HUANG YU HUI v. ZHENG SHIZHI (ALSO KNOWN AS ZHENG SHIZHI)

HCA 646/2015

[2021] HKCFI 3362

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 646 OF 2015

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BETWEEN

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(By Original Action)

AND BETWEEN

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(By Counterclaim)

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D E C I S I O N

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A. Introduction

1.  The Plaintiff is the purchaser and the Defendant is the vendor of the subject property under a sale and purchase agreement dated 29 January 2015 (“SPA”). The Plaintiff seeks specific performance of the SPA, alternatively for return of the deposit and damages to be assessed.

2.  The Defendant claims that the SPA was signed by him in Mainland China under duress, of which the Plaintiff had knowledge. The SPA was thus void. The deposit was passed on by his purported solicitors to the 2^nd Defendant by counterclaim without the Defendant’s consent. The Defendant has never received the deposit.

3.  The case has been set down for trial on 2-4 November 2022, with a pre-trial review on 8 June 2022.

4.  The Defendant has been detained in Mainland China since 1 December 2016. Following conviction for fraud on 21 November 2019 by the Mainland Chinese Court, he is now serving life imprisonment in Jinjiang City (晉江). He lodged an appeal in December 2019, which has not yet been heard till this hearing, allegedly due to Covid-19.

5.  There are 2 applications before the Court:

(1) The Defendant’s summons for the issue of a letter of request (“LR”) to the judicial authority of Mainland China for the examination of the Defendant in the Mainland prison and that this action be stayed until the return of the LR or examination. The Defendant has prepared a draft LR.

(2) The Plaintiff’s summons filed on 23 August 2021 for filing a further expert report in opposition.

6.  Eventually, the Plaintiff’s summons was not pursued. I therefore dismiss it with costs to the Defendant.

7.  The Plaintiff opposes the Defendant’s summons on 2 broad grounds:

(1) That the Defendant has failed to show that there is provision for the PRC Courts to take evidence from a prisoner in Mainland China.

(2) That the LR would not be executed by the PRC courts as examination of the Defendant falls outside the scope of Arrangement on Mutual Taking of Evidence in Civil and Commercial Matters between Courts of Mainland China and the Hong Kong Special Administrative Region (“the Arrangement”).

8.  With leave of the Court, the parties have adduced expert evidence to answer 5 questions:

(1) Whether it is permissible to take evidence from a prisoner serving imprisonment in Mainland China for the purpose of a civil action in Hong Kong in which he is the defendant?

(2) For the purpose of taking evidence, whether it is permissible to conduct cross-examination of the Defendant under Article 6 and Article 7 of the Arrangement apart from taking a statement from him?

(3) Whether it is permissible to allow the following persons to attend the hearing for the purpose of taking evidence in the Mainland Chinese Court?

• a Hong Kong judge

• the parties’ lawyers

• the plaintiff

(4) Whether it is permissible for the process of taking of evidence to be conducted by video conferencing?

(5) If the answer to Q4 is yes. whether it is permissible for each party to attend by a representative at the court/conference venue?

B. Legal principles

9.  The starting point is that a witness should attend in person to give evidence. The onus lies on the applicant to demonstrate that the witness cannot reasonably be expected to come to Hong Kong.

10.  Under Order 39, rule 1, Rules of the High Court, the Court has jurisdiction to order the issuance of an LR. The Court will exercise its discretion to do so if the recipient authority has an obligation or established practice of executing LRs: Kwan Chui Kwok Ying v Tao Wai Chun, CACV 194/2002, 13 December 2002, §22, Woo JA (as he then was).

11.  In deciding whether to order the issuance of an LR, the Court takes into account 5 factors:

(1) Whether the evidence to be obtained is necessary and in the interest of justice;

(2) Whether the witness cannot reasonably be expected to come to Hong Kong;

(3) Whether reasonable attempts have been made to obtain evidence in other ways;

(4) Whether the evidence is such that a full-fledged cross-examination is appropriate; and

(5) Whether the application is made bona fide and with such promptness as not to cause unreasonable delay.

See Tang Yi v Edmond De Rothschild Asset Management Hong Kong Ltd[2018] HKCFI 1050, L Chan J; Delco Participation BV v HWH Holdings Ltd[2021] HKCFI 249, at §22, Coleman J.

12.  “Necessary for the purposes of justice” in the first factor means the interests of all the parties to the litigation and not just the applicant: Delco Participation, at §§23 & 25-26.

13.  The Court also has to be reasonably satisfied that the proposed exercise to be conducted in the foreign court would not be an exercise in futility: Delco Participation, at §58.

14.  As between Mainland China and Hong Kong, issuance of an LR is governed by the Arrangement which came into force on 1 March 2017. The following articles are relevant:

“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.

Article 7

The requested party shall arrange the taking of evidence in accordance with the provisions of the law of its jurisdiction.

The requested party may carry out the taking of evidence in a special manner as requested by the requesting party, provided that the requested party considers it is not in breach of the provisions of the law of its jurisdiction.

If the requesting party requests that their judicial officers, the party concerned and their agent ad litem (legal representative) be present during the taking of evidence by the requested party and be involved in the proceedings for taking testimony, the requested party may consider granting approval in accordance with the relevant provisions of the law of its jurisdiction.

Upon approval, the requested party shall inform the requesting party’s liaison authority of the time and place for the taking of evidence.”

C. Necessity of the Defendant’s evidence

15.  The Defendant has only himself as a witness but cannot come to Hong Kong for trial. His evidence is crucial as the burden is on him to establish that he was under duress when he signed the SPA. His case is hotly contested by the Plaintiff. Full-fledged cross-examination of him is thus essential in the interests of justice.

D. Delay

16.  The Defendant has been detained since 1 December 2016. He was not convicted until 21 November 2019. He immediately lodged an appeal 12 days later on 2 December 2019. Application for hearing of the appeal was lodged in August 2020 but the appeal has not yet been heard due to the pandemic. On 14 February 2020, prior to the case management conference for this case, the Defendant has informed the Plaintiff about his conviction and his intention to apply for issuance of an LR.

17.  Since 22 April 2020, the Defendant’s Mainland Chinese lawyer has been in contact with the Hong Kong lawyers on the possibility of using video conferences for the purpose of taking evidence. In August, the PRC lawyers attempted to contact the Defendant but in vain. On 6 December 2020, the Mainland Chinese lawyer said that he would ask the detention centre where the Defendant was detained about video conferencing but no news has been received from the PRC lawyer since then.

18.  The Defendant’s efforts were bona fide. Although he should have applied to Court earlier for the issuance of an LR, I shall not hold the delay against him because there is still a year to go before trial. There ought to be sufficient time to arrange for the taking of evidence in the Mainland China, if this Court were to order the issuance of an LR. The Plaintiff does not allege that any delay has prejudiced him.

E. Issue 1: Whether there is provision for the Mainland Chinese courts to take evidence from a prisoner in Mainland China

19.  The experts are generally in common in their answers to questions 1, 3, 4 and 5:

(i) Re question 1: It is permissible to take evidence from a prisoner in Mainland China for the purpose of a civil action in Hong Kong in which he is the defendant: §10 of the Plaintiff’s expert report (A/201); and §1 of the Defendant’s expert report (A/217).

(ii) Re questions 3, 4 & 5: The process of taking of evidence may be conducted by video conferencing. For this purpose, it is permissible for the Hong Kong judge, the parties’ lawyers and the plaintiff to attend the venue of the video conferencing:

(a) Defendant’s expert report: “鋻於內地監獄內大多設有視頻會議系統，如硬件條件允許且經過受委托內地法院與被告人所在監獄溝通後，可以通過錄像(視頻)會議形式，向被告人提起詢問，獲得被告人的陳述，具備現實操作的可能性。但是，受委托方的內地法院需是作為取証或者盤問等審判活動的主持方，在受委托的中國大陸法院的主持下，委托方的香港法院，包括香港法官及香港律師，可以向被告人在內地法院的許可內向被告方進行詢問、盤問等審判活動 ……” (A/219)

(b) P’s expert report, §§16 & 17: “如被告人專家認為由內地法院運用在線錄像(視頻)系統提取証據可行，則我同意這一觀點” (A/205); “由於相關人員可不進入監獄，內地法院有可能根據《內港取証規定》第七條第三款允許與訟雙方各派一名代表出席法院/錄像會議處所”. (A/205)

20.  The experts are also in common that for the purpose of giving/obtaining evidence, (i) the Defendant will not be allowed, even temporarily, to leave the prison and (ii) the Hong Kong judge, parties’ lawyers and the Plaintiff will unlikely be allowed to enter the prison:

(i) Plaintiff’s expert report, §14 (A/204); and

(ii) Defendant’s expert report, §5 (A/219).

21.  Therefore, the process of obtaining evidence from the Defendant will likely be conducted by way of video conference.

22.  Mr Shum, counsel for the Plaintiff, submits that even if the LR will be executed, there is no evidence as to the availability of video conferencing facilities in the prison in which the Defendant is remanded.

23.  The evidence already shows the availability of video link facilities. I do not think it is necessary for the Defendant to go so far as to establish its availability in a particular prison. After all, if the Mainland Chinese courts cannot execute the LR due to this logistics issue, it is at liberty to return the request under Article 3 of the Arrangement.

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.

G. Conclusion

38.  For the reasons given in Section F, the present request does not fall within the scope of Article 6. There is no reason to believe that the LR, even if issued, would likely be executed. Accordingly, the summons should be dismissed.

H. Costs

39.  Each party should bear the other party’s costs of its own summons.

40.  The Plaintiff’s costs statement is a 13-page document which sets out the dates of all communication and time spent as if it were a taxation bill. This is wholly unnecessary and simply a waste of costs and the court’s time. Costs for preparation of such a costs-statement should, save for good cause shown, not be recoverable from the client. Costs of the 2^nd expert opinion are also not recoverable since the Plaintiff’s summons has been dismissed.

41.  Setting off the costs on each summons, I make a global order that the Defendant is to pay costs of $450,000 to the Plaintiff.

42.  I make an order nisi in terms of paragraphs 39 and 41 above.

I. A note on practice

43.  For an application of a similar kind, it is always helpful to prepare a draft LR to be lodged with the written submission of the applicant. The draft should set out all the terms of request, including the mode of taking evidence (such as by video link, if permissible), and whether a Hong Kong trial judge, parties and legal representatives are to attend. If the request is made to the Mainland courts, the draft LR should be drafted in Chinese.

44.  I thank counsel for their assistance.

Mr Erik Shum, instructed by Raymond Siu & Lawyers, for the Plaintiff (By Original Action) and the 1^st Defendant (By Counterclaim)

Mr Alex Y H Lai, instructed by Yung, Yu, Yuen & Co, for the Defendant (By Original Action) and the Plaintiff (By Counterclaim)

HCA 646/2015
[2018] HKCFI 174

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 646 OF 2015

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RULING ON APPLICATION
TO VARY COSTS ORDER NISI

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INTRODUCTION

1.  This is the plaintiff’s application to vary the costs order nisi made in the judgment of this court (“the Judgment”) handed down on 13 January 2017 where it was ordered, by way of summary assessment, that the plaintiff shall pay the defendant a sum of $160,000 in total for the hearings before the master and this court.

PROCEDURAL HISTORY

2.  The case is about the sale and purchase of an apartment in Pokfulam in which the plaintiff is the named purchaser and the defendant is the named seller.  I will not repeat the facts here as they can be found in the Judgment.  For the present purpose, a brief procedural history of the case is as follows:

(i) the plaintiff obtained a summary judgement for specific performance of the transaction against the defendant before the master on 24 August 2016;

(ii) the defendant appealed against the master’s decision to this court.  The appeal, which was by way of rehearing, was heard on 5 January 2017.  This court handed down the judgment on 13 January 2017 granting the defendant conditional leave to defence and made the aforesaid costs order nisi against the plaintiff;

(iii) by a summons dated 25 January 2017 (“the Summons”), the plaintiff applied for variation of the costs order nisi. On 9 February 2017, by consent, the hearing of the summons was adjoined sine die with to liberty to restore;

(iv) on 21 April 2017, this court refused the plaintiff leave to appeal against the Judgment;

(v) on 8 August 2017, the Court of Appeal also dismissed the plaintiff’s application for leave to appeal.  The plaintiff then applied to restore the hearing of the Summons; and

(vi) on 2 January 2018, by consent the parties were directed to deal with the Summons on paper.

ORDER SOUGHT

3.  By the present application, the plaintiff asks that:

(1) the costs for the hearing before the master and the costs for the appeal before this court be in the cause;

(2) the costs of this application be paid by the defendant to the plaintiff forthwith, to be taxed if not agreed.

RELEVANT LEGAL PRINCIPLES

4.  The starting point is that costs in an application for summary judgement are in the discretion of the Court: Hong Kong Civil Procedure (“HKCP”), Vol 1, at §14/7/6.

5.  As regards the costs before the master, if leave to defend is granted unconditionally, the usual costs order is for the costs to be in the cause: see HKCP 2018, at §§14/7/12-13.   

6.  As pointed out by Mr Lai, counsel for the defendant, it is not uncommon that when a judge overturns a master’s decision to grant summary judgment, the judge will order both the appeal costs and the master’s costs to follow the event: see, e.g., Li Chuen Kwai v Po Lam Construction Development Ltd[1]; Lin Jan v Long Xiaobo[2]; and Rich Lucky Properties Development Ltd v Siu Pin Siu[3].  That said, the aforesaid 3 cases referred to by Mr Lai are just examples and that they do not purport to lay down any general principles.  I am fully alive to the discretionary nature of costs orders, so that the exercise of that discretion by the court must be case-specific. 

CONSIDERATION

Whether there was an agreement on costs

7.  At paragraph 40 of the Judgment, it was noted that, “Both parties agree that costs should follow the event.” It was on that basis that the costs order nisi was made.

8.  In the present application, Mr Tang for the plaintiff in his written submission first denied that there had ever been such an agreement between the parties.  To that end, Mr Tang attached to his written submission a transcript of the audio recording of the hearing on 5 January 2017 between 2.40 pm and 2:42 pm, which were the last two minutes of the hearing of the appeal, purporting to show that the agreement was only to the extent that there should be a summary assessment on quantum but not that costs should follow the event of the appeal. 

9.  Mr Lai, in his written submissions, is somewhat taken aback by the plaintiff’s denial.  Mr Lai recollects that there was a clear agreement during submissions just before the luncheon break on 5 January 2017 that costs should follow the event.  However, because of time restraint, Mr Lai was unable to seek further transcript of the hearing to support his recollection and therefore he invites the court to check its own records for verification.

10.  Mr Tang, in his written reply, retracts his denial a bit and submits that even if there was an agreement between the parties that costs should follow the event, the agreement is “not material” in determining the present application. This is because (i) the court retains a discretion on the issue of costs; and (ii) by making an order nisi, there was a clear intention of the court to hear further submissions from the parties.  

11.  In view of the aforesaid dispute, this court has listened to the relevant part of the audio recording of the proceedings.  Based on the recording, at 12:51:24 hours, which was towards the end of the submissions, this court raised with the parties whether costs should follow the event.  Mr Lai submitted then that it should be the case.  Mr Tang did not gainsay that but he asked, at 12:51:50 hours, that if the result of the appeal was in the plaintiff’s favour, that the costs of the appeal should be deducted from the balance of the purchase price which the plaintiff was to pay, there already being a similar order made by the master regarding the costs of the hearing before her.  At 12:52:30 hours, the proceedings were adjourned for luncheon break. The proceedings resumed at 14:40 hours.  After having dealt with a few legal points left over before lunch, this court reserved its judgment and said,

“And I propose to make an order nisi in relation to costs, so that if there is any application in that regard, parties can come back. But for the purpose of assessment, are both parties content with summary assessment?”

Both Mr Lai and Mr Tang confirmed there and then that they were content with summary assessment and that they both had filed their respective statements of costs.  Even up to that point, Mr Tang did not gainsay that costs should follow the event.  The hearing was then concluded at 14:42 pm.

12.  Based on the aforesaid exchanges between the court and the legal representatives, this court is of the view that there was clearly a consensus between the parties then that costs should follow the event of the appeal and that the quantum should be dealt with by way of summary assessment. As such, it is perhaps understandable why Mr Tang would now like to withdraw from that consensus and to seek to revisit the subject.  However, it would lie ill in Mr Tang’s mouth to deny the existence of that consensus.  It is also entirely unsatisfactory for him to refer to the court just what was said shortly after the luncheon break, without putting that in the context of what the parties had apparently agreed just before the luncheon break.  

13.  In my humble view, the aforesaid agreement between the parties on how the matter of costs should be approached is a factor that this court should take into account.  This is not to say that the court is dictated by what was agreed between the parties.  After all, it is a matter of discretion for the court.  Mr Tang has a point that this court, by making an order nisi, leaves open the possibility for the parties to make further submission on costs.  However, whilst the aforesaid agreement is not conclusive, I do not agree that it is “not material”.  The agreement remains a factor for consideration which is in the defendant’s favour and should not be ignored.

Other considerations

14.  I bear in mind that the defendant’s case is on its face not a strong one and was even described by this court as “shadowy” and that leave to defend was only granted on the condition that the defendant pay into court $2.12 million which represents the amount of the deposit said to have been paid by the plaintiff and not returned by the defendant.  

15.  Nonetheless, even without taking into account the aforesaid consensus on costs, by having looked at the matter of costs afresh and having considered the written submissions of the parties filed for the present application, I am satisfied that there are positive reasons as to why the plaintiff should bear the costs of the hearing before the master and those of the appeal heard before this court:

(i) as can be seen from the written submissions used by the parties in the hearing before the master, the plaintiff’s success before the master was mainly based on the procedural point that the defendant’s defence was not supported by a proper affirmation.  That procedural point, however, was firmly rejected both by this court and the Court of Appeal[4].  Moreover, much of court’s time in the appeal before this court was spent on dealing with the plaintiff’s aforesaid procedural point;

(ii) as the Court of Appeal points out in its judgment, in the present case the plaintiff’s application for summary judgment was made only after the defendant had filed its defence.  As such, the plaintiff should have known at the outset what the defence case is about and that there are circumstances indicating substantial disputes of fact, as identified at paragraph 18 of the Judgment, which would make the case not suitable for summary disposal; and

(iii) this court also set aside the master’s decision on the basis that there is sufficient foundation for the contention that the estate agent had constructive knowledge of the alleged impropriety in the transaction so that the plaintiff, who is seeking an equitable remedy, is not with clean hands.  By its judgement, the Court of Appeal agrees with this court that there is a triable issue as to whether an estate agent can impute his knowledge to his principal.

In view of the above, this court takes the view that the present case is not only not a plain and obvious one for summary disposal, but also that the application for summary judgment was ill-conceived.

Defendant got only conditional leave to defence

16.  Mr Tang places emphasis in his written submission on the fact that the defendant has only obtained a conditional leave to defence and that the defence is described as “shadowy”.  Nevertheless, it has to be borne in mind that this is a case for specific performance and (as noted in the Judgement[5]) normally no condition would be attached if leave to defend was granted.  In the present case, the conditional leave to defence was granted after consideration of a host of factors, including the defendant’s poor track record of meeting time requirements and that the plaintiff was said to have paid $2.12 million as deposits which had not been repaid by the defendant.  The condition was therefore imposed as a means to protect the plaintiff’s potential interest and to ensure that the defence would be proceeded with some diligently.  In the circumstances, this court takes the view that the fact the defendant is granted leave to defend on condition is not a sufficient reason for not awarding him the costs arising from the plaintiff’s application for summary judgment which is based mainly on a misunderstanding of the law and which, in the view of this court, also is ill-conceived.

CONCLUSION

17.  Based on all the above, the present application by the plaintiff for variation is refused and the costs order nisi is hereby made absolute.

18.  It is further ordered that the plaintiff is to pay the defendant’s costs for this application forthwith, to be taxed if not agreed. 

HCA 646/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 646 OF 2015

____________________

____________________

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R U L I N G

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INTRODUCTION

1.  This is the application by the plaintiff (P) for leave to appeal against the interlocutory judgment (“the Judgment”) of this court handed down on 13 January 2017 setting aside the summary judgment granted in his favour by the master[1] and giving conditional leave[2] for the defendant (D) to defence.

2.  The background of the case was outlined at §§2‑4 of the Judgment which I reproduced as follows:

“2.  Shortly stated, D was the sole owner of a residential property on Pokfulam Road (“Property”).  The case is about the alleged sale of the Property by D to P at the price of $21.2 million.  P paid a total of $2.12 million as the initial and further deposits respectively upon the execution of the Preliminary Sale and Purchase Agreement (PSPA) and the formal Sale and Purchase Agreement (SPA).  However, D then failed to complete the transaction or to return the deposits.

3.  As a result, P took out proceedings against D for specific performance of the transaction and also damages.  D responded by filing a defence asserting that he had been forced to sign documents on the Mainland under threats of personal safety by a Mr Sze with whom he had a commercial dispute.  D said that he had not engaged any estate agent or solicitors and had not received any of the deposits paid by P, those monies being first paid to a firm of solicitors purporting to be acting for D (“the Solicitors”) and then to a Mr Ng who was said to be a business partner of Mr Sze and a relative of P.  D alleges that Mr Ng (on Mr Sze’s instruction) had without D’s authority and consent sold the Property to P.  D claims that the transaction was voidable because of P’s knowledge of the relevant improper and unlawful acts.  D also counterclaims for declaration, damages and other reliefs.

4.  D replied to P’s request for further and better particulars of the defence.  After that, P took out a summons pursuant to O 86, Rules of the High Court (“RHC”) for specific performance and striking out of D’s counterclaim.  The orders sought were granted by the master and D filed a notice of appeal against the master’s decision.”

3.  This court granted D conditional leave to defence on the basis that:

(i) there is just sufficient foundation for the contention that the estate agent had constructive knowledge of the alleged impropriety in the sale of the Property which should not be dismissed offhandedly and warrants further examination;[3] and

(ii) D has by a narrow margin managed to raise a triable issue as to whether P has constructive knowledge (through his estate agent) that the sale of the Property was tainted with impropriety.[4]

4.  In arriving at the above, this Court relied on a letter written by D (who was not in Hong Kong) dated 30 March 2016 (“the Letter”) which was not covered by a proper affirmation.[5]  Reference was made to O 86 r 4(1), RHC which provides that,

“A defendant may show cause against an application under rule 1 by affidavit or otherwise to the satisfaction of the Court.” (Emphasis supplied)

This Court was of the view that the phrase “or otherwise” is wide to enable the court to have regard to the Letter in the present case.

PROPOSED GROUNDS OF APPEAL

5.  P’s proposed grounds of appeal can be summarised as the following complaints:

(i) this Court erred in law in holding that D could rely on the Letter;

(ii) this Court erred in giving any weight to the Letter when there were ample opportunities for D to make an affidavit verifying the contents of the Letter;

(iii) this Court erred in holding that P had “imputed knowledge” of the “constructive notice” by the estate agent of the alleged undue influence; and

(iv) this Court erred in holding that the estate agent had constructive knowledge of the alleged misconduct of Mr Sze.

RELEVANT LEGAL PRINCIPLES

6.  The legal principles governing the granting of a summary judgment have already been stated at §§7‑8 of the Judgment and are not in dispute.

7.  The test for granting leave to appeal is well settled and not in dispute.  Leave to appeal shall not be granted unless (a) the appeal has a reasonable prospect of success; or (b) there is some other reason in the interests of justice why the appeal should be heard: s 14AA(4), the High Court Ordinance (Cap 4).   It is well‑established that reasonable prospect for this purpose involves the notion that the prospects of succeeding must be reasonable, and therefore more than fanciful, without having to be probable: Wynn Resorts (Macau) SA v Mong Henry.[6]

8.  In case a ground of appeal is levelled at the exercise of the court’s discretion, the well‑known principles in Hadmor Productions Ltd v Hamilton[7] would apply.  See also Wong Luen Hang & Anor v Chan Yuk Lung & Ors.[8]

9.  It is rare for a party to appeal against a decision of granting leave to defend. InStrong Base Services Ltd v Geroma Electronic Ltd & Anr,[9] the Court of Appeal cited with approval the following passage from European Asian Bank AG v Punjab & Sind Bank (No 2),[10]

“If the judge has already decided, on the evidence, that there is a triable issue on a question of fact, it must in the very nature of things be unlikely that this court will interfere with his decision and decide that no trial should take place; because, where such a conclusion has already been reached by a judge, this court will be very reluctant to hold that there is no issue or question which ought to be tried.”

In RG Carter Ltd v Clarke,[11] which is also cited with approval in Strong Base, Lord Donaldson of Lymington, MR, explained why an appellant court would be reluctant to interfere with the dismissal of an application for summary judgment as follows:

"By contrast, the dismissal of an application for summary judgment or, which is the same thing, the making of an order giving unconditional leave to defend leaves the rights of both parties wholly intact and the parties with everything to play for.  All that has happened is that the court has declined to take a short cut."

CONSIDERATION

As to Ground (1): “or otherwise”

10.  Ms Wong, counsel for P, submits that this Court erred in saying the following at §13(i) of the Judgment:

“I note the remarks at §14/4/3, HKCP that the use of the term “or otherwise” is not intended to open wide the door for giving leave to a defendant who has no real defence and that in exceptional and obvious cases a letter from a defendant raising a genuine issue may be sufficient. In other words, the phrase “or otherwise” allows the court to look at the substance of the materials relied upon by a defendant in case they are not covered by a proper affidavit.”

Ms Wong relies on Chinakong Manufactory Ltd v Uniden Hong Kong Ltd,[12] where Kaplan J (as he then was) stated that there are four methods by which a defendant may show cause under O 14 r 1, RHC against an application for summary judgment, namely:

(i) to file an affidavit(s) deposing to the fact that there is a defence on the merits and setting out the matters which give rise to the defence;

(ii) in addition to this narrative, to exhibit to the affidavit a draft defence which it is proposed to file;

(iii) to exhibit a defence and verify its truth and content by affidavit; and

(iv) to show on the face of the Statement of Claim itself that there is no cause of action against him.

11.  As O 14 r 4(1) is similar to O 86 r 4(1), Ms Wong submits therefore that the phrase “or otherwise” in the latter also refers to (iv) above where an affidavit is not necessary, like where the defects of the Statement of Claim alone would be sufficient in discharging the application for summary judgement and it does not encompass the situation where an affidavit is necessary but the defendant fails to file one.  Reference is also made to Cheung Tai Hong Holdings (Technology) Limited v Cheng Yuk Kuen[13] in which Chinakong’s case was followed.  Lastly, Ms Wong submits that even if it is accepted that in some cases the court has discretion to consider unsworn evidence filed in opposition to an application for summary judgment, this Court erred in fact that this is a proper case to do so.

12.  With respect, I am unable to accept Ms Wong’s above submissions.  My reasons are as follows:

(i) Kaplan J referred to the previous edition of the White Book and his Lordship did not disagree with the following comments made there that:

“In practice the Masters will generally require an affidavit from the defendant before they will feel “satisfied” that the defendant is entitled to leave to defend save in exceptional or obvious cases, e.g. in a small claim, a letter from the defendant acting in person living a long way from the Court raising a genuine issue may be sufficient.”

This Court relied on a similar paragraph in the Hong Kong Civil Procedure 2017 which contains the same comment.

(ii) There is in fact no inconsistency in approach between Chinakong’s case and the approach adopted by this Court.  Kaplan J said,[14]

“the practice of the court, save in these unusual cases, is to require an affidavit before it can be satisfied.”

In a similar vein, this Court said that “in exceptional and obvious cases a letter from a defendant raising a genuine issue may be sufficient.”  The difference between the two is only one of emphasis.

(iii) I note that the concern expressed by Kaplan J that:

“There may be many reasons why a defendant wishes not to go on affidavit, the most obvious being that he is fearful of being caught out in a lie with all the consequences that may entail.”[15]

It is pertinent to note that in both Chinakong’s case and in the case Cheung Tai Hong Holdings (Technology) Ltd, the defence had filed no evidence whatsoever in opposition to the application for summary judgment.  In the present case, however, D had caused his brother to exhibit the Letter.  Moreover, this Court had in fact considered and addressed the concern of Kaplan J at §13(iv) of the Judgment:

“Mr Tang submits that if D is allowed to rely on his letter instead of a proper affidavit, then even if D deliberately lied in what he said in the letter, he could not be caught for perjury, as the letter was not made under oath. That may be correct. However, if D1 deliberately caused a document to be placed before the court for the purpose of court proceedings which he knew contain false information, then there would remain a possibility of charging him with the offence of doing an act tending and intended to pervert the course of public justice.”

(iv) I agree with the submission of Mr Lai, counsel for D, that neither Chinakong’s case nor the case Cheung Tai Hong Holdings (Technology) Ltd supports the very narrow interpretation of the phrase “or otherwise” in O 86 r 4(1), RHC that it can only cover situations where the Statement of Claim under consideration is on its face defective so that no opposing affidavit would be necessary and that it cannot cover a letter made by the defendant even in case of exceptional circumstances.

(v) As regards the exercise of discretion, I have regard to what Ms Wong has said in her written submission.  However, D had in the Letter explained why he was not able to come to Hong Kong to make an opposing affidavit.  The fact that D was able to put his signature on the statements of truth of the Defence and the Amended Defence does not mean that he would also have been able to come to Hong Kong to make an affirmation to oppose the application for summary judgment.  This contention of Ms Wong, with respect, is to impermissibly ask the Court of Appeal to exercise an independent discretion of its own: see also Excel Courage Holdings Ltd v Wong Sin Lai.[16]

13.  Based on the above, I can see no merits in this ground.

As to Ground (2): weight given to the Letter

14.  The complaint is mainly that D had ample opportunities to make an opposing affirmation but failed to do so.  In the circumstances, it is submitted by Ms Wong that the Court erred in giving any weight to the Letter.  I note, however, that very little was said in Ms Wong’s written and oral submissions in support of this ground.

15.  The point raised had been considered at §§ 14‑15 of the Judgment where this Court said,

“14. Mr Tang went on to submit that before the defendant can rely on the words “or otherwise” in O 86 r 4(1), RHC, there has to be affidavit evidence showing the existence of exceptional circumstances justifying D’s reliance on just his letter instead of a proper affidavit.

15. I am unable to accept Mr Tang’s submission above.  With respect, that is to put a stricture on the provision which is not supported by its wording.  It is also to put the cart before the horse, as D would not rely on a letter if he could adduce affidavit evidence.  The absence of a proper affidavit from a defendant, in my view, goes only to the question of weight.  That said, depending on the nature and contents of the materials in question, the absence of a proper covering affidavit may cause the court not to attach any weight to them.  Whether or not that is the case is a fact‑specific question.  In the present case, the document in question is D’s own letter which contains what he is supposed to give evidence about.  D had also given some reasons as to why he could not come to Hong Kong to make an affirmation.  In the circumstances, I simply cannot see why D should not be allowed to rely on the contents of that letter, simply because the letter is not a proper covering affidavit.  Of course, if D would not come to Hong Kong to give evidence in case of a trial, then the situation would be different.”

16.  With respect, the question of weight rarely affords a ground of appeal.As regards the present case, I can see no reasonable prospect of success in this ground. 

As to Ground (3): imputed knowledge through estate agent

17.  The complaint is that this Court erred in law and in fact in finding that P was capable of having constructive knowledge of any impropriety of the sale of the subject Property through his estate agent.  Ms Wong relies heavily on Mo Ying v Brillex Development Ltd & Anor[17] and the case authorities referred to in that judgment for the proposition that estates agents in Hong Kong are different from those in England and Wales, that in Hong Kong that they usually act as brokers or introducers of the relevant property and that in law they are not a true agent of the principal but only a middle man.  It is submitted therefore that the knowledge of the estate agent, if any, cannot in law be reputed to P.

18.  With respect, I agree with Mr Lai that there are obvious difficulties with P relying on the above law point as a ground of appeal. First, the point that the estate agent was not a true agent in law had never been raised before the master or this court at the substantive hearing.  It is only raised for the first time now.  Before the master and before this court at the substantive hearing, the sole argument raised by P on constructive or imputed knowledge was the “fraud exception” which, P said, would have the effect of avoiding the estate agent’s knowledge being imputed to him.  That was the reason why this Court focused on that issue: see §24 of the Judgment.

19.  Ms Wong fairly accepts that the point based on Mo Ying’s case had not been argued in this case before.  Nevertheless, she submits that it is appropriate to grant leave as this is “a new argument based on the same matter if the whole matter was before the court”: see §59/10/7, HKCP.

20.  With respect, I accept Mr Lai’s submission that it would be procedurally unfair for this court to grant leave to appeal on the new point.  As said by the Court of Appeal in Lehman Brown Ltd v Union Trade Holdings Inc & Others,[18]

“10. Whilst the Court of Appeal obviously has power to entertain new points in an appeal, it is also clearly and firmly established that new points which are fact sensitive or otherwise affect the course of evidence or conduct of the case at the hearing below should not be allowed.  Though this principle is usually applied in situations where the new points necessitate further evidence to be adduced, it is not confined to such scenarios.  Very often, the raising of new point by one party may lead to the other party raising counter arguments and the consideration of such counter arguments may involve factual assessment in a different light from that undertaken by the court below. Sometimes, it may involve a different weighing of factors in the exercise of discretion.  Alternatively, the other party may embark on a different course of forensic conduct if the new point were taken earlier.  The appellate court, in considering whether the new point would be entertained, is entitled to take these matters into account in order to avoid unfairness to the other party.

11. Bearing in mind the broad discretion under section 14AA of the High Court Ordinance, this court should apply the same approach when leave to appeal is sought on the basis of some new points which had not been canvassed at the substantive hearing below.  There is no point in granting leave on a new ground which the Court of Appeal would not entertain on the hearing of the appeal proper.”

21.  In the present case, there would have no need to invoke the “fraud exception” at all if (i) an estate agent in Hong Kong cannot in law be an agent properly so-called; and (ii) there is not a triable issue that the estate agent in question was in fact acting as P’s agent.  Therefore, I accept Mr Lai’s submission that the way P had argued its case led D to believe that there was a tacit acceptance on P’s part, at least for the purpose of the application for summary judgment before the master and the substantive hearing before this court, that there were triable issues on both (i) and (ii).  Had it be otherwise, the conduct of the defence may well have been different.  Moreover, this Court responded to the contentions of the parties at the time and focused its attention accordingly in the Judgment.

22.  Secondly, neither Mo Ying’s case nor the case authorities to which it referred has laid down any general rule of law that an estate agent in Hong Kong can never be an agent in the strict legal sense.  For example, in Yili Concepts (HKG) Ltd v Lee Wai Chuen,[19] DHCJ Susan Kwan (as she then was) held that:

“It is a question of fact in each case whether an estate agent is authorised by and therefore acting for a particular party in providing information relating to a property to another party. Although an estate agent in Hong Kong usually acts as a broker taking commission from both sides, he may assume different roles at different stages of the negotiation leading to the transaction.

...

I do not think Godfrey J [in Cheng Kwok Fai] was laying down any proposition of law that is generally applicable in that part of his judgment. As I have stated, it is a question of fact whether an estate agent was acting for a particular party at a particular stage of the negotiating process.” (Emphasis supplied)

23.  I have taken into account Ms Wong’s argument that in view of Mo Ying’s case, the mere fact that P had engaged an estate agent does not mean that he would automatically be imputed with the knowledge of that estate agent and more would be required.  However, in view of the way in which P had conducted his argument before the master and this court at the substantive hearing which Ms Wong describes as “unfortunate”, in my view it would not be right to blame D for the present lacuna of evidence about the scope of the authority of the estate agent and then to deny him of his day in court.  As I have said, had the point been raised before, the conduct of the defence may well have been different.  In my view, the issue of whether imputed knowledge, which entails a question of fact depending on the evidence, should be left to the trial judge.

As to Ground (4): constructive knowledge of the estate agent

24.  There are three points involved: (i) whether there is a sufficient factual basis to raise a trial issue of duress; (ii) whether there is a sufficient factual basis to raise a trial issue that the estate agent had at least constructive knowledge; and (iii) whether it is necessary for the constructive knowledge to relate to the risk of duress in particular or a risk of some kind of wrongdoing in general which may vitiate the transaction.

25.  All of the above issues have been dealt with at some length in the Judgement: as regards (i), at §§18‑19; as regards (ii), at §§ 22‑23; and as regards (iii), at §§33‑34. 

26.  I note that very little was said by Ms Wong in her written and oral submission in support of this ground.  With respect, I am unable to see a reasonable prospect of success in this ground.

CONCLUSION

27.  Having considered submissions of counsel, with respect the grounds of appeal, whether taken individually or as a whole, do not in my view have a reasonable prospect of success.  In the circumstances, I refuse leave to appeal.

28.  I make an order nisi that D has the costs of this application, with certificate of counsel, to be taxed if not agreed.

HCA 646/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 646 OF 2015

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JUDGMENT

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INTRODUCTION

1.  This is the appeal by the defendant (“D”) against the order of Master Chow made on 24 August 2016 giving summary judgment in favour of the plaintiff (“P”) for specific performance and striking out D’s counterclaim against P.[1]

2.  Shortly stated, D was the sole owner of a residential property on Pokfulam Road (“Property”).[2]  The case is about the alleged sale of the Property by D to P at the price of $21.2 million.  P paid a total of $2.12 million as the initial and further deposits respectively upon the execution of the Preliminary Sale and Purchase Agreement (PSPA)[3] and the formal Sale and Purchase Agreement (SPA).[4]  However, D then failed to complete the transaction or to return the deposits.

3.  As a result, P took out proceedings against D for specific performance of the transaction and also damages.[5]  D responded by filing a defence[6] asserting that he had been forced to sign documents on the Mainland under threats of personal safety by a Mr Sze with whom he had a commercial dispute.  D said that he had not engaged any estate agent or solicitors and had not received any of the deposits paid by P,[7] those monies being first paid to a firm of solicitors purporting to be acting for D (“the Solicitors”) and then to a Mr Ng who was said to be a business partner of Mr Sze and a relative of P.  D alleges that Mr Ng (on Mr Sze’s instruction) had without D’s authority and consent sold the Property to P.  D claims that the transaction was voidable because of P’s knowledge of the relevant improper and unlawful acts.  D also counterclaims for declaration, damages and other reliefs.

4.  D replied to P’s request for further and better particulars of the defence.[8] After that, P took out a summons pursuant to O 86, Rules of the High Court (“RHC”) for specific performance and striking out of D’s counterclaim.[9]  The orders sought were granted by the master[10] and D filed a notice of appeal against the master’s decision.[11]

ISSUES

5.  In view of the submissions from both sides, the major issues for the present purpose are as follows:

(i) whether the letter by D,[12] which does not comply with O 41 r 5(2), RHC, is admissible for the purpose of opposing P’s application for summary judgment;

(ii) if so, whether D has raised any substantial question of fact which ought to be tried; and

(iii) if so, whether what D says could amount to an arguable defence in law.

GENERAL LEGAL PRINCIPLES

6.  It is well‑established that the present appeal is by way of an actual rehearing of the plaintiff’s application and I should treat the matter as though it came before me for the first time.  I will give the weight it deserves to the previous decision of the master but I am in no way fettered by the previous exercise of her discretion: see §58/1/2, Hong Kong Civil Procedure 2017 (“HKCP”).

7.  It is also trite that summary judgment under O 86 should only be given where it is a plain case and ought therefore not to be tried: see Au Wing Cheung v Roseric Ltd.[13]  While the scope of application of O 86 and O 14 are different, the legal principles applicable to an application for summary judgment under both Orders are the same: see generally §86/4/1, HKCP.

8.  Where facts are in dispute, the court will not embark upon a mini‑trial on affidavit evidence and will only be satisfied that there is no issue or question in dispute which ought to be tried if it can be demonstrated that the defendant’s assertions are incredible or that even if what the defendant says is true, it gives rise to no defence as a matter of law.  In assessing the credibility of the defendant’s factual case, the question to ask is whether such case is capable of being believed, not whether it is to be believed: see Ng Shou Chun v Hung Chun San.[14]  The burden on the defendant in an O 14 application is not to disprove the plaintiff’s claim or to prove a ground of defence, set‑off, cross claim or counterclaim but only to satisfy the court that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial: see Ho Kuen Fai v Chun Wo Construction & Engineering Co Ltd.[15] If an element of the defence is based on a matter of inference, the court should not attempt to determine whether the inference should be drawn.  Instead the court should ask itself whether the evidence put forward by the defendant raise a sufficiently credible foundation on which the inference may (not must) be drawn at trial: see generally §14/4/9, HKCP.

CONSIDERATION

9.  I am grateful for the helpful written submissions from Mr Tang (acting for P) and Mr Alex Lai (acting for D), which are supplemented by their respective oral submissions in court, all of which I have carefully considered.

As to (i): Admissibility of D’s letter

10.  In the present case, D’s defence is that he has been subject to the continuing threats and monitoring of Mr Sze on the Mainland, that the Property was arranged to be sold without his authority and that his signed on the PSPA and SPA under duress.  In his letter, D purports to confirm the truthfulness of his allegations as contained in his pleadings and his answers to P’s request for further and better particulars.  He further explains that he is having a lawsuit with Mr Sze on the Mainland and therefore is not free to come to Hong Kong to make an affidavit.  He says that he authorises his elder brother, Mr Cheng, to deal with the present case for him in Hong Kong.

11.  There is no dispute that Mr Cheng, who produced D’s letter as an exhibit to his affirmation, has no personal knowledge of the subject matter in dispute.  He has not verified the contents of D’s letter. He has not even affirmed his belief that what was said in D’s letter is true. He has only deposed that he is D’s elder brother and that he has been authorised by the latter to make the affirmation.

12.  In view of the aforesaid, Mr Tang submitted that Mr Cheng’s affirmation is not in conformity with the requirements of O 41 r 5, RHC and therefore D’s letter is not admissible.  It follows, so the argument goes, that D has failed to discharge his burden to show cause against P’s summons by affidavit.  Reliance was also placed on Commissioner of Police v Lin Xin Nian,[16] a case about proceedings under O 115, RHC,[17] where it was said that documents annexed to a deponent’s affirmation were not evidence in their own right.  Furthermore, it was submitted that even assuming that D was not able to come to Hong Kong to make an affirmation, he could have made an affirmation before a notary public on the Mainland and in which case the affirmation could be used in Hong Kong.  That, D had not done.  In short, the above submissions are mainly concerned with the formal requirements of affidavit evidence.

13.  With respect, I am unable to accept the above submissions.  My reasons are as follows:

(i) I agree with Mr Lai that the fact that D’s letter is not covered by a proper affidavit does not on its own render the letter inadmissible for the purpose of opposing an application for summary judgment. It is because O 86 r 4(1), RHC provides that:

“A defendant may show cause against an application under rule 1 by affidavit or otherwise to the satisfaction of the Court.” (Emphasis supplied)

A corresponding provision is found in O 14 r 4(1), RHC where the phrase “or otherwise” also appears.  I note the remarks at §14/4/3, HKCP that the use of the term “or otherwise” is not intended to open wide the door for giving leave to a defendant who has no real defence and that in exceptional and obvious cases a letter from a defendant raising a genuine issue may be sufficient.  In other words, the phrase “or otherwise” allows the court to look at the substance of the materials relied upon by a defendant in case they are not covered by a proper affidavit.

(ii) The above is to contrast with the evidential requirement imposed on an applicant under O 86 r 2(1) where it is stipulated that an application for summary judgment shall be made by summons supported by an affidavit verifying the facts on which the cause of action is based and stating that in the deponent’s belief there is no defence to the action.  There is a similar provision in O 14 r 2(1).  Therefore, it is necessary for an applicant to have affidavit evidence in support of his application for summary judgment.

(iii) The above difference in evidential requirements between a plaintiff and a defendant is consistent with the nature of application, as the court considering the application of this type is concerned with whether or not there are any triable issues raised by the defence.  In other words, the focus is not so much on what D is able to show now by evidence but whether he may have a defence if there is a trial.  Bearing that in mind, there is no valid reason why the court should be precluded from having regard to materials placed before it which may shed light on that issue simply because of the absence of a proper covering affidavit from the defence.

(iv) Mr Tang submits that if D is allowed to rely on his letter instead of a proper affidavit, then even if D deliberately lied in what he said in the letter, he could not be caught for perjury, as the letter was not made under oath.  That may be correct.  However, if D1 deliberately caused a document to be placed before the court for the purpose of court proceedings which he knew contain false information, then there would remain a possibility of charging him with the offence of doing an act tending and intended to pervert the course of public justice.

(v) As regards the case of Commissioner of Police v Lin Xin Nian, there the issue before the court was whether the affirmation filed and relied upon by the prosecution in confiscation proceedings could contain hearsay, ie evidence of belief rather than evidence only of the deponent’s own knowledge.[18] McMahon J held that the effect of O 115 r 29(2) or O 41 r 5(2), RHC which permits evidence to be provided to a court expressed in the form of a belief based on disclosed grounds or sources must envisage the deponent providing what would otherwise be hearsay evidence to the court.  That must be a deliberate decision of the legislature based upon usually apparent reasons.[19]  It was in that context that McMahon J held that documents annexed to an affirmation are not evidence in their own right but they simply demonstrated the source of the deponent’s belief so that they could be examined to test what weight should be attached to the deponent’s statement of fact which was based upon them.[20]  It has to be noted that Lin Xin Nian’s case concerns the affirmation of a police officer filed in support of an application for forfeiture.  Therefore, there were obvious reasons why the affirmation should comply with stringent evidential requirements before a forfeiture could be ordered to extinguish the proprietary rights of other people.  Here, we are talking about whether the defendant has raised a triable issue so that he can be allowed to have his day in court, not that he will necessarily succeed in the action.  Therefore, in my humble view the ratio of Lin Xin Nian’s case, which is based on another Order of RHC with differently provisions dealing with proceedings of very differently nature, is not pertinent to the issue now under consideration.

14.  Mr Tang went on to submit that before the defendant can rely on the words “or otherwise” in O 86 r 4(1), RHC, there has to be affidavit evidence showing the existence of exceptional circumstances justifying D’s reliance on just his letter instead of a proper affidavit.

15.  I am unable to accept Mr Tang’s submission above.  With respect, that is to put a stricture on the provision which is not supported by its wording.  It is also to put the cart before the horse, as D would not rely on a letter if he could adduce affidavit evidence. The absence of a proper affidavit from a defendant, in my view, goes only to the question of weight.  That said, depending on the nature and contents of the materials in question, the absence of a proper covering affidavit may cause the court not to attach any weight to them.  Whether or not that is the case is a fact‑specific question.  In the present case, the document in question is D’s own letter which contains what he is supposed to give evidence about.  D had also given some reasons as to why he could not come to Hong Kong to make an affirmation.  In the circumstances, I simply cannot see why D should not be allowed to rely on the contents of that letter, simply because the letter is not a proper covering affidavit.  Of course, if D would not come to Hong Kong to give evidence in case of a trial, then the situation would be different.

16.  Based on the above, I am satisfied that the court can have regard to what is said in D’s letter in order to decide whether or not there are any triable issues. 

As to (ii): Factual basis of D’s assertions

17.  There are two sub‑issues here: (a) whether there is a sufficient factual basis to raise the issue of duress; and (b) if so, whether there is a sufficient factual basis to raise the issue about P’s knowledge (actual or constructive) of the alleged duress. 

18.  As to (a), Mr Lai pointed to a number of features in the sale of the Property which, he submitted, were unusual and suspicious and could provide support to D’s case of duress:

(i) the land search record[21] shows that there was an attempt by Mr Sze to register an encumbrance against the Property which indicates a financial dispute between he and D involving $100 million;

(ii) there is some evidence, in the form of a Whatsapp message from the estate agent to P,[22] saying that the asking price of the Property was, to the knowledge of the estate agent, substantially below the market value;

(iii) the PSAP was first signed by Mr Ng as the vendor, apparently without any power of attorney;[23]

(iv) contrary to the usual practice, it was provided in the PSPA that P would pay all the commissions (2%) to the estate agent and the vendor was not required to pay any commission;[24]

(v) neither the estate agent nor the Solicitors was engaged personally by D;

(vi) the initial deposit and the further deposit did not go to D but went eventually to the bank account of Mr Ng who, D said, was a stranger to him;

(vii) the signature of Mr Ng on the PSPA was subsequently crossed out and replaced by D’s signature.  As regards the SPA, although the execution of it was said to have been witnessed by a clerk of the Solicitors, it was not executed at the office of the Solicitors in Hong Kong.  The SPA was taken by the clerk to the Mainland for D’s signature there.  I note that it is D’s pleaded case is that he was made to sign certain documents on the Mainland by Mr Sze; and

(viii) shortly after the SPA was signed and before the present action was taken out by P, D had already written to the Solicitors raising queries about the transaction.[25]

19.  I have considered Mr Tang’s submission that there can be innocent explanations for each and every one of the above so that the circumstances of the transaction were neither unusual nor suspicious. However, in my view the above matters should be looked at as a whole rather than individually.  Having done that, I am of the view that there is some collateral support of D’s assertion of duress.

20.  I have not lost sight of Mr Tang’s criticisms about the credibility of D’s account as listed at §27‑29 of his written submissions, including (but not limited to) the fact that D’s account has not been supported on oath, that D has given various and different descriptions of P’s relationship with Mr Ng and none of them is supported by independent objective evidence and that there have been delays at various stages in the conduct of D’s defence.  It would not be appropriate for me to deal with the criticisms in detail now.  It suffices for me to say that I have considered all of them.  However, having considered everything as a whole, I am of the view that D’s assertion of being subject to duress by Mr Sze is not so incredible as to render it incapable of being believed.  Having applied the relevant legal principles discussed above, in my view there is a triable issue here which ought to be tried.

21.  As to (b), bearing in mind that specific performance is an equitable remedy and equity must come with “clean hands”, P’s purchase of the Property may be tainted if he is affixed with either actual or constructive knowledge of the alleged duress.  Mr Lai admitted that D’s case of P having actual knowledge is apparently a bit thin.  Had D’s case been based solely on P having actual knowledge, I would have no hesitation to grant summary judgment. 

22.  However, it is Mr Lai’s contention that D is also relying on P having constructive notice of the alleged duress through the estate agent.  Mr Lai submitted that there is a triable issue as to whether the estate agent had at least constructive knowledge of the alleged improper conducts on the part of Mr Sze and Mr Ng, if not also actual knowledge.  Apart from the features of the transaction referred to above, Mr Lai also pointed to the following:

(i) the estate agent was apparently not personally engaged by D;

(ii) it is reasonable to expect that the estate agent would have done a land search soon after he had received instruction to promote the Property and in any event before the signing of the PSPA and he would have known that Mr Ng was not the registered owner of the Property;

(iii) the estate agent should have required Mr Ng to produce evidence that he had D’s authority to sign the PSPA.  However, it is apparent that the agent estate had not done that; otherwise, there should be an indication on the PSPA showing that Mr Ng was signing in a representative capacity;

(iv) it is apparent that when Mr Ng signed the PSPA he did not have any power of attorney from D, as the power of attorney purportedly made in his favour was only dated after the execution of the PSPA; and

(v) in the circumstances, the estate agent not only allowed Mr Ng to sign as the vendor on the PSPA but also then purportedly gave initial instruction on D’s behalf to the Solicitors to handle the transaction.

23.  Again, looking at all the circumstances as a whole, I agree that there is just sufficient foundation for the contention that the estate agent had constructive knowledge of the alleged impropriety in the sale of the Property which in my view should not be dismissed offhandedly and warrants further examination.

24.  Mr Tang then submitted that even assuming that the estate agent had knowledge of any alleged impropriety in the transaction, his knowledge should not be attributed to P because of the “fraud exception”, as the estate agent would then be acting in breach of his duty by procuring P to enter into the transaction: Bilta (UK) Ltd (in liquidation) & Ors v Nazir & Ors.[26]

25.  For a concise statement of the law on the “fraud exception”, see Bowstead & Reynolds on Agency, 20^th ed, at §8‑207.  In my view, Mr Tang’s submission may carry a greater force in case the estate agent had actual knowledge of the alleged duress or had otherwise acted dishonestly.  However, it is difficult to see how it can be said that P was a victim of “fraud or wrongdoing” by the estate agent of the latter had only constructive knowledge of the alleged duress.  Moreover, P is not suing the estate agent and uses the fraud exception to counter a defence by the latter.  P is seeking to take advantage of the estate agent’s action (by asking D to specifically perform the contact which D said was procured by duress) whilst disowning the estate agent’s knowledge.  In other words, P is seeking to have the best of both worlds.  As discussed at §8‑213 of Bowstead,[27] there can hardly any justification for the application of the fraud exception in a situation like this.  Based on the above, Bilta (UK) Ltd (in liquidation) & Ors v Nazir & Ors is clearly distinguishable.

26.  Mr Tang then submitted that the effect of any constructive knowledge attributed to P would have become inoperative, as P would be entitled to rely on the execution of the SPA by D which amounts to a ratification of any unauthorised act of Mr Ng in the sale of the Property.

27.  With respect, whether D had in fact ratified the sale is a question of mixed fact and law.  D’s pleaded case, which is repeated in his letter, is that he was forced to sign even the SPA, albeit in the presence of the clerk of the Solicitors on the Mainland.  As discussed above, I am of the view that there is a triable issue as to whether D had acted under duress.  It follows that there is also a triable issue whether D had voluntarily ratified the sale by signing the SPA.

28.  Lastly, Mr Tang submitted that D should not be allowed to reply on the contention of constructive knowledge, the same not having been pleaded in D’s Defence and Counterclaim or in his answer to the request for further and better particulars.  All that has been alleged is that P is some sort of a relative of Mr Ng.  It was further submitted D should not be allowed to ambush P arguing constructive knowledge through the estate agent which was raised for the first time in counsel’s submission after P had already taken out the application for summary judgment.

29.  In these regards, I note that D has pleaded a case of P having knowledge of the duress without specifying whether the knowledge was actual or constructive and if the latter, by what means it was attributed to him.  No such particulars were sought by P’s request and none was given.  As far as D’s pleadings are concerned, he had just listed out the circumstances which he said were suspicious and then asserted that P had knowledge of the alleged duress.

30.  Based on the way in which D has framed his Defence and Counterclaim, I am of the view that the allegation of constructive knowledge is capable of being covered by and is thus implicit in D’s pleadings.  Although there is no expressed reference in D’s pleadings to any allegation of P having acquired constructive knowledge through the estate agent, that contention is not inconsistent with D’s pleaded case.  Besides, the factual foundation for such a contention has already been provided there.  It is well‑established that what has to be pleaded are facts and not evidence: see for example Tiong King Sing v Sam Boon Peng Yee.[28]  Therefore, I do not agree that the defence would be precluded from raising that issue at the trial, should there be one.

31.  As to whether it would be unfair for D to rely on the contention of “constructive knowledge obtained through agent” given that there is no explicit reference to it in D’s pleadings, I note that the contention was first expressed in the defence skeleton argument filed prior to the hearing before the master.  Therefore, the situation was not that P had never been made aware of it.  Prior to the hearing before the master, P could have either withdrawn the application or sought an adjournment and leave to file further affidavit.  However, P chose to do none of them and just go ahead with his application.  In the circumstances, I do not think that it would be unfair to allow D to rely on the contention for the present purpose.

32.  To conclude, I am of the view that D has by a narrow margin managed to raise a triable issue as to whether P has constructive knowledge that the sale of the Property was tainted with impropriety.

As to (iii): Arguable defence in law

33.  On the basis of the rulings above, I go on to consider whether it is necessary in law for D to show that P ought to have been aware of the risk of duress in particular or whether it would be sufficient for D to show that P ought to have been aware of a risk of some kind of wrongdoing in general which may vitiate the transaction.  In this regards, Mr Lai relied on Barclays Bank Plc v O’Brien[29] and contended for the latter.

34.  With respect, I agree with Mr Lai’s submission.  This is because of the nature of constructive notice which is about the existences of certain circumstances which would put a contracting party to enquiry.

CONCLUSION

35.  Having pondered over the respective submissions of both sides, I respectfully beg to differ from the view of the master.  I am of the view that D has just managed to raise triable issues in his Defence and Counterclaim and should therefore be allowed his day in court. 

36.  Lastly, I have considered whether D should be given leave to defence with or without condition.  I am alive to the comments at §86/4/1, HKCP that in claims for specific performance, as distinct from claims for damages, it is unusual for condition leave to defend to be given.  However, no case authorities have been provided for that proposition. In any event, the factual issues raised by the defence in the present case are also unusual.

37.  In considering whether and what conditions should be imposed on the defendant for his leave to defend, I have taken into account that the principles stated at §14/4/16, HKCP including the following:

(i) the fact that D’s case at present appears to be “shadowy” and that it is almost one in which summary judgment should be given.  I emphasis “at present”, as the state of the affairs may change and the trial judge will make his or her own findings;

(ii) D’s track record of meeting time requirements regarding the conduct of his defence has not been impressive.  This can be seen from the Chronology of Events prepared by Mr Tang;

(iii) on the face of it, P has already paid out $2.12 million as deposits and such sums have not been returned; and

(iv) the court should not shut out a triable case by the conditions it imposes on a defendant.

38.  Having considered all the relevant factors, I am of the view that justice would be best served by requiring D to pay $2.12 million into court without 28 days of this judgment as a condition for his leave to defend.  I am given to understand by Mr Lai that D is able to meet this condition.

39.  Therefore, I order that:

(i) the master’s order made on 24 August 2016 be set aside; and

(ii) leave be granted to D to defend on the condition that he pay $2.12 million into court within 28 days of this judgment.

COSTS

40.  Both parties agree that costs should follow the event.  Statements of costs have been filed by both sides and I have considered those.  Besides, I have looked at the written submissions used by both sides at the hearing before the master.  The written submissions the parties used then are very similar to the ones they used before me.  As such, some deduction should be made from the sum of $186,800 claimed by D.

41.  By way of summary assessment, I make an order nisi that P shall pay D a sum of $160,000 in total for the hearings before the master and this court.