses” in the scope of assistance from the Mainland Chinese courts because of the different terminology used under Mainland law and Hong Kong law. He says that “statements from parties concerned” （當事人陳述）and “testimonies from witnesses” （證人證言）are one of 8 types of evidence under PRC law (A/217-8).

31. Without disrespect, the Arrangement is one negotiated between Mainland China and Hong Kong. The terminology in the Arrangement indicates that the draftsmen did not intend to introduce, wholesale, all types of evidence under Mainland law where Hong Kong is the requesting party.

32.Secondly, the Defendant’s expert says that the although there are no specific provisions for cross-examination under Mainland Chinese Court law, cross-examination could be achieved through a “confrontation” process (質證) under Mainland Chinese law. Under the confrontation process, the parties and their legal representatives can ask questions of a witness before evidence becomes admissible. The Defendant’s expert also cited the PRC Evidence Code (證據規定) which provides that the parties and their legal representatives can ask questions of witnesses upon approval of the Mainland Chinese courts and this is not disputed by the Plaintiff’s expert:

‘雖然中國大陸法律沒有關於盤問的具體規定，但是……在審判人員許可的情況下，當事人及其訴訟代理人是可以詢問證人的。

中國大陸法律中沒有關於盤問的具體規定，根據《民事訴訟法》和相關司法解釋法官當事人雙方及其律師可以對證人進行詢問，但是當事人雙方及其律師的詢問要在獲得法官的許可下，但是中國大陸法律沒有關於順序、回合、問題範圍等的詳細規定。

所以，雖然中國大陸法律中沒有盤問的具體規定，但是在質証過程中訴訟雙方是可以對証人做出詢問並且達成和香港普通法規定的盤問相同的效果的。’（A/218）

33. With respect, the Defendant’s expert himself made a distinction between cross-examination in general and examination in the confrontation process. It is plain that the confrontation process is for the limited purpose of establishing admissibility of evidence, whereas cross-examination under Hong Kong law is for much wider purposes of attacking credibility, establishing the truth of one’s case and destroying the truth of the opponent’s case.

34.Thirdly, the Defendant’s expert refers to the case of HKSAR v Hui Yat Sing (A/218-9) wherein the assistance of the Mainland Chinese courts was sought to cross-examine a witness. However, that was a criminal case not governed by the Arrangement. This has been confirmed by the opinion of the Plaintiff’s expert.

35.Fourthly, the Defendant’s expert suggests that even if the present request does not fall within the scope of assistance of Article 6, the Mainland Chinese courts may still, pursuant to Article 7, arrange for cross-examination, as this is not in breach of PRC law.

36. Mr Lai, counsel for the Defendant, submits that even if there is material difference between the confrontation process and cross-examination under Hong Kong law, it would not prevent the Court from issuing an LR. He relies on Delco Participation, §58, for the proposition that the important point is for there to be a fair and proper opportunity for the Plaintiff to cross-examine the Defendant:

‘Nor does it seem to me necessarily fatal to the application that there may be difference between the cross-examination which might be conducted in a Hong Kong court and the cross-examination which might be conducted in the Dutch court. What seems to me to be important is that Fang/HWH and CT/CTHK would have a fair and proper opportunity to cross-examine SVO on those issues in the Hong Kong actions on which they wish to cross-examine.”

37.  With respect, that is putting the cart before the horse. Article 6 governs the scope of assistance. Article 7 governs the manner of giving assistance. If Article 6 is not invoked, the procedural provision of Article 7 simply does not come into play. Article 7 cannot be invoked to expand the scope of assistance.’

23.  HuangYu Hui (supra) is of course strictly speaking not binding on me. I however respectfully agree with her Ladyship’s analysis and do not consider that the submissions now made by the Plaintiff or the points made in the ‘opinion’ of Professor Zeng take the matter any further.

24.  There is nothing of substance which suggests that the People’s Court would pursuant to the Arrangement agree for Mr Luo to be cross-examined in the sense conventionally understood in Hong Kong SAR.

25.  As Sir Donald Nicholls observed in Panayiotou v Sony Music Entertainment (UK) Ltd [1994] Ch 142 at p 150F, “the English court would not normally embark on such a course unless there was reason to suppose the foreign court would be receptive to the request”.

26.  The issue here is not whether cross-examination is generally available in the case of domestic litigation^[4] in the Mainland Chinese Courts, but whether there is a basis for thinking that the People’s Court would be receptive to a request for cross-examination from the Hong Kong SAR Court.

27.  Based on the Arrangement and on the evidence before me, I am not satisfied that there is sufficient reason to suppose that the People’s Court would be receptive to a request for cross-examination and therefore I find Issue 1 against the Plaintiff.

28.  I therefore need to consider Issue 2.

          Issue 2:is it necessary for the purposes of justice if no or restrictive form of cross-examination

29.  Even if Luo cannot be cross-examined under the Arrangement, should he be ‘examined’ in chief^[5] assuming that this is available under the Arrangement?

30.  The Plaintiff’s fallback submissions, as contained in his Notes of Submissions, put it this way: “the fact that (assuming it is correct but Ps are not conceding it) the witnesses might not be cross-examined by Ds goes to the Court’s discretion and it does not go to jurisdiction”.

31.  In so far as it goes, it seems to me that this submission is correct. The non-availability of fully-fledged cross-examination is one factor to consider and to be balanced against other ones in favour of making a letter of request.

32.  It is accepted by the Plaintiff that where “the witness’s evidence merits fully fledged cross-examination yet such cross-examination will not be available if the matter proceeds by way of a letter of request, then this will weigh against the application” (the Conflict of Laws in Hong Kong 3^rd ed, paragraph 11.060, citing Okura & Company [1977] HKLR 557, a decision of Commissioner Liu QC (as Liu J.A then was).

33.  It is important to bear in mind, in particular by reference to judicial comity, that the Hong Kong SAR Court is not (and should not be) comparing the overall merits of its own judicial processes and procedures with that of other jurisdictions.

34.  What the Hong Kong SAR Court, as the requesting Court, has to do is to ask itself whether the processes available in the requested Court (assuming it accedes to the letter of request) are such that it would facilitate a fair trial in Hong Kong SAR in any particular case or would otherwise be for the purposes of justice to do so.

35.  Coleman J in Delco Participation B.V. v HWH Holdings Ltd[2021] HKCFI 249 summarised the relevant applicable principles on issuing letter of request at paragraphs 21-23, 25-28 as follows:

“21.  Issuing a letter of request is part of the inherent jurisdiction of, and in the discretion of, the High Court: see Kwan Chui Kwok v Tao Wai Chun [2002] HKCA 304 at §12.

22.  The relevant considerations for the court have been considered in, for example, Tang Yi v Edmund de Rothschild Asset Management Hong Kong Ltd[2018] HKCFI 1050 at §§13-17.  Reference can also be made to Johnston and Harris ‘The Conflict of Laws in Hong Kong’ 3^rd Ed at §§11-056 to 11-061.

23.  The starting point remains that witnesses should attend in person in Hong Kong to give their evidence. Therefore, the onus lies on the applicant to demonstrate that the witness cannot reasonably be expected to come to Hong Kong.  The court will bring a healthy dose of scepticism to arguments that the parties themselves, or the parties’ own employees, family members or other associates will not come to Hong Kong at their behest, where there is no medical or other reason to justify the refusal to come.

25.  It also falls to the applicant to satisfy the court that the evidence to be obtained is necessary in the interests of justice.  The actual wording to be found in Order 39 rule 1 is “necessary for the purposes of justice”, which seems to me to identify one requirement of necessity, and not two separate requirements of (a) necessity and (b) in the interests of justice.  In so far as any submissions have seemed to suggest two separate requirements, I reject that point.  The necessity is tied to the purposes of justice.

26.  One important feature is to consider whether the witness can give substantial evidence material to an issue in the trial, requiring the court to identify the issue to which the evidence is said to relate, and then to consider whether the evidence sought is relevant to that issue.  That approach identifies that the relevant interests or purposes of justice are the interests of all the parties to the litigation (not just the applicant).  That triggers a consideration of potential prejudice as well as benefit in the letter of request procedure, but it should be obvious that one of the purposes of justice is to seek to reach the fair adjudication of the factual issue(s) in question.

27.  If the evidence is such that a full-fledged examination (including cross-examination) is appropriate, such as where it concerns disputed versions of what an individual has said, that would weigh against the making of an order.

28.  On the other hand, if on the examination proposed to be conducted in the foreign jurisdiction the rights of the parties would not be so different from those under Hong Kong law, the letter of request may be issued.  Further, including in the letter of request particular provisions designed to obtain improved facilities for the conduct of the cross-examination might, where relevant, be added to the order.” (my emphasis)

36.  Louis Chan J in Tang Yi v Edmond de Rothschild[2018] HKCFI 1050 put it this way at paragraph 16:

“16.  If the evidence is such that a full-fledged cross-examination is appropriate (e.g. it concerns disputed version of what an individual has said), that would weigh against the making of an order (The Conflict of Laws at §11.060).”

37.  As explained above, I accept that the unavailability of ‘fully-fledged’ cross-examination not to be fatal to the making of a letter of request (see International Justice Assistance by David McLean at p.79)

38.  I also accept that in the present case (and this is not seriously opposed by the Defendant) that the evidence of Luo would be important to the Plaintiff’s case. I also accept that Luo, given his current incarceration, would not be able to come to Hong Kong SAR to give evidence. This is of course not the fault of the Plaintiff but neither is it the fault of the Defendant.

39.  However, Luo has already filed a written witness statement.

40.  What I have to compare from the perspective of the trial is (1) the Court can look at and submissions will be made on the weight to be given to the statement of Luo and (2) Luo can be examined-in-chief or perhaps orally confirm or swear that the contents of this witness statements are true but cannot be cross-examined.

41.  Is it better from the perspective of the trial and the trial Judge if Luo can be examined-in-chief but in substance not be cross-examined, than if only his witness statement is produced?

42.  In the present circumstances, I am unable to see how the parties and indeed the Court would be in a more advantageous position to assess Luo’s evidence (if it is to be given in chief) as opposed to considering his statement as a hearsay statement on the basis that he was unable rather than unwilling to make himself available for cross-examination.

43.  In any event, in the post civil justice reforms era, it is quite unusual for the Court to allow substantial (if at all any) examination-in-chief. In the premises, from a point of view of a fair trial or looking at the purposes of justice, I do not think it has been demonstrated that an examination-in-chief without fully-fledged^[6] cross-examination would be necessary, let alone desirable.

44.  Therefore, it does not seem to me that the letter of request (if in reality sought for the purpose of examination-in-chief rather than for cross-examination as understood in our system) would either be in the interests of justice, let alone being necessary in the interest of justice.

OTHER MATTERS

45.  Given my conclusions above, it is unnecessary to consider another ground relied upon by the Defendant to resist this application, namely delay.

46.  While the Plaintiff has skilfully tried to explain away the delay, I am of the view that there was delay (at least from the date of the filing of the witness statement of Luo until the filing of the Summons).

47.  However, had I considered that the letter of request was otherwise necessary for the purposes of justice, I would have been prepared to accede the Summons, albeit the inexcusable delay would be a factor I would have considered relevant to the issue of costs.

DISPOSAL

48.  For these reasons, I would dismiss the Summons as well as the summons seeking retrospective leave to file evidence dated 12^th April 2022. It seems to me plain that costs follow the event, and the Plaintiff will bear the costs of this Summons to be taxed summarily on a gross sum basis. I will thus make the costs order on a nisi basis.  The parties have submitted gross sum assessment schedules.  If no application is made within 14 days to vary the costs order I will assess the costs on a gross sum basis.

49.  It remains for me to thank the parties’ respective counsel team for their able assistance.

Annexure

HCA 1676/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1676 OF 2011

_________________________

_________________________

______________________

DECISION ON COSTS

______________________

I.  BACKGROUND

1.  On 10 June 2013, I handed down my Decision in respect of the plaintiff’s application for summary judgment against the defendant (“Decision”). For convenience, I adopt the abbreviations in the Decision.

2.  In the Decision, I concluded there were features in this case that required resolution by trial, and the defendant had raised triable issues of fact that could not be resolved in a summary way. I was not persuaded that I should dismiss the summary judgment application (ie the Amended Summons) as there were also matters in the defendant’s case that needed to be canvassed.

3.  At the Hearing, Mr Chang, counsel for the defendant, offered not to dispose of the Property until the final determination of the present action. I believed it was an appropriate offer to preserve the status quo pending final determination at trial. It was also not onerous since I was given to understand the plaintiff had registered the writ of summons against the Property at the Land Registry.

4.  On such basis, I ordered that conditional upon the defendant not to sell, transfer, assign, charge, dispose of or otherwise deal with the Property or any part thereof until the final determination of the present action (“Condition”), leave to defend be granted to the defendant (“Order”). I also granted an order nisi that costs of the Amended Summons be costs in the cause (“Costs Order Nisi”).

II.  APPLICATION

5.  On 24 June 2013, the defendant took out a summons to seek the following reliefs (“Variation Summons”), and the hearing of the Variation Summons came before me on 11 October 2013 (“Variation Hearing”):

(a)   to vary the Costs Order Nisi to the extent that costs of the Amended Summons for the period from 15 November 2012 to 19 February 2013 be costs in the cause of the present action, and costs of and occasioned after 19 February 2013 be to the defendant to be summarily assessed or alternatively to be taxed if not agreed and to be paid forthwith (“VariationApplication”);

(b)   to clarify whether the Condition encompasses residing at or renting out the Property or any part thereof (“Clarification Application”).

6.  On 30 September 2013, the plaintiff filed Sousa’s 2^nd affidavit in support of the Variation Summons. Sousa claimed he had to travel to a remote part of Mainland China where the defendant was imprisoned in order to take instructions to oppose the Amended Summons, and this had been a costly exercise. He said the plaintiff also made a summary judgment application against the defendant’s wife in HCA1867/1999, which was dismissed by DHCJ Sakhrani on 16 April 2013 with costs to the defendant’s wife. The defendant suspected that the plaintiff’s summary judgment applications against him and his wife respectively in the present action and in HCA1867/1999 despite obvious triable issues in both actions were made “with a view of draining the Defendant and his wife out of their funds so as to undermine their ability to conduct” both sets of proceedings.

7.  I do not propose to deal with the matters set out in the above paragraph because (a) they did not feature in counsel’s written submissions and (b) Mr Chang informed me at the Variation Hearing that the defendant would not be relying on such grounds.

8.  Sousa’s 2^nd affidavit went on to say that after his affidavit for opposing the Amended Summons was filed on 14 February 2013, the defendant’s solicitors wrote to the plaintiff’s solicitors on 19 February 2013 (“Letter”) to make an open offer to dispose of the Summons for the sake of saving the court’s and the parties’ time and costs.

“As you must well know from our client’s affirmation in opposition ……, our client has (i) clearly raised triable issues entitling him to unconditional leave to defend; and (ii) your client has grave difficulties to prove its case, for reasons which are apparent form the Affirmation. As the hearing is coming up soon, we shall have to deliver brief to counsel soon.

In view of the above, we are instructed to make an open offer to your client that (i) the Application be withdrawn; (ii) our client shall have unconditional leave to defend; (ii) our client shall have leave to file his Defence within 14 days from the date of the consent order to be made; and (iv) costs of the Application be in the cause of the action. If your client agrees, kindly let us have your consent summons for our consideration. ……

We invite your client to seriously consider our proposal above, in an attempt to save the parties’ time and costs, and in the light of the underlying spirit of the Rules after the Implementation of the Civil Justice Reform. Please revert within 14 days from the date hereof. ……”

9.  The defendant claimed the offer in the Letter was reasonable, and the plaintiff should have accepted it and thereby saved the time and costs for the Hearing and the Variation Hearing. Sousa’s 2^nd affidavit claimed that at least the plaintiff should have seized the offer as a starting point to explore a way forward for avoiding unnecessary court hearing, but to the defendant’s disappointment the plaintiff did not reply to the Letter. As a result, the Hearing went ahead. The defendant claimed it was unreasonable for the plaintiff to ignore the offer made in the Letter, and asked for an order to be made in terms of the Variation Application.

III.  VARIATION APPLICATION: PLAINTIFF’S CASE

10.  Mr Chow, counsel to the plaintiff, submitted that even when unconditional leave to defend is given (ie a trial is ordered), the usual order as to costs is for costs to be in the cause. But here the court only granted conditional leave to defend. Since (a) the defendant in the first place asked for dismissal of the Amended Summons (which did not find favour with the court), (b) at the Hearing Mr Chang “offered for the first time to impose conditions for leave to defend”, and (c) the Letter proposed to dispose of the Summons on the basis of unconditional (and not conditional) leave to defend, there was no basis to vary the Costs Order Nisi.

11.  Mr Chow accepted that the Decision did not appear to be the strongest of cases where conditional leave to defend was given, but the court obviously came to the conscious decision that a condition (being the one orally offered by Mr Chang at the Hearing) was necessary and appropriate given that there were “matters in [the defendant’s] case that need to be canvassed”. He reminded that although there were questions arising from the plaintiff’s case that required resolution at trial, the court by the Decision did not exactly endorse all the defendant’s contentions. Since the defendant’s main arguments did not carry the day, there was no basis to vary the Costs Order Nisi. After all, the Costs Order Nisi was fair in that it still allowed the defendant to recover costs of the Amended Summons if he ultimately succeeds in his defence in the main action.

IV.  VARIATION APPLICATION: DEFENDNT’S CASE

12.  On the other hand, Mr Chang emphasised there were triable issues even on the plaintiff’s own evidence, and upon receipt of the defendant’s evidence in opposition on 14 February 2013 the plaintiff should have known there were further triable issues which should have persuaded them to accept the defendant’s sensible offer in the Letter for the application for summary judgment to be withdrawn with costs in the cause. Instead, the plaintiff caused two affirmations by Luo and Feng to be filed exhibiting voluminous documents which raised more questions than answers and which did not advance their claim any further.

13.  Mr Chang submitted that the Decision did not reflect a typical case where the court was prepared to grant conditional leave to defend on the basis that the defence put forward was shadowy and the court was almost prepared to give summary judgment. The condition was only imposed because of the voluntary offer made by Mr Chang at the Hearing which the court considered to be an “appropriate offer in preserving the status quo pending the full determination at trial”. Given all the triable issues in the case found by the court in the Decision, Mr Chang submitted there was never any prospect of the plaintiff succeeding in their application for summary judgment with or without the Condition.

14.  Mr Chang further reminded that the plaintiff only withdrew the Order 14 relief for payment of rental received by the defendant from the Property at the Hearing, and they also made an unmeritorious attempt to exclude the defendant’s evidence in opposition made through his handling solicitor despite knowing of the defendant’s present predicament of being incarcerated in Mainland China. Mr Chang submitted that the plaintiff had acted unreasonably in invoking the summary judgment procedure, and had the plaintiff not done so or at least accepted the offer in the Letter substantial headway would have been made in progressing the present action towards trial. Mr Chang argued that the appropriate course would be to vary the Costs Order Nisi to reflect disapproval of the plaintiff’s unreasonable conduct and to fairly remedy the defendant who in practical terms was the successful party in respect of the Amended Summons

V.  VARIATION COSTS ORDER: DISCUSSION

15.  There is no dispute that where a trial is ordered pursuant to a summary judgment application, the usual order is for costs to be in the cause. “However, where unconditional leave to defend is given, rather than dismissing the summons, in order that further orders for the proper conduct of the action may be given …… the court may make an order it could make on dismissing the summons in respect of costs. ……”[1] In the event of conditional leave to defend, the order for costs generally corresponds with the condition imposed, and its operation may depend upon whether or not the condition is complied with.[2]

16.  In Skink Ltd (in liquidation) v Comtowell Ltd,[3] Penlington JA held that “…… O 14 is only to be used in the plainest possible cases”.[4] Godfrey JA also said as follows:[5]

“I wish to express my approval of a valuable passage in the judge’s judgment in which he commented on the use, in the present case, of O 14. The passage is worth quoting in full. The judge said this:

I cannot leave this case without commenting, that, in my judgment, it is a pity that an application under O 14 was taken out because it would have been better, as it usually is, to pursue an early hearing date. The writ was issued almost 12 months ago, on 28 April 1993. For some reason it took five months for the statement of claim to be issued. The defence was dated the 1 December and there were consequential amendments. The O 14 summons was not taken out until 31 January 1994. Had the statement of claim been taken out earlier, bearing in mind that this is not a case where there can be a great deal of discovery as the documents speak for themselves, by mid 1994 the matter could have, perhaps, been ready for trial. The issue of fact is relatively simple and I do not think that this case could or should last more than a couple of days. At the O 14 hearing before me, the hearing lasted less than a day and we canvassed most of the authorities that would be required at trial. Order 14 applications seem to be a reflex action in Hong Kong, and a great deal of a civil judge's time is taken up deciding whether or not cases should go on for a hearing. In many of them, the parties would have been better off to go on with the matter and get a final judgment at trial.[Emphasis added.]

I entirely agree with these observations, and would add that a plaintiff who starts O 14 proceedings believing that the defendant has no defence to the action should be advised, as soon as a credible defence is shown, to give up trying to obtain summary judgment; to do otherwise is simply to waste time and money. In particular, it should be realized that this court will only very rarely be prepared to reverse a decision by a judge that the defendant ought to have unconditional leave to defend the action.”

17.  Mr Chow sought to downplay the per curiam observation by Godfrey JA which he said was made in the context of an appeal from a decision to grant unconditional leave to defend involving an element of fraud that precluded the jurisdiction of the court to hear the matter to begin with. Nevertheless, Mr Chow agreed that Godfrey JA’s observation must generally be correct.

18.  Whilst I agree there is no fixed formula for costs which are in the discretion of the court, Godfrey JA’s words of wisdom take on particular significance after the Civil Justice Reform with its emphasis on efficiency, economy and proportionality.[6] His guidance is also reflected in Order 62 rule 5 of the RHC which provides as follows:

“(1) The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account – (aa) the underlying objectives set out in Order 1A, rule 1;…… (e) the conduct of all the parties; …… (g) any admissible offer to settle made by a party, which is drawn to the Court’s attention.

(2)     For the purpose of paragraph 1(e), the conduct of the parties includes – (a) whether it is reasonable for a party to raise, pursue or contest a particular allegation or issue; (b)      the manner in which a party has pursued or defended his case or a particular allegation or issue  ……”

19.  In my view, the guidance in Order 62 rule 5(2)(a)-(b) of the RHC in the context of summary judgment applications are well reflected in the aforesaid observation by Godfrey JA.

20.  An example of the exercise of discretion on costs in light of the above considerations can be seen in Alviero Martini SPA v Bubble Retail Management Limited & anor.[7] In respect of the summary judgment application in that case, the plaintiff did not file any affidavit in reply upon expiry of the court-imposed deadline of 7 September 2009. The hearing for the application was scheduled on 24 September 2009. On 11 September 2009, the plaintiff’s solicitors proposed to the defendants’ solicitors to give the defendants unconditional leave to defend. DHCJ L Chan (as he then was) held as follows:

“25. I am of the view that 7 September was the time for the plaintiff to fairly and properly advise the defendants of its change of position. If the plaintiff was still considering what to do, it should at least have informed the defendants on a without prejudice save as to costs basis about its consideration and requested the defendants not to incur further costs. I am not sure if such notification made on or about 7 September could or could not have saved the further costs as the hearing date was approaching and counsel’s availability had to be secured. However, silence would surely not assist the plaintiff.

26. One further point raised by counsel for the plaintiff is that even if the matter should have proceeded to argument, the defendants would only have obtained at best unconditional leave to defend with costs to be in the cause. I think there is a mistaken assumption that the court would invariably order costs to be in the course if unconditional leave to defend is given. If the defendant’s affidavit in opposition should reveal an entitlement to unconditional leave to defend, but the plaintiff still pursues the application for summary judgment without good reason, then the plaintiff should be ordered to bear all costs incurred from the time when the defendants’ case has been properly revealed. Such costs would normally include the costs of the hearing.

27.    For the above reasons, I agree with the position taken by the defendants.  …… I order that the costs incurred by the defendants in the Order 14 Summons after 7 September 2009 including the costs for this paper argument be paid by the plaintiff to the defendants in any event.”

21.  Mr Chow sought to distinguish Alviero Martini SPA on the basis that the summary judgment application in that case was disposed of by consent giving the defendant unconditional leave to defend. Whilst I agree that each case must turn on its own facts, I do not see how the broad principle elicited from such case, ie that as soon as a plaintiff is sufficiently aware of a triable issue upon the affirmation in opposition he should fairly and properly arrest the summary judgment application and alter course to proceed to trial, can be objectionable. In my view, failure to adopt such approach in face of triable issues must be a relevant consideration in the overall exercise of the discretion on costs.

22.  Turning to the present case, it must be apparent from the Decision that the plaintiff’s own case/evidence on the source of the monies in the Company Account and/or Joint Account is wanting for the purpose of seeking summary judgment,[8] and the documentary evidence does not entirely sit together with the plaintiff’s case.[9] Therefore, even though some of the documentary evidence also does not appear to sit too well with the defendant’s case,[10] the defendant was able to demonstrate that the present case should go to trial.[11] As explained in the Decision, the 1998 and 2000 Minutes and the findings in the PRC Judgment only served to highlight the disputes of fact that could only be resolved at trial. On the question of the purchase of the Property, the documentary evidence also did not sit entirely comfortably with the plaintiff’s case, and these matters required resolution at trial.[12]

23.  Even though Mr Chow submitted that the court found certain triable issues not advanced by Mr Chang at the Hearing,[13] which were matters drawn from the documentary evidence that were either the plaintiff’s documents or were documents exhibited to the defendant’s evidence in opposition. In such circumstances, upon service of the defendant’s evidence in opposition, the plaintiff should be in a position to re-consider whether their summary judgment application should be pursued (particularly in light of the reminder by way of the Letter).

24.  Further, the fact that the court did not favour some of the defendant’s contentions made at the Hearing does not alter the fact that there were triable issues even on the plaintiff’s own case. This is quite different from Tai Da Trading (HK) Limited v Chan Wai Kuen (and Hoosenally & Neo, Solicitors (a firm)[14] in which on the particular facts of that case I held that, contrary to the defendant’s and the third party’s contentions, the plaintiff’s case was quite arguable, but the affidavit evidence revealed an arguable defence of waiver which if successful might raise an arguable defence. Hence in that case, the defendant’s and/or the third party’s “success” in having unconditional leave to defend was not due to inherent concerns about the plaintiff’s case but because of arguable contentions apparent from the affidavit evidence even though they had not been specifically put forward. It was on such basis that I ordered costs to be in the cause. The circumstances of Tai Da Trading (HK) Company Limited are a far cry from the present situation, and I am not persuaded that such case-specific ruling on costs is of assistance here.

25.  I agree with Mr Chang that the present case is no ordinary case of the court granting conditional leave to defend simply on the basis that the defence is shadowy. I have made clear that the Condition was imposed in the spirit that it was offered, ie it would preserve the status quo pending the final determination at trial, and also because it would not be onerous to the defendant (since after all the writ of summons had been registered against the Property at the Land Registry). The Condition was not imposed against the will of the defendant and certainly not because of any shadowy defence. The fact there are matters in the defendant’s case that need to be canvassed at trial does not necessarily make his defence shadowy for it merely mirrors the fact there are also triable issues in the plaintiff’s case that require resolution by trial.

26.  On such analysis, it is necessary to bring the Letter into consideration at this point. In my view, the plaintiff should have given the offer in the Letter serious consideration as it was made after service of the defendant’s evidence in opposition. In my view, the plaintiff should have agreed to the offer of unconditional leave to defend by 7 March 2013, ie the initial court-imposed deadline for filing the affidavit in reply to the Amended Summons pursuant to my order dated 24 January 2013. Such period would have allowed the plaintiff to have a fair opportunity to consider the defendant’s evidence in opposition and to revisit their own position in respect of the summary judgment application. By that time, the plaintiff should have realised there are triable issues even on their own case irrespective of the defendant’s case and/or any condition.

27.  In all the circumstances, I vary the Costs Order Nisi to the effect that costs of the Amended Summons (including all costs reserved, if any) up to and including 7 March 2013 shall be costs in the cause and thereafter such costs shall be paid by the plaintiff to the defendant to be taxed forthwith if not agreed. I do not consider it appropriate to deal with the costs payable to the defendant by way of summary assessment as there may be apportionment issues. There may also be some complexity in respect of communications with the defendant who is imprisoned in Mainland China, which may well benefit from the process of taxation.

VI.  CLARIFICATION APPLICATION

28.  Mr Chang submitted that the rationale for imposing the Condition was to preserve the status quo of the Property pending trial. He argued that so long as the Property would not be disposed of or otherwise encumbered, that should serve such purpose. The defendant was concerned that the words “otherwise deal with” imposed under the Condition, which if viewed cautiously would appear to prohibit him from even residing in or renting out the Property. Mr Chang submitted that would be unnecessarily wide, particularly when the plaintiff had withdrawn their claim for summary judgment for payment of the rental of the Property received by the defendant.[15] He argued that the defendant should thus be permitted to reside in or rent out the Property pending full determination of the present action. Mr Chang invited the court to make an order/direction to such effect.

29.  Mr Chow informed the court that save and except for the following observations the plaintiff would adopt a neutral stance in respect of the Clarification Application:

(a)    the Clarification Application was neither an appeal against the Order nor an application for amendment under the slip rule;

(b)   the terms of the Order were clear and unequivocal that the defendant was prohibited from residing in or renting out the Property.

30.  I do not agree with the observations made by Mr Chow. In my view, the clarification sought is consequential to the Condition imposed in the reasoned Decision. Very often, in a reasoned decision, the court focuses on matters argued before it, and there may well be consequential or uncontroversial matters which the court does not deal with in the reasoned decision. But that does not mean the formal order should not deal with such matters otherwise it would be a recipe for future applications that translate into time/costs inconsistent with the spirit of the underlying objectives in the RHC. But of course this avenue is confined to matters properly within the ambit of the proceedings seized by the court in coming to the reasoned decision.

31.  In my view, the Condition must be viewed in context, ie it was made to preserve the status quo pending trial and it was not onerous because the plaintiff has registered the writ of summons against the Property at the Land Registry. In referring to the registration at the Land Registry, plainly the court had in mind preservation of the Property against disposal, alienation and/or encumbrances. Bearing in mind that the court found there were triable issues that ought to go to trial when the court would adjudicate on the dispute over the ownership of the Property, the plaintiff ought not by virtue of the Condition gain a windfall protection akin to a prohibitory injunction just because the defendant made an offer to preserve the status quo and the plaintiff has not made any attempt to seek interim injunctive relief. Neither the defendant’s residence at the Property nor his letting of the Property (save for some kinds of registrable leases) affect the registration of the lis pendens at the Land Registry.

32.  I hereby direct that for the avoidance of doubt paragraph 1 of the Order does not prohibit the defendant from residing at and/or renting out the Property until the final determination of the trial or until further order.

VII.  COSTS

33.  The parties have agreed that costs should follow event I should find in favour of the defendant in respect of the Variation Application. Notwithstanding my invitation, Mr Chang did not address on the costs of Sousa’s 2^nd affidavit in view of the abandoned grounds therein for the Variation Application. I therefore order that:

(a)   there be no order as to costs in respect of a third of Sousa’s 2^nd affidavit filed on 30 September 2013;

(b)   subject to (a) above, the plaintiff do pay to the defendant costs of the Variation Summons insofar as it relates to the Variation Application to be taxed forthwith if not agreed.

34.  In respect of the Clarification Application, since it is an application for clarification of the Condition imposed by the court and the plaintiff adopted a fairly neutral stance, it is agreed and I order that costs of the Variation Summons insofar as it relates to the Clarification Application be costs in the cause.

HCA 1676/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1676 OF 2011

_________________________

BETWEEN

_________________________

_______________

D E C I S I O N

_______________

I.BACKGROUND

1.  The plaintiff is a Hong Kong company incorporated on 2 April 1992.  The nominal and issued share capital was 10,000 shares and 2 shares respectively.  The defendant and Luo Bing Kun (“Luo”), who were the first directors, each held 1 share.

2.  Chen Zhuhui (“Chen”) was appointed as director with effect from 1 January 1994.  On 11 August 1998, 9,998 shares were allotted to Luo (4,499 shares), the defendant (999 shares) and Chen (4,500 shares).  On 4 September 2000, Fong Biao Wen (“Fong”) was appointed as director.  On 19 September 2000, Chen’s 4,500 shares were transferred to Fong.  With effect from 18 April 2002, Chen ceased to be a director and the defendant was removed as a director.

3.  At present, the plaintiff’s directors are Luo and Fong, and the shareholders are Luo, Fong and the defendant.  The defendant still holds 10% of the shareholding.

4.  Prior to his conviction pursuant to “刑事判決書” by the People’s Court of Foshan City, Nanhai District, Guangdong Province dated 3 April 2004 (“PRC Judgment”), the defendant had been in custody since 20 September 2001.  By the PRC Judgment, he was sentenced to inter alia a term of imprisonment for 20 years. Since the defendant’s prior detention would be counted as part of his sentence, in practical terms his prison sentence commenced from 20 September 2001 until 25 September 2021.  He is now serving his prison sentence in Gaoming, Foshan City, Guangdong Province, Mainland China.

5.  The present action concerns a property known as Flat D on 7^th Floor and Car Park No 9 on Ground Floor (of Block 3) Mandarin Court, Nos 142&144 Argyle Street, Kowloon (“Property”).  The defendant was/is the registered owner of the Property.

6.  The main issue in the present action is whether the Property was/is beneficially owned by the plaintiff or the defendant, which issue essentially turns on the question of who funded the purchase of the Property.

II. UNDISPUTED FACTS

(a) Purchase of the Property

7.  Cheng Chun Wing and Lee Fong Fong (“Vendors”) as vendors and the defendant as purchaser entered into a provisional agreement for sale and purchase dated 30 July 1992 (“PASP”) and a formal agreement for sale and purchase dated 6 August 1992 (“FASP”) in respect of the Property.

8.  Under the PASP and the FASP, the purchase price of the Property was HK$4,999,000.00 (“Price”) to be paid as follows:

(a) initial deposit in the sum of HK$100,000.00 (“Initial Deposit”) upon the signing of the PASP;

(b) further deposit in the sum of HK$399,900.00 (“Further Deposit”) upon the signing of the FASP;

(c) balance of the Price in the sum of HK$4,499,100.00 (“Balance”) upon completion.

9.  Under the PASP and the FASP, the agent’s fee or commission payable by the purchaser to Fu Ching Realty Company was HK$50,000.00 (“Commission”).

10.  By an Assignment dated 14 September 1992 and registered with the Land Registry on 26 September 1992, the Vendors formally assigned the Property to the defendant who became and still remains as the registered owner of the Property.

11.  For the relevant conveyancing transaction, the solicitors for the Vendors were Messrs Paul Kwong & Co (“PKC”), and the solicitors for the purchaser were Messrs Phyllis KY Kwong & Co (“PKYKC”).

12.  The stamp duty payable for the FASP (“Stamp Duty”) and the costs and disbursements of PKYKC (“Legal Fees”) were HK$137,472.00 and HK$31,260.00 respectively.

13.  Thus, the sums payable in relation to the purchase of the Property were as follows:

Date of Payment	Payment Nature	Amount (HK$)
30 July 1992	Initial Deposit	100,000.00
5 August 1992	Further Deposit	399,900.00
5 August 1992	Stamp Duty	137,472.00
8 September 1992	Balance	4,499,100.00
9 September 1992	Commission	50,000.00
9 September 1992	Legal Fees	31,260.00
	Total:	5,217,732.00

(b) Initial Deposit

14.  The PASP stated that the Initial Deposit was paid by cheque no 438560 drawn on the Bank of East Asia Limited (“BEA”).  The FASP confirmed that the Initial Deposit had been paid to the Vendors directly before the signing of the FASP.

(c) Further Deposit

15.  The Further Deposit was paid to PKC by cheque no 274231 dated 5 August 1992 drawn on the bank account of the defendant and Luo with the BEA (“Joint Account”).

(d) Stamp Duty

16.  The Stamp Duty was paid by cheque no 274233 in the sum of HK$137,472.00 drawn on the BEA.  By a receipt dated 5 August 1992, PKYKC acknowledged payment of the Stamp Duty (by such cheque) from the defendant and Luo.  Mr Chow, counsel of the plaintiff, accepted that cheque no 274233 was drawn on the Joint Account.

(e) Balance

17.  The completion statement for the Property stated that the sum payable upon completion was HK$4,530,360.00 being (a) the Legal Fees and (b) the Price less the Initial and Further Deposits (ie the Balance).

18.  The plaintiff’s voucher record dated 8 September 1992 (“Voucher Record”) stated that (a) cheque no 436902 was for “purchase of office” in the sum of HK$4,499,100.00 and (b) cheque no 436903 was for legal fees in the sum of HK$31,260.00.  Handwritten notations of (i) “翠華” (ie Mandarin Court where the Property was situated as seen in the PASP) and (ii) payment from the plaintiff’s bank account with the BEA (“Company Account”) to PKYKC for the purchase of “Mandarin Court” property (collectively, “Voucher Notations”) were found on the copy Voucher Record exhibited to Fong’s affirmation filed on 14 November 2012.  It is unclear when the Voucher Notations were made given the “received” stamp dated 4 September 1998 on the copy Voucher Record.

19.  The plaintiff issued cheque no 436902 dated 8 September 1992 in the sum of HK$4,499,120.00 in favour of “鄺家賢律師 or bearer” drawn on the Company Account.  The relevant bank statement dated 30 September 1992 (“Bank Statement”) showed that such cheque was cleared by cash withdrawal on 8 September 1992.

20.  The Balance was paid to PKYKC by cashier order no 638687 in the sum of HK$4,499,100.00 dated 9 September 1992.  PKYKC issued a receipt dated 9 September 1992 that acknowledged inter alia such fact.

(f) Legal Fees

21.  PKYKC’s bill no B0434 dated 9 September 1991 addressed to the defendant in relation to the Property was settled by cheque no 436903 dated 8 September 1992 drawn on the Company Account (as evidenced by PKYKC’s receipt dated 9 September 1992 in paragraph 20 above and the copy Voucher Record and the Bank Statement referred to in paragraphs 18‑19 above).

(g) Commission

22.  The plaintiff claimed they paid HK$50,000.00 to Fu Ching Realty Company on 9 September 1992 in settlement of the Commission, but this is denied by the defendant.

III. PLAINTIFF’S CLAIMAND ORDER 14 APPLICATION

23.  The plaintiff claimed the Price, Stamp Duty, Commission and Legal Fees were paid by them and/or by the defendant and Luo on their behalf, so the plaintiff were/are the beneficial owner (and entitled to recover possession) of the Property by operation of the principle of resulting trust.

24.  The plaintiff further claimed that after the defendant was removed as director they were unable to contact him to execute documents for transfer of legal title of the Property back to them.  So on 3 October 2011, they commenced the present action against the defendant for inter alia the following reliefs:

(a) a declaration that the Property was held by the defendant upon trust for the plaintiff fully or alternatively in such shares as the court shall determine;

(b) an injunction to restrain the defendant from transferring, disposing of, charging or otherwise howsoever dealing with the Property or any part thereof;

(c) the defendant do pay the plaintiff all sums received by the defendant for the rental of the Property;

(d) an order directing the defendant to transfer the legal ownership of the Property to the plaintiff;

(e) an order that the defendant do by way of assignment convey the Property to the plaintiff free from encumbrances;

(f) so far as is necessary, an order that the Registrar of the High Court do execute such conveyance under section 25A of the High Court Ordinance Cap 4 and/or Order 45 rule 8 of the Rules of the High Court (“RHC”);

(g) an order for delivery of vacant possession of the Property to the plaintiff.

25.  On 15 November 2012, the plaintiff issued a summons for summary judgment (“Summons”) to seek the reliefs set out in (a), (b), (f) and (g) of the above paragraph and also the following reliefs:

(a) an order that the defendant do execute all documents and do all things necessary for the transfer of the Property to the plaintiff;

(b) payment of all sums received by the defendant for the rental of the Property or such sum as the court sees fit.

26.  At the hearing on 9 May 2013 before me (“Hearing”), I granted leave for the plaintiff to amend the Summons so that it referred to the Amended Statement of Claim rather than to the Statement of Claim (“Amended Summons”). Mr Chang, counsel for the defendant, confirmed he would not take issue over the absence of further supporting affirmation by the plaintiff to verify the claim pleaded in the Amended Statement of Claim.

27.  At the Hearing, I also granted leave for the plaintiff to withdraw the relief sought in Amended Summons set out in paragraph 25(b) above.

28.  The plaintiff filed two affirmations of Fong on 14 November 2012 and 20 March 2013 respectively and the affirmation of Luo on 18 March 2013 in support of the Amended Summons.  The defendant filed the affidavit of his solicitor Sousa Richard Alvaro (“Sousa”) on 14 February 2013 in opposition.

IV. LEGAL PRINCIPLES ON SUMMARY JUDGMENT

29.  Mr Chow and Mr Chang had no essential quarrel over the legal principles on applications for summary judgment.  A plaintiff may invoke the procedure under Order 14 of the RHC where there is no valid defence to his claim or otherwise a triable issue.  The rationale is set out in Hong KongCivil Procedure 2013 Vol 1, para 14/4/1 at p 247:

“ …… The underlying policy of the summary procedure is to prevent a defendant from delaying the plaintiff from obtaining judgment in case in which the defendant clearly has no defence to the plaintiff's claim: Man Earn Ltd v Wing Ting Fong[1996] 1 HKC 225. Order 14 proceedings for summary judgment when there is no defence to a claim are an important feature of the legal process. It enables plaintiffs in cases where there is no defence to obtain expeditious summary judgment to avoid unnecessary delay. When applied for, it is for the defendant to show that there is a triable issue or an arguable defence if he is to be allowed his day in court. To deny him his day in court, if he shows a triable issue or an arguable defence, is indeed a fearful injustice. On the other hand, if he has no defence and he obtains leave to defence, equally, there is injustice to the plaintiff” (per Mortimer JA in Manciple Ltd v Chan On Man [1995] 3 HKC 459 at 466). The machinery of O.14 works on the basis that if the plaintiff's application is properly constituted, he is prima facie entitled to judgment unless the defendant shows cause to the contrary or the application is dismissed.”

30.  In Ng Shou Chun v Hung Chun San [1994] 1 HKC 155, Godfrey J noted it was not appropriate to embark on a mini‑trial of the action on affidavit evidence.  The court should ask itself the question whether what the defendant says is credible or believable.  If so, he must have leave to defend; if not, the plaintiff is entitled to summary judgment.

31.  Hong KongCivil Procedure 2013 Vol 1, para 14/4/9 at pp 251 goes on to say that:

“ “In considering whether there are triable issues the Court will, of course, not take the alleged defence on its face value but test it against the evidence disclosed in the affidavit including matters such as contemporaneous documents, whether the alleged defence is inconsistent with the defence previously put forward or whether the defence is only recently raised despite opportunity being given to the defendant to respond earlier. The Court will also consider the inherent probability of the defence. But what the Court should not do is to conduct a mini‑trial on complicated factual issues.” per Cheung J A in Paul Y Management Ltd v Eternal Unity Development Ltd [2008] HKEC 1359 at para 19.

                           ……

 On the other hand, a complete defence need not be shown. The defence set up need only show that there is a triable issue or question or that for other reason there ought to be a trial; and leave to defend ought to be given unless there is clearly no defence in law such as could have been raised on the former demurrer to the plea and no possibility of a real defence on the question of fact (Jacobs v Booth’s Distillery Co (1901) 85 L T 262, HL; Runnacles v Mesquita (1876) 1 QBD 416). Where there are unexplained features of both the claim and the defence which are disturbing because they bear the appearance of falsity and disreputable business dealings and questionable conduct, the court should not make tentative assessments of the respective chances of success of the parties or the relative strengths of their good and bad faith, and should not on such an examination grant the defendant conditional leave to defend, but should give unconditional leave to defend (Extraktionstechnik Gesellschaft für Anlagenbau Gmbh v Oskar (1984) 128 S J 417; (1984) L S Gaz 1362, CA applied in Billion Silver Development Ltd v All Wide Investments Ltd [2000] 2 HKC 262).”

V. LEGAL PRINCIPLES ON RESULTING TRUST

32.  Mr Chow submitted it is trite that where a person contributes to the purchase price of property in name of another, the law will presume that the property is held by the person to whom it is held under a resulting trust in favour of the person who provided the money for its purchase proportional to his contribution (see Lee Tso Fong v Kwok Wai Sun [2008] 4 HKLRD 270, 274 and Snell’s Equity (32^nd ed) para 25‑004 at pp 753‑754).

33.  Mr Chang submitted that the burden rests on the person seeking to show that the beneficial ownership is different from the legal ownership; in other words, it is for the non‑owner to show that he has any interest at all, and if so what that interest is (see Stack v Dowden [2007] 2 AC 432, 439 and 454).

34.  Neither counsel disputes each other’s contention as set out in paragraphs 32‑33 above.

VI. MISCELLANEOUS ISSUES

35.  The Statement of Claim was served on 24 August 2012.  Prior to the Summons issued on 15 November 2012, the defendant had not filed and served his Defence or applied for extension of time to do so.  At the initial hearing of the Summons on 28 November 2012, DHCJ Seagroatt ordered the defendant to file and serve his Defence and Counterclaim, if any, within 28 days thereof, but the defendant still failed to do so.  Mr Chow submitted that such conduct by the defendant was reminiscent of one who had no defence.

36.  I note that even though the defendant was imprisoned in Mainland China since 2001, he promptly instructed solicitors to file acknowledgment of service on 13 September 2012.  It is true he did not file a Defence thereafter, but such fact was overtaken by the plaintiff’s issuance of the Summons on 15 November 2012.  In usual circumstances, a defendant need not file any Defence pending disposal of a summary judgment application.  But at the initial hearing of the Summons, DHCJ  Seagroatt adjourned such Summons and gave directions (a) for the defendant to file and serve his Defence and Counterclaim, if any, within 28 days, (b) for the plaintiff to file and serve their Reply and Defence to Counterclaim, if any, within 14 days thereafter, and (c) for the parties to serve their respective List of Documents within 28 days thereafter.

37.  Thereafter, the defendant applied by summons dated 27 December 2012 for extension of time to file his pleading due to his hospitalisation during prison custody (“Time Summons”).  According to Master Ho’s notes of the hearing of the Time Summons on 4 January 2013, he granted general extension of time for the defendant to file his pleading pending the determination of such application.  At the substantive hearing of the Time Summons before me on 24 January 2013, I extended time generally for the defendant to file/serve his Defence until further directions to be made upon the disposal of the Summons or until further order, whichever would be earlier.

38.  I am not persuaded that the above procedural chronology suggests feet dragging by the defendant from which one necessarily infers absence of any viable defence.  Ultimately, the question remains whether the affidavit in opposition raises a credible or believable defence, or a triable issue.

39.  Mr Chow next submitted that Sousa’s affidavit is defective as an affidavit in opposition since it was not sworn by the person with the most direct knowledge of the matters deposed (see Hong Kong Civil Procedure 2013 Vol 1 para 41/5/4 at p 816).  Mr Chow complained that no draft Defence was annexed to Sousa’s affidavit, and it was unclear (and the court would be unable to verify) how much of its contents were actually based on the defendant’s instructions.  Mr Chow suggested that the admissibility of Sousa’s affidavit was questionable, and in any event no weight should be placed on the matters stated therein.

40.  There is no dispute that Sousa had no personal knowledge of the matters deposed in his affidavit.  But whilst it may be useful for a draft Defence to be prepared and exhibited to the affidavit in opposition to inform the other party and the court of the essence of the defence contentions that the defendant intends to put forward, I do not consider it to be a necessary prerequisite without which a defendant cannot mount any successful resistance against an Order 14 application.  It is sufficient if a credible or believable defence or a triable issue is raised in the affidavit in opposition.

41.  Sousa in his affidavit frankly acknowledged that in usual circumstances the affidavit in opposition would be made by the defendant, but he claimed that the defendant could not do so here because of his imprisonment.  Sousa stated that he recently visited the defendant in prison, and took instructions from him to make the affidavit in opposition.

42.  I accept that preferably the affidavit in opposition should be prepared by the person with the most direct knowledge.  But it must not be forgotten that the defendant is imprisoned in Mainland China, and Sousa has sworn he had visited the defendant to obtain instructions and his affidavit is “based on [the defendant’s] instructions”.  In such circumstances, I do not agree that Sousa’s affidavit should be ignored either as inadmissible evidence or evidence upon which the court should place no weight at all.  For the purpose of the Amended Summons, the proper approach is for the court to take note that the affidavit in opposition was not made by the defendant personally, but at the same time bear in mind the practical reality and context in which such affidavit was made.

VII. ISSUES

43.  It is the defendant’s case that he wholly funded the purchase of the Property with his own monies which he placed in the Company Account and/or the Joint Account, and that he set up the plaintiff to facilitate his business partnership with Luo.

44.  The plaintiff agreed that the Property was purchased with funds paid out from the Company Account and/or the Joint Account, but claimed that the funds in such bank accounts came from a subordinate entity of the Nanhai Government, Mainland China (“Nanhai Entity”) for investment purpose, and that the plaintiff company was a government‑owned investment vehicle beneficially owned by the Nanhai Entity.

45.  The Amended Summons raises the following issues:

(a) the purpose and nature of the plaintiff company;

(b) the source of funds in the Company Account and/or the Joint Account;

(c) the source of funds for various payments in connection with the purchase of the Property in the name of the defendant.

If the defendant is able to raise a triable issue or credible/believable defence in respect of the above issues, then he should be entitled to leave to defend the plaintiff’s claim.

46.  The defendant also raises subsidiary issues, eg the apparent delay by the plaintiff since the acquisition of the Property in making the present claim, and the plaintiff’s failure to explain their alleged inability to contact the defendant when he was in fact imprisoned in Nanhai, Mainland China since April 2001.

VIII.  PLAINTIFF AND SOURCE OF FUNDS

(a) Defendant’s case

47.  The defendant claimed that in/about 1986 he left military services in Mainland China to work at “廣州技術開發區”.  In 1989, he resigned and began his own business in property development in Guangzhou under the name of Da Ming Company (presumably “廣州大明房地產開發有限公司” as referred to in the PRC Judgment, “DM Guangzhou”).  In 1990, his business moved into Macau, and he set up a company known as Lai Meng Investment Limited (presumably “澳門麗明投資置業有限公司” as referred to in the PRC Judgment) which later changed its name to Da Ming (Holdings) Limited (presumably “澳門大明(集團)有限公司” as referred to in the PRC Judgment, “DM Macau”).  The other shareholders of DM Macau were Luo, Chen and a couple who were Macanese residents in order to satisfy the then requirement for establishing a company in Macau, ie having at least one Macanese resident as named shareholder.

48.  In April 1992, the defendant incorporated the plaintiff to act as sales agent in Hong Kong for a property development project in Guangzhou named Pearl Garden (presumably “明珠花園項目” as referred to in the PRC Judgment, “PG Project”).  Luo joined the PG Project as the defendant’s business partner, and they each held 1 share of the plaintiff.  The defendant who came from Mainland China viewed the plaintiff as a shell company (or, as Mr Chang put it, his alter ego) to facilitate his business partnership with Luo.

49.  By the time of purchase of the Property, Luo and the defendant had already opened the Joint Account.  The defendant said that even though he could not exactly recall, the Company Account was probably opened after the opening the Joint Account.

50.  Not long after the plaintiff was incorporated, the defendant and Luo discussed about each of them purchasing a property in Hong Kong for residential purpose.  The defendant decided to purchase the Property and entered into the PASP using his funds which he placed in either the Joint Account or the Company Account.

51.  At that time, Luo had not yet purchased any property.  The defendant could not remember the exact reason for this, but it could have been because Luo was unable to provide sufficient funds (since most of his monies were tied up in business ventures in Macau).  Luo eventually transferred funds to Hong Kong (probably into the Company Account and/or the Joint Account) at/about the end of 1992 or the early part of 1993.  As a result, in/about February 1993 Luo used funds from the Company Account and/or the Joint Account to purchase a property known as Flat B, 7^th floor, Block 4, Balwin Court, Nos 154‑156 Argyle Street, Kowloon (“Luo’s Property”).

52.  The defendant and Luo promoted the PG Project.  At the beginning of 1994, Chen (who was not involved in the plaintiff and/or the PG Project) was appointed as a director of the plaintiff to facilitate his coming to Hong Kong.

53.  As a result of problems arising in/about 1997 or early 1998, there was a meeting on 23 March 1998 at the Guangzhou offices of DM Guangzhou attended by the defendant, Luo and Chen to clear up the financial position between the defendant and Luo.  At the meeting, it was clarified that Luo’s Property actually belonged to Luo even though it was conveyed into the name of the plaintiff’s staff Yu Cho Sing.  It also appeared that Luo had allowed Chen to use the address of Luo’s Property as his address in the Companies Registry records.

54.  Shortly after such meeting, the defendant was detained in Mainland China.  He was subsequently released in/about December 1999.  Since the matters amongst the defendant, Luo and Chen had not been cleared up, they had another meeting on/about 30 March 2000 to discuss matters in relation to DM Guangzhou and DM Macau.  The minutes of such meeting are known as the “2000 Minutes” below.  Such minutes referred to “香港大明公司” which the defendant claimed referred to the plaintiff since “… the Chinese name of the Plaintiff as appearing in the Companies Registry also contain the characters “大明”.”

55.  It appeared from the 2000 Minutes that (a) such minutes were initialled/signed at various places by the defendant, Luo and Chen, (b) some of the projects named therein involved substantial sums of money paid by the defendant in his personal capacity which clearly showed he had funds to pay for the purchase of the Property, and (c) the sales agency relating to the PG Project had ceased and there was no further need for the plaintiff’s continued existence.

56.  Thereafter, the defendant was again arrested in Mainland China.  On/about 20 September 2001, he was sentenced to imprisonment and he remained in prison since.  The defendant claimed he was sentenced on 20 September 2001 and not 3 April 2004.

57.  The defendant was removed as a director of the plaintiff in April 2002 during his imprisonment.  The 9,998 shares purportedly allotted in August 1998 had the effect of diluting his shareholding in the plaintiff, but he (who was then imprisoned) had not been given notice of and did not attend the meeting for allotting such shares.  Further, when Fong received 4,500 shares of the plaintiff on/around 2 April 2001, the defendant was still a director of the plaintiff but he could not remember ever having received any notice of meeting or attending any such meeting regarding the purported transfer of the shares.

58.  The defendant claimed he funded the entire purchase of the Property.  He denied that the plaintiff was a company set up in Hong Kong with funds of the Nanhai Government or that he was at all material times a cadre or official working for the Nanhai Government.  All the companies that the defendant had set up in Mainland China, Macau and Hong Kong (including the plaintiff) had nothing to do with the Nanhai Government or any other government agency or organisation in Mainland China.

(b) Plaintiff’s case

59.  According to Luo, he and the defendant were cadres or officials of the Nanhai Entity, which funded/established and hence beneficially owned various government‑owned investment vehicles/ companies in Macau, Guangdong and Hong Kong.  For ease of operation, the Nanhai Entity would send cadres or officials to manage such government‑owned enterprises, and authorise them to hold shares/assets of such enterprises on their behalf.

60.  The plaintiff was one such overseas government‑owned investment enterprise, and its main business was to invest in Hong Kong properties.  The defendant and Luo were not business partners, but were assigned by the Nanhai Entity to be shareholders/directors to take charge of and manage the plaintiff.  Neither of them made any contribution to the capital for the formation of the plaintiff.  Indeed, they could not afford to do so because each of them only earned a few hundred RMB a month as cadre or official.  The plaintiff was beneficially owned by the Nanhai Entity which was the source of their capital and funds.  Such funds were made available to the plaintiff by the Nanhai Entity by deposit into the Company Account and/or the Joint Account for the defendant and Luo to make investments on their behalf. Luo confirmed all the capital and/or funds in the plaintiff were injected by the Nanhai Entity (including the funds used to acquire the Property).

61.  In the defendant’s record of interview (“訊問筆錄”) during the criminal investigation by Nanhai City Public Security Bureau dated 23 April 1998 (“Interview Record”), the defendant stated as follows:

“(4) 香港亞皆老街142號7樓B(或C)，是一九九二年買的，當時付了四百九十萬元港幣，是[the defendant]名下的產業，但這錢是用[DM Macau]的錢買的，只是借用[the defendant]的名義，這已列入公司資產。”

Luo said (a) the property referred to in the Interview Record should be the Property because the defendant only held the Property (and not any property at Flat B or C on 7^th Floor, No 142 Argyle Street) in his name, and (b) the source of funds as referred to in the Interview Record should be from the Nanhai Entity through the plaintiff.  The plaintiff claimed that the above discrepancies were due to the defendant’s mistaken recollection, but the main thrust of such record was supportive of the plaintiff’s position that the defendant never paid for the Property with his own monies.

62.  Luo claimed that on 1 January 1994 the Nanhai Entity sent another cadre or official Chen to be a director of the plaintiff.  As explained above, 9,998 shares were allotted in November 1998, and thereafter Luo, the defendant and Chen respectively held 4,500, 4,500 and 1,000 shares in the plaintiff.

63.  Luo said that in/about 2000 the defendant and Chen were investigated for fraud against various companies set up with funds by the Nanhai Government.  It was discovered that the defendant had misused the powers granted to him by the Nanhai Entity to commit fraud with respect to their assets.

64.  As a result, on 4 September 2000 Chen resigned and Fong was appointed as director of the plaintiff.  The Nanhai Government arranged for their cadre or official Fong to replace Chen and to assist Luo to manage the plaintiff.  The Nanhai Government also caused Chen to transfer his entire shareholding in the plaintiff (ie 4,500 shares) to Fong on/about 19 September 2000.  On/about 18 April 2002, the defendant was removed as a director.  Luo said that since he and Fong constituted the majority shareholders of the plaintiff, the Nanhai Government did not make further arrangements in relation to the defendant’s shareholding in the plaintiff.

65.  On 23 July 2003, the People's Procuratorate of Foshan City Nanhai District prosecuted inter alia the defendant for fraud and other crimes.  On 3 April 2004, they were convicted by the People’s Court of Foshan City, Nanhai District, Guangdong Province.

66.  Luo considered the minutes of the meeting on 23 March 1998 (“1998 Minutes”) and the 2000 Minutes relied on by the defendant, which were minutes of shareholders’ meetings of DM Macau and not of the plaintiff (as shown by the cover letter to 2000 Minutes), to be irrelevant.  He claimed that DM Macau was another overseas investment company similar to the plaintiff that was funded by the Nanhai Entity.

67.  Luo recalled that the meeting recorded in the 2000 Minutes was convened by the defendant who was then on bail during the investigation by the Public Security Bureau against him for fraud.  When Luo arrived at the meeting, Chen was already there.  The defendant distributed the pre‑written 2000 Minutes to Luo and Chen and asked them to countersign such minutes.  But upon reading the 2000 Minutes, Luo realised the defendant intended to transfer and deal with assets of the Nanhai Entity without their authorisation.  Luo thought such acts were in excess of their authority and would cast suspicion upon them of becoming involved in the defendant’s fraudulent conduct that was under investigation.  But whilst Luo did not wish to indirectly support the defendant’s unclear motive, he also wished to avoid direct confrontation, so he signed the 2000 Minutes at the defendant’s direction but deliberately added the following at the last page next to his signature: “以上待清算核實後進一步確認”.  Luo said the contents of the 2000 Minutes had not been verified before or after the meeting.

(c)  Discussion

68.  The plaintiff and the defendant adopt diametrically opposite stance on the question of the source of funds in respect of the monies in the Company Account and/or Joint Account.  The plaintiff claimed that not only did the monies in the Company Account belonged to them, the monies in the Joint Account (in the name of the defendant and Luo and not in the name of the plaintiff) also belonged to them.  On the other hand, the defendant claimed the monies in both accounts (including the Company Account) belonged to him.

69.  In support of their contentions, the plaintiff claimed the source of the monies in the Company Account and/or the Joint Account (which they said belonged to them) was from the Nanhai Entity, and both the defendant and Luo were merely cadres or officials of the Nanhai Entity earning a modest income and therefore could not have afforded to set up and inject funds into the plaintiff and/or purchase the Property.

70.  However, the plaintiff in Luo’s and Fong’s affirmations did not even identify the Nanhai Entity save to allege that it was a subordinate entity of the Nanhai Government.  As Mr Chang submitted, the plaintiff produced no supporting evidence of their affiliation with the Nanhai Entity or the Nanhai Government, or that it was an investment vehicle of the Nanhai Entity.  There is no document to show that the defendant, Luo and Fong were cadres and/or officials of the Nanhai Entity and/or what their respective income was at the material time.  Further, the plaintiff did not identify or particularise (let alone provide documentary support of) the injection of funds into the plaintiff by the Nanhai Entity by deposit of monies into the Company Account and/or the Joint Account or otherwise.  No paper trail of any transfer of monies from the Nanhai Entity to the plaintiff and/or no subsequent written confirmation of such injection of funds by the Nanhai Entity was provided.  Still further, no explanation was given by the plaintiff as to why injection of monies into the plaintiff by the Nanhai Entity was placed in both the Joint Account and the Company Account and not just in the Company Account, especially when it was said that the plaintiff was set up for the purpose of making property investments in Hong Kong.  Indeed, the plaintiff did not explain why the Property was acquired in the sole name of the defendant when (a) the plaintiff was set up as an investment vehicle of the Nanhai Entity, and (b) even the Joint Account was opened in the name of both the defendant and Luo.

71.  In respect of the Interview Record, even though the plaintiff claimed that what the defendant said at the interview (see paragraph 61 above) concerning the property in Argyle Street, Hong Kong (which, according to the plaintiff, should refer to the Property) contradicted the defendant’s case, the Interview Record does not aid the plaintiff’s case in the sense that the defendant stated the source of funds for acquiring such property originated from DM Macau and not the Nanhai Entity as alleged by the plaintiff, and that such property was beneficially owned by DM Macau.

72.  In my view, question therefore arises from the Interview Record as to whether (as the plaintiff alleged) the defendant was mistaken as to:

(a) the description of the property therein, ie whether the defendant in fact referred to the Property when he mentioned Flat B or C on 7^th Floor of No 142 Argyle Street, Hong Kong;

(b) the source of the purchase price of the property therein was from DM Macau;

(c) the property therein registered in the name of the defendant was beneficially owned by DM Macau.

I am also of the view that these questions can only be resolved upon assessing the evidence at trial, and that they are not amenable for summary determination under the Order 14 procedure.

73.  Nevertheless, Mr Chow submitted that irrespective whether the Interview Record supported the plaintiff’s case, it refuted the defendant’s case that he paid for the Property with his own monies.

74.  The defendant claimed he set up DM Macau to carry on business in Macau, and he later set up the plaintiff to facilitate his business partnership with Luo.  He further claimed that both he and Luo decided to each purchase a property in Hong Kong by transfer of their respective funds from their business ventures in Macau to the Company Account and/or the Joint Account for such purpose.  The defendant further claimed he purchased the Property before Luo purchased his since Luo was only able to transfer monies from his business ventures in Macau to the Company Account and/or the Joint Account in 1993.

75.  This, of course, does not sit well with the Interview Record in which it was suggested that the property referred therein (which, according to the plaintiff, meant the Property) was an asset of DM Macau purchased by using DM Macau’s monies and by “borrowing” the name of the defendant (see paragraph 61 above).  Nevertheless, the defendant’s statement in the Interview Record also does not support the plaintiff’s case that the Property was purchased with the plaintiff’s own monies sourced from the Nanhai Entity.  In my view, this is a matter for trial.

76.  The above also brings into focus the role played by DM Macau and the relationship amongst DM Macau, DM Guangzhou, and the plaintiff.  It is the defendant’s case that he set up his own property development business in Guangzhou (ie DM Guangzhou) and he later extended his business to Macau (ie DM Macau), and still later he incorporated the plaintiff.  He claimed that he and Luo were shareholders and directors of DM Macau and the plaintiff, and that DM Macau and the plaintiff facilitated his business partnership with Luo.  The defendant further claimed that although Chen was appointed as a director of the plaintiff he was not involved in the plaintiff or in the PG Project of which the plaintiff was the sales agent, and that Chen’s directorship was to facilitate his coming to Hong Kong.

77.  In short, the defendant said his source of funds for the purchase of the Property was the monies he made from his businesses in Guangzhou and Macau.  The defendant claimed that such assertion was supported by the 1998 and 2000 Minutes, especially by the latter minutes that were countersigned by the defendant, Luo and Chen (who were also directors of the plaintiff) and referred to various projects that involved substantial sums of monies paid by the defendant in his personal capacity (which in turn showed he had funds to pay for the purchase of the Property and which undermined the plaintiff’s claim that DM Macau and/or the plaintiff were government‑owned investment vehicles).

78.  I do not think, as Mr Chow suggested, that the 1998 and 2000 Minutes can be lightly brushed aside merely because they are minutes of meetings of DM Macau. If the parties involved in such meetings were also directors and/or shareholders of the plaintiff, and further if the discussion touched on funds injected into the plaintiff and/or the acquisition of the Property, then one needs to consider the relevance of such minutes to the issues in the present action.

79.  However, I am not persuaded that the 1998 Minutes are of any direct assistance since they made reference to Luo’s Property and not the Property, and they specified that further account and inquiry should be undertaken.

80.  It is true that the 2000 Minutes stated that various projects were the defendant’s personal investments, eg “澳門巴坡沙大馬路“大明閣”項目” and “竹灣項目”, and that income from other projects would be shared amongst the defendant, Luo and Chen, eg DM Guangzhou’s “售樓撻訂收入”. There were also suggestions as to the ownership of DM Guangzhou and “廣州大華物業公司” (ie belonging to Chen and the defendant since they invested in those companies and would consider sharing with Luo after turning a profit) as well as “河南大明” and “青島大明” (ie belonging to the defendant but with manuscript notation “查訪後，視乎誰投入的錢”).

81.  In respect of “香港大明公司” (which the defendant claimed to be the plaintiff), paragraph 3 of the 2000 Minutes provides as follows:

“三、確認香港大明公司的資金來源:

1. 香港大明公司代理[PG Project]費用共計港幣3700萬，其中自行費用港幣1700萬，仍餘差額2000萬，按公司當時股份分配，應為[the defendant]港幣1000萬，[Luo] 港幣1000萬收益。

2. [DM Guangzhou]港幣資金通過香港大明所進行過調劑。

3. [Luo]投入項目資金及調劑償還資金。

4. 廣州大中公司轉讓給[Luo]和王基，收入港幣1200萬，此收入為[the defendant]和[Chen]共有。ï[Luo]: 三方應去同分。

5. 香港大明公司向徐議群[defendant’s wife]借款港幣300 萬。”

(italics in manuscript)

On the same page, there was a manuscript notation as follows: “注: [Chen]指出,香港大明收益的餘額港幣2000萬,不應只[the defendant]和[Luo]分配,應視為三人共分配。”

82.  Paragraph 8 of the 2000 Minutes goes on to state as follows:

“八、 香港大明其代理責任已過，存在意義不大，可以取消，無所謂歸誰:

提議現有物業的處理:

1. 香港:

[the defendant]現有住宅，

徐議群[defendant’s wife]名下住宅，

新東海寫子樓留下的在[the defendant]名下的50%

2. 澳門: ……

上述物業:在確定各自資金後，盡快各自確認物業,確認後減少項目投入資金總額，如明確出資的，應歸回出資人所有，在已無合作前提的情況下，不應該再由集體承擔如此龐大的費用，特別是目前在建項目，需要盡快啟動，明確歸屬，減少內耗。

……

會議再三重申，…… 力爭在二十天內完成確認，劃清歸屬，各自負責，啟動項目，互不拖累。”

83.  Whilst the above provisions in the 2000 Minutes do not directly address on the source of funds in respect of the Property, and indeed those provisions made clear that the ownership and/or distribution of the properties in relation to “香港大明公司” were pending accounts and inquiry as to the investments made by various parties, the 2000 Minutes made no mention of the Nanhai Entity as the source of funds for the named companies (including DM Macau and/or the plaintiff) and/or the Property.  But, on the other hand, clause 3 of the 2000 Minutes also does not suggest that the plaintiff’s source of funds directly originated from the defendant.  It is unclear what is meant by DM Guangzhou “港幣資金通過香港大明所進行過調劑” or the income of HK$12 million that “廣州大中公司轉讓給[Luo]和王基” belonged to the defendant and Chen.  In my view, these are matters for trial.

84.  Luo played down the weight of the 2000 Minutes by saying that he disagreed with the contents, but to avoid direct confrontation he signed such minutes and added in manuscript at the end the following: “以上待清算核實進一步確認”.

85.  In the PRC Judgment (see p 14), Luo gave evidence of what happened in March 2000 (ie shortly before the meeting on 30 March 2000 which resulted in the 2000 Minutes):

“2000年3月22日, [Luo]、[Chen]、[the defendant]開會制作了一份“[DM Macau]股東會議紀要”，[the defendant] 在紀要中要求“確認[the defendant]在[DM Macau]的股東身份，[Luo]、[Chen]沒有參與公司經營和[the defendant]以其利潤收入購買了公司物業”，[Luo]對上述三點不同意，在會議記錄後簽下“以上股東會議記錄不能作為任何法律用途，本人保留有補充意見”的字句。

在[DM Macau]成立初期，[Luo]、[Chen]、[the defendant]都有私人帳戶作為公司的備用資金調整帳戶，目的是方便公司運作。事實上，竹灣豪園項目是黃岐集團獨資，所得本金和利潤亦是先劃入[the defendant]的私人帳戶,之後才劃出。[Luo]還先後三次通過林桂棋兌煥美元匯入[the defendant]在澳門或香港的私人帳戶作為[DM Guangzhou]的注冊資金。

2000年3月，[the defendant]被廣州市海珠區人民檢察院決定不予起訴後，回澳門向初級法院提起訴訟，要求[Luo]、[Chen]和[DM Macau]返還利用不法手段佔有[the defendant]的66%股份。”

At p 15 of the PRC  udgment, Chen also gave evidence as follows:

“ 關於2000年3月22日“[DM Macau]股東會議紀要”的內容,[Chen]稱因當時有求於[the defendant]回籠九江集團投入[DM Guangzhou] [PG Project]的資金(對比起來，[DM Macau]的物業比九江集團投入到[DM Guangzhou][PG Project]的資金少得多),對[the defendant]所說的物業由其出錢購買的說法也沒有深究，實際上公司物業不是[the defendant]自己出錢購買，而是[DM Macau]帳上支出。”

The PRC Judgment (p 20) held that “上述證據經庭審查證屬實，本院予以確認”.

86.  It is clear from the above that there appears to be another meeting amongst the shareholders of DM Macau shortly (ie about a week) before the meeting which resulted in the 2000 Minutes.  The extracts from the PRC Judgment in above paragraph also suggest that the contents of the minutes of that earlier meeting do not conform with Luo’s and Chen’s understanding of the actual position.  In my view, this means that the viability of the plaintiff’s and the defendant’s respective contentions as to the validity and/or meaning of the 2000 Minutes (and in particular the purpose and meaning to be attached to the notation made by Luo on the 2000 Minutes – see paragraph 84 above) must be looked at in the context of a wider factual matrix, and it is insufficient to simply scrutinise the 2000 Minutes themselves.  Further, even though Luo’s and Chen’s evidence was accepted in the PRC Judgment, Mr Chow confirmed at the Hearing that the plaintiff would not rely on the principle of res judicata or issue estoppel on the basis of the findings and verdict in the PRC Judgment, but would only argue on the strength of the PRC Judgment that the defendant’s case was incredible.  In my view, given what has been set out in the 2000 Minutes as well as the explanation put forward by Luo against the background of the evidence and findings in the PRC Judgment, such dispute of fact should and needs to be resolved at trial.

87.  Mr Chow placed strong emphasis on the findings in the PRC Judgment to say that the defendant’s case was not credible.  I note from the PRC Judgment that the defendant in those proceedings claimed inter alia that:

“ …… [the defendant]在[DM Macau]是投資股東，在澳門各個項目中有投入資金，且[DM Macau]的物業由[the defendant]投資所得利潤購買, 記入公司名下，在澳門各個項目中，[Chen]和[Luo]只投入4000萬元，[the defendant]投入5120萬元 ……” (p 5)

“ …… [DM Guangzhou]、大成公司、大中公司是[the defendant]本人以[DM Macau]的名議與中方合作經營的公司，均由[the defendant]個人投入資金，上述三間公司的中方利益已被[the defendant]買下，且[the defendant]本人有巨額資金存放在上述三間公司內，又一直沒有領過工資，故沒有侵犯他人的利益; ……” (p 40)

88.  In respect of the source of funds for DM Macau, DM Guangzhou and various projects involving DM Macau, the PRC Judgment made various findings.  These findings were made and discussed in various parts of the PRC Judgment (eg pp 6‑12) but the essence of such findings can be found at pp 21‑23 as follows:

“ 1. 《麗明投資置業有限公司》、《關於公司財務管理及費用支付的有關規定》和《關於公司人員分工負責任制》三份書證,證[DM Macau]股東以書面形式約定公司所有資產由[Chen]和[Luo]負責組織資金投入。[Chen]、[Luo] …… 等人的證言及[the defendant]本人的供述，亦證實[Chen]、[Luo]是公司的直接出資人。[The defendant]佔有的10%股份屬紅股。上述書證和證人證言均證實[the defendant]在[DM Macau]不負責投入資金，只是參與經營管理。[Macau residents]退出後，[DM Macau]以帳上支出100萬元(實際上是[Chen]、[Luo]出資)收回[Macau residents]兩人的20%股份，當時分給[the defendant]10%股份的目的是提高[the defendant]的利潤分配，但由於[the defendant]沒有出資，故重新分配股份的行為沒有改變[the defendant]所持的20%股份為紅股的性質。

2. [The defendant]對[DM Macau]的全部資產不具有所有權。根據我國有關法規，九江集團和黃岐集團均屬集體所有制企業，其資產屬集體所有，由於集體所有制企業在澳門不能作為股東，才出現了[Chen]和[Luo]分別代表九江集團和黃岐集團以個人名議在[DM Macau]的狀況，雖然如此，[DM Macau]的財產仍屬集體資產，所有權也屬於黃岐集團和九江集團。[The defendant]在[DM Macau]初期只持有10%(或曾變更為20%)的紅股，其權利僅限於分配[DM Macau]經營的項目所得利潤的10%(或20%)，而不是拥用[DM Macau]本身資產的10%(或20%)。[The defendant]雖然曾持有[DM Macau]的76%股份，但這只是股東之間基於集中管理權而形成的[the defendant]形式上的持有，不涉及股份的所有權，即[the defendant]只是76%股份名義上的持有者，不是76%股份所包含的公司資產的合法拥有者。

3. [The defendant]稱其在[DM Macau]有出資的說法沒依據，理由如下: (1) [the defendant]稱其有出資的主要依據是其在澳門有美元、港幣等私人帳戶，并有資金以其私人帳戶中劃入[DM Macau]。但本案證據顯示，[the defendant]帳戶上的資金是九江集團、黃岐集團的注資。[DM Macau]《關於公司財務管理及費用支付的有關規定》已明確規定，[DM Macau]除在銀行開設帳戶外，同時又以[Chen]、[Luo]、[the defendant]私人帳戶在國際銀行開設了公司備用資金調整帳戶，[Chen]和[Luo]對該說法不持異議。上述證據證實，[the defendant]、[Chen]、[Luo]三人在澳門銀行的私人帳戶均應視為[DM Macau]的帳戶。此外，[Luo]、[Chen]、李耀志、林桂棋的證言及林桂棋提供的相關書證均證實[the defendant]私人帳戶上的資金來源於[Luo]、[Chen]投入的資金或[Luo]、[Chen]兩人投資項目的收益; (2) [the defendant]為了掩飾其在[DM Macau]及屬下公司沒有投入任何資金的事實，便通過制作會議記錄、資金使用協議書，讓[Chen]、[Luo]確認其在[DM Macau]、[DM Guangzhou]有資金投入，但被[Chen]、[Luo]、…… 等人的證言和相關書證(如[DM Guangzhou]收取九江集團投資款時，在有關單據上寫明是投資款)否定; (3) [the defendant]在法庭上稱其有5120萬元資金投入，但沒有相關證據支持，以情理上分析，[the defendant]有限的收入與巨額消費性支出來看，[the defendant]亦不可能有5120萬元資金投入。另外，[the defendant]聲稱澳門竹灣豪園項目是其本人出資，但[Luo]、李耀志的證言和[the defendant]寫給[Luo]的一份書證均證實該項目[the defendant]沒有投資; (4) [the defendant]在供述中亦曾承認自己沒有投資。”

89.  Further, the PRC Judgment at p 55 made the following findings:

“ [The defendant]、徐議群[defendant’s wife]及其各自辯護人均辯稱[DM Guangzhou]、大中、大成公司屬[the defendant]所有。現有證人[Chen]、[Luo] …… 等人的證言及相關的書證證實，上述涉案公司的實際投資者均是黃岐集團和九江集團，而被告人[the defendant]在偵查階段的供述中均承認以黃岐集團、九江集團是上述公司所開發項目的投資者。另外，以上述公司的工商登記資料及公司章程、相關合作合同也明確反映出上述公司是中外合作經營企業，合作的一方是[DM Macau]而非[the defendant]。這是以證實上述公司並非[the defendant]個人所有，[the defendant]、徐議群[defendant’s wife]及其各自辯護人的上述辯護意見與查明事實不符，本院不予采納。

     [The defendant]及其辯護人均辯稱，[the defendant]本人有巨額資金存放在[DM Guangzhou]、大成、大中等公司內，現沒有任何證據予以證實，本院不予采納。”

90.  It is on the strength of the above findings in the PRC Judgment that Mr Chow submitted that the defendant’s allegations as to the source of funds (ie his own businesses in Guangzhou and Macau) have been refuted by the People’s Court, and hence they are incredible and unbelievable.  However, Mr Chow fell shy of saying that the res judicata and/or issue estoppel principles apply to the PRC Judgment.  In the circumstances, there plainly remains a dispute of fact between the parties over the source of funds albeit the defendant relies on the 1998 and 2000 Minutes (which contents appear to suggest that the shareholders of DM Macau consider various projects as personal investments rather than investments by the Nanhai Government) to challenge the plaintiff’s case and the plaintiff relies on Luo’s explanation and the findings in the PRC Judgment to refute the defendant’s contrary contention.

91.  I agree with Mr Chang that the above rival contentions between the plaintiff and the defendant should be resolved by trial since it is inappropriate to conduct a mini-trial on affidavits for the purpose of making findings of fact (see Pacific Electric Wire & Cable Co Ltd vHarmutty Ltd [2009] 3 HKLRD 94, 98).

IX.  PURCHASE OF THE PROPERTY

(a)  Defendant’s case

92.  It was the defendant’s case that he funded the purchase of the Property with funds that came from the Company Account and the Joint Account where he placed his own funds. Mr Chang submitted that save for the Legal Fees where there was evidence to show that it was settled by a cheque issued by the plaintiff, there was no credible or concrete proof that the plaintiff provided the funds for the remaining 5 items.

93.  Mr Chang argued that no copy of cheque no 438560 allegedly for the Initial Deposit was produced.  There was nothing to show where this cheque came from, and the plaintiff merely assumed from the cheque number and amount recited in the PASP that such amount was paid.  But the payer of such cheque was not identified, and there was no evidence that the Initial Deposit was paid using funds from the Company Account.

94.  Likewise for the Commission, the only information was that such sum was payable (although it must have been paid), but there was no information as to how it was paid (ie whether or not by cheque) or from which account.  The Commission was referred to in the PASP, and the plaintiff adduced no evidence of their payment of the same.

95.  There is no dispute that the Further Deposit and Stamp Duty were paid by cheques from the Joint Account.  The defendant claimed that such funds did not come from the Company Account or the plaintiff.  Mr Chang submitted that although the plaintiff invited the court to accept Luo’s bare assertion that the monies in the Joint Account were received and held for the benefit of the plaintiff, the court clearly could not do so without testing Luo’s evidence at trial.

96.  In respect of the Balance, cheque no 436902 drawn from the Company Account was cleared upon presentment.  Mr Chang submitted that upon taking a closer look, the plaintiff’s case in respect of this item (in the light of the evidence) made absolutely no sense.  The Statement of Claim pleaded that the plaintiff paid a sum of HK$4,999,120.00 to PKYKC on 8 September 1992 by way of cheque no 436902 drawn on the BEA to settle the Balance.  But in the Amended Statement of Claim, the plaintiff suddenly changed their case: they claimed that instead of paying PKYKC by cheque no 436902, they paid the Balance by cashier order no 638687 purchased by cheque no 436902.  The plaintiff did not explain its change of case, particular when its director Fong signed statements of truth vouching for the accuracy and truthfulness of both the Statement of Claim and the Amended Statement of Claim.

97.  Mr Chang asked the court to note the timing of the plaintiff’s amendments (11 March 2013) made only after Sousa’s affidavit in opposition was filed (14 February 2013), which affidavit set out his analysis based on the evidence that the Balance could not have been paid by cheque no 436902 as the plaintiff alleged, but rather it was more likely to have been settled by cashier order no 638678 as stated in the receipt issued by PKYKC dated 9 September 1992.  Mr Chang submitted that it was beyond doubt that it was Sousa’s affidavit that prompted the plaintiff to patch up their case by amending the Statement of Claim.

98.  However, Mr Chang submitted that the new version put forward by the plaintiff was wholly incredible.  The amount of the Balance in the sum of HK$4,499,100.00 (as evident from the PASP, the FASP and the completion statement) and the amount of cheque no 436902 in the sum of HK$4,499,120.00 were discrepant, and cheque no 436902 could not have been used to purchase cashier order no 638678 since the payee of the Cheque was “鄺家賢律師 or bearer”.

99.  Mr Chang submitted that if cheque no 436902 was withdrawn in cash, there would not have been any need to name the payee on the face of the cheque.  In such circumstances, the plaintiff’s latest version of events meant that PKYKC must have first cleared cheque no 436902, deposited the funds into the Company Account and then withdrew such funds from the Company Account to buy cashier order no 638678 that was made payable to PKYKC yet again, which made no sense at all.

100.  Although PKYKC’s receipt stated the Balance was paid by cashier order no 638678, this did not mean that the funds used to acquire the cashier order originated from the plaintiff.  Mr Chang submitted that the plaintiff could not link cheque no 436902 to cashier order no 638678 without PKYKC twice getting paid for the same amount as analysed in the above paragraph, which was “ludicrous”.  In the premises, the defendant suggested that the plaintiff advanced a wholly incredible case in respect of its purported funding of the Balance.  To say the least, there was no evidence that the plaintiff was the source of such funds.

101.  Further, although the bank statement of the Company Account showed that cheque no 436902 had been cashed and paid out, the receipt by PKYKC showed that the Balance was paid by cashier order in the sum of HK$4,499,100.00 which amount tallied with the amount stated in the PASP, the FASP and the completion statement and not with amount of cheque no 436902.  Mr Chang submitted that since the Balance was paid by the cashier order and the bank statement of the Company Account did not show any other withdrawal entry for the sum of HK$4,499,100.00 which might have been used to purchase the cashier order, the monies used to pay the Balance did not come from the Company Account.  Further, the Voucher Record stated that cheque no 436902 in the sum of HK$4,499,120.00 was for “purchase of office”, which suggested that such cheque was used for some other purpose.  It was not known how the Voucher Notations came to be written on the copy Voucher Record.  Hence, the defendant claimed the Balance was not funded and/or paid directly by the plaintiff.  These matters happened more than 20 years ago, so the defendant could not be absolutely sure, but he believed the funds for purchasing cashier order no 638687 which in turn was used to pay the Balance came from the Joint Account.

102.  In respect of the Legal Fees, the funds for cheque no 436903 in settlement thereof came from the Company Account.  But the defendant reiterated that all the funds in the Company Account and/or the Joint Account at the time were provided by him and hence were his funds.

103.  The defendant said that all of the disclosed cheques were signed by the defendant and Luo, so both directors of the plaintiff were well aware of these payments and must have known they were for the purchase of a property in the name of the defendant.  Mr Chang submitted that Luo agreed to and signed the cheques to facilitate the purchase of the Property in the name of the defendant, so the only conclusion must be that Luo was willing to do so because he must have known that these were payments made out of funds provided by the defendant in order to purchase the Property for the defendant’s own benefit.

104.  The defendant therefore contended that he had a good defence to the plaintiff’s claim because it was he who provided all the funds for the purchase of the Property.

(b) Plaintiff’s case

105.  As regards the defendant’s allegation that all monies in the Company Account and the Joint Account were provided by the defendant, Mr Chow submitted that it was a bare assertion unsupported by evidence:

(a) In respect of the Joint Account, Luo confirmed that any monies therein were received and held for the benefit for the plaintiff.

(b) In relation to the Company Account, the defendant’s position was not entirely clear (ie whether the money he said he placed therein was for capital or otherwise).  Sousa’s affidavit failed to condescend upon particulars.  But it must be trite that the rights and interests of the company and its shareholders must be distinguished such that a shareholder has no right to any item of the company’s property and is only entitled to a share in the profits while the company continues to carry on business and a share in the distribution of the surplus assets when the company is wound up (see Terrian Ltd & ors v Oriental Peer Company Limited CACV 23/1987 (unreported, 30/7/1987) paras 45‑46).  Mr Chow submitted there was no reason why the monies in the Company Account should not be treated as the plaintiff’s property.

(c) Discussion

106.  Given my conclusion in Part VIII above, it is unnecessary for me to make a determination on the above submissions.  This is because the plaintiff’s case is that the Price was paid by various payments out of the Company Account and/or the Joint Account, and I have found there is a triable issue as to the source of the funds in such accounts (ie whether such monies came from the Nanhai Entity or belonged to the defendant).

107.  However, for the purpose of completeness, I will deal with this briefly. I will concentrate on the Initial Deposit, Further Deposit and the Balance which go to the Price.  In my view, Mr Chang is right in saying that at the very least there is little evidence to show that the Initial Deposit came from either the Joint Account or the Company Account.  Mr Chow urged the court to draw an inference, but interestingly cheque no 438560 for the Initial Deposit (a) has a later number than cheques no 436902 (allegedly in relation to the Balance) and no 436903 (for payment of the Legal Fees) drawn on the Company Account for payments subsequent to the Initial Deposit, and (b) is quite different from the number sequence of cheques from the Joint Account, eg cheques nos 274231 and 274233 respectively for the Further Deposit and the Stamp Duty.  This raises a question as to whether the Initial Deposit was paid out of the Company Account and/or the Joint Account at all.

108.  As regards the Balance, I am not persuaded that the scenario suggested by Mr Chang in paragraphs 98‑99 above is necessarily the only option. There is always the possibility that cheque no 436902 being a bearer cheque was used to purchase the cashier order as suggested by the plaintiff and the bank charges of HK$20.00 were included in the cheque amount.  The question is whether the court can be sure this is the only possibility, and there is no arguable contention otherwise.

109.  In this respect, the contemporary record made by the plaintiff in the Voucher Record that cheque no 436902 was for purchase of an office raises concern.  Plainly the Property is residential premises and not an office.  The Voucher Notations refer to “Mandarin Court” and payment to PKYKC, but there is no evidence before me as to when such notations were made (see paragraph 18 above).  More significantly, the defendant stated in the Interview Record (which was disclosed by the plaintiff) as follows:

“ ?: 那你接著講你的私人房產。

……

答: ……

(5) 香港九龍新東海商業中心413A，辦公室,九二年用[DM Macau]的錢買的，花了約五百萬，記在[the defendant]和[Luo]的名下，已列入公司資產，帳面有反映，原來那裡是作為集體宿舍, 現由[the defendant]及妻子暫住。” (my emphasis)

110.  The Interview Record suggests that the identified office premises were purchased in 1992 in the name of the defendant and Luo.  The defendant claimed that such premises were entered into the company’s voucher records as company asset.  Question immediately arises as to whether or not the Voucher Record’s reference to purchase of office premises in fact refers to the acquisition of such office premises at “新東海商業中心” in the Interview Record.  It therefore follows that question also arises as to whether cheque no 436902 was intended for the Balance (as the plaintiff suggested) or for the acquisition (also in 1992) of the office premises at “新東海商業中心”.  In my view, this plainly raises a triable issue that needs to be resolved at trial.

111.  In light of the above, there is no need for me to go further to consider the payments for the Stamp Duty, Commission and Legal Fees, and Mr Chow’s submissions in paragraph 105(b) above.

VIII. CONTACTING THE PLAINTIFF

(a) Defendant’s case

112.  Sousa in his affidavit claimed that the plaintiff had not explained why they were not able to contact the defendant to execute documents to transfer the legal title of the Property back to the plaintiff when the defendant had been imprisoned since April 2001.  The defendant claimed it was surprising and unbelievable that Fong as a public officer of the Nanhai Government would not know of the defendant’s conviction and his subsequent detention in prison due to such conviction given that the defendant was convicted in the People’s Court in Nanhai District.  Fong also did not provide any explanation why the plaintiff was suddenly able to locate the defendant to commence the present action.  It was suggested that Fong was not entirely forthcoming.

(b) Discussion

113.  It is true that Fong did not offer an explanation in his affirmations.  However, this forms part and parcel of the argument on the question of delay (if any), and will be discussed in Part X below.

IX. DELAY

(a) Defendant’s case

114.  Mr Chang submitted there had been a long delay of about 20 years between 1992 when the Property was acquired and put under the defendant’s name and 2011 when the plaintiff issued the present action to seek recovery of the Property from the defendant.

115.  Luo was one of the first two directors and shareholders of the plaintiff (the other being the defendant) after the plaintiff was incorporated on 2 April 1992.  Luo, however, did not explain why the Property was put under the defendant’s name (when according to him it was supposed to be purchased as an investment for the Nanhai Government with their funds).  Nor did he explain why the plaintiff took no action to recover the Property from the defendant until almost 20 years later.

116.  Mr Chang submitted that the wholly unexplained inactivity and gross delay in taking any recovery steps for the Property greatly militates against the plaintiff’s claim that the defendant was not the true owner of the Property.  In such circumstances, the court must view the plaintiff’s claim against the defendant with the greatest circumspection.

(b) Plaintiff’s case

117.  Mr Chow accepted that Luo’s and Fong’s evidence did not give any explanation for the delay even though there was no limitation issue.  However, he argued that the objective facts would go a long way to explain the time that had been taken to bring the present action.

118.  Mr Chow submitted that the Interview Record showed that the defendant was under investigation for fraud in 1998, and the PRC Judgment showed that he was convicted in 2004.  According to the Amended Statement of Claim, the plaintiff was struck off the register of companies in December 2005, and Fong and Luo applied in December 2009 to restore the name of the plaintiff to the register of companies.  The plaintiff was so restored in April 2010, and in October 2011 the present proceedings were commenced.

(c) Discussion

119.  It will be noted that Fong became a shareholder and director of the plaintiff in 2000.  According to the PRC Judgment, he also took over the shareholding in DM Macau from Chen in 2000.  The PRC Judgment also showed that Luo was involved in DM Macau.  In the circumstances, both Luo and Fong should have known that the defendant had been under investigation since at least 2000 and later convicted for fraud in 2004.  Indeed, Luo was a witness in the criminal proceedings that led to the PRC Judgment.  Little or no explanation is forthcoming as to why Luo and/or Fong (or indeed the Nanhai Entity) allowed the plaintiff to become struck off the register of companies, and why they waited for 4 years before applying to restore the plaintiff.  Whilst the absence of explanation for such delay of itself may not amount to an arguable defence, it lends weight to the conclusion that the relevant factual matrix needs to be considered in determining the factual disputes between the parties.

XI. CONCLUSION

120.  I agree with Mr Chang that there are features in this case that require resolution by trial, and that the defendant has raised triable issues of fact that cannot be resolved in a summary way (see Billion Silver Development Ltd v All Wide Investments Ltd [2000] 2 HKC 262, 268‑268 and Comprehensive Auto Restoration Limited v Lee Seng Siew CACV 159/2012 (unreported, 30 May 2013) at paras 12‑14 and 23).  However, I am not persuaded that I should dismiss the Amended Summons as there are also matters in the defendant’s case that need to be canvassed.  Mr Chang on behalf of the defendant offered not to dispose of the Property until final determination of the present action.  I believe this is an appropriate offer in order to preserve the status quo pending the final determination at trial.  It is also not onerous since I am given to understand that the plaintiff has registered the writ of summons against the Property at the Land Registry.

121.  I therefore grant an order that conditional upon the defendant not to sell, transfer, assign, charge, dispose of or otherwise deal with the Property or any part thereof until the final determination of this action, leave to defend be granted to the defendant.  I also grant a costs order nisi that costs of the Amended Summons (including all cost reserved, if any) be costs in the cause.

Mr Tony Chow, instructed by CL Chow & Macksion Chan, for the plaintiff

Mr Jonathan Chang, instructed by Chan, Lau & Wai, for the defendant