Kaefer a.G. v. Winfield Marine Services Co., Ltd

CAMP 559/2021

[2022] HKCA 807

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 559 OF 2021

(ON AN INTENDED APPEAL FROM DCCJ NO. 4320 OF 2019)

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J U D G M E N T

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Hon Chu JA (giving the Judgment of the Court):

A. Introduction

1.This is the defendant’s renewed application for leave to appeal against the decision of His Honour Judge Andrew Li (“the Judge”) dated 31 May 2021 granting the plaintiff’s application for summary judgment against the defendant and dismissing the defendant’s appeal against Master Maurice Lam’s refusal to order security for costs against the plaintiff. The defendant also applies for an interim stay of execution of the judgment pending the determination of the intended appeal.

2.Having considered the papers and the parties’ written submissions, we consider it appropriate to determine the applications on paper without an oral hearing pursuant to Order 59 rule 2A(5)(a) of the Rules of the High Court, Cap.4A.

B.  The Background

3.The background facts are not controversial and have been set out at §§32 to 50 of the Judge’s decision[1].

4.In brief, the plaintiff, a company incorporated in Germany, is the victim of an email fraud. On 16 April 2019, it made payment of €987,026 to a company named Hong Kong Tangxin Trade Limited (“Tangxin”) in furtherance of a fake business deal. After receiving the money on 17 April 2019, Tangxin transferred HK$785,889 (“the Sum”) out of the €987,026 received to a bank account of the defendant in Hong Kong.

5.The plaintiff instituted the action below to recover the Sum from the defendant.

6.The defendant is a supplier of vessel fuel. It does not dispute it had received the Sum, but claims to be entitled to it as payment for vessel fuels it had supplied to six vessels.

7.The defendant’s case is that in about mid-April 2019, it received an order from a long-time Mainland customer named “Ah Po” to refuel six Mainland vessels at an agreed price of HK$785,889. The defendant carried out the order and refuelled six vessels between 15 and 18 April 2019. On or about 17 April 2019, Ah Po informed the defendant that he had arranged payment for the order. Upon checking, the defendant found that on 17 April 2019 Tangxin had transferred the Sum to its bank account. By then, the defendant had already supplied fuels to five of the vessels.

C.  The parties’ pleaded cases

8.In the action below, pleadings had closed.

9.In the Statement of Claim, the plaintiff seeks to recover the Sum as money had and received on the ground of unjust enrichment and/or restitution[2].

10.In its Defence, the defendant raises the defence of change of position, claiming that it received the Sum as settlement of fuel charges in good faith and without notice of the alleged email fraud on the plaintiff and/or alleged holding on trust for the plaintiff[3].

11.By way of Reply, the plaintiff disputes the change of position defence, arguing that the defendant remains entitled to be paid by its actual customers, the receipt of the Sum was not causative of the change of position because five out of the six vessels were refuelled prior to the receipt of the Sum, and the defendant has failed to show it had incurred any extraordinary expenditure upon receipt of the Sum[4].

D.  The Master’s decision on the application for security of costs

12.The defendant applied for security for costs under Order 23 of the Rules of the District Court, Cap. 336H (“RDC”) on the ground that the plaintiff is a foreign resident with no assets or connections in Hong Kong. The plaintiff opposed the application on the basis that it has a genuine and strong case against the defendant and there is a reciprocal enforcement procedure in place between Hong Kong and Germany under the Foreign Judgments (Reciprocal Enforcement) Ordinance, Cap.319 (“FJREO”).

13.By his decision dated 2 July 2020 (“the Master’s Decision”)[5] Master Lam dismissed the application principally on the basis that the plaintiff has a very high probability of success in its claim, and the defence of change of position appeared to be weak[6]. The Master did not rely on the FJREO argument[7].

E.  The Judge’s decision

14.The defendant appealed the Master’s decision to a judge of the District Court.

15.At the same time, the plaintiff took out a summons applying for summary judgment and/or determination of three questions of law under Order 14A of the RDC.

16.The Judge heard the defendant’s appeal and the plaintiff’s application together. By his decision dated 31 May 2021 (“Judge’s Decision”)[8], the Judge dismissed the defendant’s appeal and entered summary judgment for the plaintiff for the amount of the Sum.

17.On the plaintiff’s application, the Judge refused the Order 14A application holding that the three questions were fact-sensitive and not suitable for Order 14A determination[9]. The Judge granted the summary judgment application and entered judgment in favour of the plaintiff for the amount claimed. In summary, the Judge considered that[10]:

(1)  The plaintiff had obtained judgment against Tangxin and had provided evidence on the details of the tracing, which was not challenged. The evidence shows that the Sum, which was deposited into the defendant’s account, came from the traceable proceeds from the fraud. The burden is thus on the defendant to prove that it has changed its position and it had acted in good faith.

(2)  The defendant’s belief that the Sum was paid by its customers is unconvincing and lacks credibility having regard to the fact that (i) Tangxin is not the owner of any of the six vessels; (ii) Tangxin is not a customer of the defendant and they had no prior or ongoing relationship; (iii) there was no evidence of any communication between the defendant and the vessel owners; and (iv) there was no plausible basis on which the defendant could have formed the belief that the Sum deposited by Tangxin was to settle the fuel charges.

(3)  The defendant had a right of recovery for the fuel charges by an in personam claim against the vessel owners and also by an in rem claim against the vessels. Alternatively, the defendant could have gone after Ah Po.

(4)  In respect of five of the vessels, the fuel was supplied in advance of payment. There was no (and no pleaded case of) any causal link between the provision of fuels and the receipt of the Sum from Tangxin. The absence of this essential element rendered the plea of change of position defective.

(5)  Further, by providing the fuel in advance of payment, the defendant had acquired the right to be paid (by the vessel owners, Ah Po and/or the vessels) for the value of the fuel supplied. There is in fact no change of position in that the defendant just changed one asset (fuel) for another (chose in action to be paid) and there has been no reduction in assets.

(6)  The alternative plea of anticipatory change of position is unarguable because the defendant did not anticipate, and could not have anticipated, payment of the Sum from an unknown third party which turned out to be Tangxin.

(7)  The good faith element was not established having regard to the fact that (i) the defendant provided substantial amount of fuel when it did not know the identity of the vessels or their owners; (ii) the defendant accepted payment from Tangxin without enquiry; (iii) the defendant delivered most of the fuels before receiving payment; and (iv) the defendant’s modus operandi suggested that it had no concern as to the source of the funds that came to it.

(8)  On the defendant’s case, the identity of Ah Po was mysterious and his role was highly dubious and unconvincing. It was noted that the defendant made no mention of Ah Po until in the affirmation opposing the Judgment Summons[11], even though the merits of the claim and the defence had been argued in the application for security before the Master. Most probably, Ah Po was introduced in light of the decision in Laerdal Medical Limited v Hong Kong Haocheng International Limited (unreported) HCA 2193/2016, 21 June 2017 in order to create a separation between the defendant and the vessel owners, and it would be convenient for the defendant to make a bare assertion that the payer could no longer be contacted because Ah Po said so.

(9)  In any event, even if Ah Po was treated as the representative of the vessel owners, the defendant still had a right of recovery against the vessel owners who are liable to pay the defendant for the fuels supplied.

18.The Judge also refused to consider the new defence of bona fide purchaser for value without notice, which was raised shortly before the commencement of the hearing[12]. The Judge was of the view that it was a new and distinct defence, notwithstanding the elements or ingredients which constitute the defence might have been mentioned “in passing” or “accidentally” in the pleadings or affirmations in the context of an entirely different plea. The Judge further held that there was no satisfactory explanation as to the lateness of the application, noting that at the hearing before the Master, the defendant’s counsel had confirmed that the defendant only relied on the change of position defence.

19.As to the defendant’s appeal, the Judge dismissed it principally for the reason that he found the plaintiff’s claim to have strong merits while the defence of change of position was not arguable and bound to fail was unarguable. The Judge also had regard to the reciprocal enforcement procedure between Hong Kong and Germany under the FJREO, and the authorities on reciprocal enforcement[13], the Judge concluded (at §81) that the Defendant had failed to discharge its burden to show that there were difficulties with enforcement in Germany as the defendant had produced no evidence on this issue, even though it had ample opportunity and time to do so. The Judge further took note of the financial position of the plaintiff[14], who claimed to have the equivalent of HK$131 million in cash reserves, and stated that the plaintiff’s financial position would have been another factor to be taken into account when considering the application for security.

F.  Application for leave to appeal

20.The defendant applied to the Judge for leave to appeal against both the summary judgment and the dismissal of the appeal against the refusal to order security for costs as well as to stay the judgment pending appeal.

21.The defendant put forward an extensive list of intended grounds of appeal, which were repeated in this renewed application.

22.By his decision dated 30 November 2021 (“the Leave Decision”)[15], the Judge refused to give leave to appeal and also dismissed the stay application.

G.  The renewed application for leave to appeal

23.By a summons filed on 14 December 2021, the defendant made the present renewed application for leave to appeal to this Court.

H.  Our reasons for decision

24.Section 63A of the District Court Ordinance Cap.336 provides that leave to appeal shall not be granted unless the Court is satisfied that the appeal has a reasonable prospect of success or there is some other reason in the interest of justice that the appeal should be heard.

25.The intended grounds of appeal and arguments of the defendant are substantially the same as those in the application for leave to appeal made to the Judge. The only new ground is Ground 1.10.

26.In summary, the defendant contended that: (i) the Judge should have considered the bona fide purchaser defence, and concluded that the case ought to go to trial on triable issues such as the change of position and anticipatory change of position defence; (ii) the plaintiff should be ordered to provide security because there were difficulties in enforcing a costs order against the plaintiff in Germany and the plaintiff’s financial position is volatile; and (iii) it is in the interest of justice to give leave to appeal because the issue of reliance in the context of a defence of change of position warrants a clarification from the Court of Appeal.

27.In our view, the defendant has only repeated its arguments made to the Judge, but had not really engaged with the primary reason underlying the Judge’ decision on the summary judgment application and the appeal as well as the leave to appeal application, namely, there is a fundamental lack of facts and evidence to support the defendant’s case and the application for security for costs. For the reasons set out below, we are of the view that the intended grounds of appeal do not enjoy any reasonable prospect of success.

  (1)  Ground 1.1

28.Ground 1.1 is a challenge against the Judge’s refusal to consider the bona fide purchaser for value without notice defence. It is said that the Judge should have considered this new defence despite it was not pleaded because (i) it was permissible for the defendant to show cause by affidavit or otherwise under Order 14 rule 4 of the RDC; and (ii) it was sufficient for the defendant to plead material facts without any need to state the legal result.

29.The Judge rejected this ground of appeal, referring to the discussions at §§94 to 110 of the Judge’s Decision and pointing out that: (i) the reference in the Defence (at §10(b)) to acting in good faith without notice was made only in the context of the change of position defence; (ii) the defendant’s counsel confirmed at the hearing before the Master that only the defence of change of position was relied on; and (iii) it is inapt to rely on Order 14 rule 4 of the RDC, which relates typically to a situation where the defence is yet to be filed, as is often the case in Order 14 applications.

30.We agree with the Judge that the bona fide purchaser defence is a separate and distinct defence from the defence of change of position. It was clearly not intended to be part of the defendant’s case when it took out the summons for security for costs. In fact, the defendant does not dispute that the bona fide purchaser defence is a new defence and that its counsel had confirmed to the Master that it only relied on the change of position defence. The defendant’s argument is that despite the defence was not pleaded, it is entitled to raise it based on the uncontradicted evidence and the pleaded facts. We do not agree.

31.Fundamentally, the two defences are not interchangeable. The nature and the tests required to establish the two defences are different. One cannot be passed off as another based on the similarity in the elements of the defence. The point was made clear by Lord Goff in Lipkin Gorman, supra, at 580H to 581A:

“The defence of change of position is akin to the defence of bona fide purchase; but we cannot simply say that bona fide purchase is a species of change of position. This is because change of position will only avail a defendant to the extent that his position has been changed; whereas, where bona fide purchase is invoked, no inquiry is made (in most cases) into the adequacy of the consideration.”

The Judge was accordingly correct to hold that the defendant could not rely on the facts that were specifically pleaded as particulars for the change of position defence to support a distinct and separate bona fide purchaser defence.

32.The case of Lo Yuk Sui v Fubon Bank [2020] HKCFA 6 does not assist the defendant. Read in its proper context, the Court of Final Appeal is not suggesting that a party is at liberty to run any defence based on the pleaded facts; otherwise, the other side and the court would be taken by surprise, which would go against the purpose of the rules of pleadings as stated by the Court of Final Appeal[16].

33.Further, in the context of case management, given the circumstances in which this defence was raised, including that it was raised shortly before the start of the hearing before the Judge and the lack of satisfactory explanation for the lateness, it cannot be said that the Judge was plainly wrong in refusing to allow the defendant to run this defence: see Wong Kar Kee Mimi v. Severn Villa Ltd [2012] 1 HKLRD 887 at §31; RK v TS (unreported) HCMP 1969/2012 at [6]; and Hong Kong Civil Procedure 2022, Vol 1, §§59/0/54 and 59/2A/4.

34.In any event, we do not accept that this defence, even if allowed to be raised, is a credible defence which merits a trial in view of the Judge’s finding that the defence “is unconvincing and lacks a ring of truth to it”.

  (2)  Ground 1.2

35.This ground complains that there is no evidential basis for the Judge’s comment that the defendant has fictitiously introduced the character Ah Po to stand between itself and the vessel owners so as to fit into the decision in Laerdal Medical Limited, supra.

36.In Laerdal Medical Limited, which was also an email fraud case, the plaintiff (Laerdal) was deceived into paying a sum of money to the defendant (Haocheng), who claimed that the money was received in the ordinary course of business under a contract with S&Y for the delivery of shoes. However, the money received by Haocheng was not from S&Y, but came from Laerdal, with whom Haocheng had no business or contractual relationship. Deputy High Court Judge Saunders held that as S&Y was obliged to pay for the shoes, Haocheng had the right to recover from S&Y, and there was no evidence that S&Y could not be found (see §28 of the judgment).

37.The Judge observed in his decision that most likely it was due to the above findings in Laerdal Medical Limited that the defendant had brought in Ah Po to stand between the defendant and the vessel owners, and it would then be convenient for the defendant to make the bare assertion that the vessel owners could not be contacted[17].

38.We accept it is arguable that the Judge’s view was to some extent speculative. However, this point is not pivotal to the Judge’s assessment of the parties’ case and the determination of the issues in dispute. It is evident from the Judge’s Decision[18] that he had considered the parties’ respective case comprehensively before concluding that the overall merits of the plaintiff’s case were very strong and the defendant’s change of position defence was not arguable. We do not consider the Judge’s view on Ah Po has a critical bearing on his conclusion on the defendant’s case.

39.It is also to be noted that the Judge had examined at length the role of Ah Po as described in the original and amended affidavit evidence[19] before coming to the view that the identity of Ah Po was mysterious and his alleged role in the transactions for refuelling of the vessels was questionable and unconvincing. The Judge concluded that the defendant’s evidence on the role of Ah Po was incapable of belief, especially in view of the significant and major changes in the defendant’s affidavit evidence over the description of the persons placing orders for fuels and the fact that the defendant could not realistically have been mistaken as to the role played by the various parties in its own business. This is a conclusion that the Judge was entitled to draw for the reasons he gave, notwithstanding it was a summary judgment application.

  (3)  Grounds 1.3 and 1.4

40.Under these grounds, the defendant challenges the Judge’s holding that he could sue Tangxin in Hong Kong or recover from the vessel owners. It is argued that there is no contractual relationship between the defendant and Tangxin, and the Judge had not considered the difficulties in extra-territorial enforcement. It is also said that whether it has a right of recovery against Tangxin and/or the vessel owners is fact-sensitive and should only be determined at trial.

41.The issue of recovery from Tangxin and the vessel owners had been considered at length by the Judge[20]. We agree with the Judge that [21]: (i) the burden was on the defendant to show it could not make a recovery but it had only made bare assertions without adducing supporting evidence, including evidence on any extra-territorial problems; (ii) the only evidence from the defendant was that the vessels cannot be traced, but one would expect Ah Po to have the relevant information, or the means of finding out, the vessel owners and the vessels; and (iii) the defendant has no answer to the fact that the vessels and their relevant details should feature in a register.

42.In the circumstances, the argument about the absence of contractual relationship with Tangxin or the assertion about extra-territorial problems in recovering payment for the fuel charges cannot advance the defendant’s case on this issue. It was also not open to the defendant to contend that the issue of recovery was fact-sensitive when it had adduced no evidence to show there would be genuine and practical difficulties in recovering payments from Tangxin and/or the vessel owners, let alone any factual issue to be tried.

  (4)  Grounds 1.5 and 1.6

43.The crux of the defendant’s arguments under these grounds is that the defence of anticipatory change of position has raised triable issues, the Judge was wrong to conclude that there was no reduction in the defendant’s assets, and the Judge had placed undue weight on the defendant’s lack of knowledge about Tangxin.

44.We are not convinced that there are merits in these grounds. The defence of anticipatory change of position was first raised in the defendant’s reply submissions before Master Lam, in response to the plaintiff’s argument that there was no change of position because the fuels were provided prior to the receipt of the Sum[22]. As the Judge and the Master pointed out, the fundamental problem with this defence is that the defendant could not have anticipated the payment of the Sum, for the simple reason that the payment came from Tangxin, a party entirely unknown to the defendant, and not Ah Po, whom the defendant claimed to be his long-time customer, or the vessels owners, to whose vessels the fuels had been supplied[23]. This being the case, there is no issue to be tried as to any “anticipation” on the defendant’s part.

45.The defendant also argues that lack of knowledge of the identity of the payer is not an essential element in the change of position defence, relying on the decision of Mr Recorder Eugene Fung SC in Credit One Finance Ltd v Yeung Kwok Chi [2020] HKCFI 2450. In that case, the plaintiff argued that a change of position defence was not made out by the defendant because she had no knowledge of the payments into her account and could not have relied on the payments to change her position. The Recorder noted that the issue of whether reliance is always a necessary ingredient of the defence of change of position is one of the unresolved issues in the law of unjust enrichment. After reviewing the relevant authorities and the development of the change of position defence in Hong Kong, the Recorder stated at §70(3) that:

“It seems to me that the insistence of having reliance as a necessary ingredient of the change of position defence in all cases would be too rigid and inhibitive to the development of the defence, which would seem contrary to the sentiments expressed by Lord Goff in Lipkin Gorman as repeatedly followed by the Hong Kong courts. I am satisfied that the “but for” causation test would be the appropriate test to be applied in this case.”

46.In the present case, the defendant has not even satisfied the “but-for” requirement in the change of position defence because the fuels were supplied to five of the vessels prior to the receipt of the Sum. The payment was not causative of the change of position. As the defendant correctly acknowledged, reliance is not necessary if the “but-for” requirement is satisfied[24]. In the Defence, the “but-for” element and the causal connection between the provision of fuels and the receipt of payment were not even pleaded. In our view, the facts of this case simply do not support a defence of change of position or anticipatory change of position. We also agree with the plaintiff’s submission that the defendant cannot maintain its ignorance of the identity of the payer while at the same time claims that it had anticipated the payment. In short, this argument and the reliance on Credit One Finance Ltd v Yeung Kwok Chi cannot advance the defendant’s case.

47.The defendant further argues that the Judge was wrong to hold there was no change of position (and no reduction of assets) because it “merely changed one asset (fuel) for another (the chose in action to be paid)”[25]. The Judge made this finding in the context of discussing the defendant’s right of recovery[26]. After considering the various means of recovery available to the defendant and noting that the defendant had made no effort to recover payment for the fuels, the Judge concluded that the fact that the defendant had the means of recovering payment for the fuels was fatal to the change of position defence. He then went on to point out that the change of position defence was also not established for the reason that the defendant has acquired an asset (the right to be paid) for exactly the value of the fuel provided, and thus there was no change of position because this was a mere change of asset from one (fuel) to another (the chose in action to be paid), an exchange that regularly happened in the ordinary course of its business. Thus, the Judge’s holding that there was no change of position (and no reduction of asset) is on the basis that the defendant has acquired a right to claim payment for the exact value of the fuel provided, and not simply because a change of asset has taken place.

48.It is also the defendant’s argument that in holding there was no reduction of asset, the Judge has ignored the operation of the anticipatory change of position defence, relying on Dextra Bank & Trust Co Ltd v Bank of Jamaica, supra. As stated above, we do not think that there is any issue to be tried on the anticipatory change of position defence as the defendant could not have anticipated the payment of the Sum, which did not come from Ah Po or the vessels owners, but from an unknown third party, Tangxin. In any event, it is not clear in what ways the Judge is said to have ignored the operation of the anticipatory change of position defence, or how this defence relates to the Judge’s finding that there was no reduction of asset. After all, the Judge’s finding was obiter, and is not the basis for the rejection of the change of position defence.

49.Lastly, the defendant contends that the change of fuel into a chose in action must be a change of position in itself, and if a chose in action could be relied on to defeat the change of position defence, then there would be no such defence. In our view, this is a misunderstanding of the defence of change of position, which “is available to a person whose position has so changed that it would be inequitable in all the circumstances to require him to make restitution, or alternatively to make restitution in full.”[27] The test is one of causation, namely, whether the party has entered the transaction that he would not have entered but for his enrichment[28]. It is not, as the defendant seems to suggest, that a change of position is established on the mere basis that there has been a change in the asset into a chose in action, or because of a mere expenditure of money. There has to be a causal link between the change of position and the enrichment.

(5)  Ground 1.7

50.This ground argues that the pleaded facts and affidavit evidence have sufficiently established the causal connection between the provision of fuels and the payment received and also the defence of change of position, hence the failure to plead the causal connection between the payment and the supply of fuels is not fatal.

51.It is helpful to begin by examining the relevant part of the Defence, which is as follows:

“E. The Defendant has changed its position

10. Paragraph 11 is denied. In particular, it is denied that the Plaintiff is entitled to the return of the sum of HK$785,889 or any part thereof from the Defendant. Insofar as the Plaintiff’s claim is one of money had and received and/or unjust enrichment and/or restitution, the Defendant bona fide changed its position in that: -

a. At all material times, it was the Defendant’s belief that the said sum of HK$785,889 were settlement of fuel charges rendered to their customers various vessels, namely, 東运428，興泰隆118，東运393. 興泰源18，東运801 and 東运938 for the period from 15^th April 2019 to 18^th April 2019 to which the payment was deposited from Tangxin;

b. The Defendant received the said sum as settlement of fuel charges in good faith and without notice of the alleged email fraud on the Plaintiff and/or alleged holding on trust for the Plaintiff; and

c. Since 17^th April 2019 to the Writ of Summons, there have been various genuine deposits, withdrawals and/or transfers into and out of D’s Bank Account in the Defendant’s ordinary course of business.”

52.The defendant has not specified which part of the above pleadings or its affidavit evidence that the Judge is said to have overlooked.

53.Putting it at the highest, this part of the Defence only shows the that defendant believed there was a connection between the supply of fuels and the payment of the Sum. This, however, is not the same as establishing a causal connection which is required in a change of position defence. Moreover, no causal link be inferred from the defendant’s affidavit evidence which deposed that the fuels were provided prior to the receipt of payment[29]. The argument that the pleaded facts and affidavit evidence have sufficiently established the defence of change of position is thus not made out. The position is as stated in Goff & Jones, supra, at §27-32:

“The onus of pleading and proving the change of position defence is on the defendant, who must put it forward “fairly and squarely” in his statement of case so that “its factual merits could be explored at the trial”; he must also adduce evidence and give disclosure in support of the defence … the defendant must prove, at least on a “but for” basis, that his change of position was causally linked with his enrichment.”

(6)  Grounds 1.8 and 1.9

54.These grounds are directed at the Judge’s finding of lack of good faith on the defendant’s part. It is said that there is no basis for the finding. It is also argued that whether there is a lack of good faith in failing to act in a commercially acceptable way is a fact-sensitive issue which should not, and could not, be determined on affidavit evidence on an Order 14 application

55.The Judge’s finding that there was a lack of good faith in that the defendant failed to act in a commercially acceptable way[30] is based on the undisputed fact that the defendant, on a regular basis, accepted payments from unknown third party for fuels supplied to vessels when it did not know the identity of the vessel owners, and that it would not make enquiries to verify the source of funds received[31]. Contrary to the defendant’s submission[32], this issue is not about whether the defendant was negligent; it is the defendant’s modus operandi that calls into question the issue of good faith. In any event, it is for the defendant to establish that it has acted in good faith. We agree with the Judge that the relevant supporting facts are only known to the defendant, but it has failed to bring them into evidence. We see no reasonably arguable basis to challenge the Judge’s finding that there was a lack of good faith in light of the defendant’s failure to act in a commercially acceptable way.

(7)  Grounds 1.10 and 1.11

56.Ground 1.10 asserts that the Judge ought not to have granted summary judgment as there is insufficient evidence to establish enrichment. The defendant’s written submission (at §15) further contends that there is no evidence to show that Tangxin is a constructive trustee for the plaintiff in respect of the defrauded money.

57.We agree with the plaintiff that this is a new argument, which was not raised before the Judge in either the summary judgment application or the application for leave to appeal. Whether Tangxin is a constructive trustee for the plaintiff in respect of the Sum was not in issue before the Judge. It is not open to the defendant to take this ground on appeal.

58.In any event, the plaintiff had obtained judgment against Tangxin, including a declaration that the defrauded money was received on constructive trust. It is also not in dispute that the Sum received by the defendant could be traced to the money paid to Tangxin.

59.Ground 1.11 is no more than a general ground that summary judgment should not have been granted. For the reasons above and those given by the Judge, we do not agree that the Judge erred in granting summary judgment to the plaintiff.

60.In summary, the intended appeal against the summary judgment has no reasonable prospect of success.

(8)  Grounds 2.1 to 2.4

61.These grounds relate to the dismissal of the appeal against the refusal of the application for security for costs. It is said that the Judge erred in placing excessive reliance on the existence of the reciprocal enforcement procedure between Hong Kong and Germany and failed to appreciate the actual difficulties in the enforcement of a cost order in a non-English speaking country that runs a civil law system. The defendant also complains that the Judge placed undue weight on the financial position of the plaintiff without regard to its extreme volatility and foreign nature. The Judge is further said to have erred in finding that the plaintiff has a high probability of success.

62.Since we have found the intended appeal against the summary judgment not reasonably arguable, it follows that the application for security of costs and the appeal against the refusal of the application must fall away.

63.In any event, while the fact that Germany is a country listed in the FJREO would not automatically immune the plaintiff from an Order 23 application, it remains for the defendant to show there were real difficulties with enforcement in Germany, including how the fact that it is non-English speaking and runs a civil law system would make the overall process of enforcement more difficult. We agree with the Judge that the defendant has not discharged its evidential burden.

64.As to the financial position of the plaintiff, the availability of HK$131 million cash reserves is only one of the factors, and not a determining factor, considered by the Judge. The Judge’s primary reasons are the strength of the plaintiff’s case and the lack of merits in the defendant’s case as well as the defendant’s failings with regard to the FJREO ground[33].

65.In short, the intended appeal against the Judge’s dismissal of the appeal on the application for security has no reasonable prospect of success.

(9)  Other grounds

66.The defendant also argues that leave to appeal should be granted because it is in the interests of justice that the reliance issue in the context of a defence of change of position, as well as the decision of Hua Rong Finance Ltd v Mega Capital Enterprises Ltd [2001] 3 HKLRD 623 (CA) and the observation of Mr Recorder Eugene Fung SC made in Credit One Finance Ltd v Yeung Kwok Chi, supra, be clarified by the Court of Appeal.

67.As pointed out by the Judge,[34] given that the decision to grant summary judgment was not based on the reliance or anticipation point alone, no useful purpose is served by giving leave to appeal on this ground as it would not have impacted on the outcome of the summary judgment application. Further, since the defendant has not even satisfied the main plea of his defence, namely the “but-for” or the “causal link” requirement in a change of position defence, clarifications by this Court on the reliance issue and Credit One Finance cannot assist the defendant.

(10)  Conclusion on the renewed application for leave to appeal

68.For the above reasons, we are of the view that the intended appeal does not enjoy reasonable prospect of success. Nor is there any matter which, in the interests of justice, requires the appeal to be heard. Accordingly, we refuse the application for leave to appeal and dismiss the defendant’s summons.

(11)  Application for stay

69.It follows from the refusal to give leave to appeal that the defendant’s application for stay of the judgment pending appeal should also be dismissed. We so order.

(12)  Costs and other matters

70.Applying the normal rule of costs follow the event, we order the defendant to pay the plaintiff the costs of the summons to be summarily assessed.

71.We have considered the statement of costs lodged by the plaintiff. We are of the view that the amount claimed is reasonable and will allow it in full. The plaintiff’s costs are summarily assessed at HK$ 36,968.

72.As the defendant’s application is totally without merit, pursuant to Order 59 rule 2A(8) of the Rules of the High Court, we order that no party may request our determination to be reconsidered at an oral hearing inter partes.

Mr Toby Brown, instructed by Lau, Horton & Wise LLP, for the plaintiff

Mr Kenny Lin and Mr Ken Cheng, instructed by CLM Lawyers, for the defendant