Chow Siu Ying and Another v. Wan Luen Tung

CAMP 94/2022

[2022] HKCA 1497

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 94 OF 2022

(ON AN INTENDED APPEAL FROM DCCJ 6597 OF 2020)

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Before: Hon Au JA and Hon Cheng J in Court

Date of Hearing: 9 September 2022

Date of Judgment: 9 September 2022

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J U D G M E N T

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

1.On 24 September 2021 by way of an ex tempore decision with reasons[1], District Court Judge Harold Leung dismissed the plaintiff’s Order 14 summons for summary judgment against the defendant with costs. On 23 November 2021, the plaintiffs applied for leave to appeal against the decision and the costs order. The application was taken out 46 days late.

2.After hearing the application, the judge dismissed the out of time leave application with reasons by his written decision dated 11 March 2022.

3.This is the plaintiffs’ renewed application for leave to appeal out of time.  Briefly stated, the 1^st plaintiff and the 2^nd plaintiff are mother and son and the defendant was, at the material times, the 2^nd plaintiff’s girlfriend.

4.In their latest amended Statement of Claim and the affirmation filed in support of the summary judgment, the plaintiffs’ claim against the defendant is for the repayment of a loan of about $1.7 million lent to the defendant to assist her to purchase a flat in Yuen Long in June 2020 with the purchase price of about $6.38 million.  The loan covered part of the payments of the purchase price, legal costs and disbursements.  The defendant financed the balance of the purchase via a mortgage taken out by her and guaranteed by her mother.

5.In her amended Defence and affirmation filed in opposition of the summary judgment application, the defendant admits that the $1.7 million was made as a loan to her by the plaintiffs but is subject to the orally agreed condition (we define it as “the oral condition”) that the loan is without interest and repayable out of the sale process only when the defendant sells it back.

6.In essence, the plaintiffs contended in the summary judgment application before the judge that no triable issues arose on the defence of the oral condition and said that it was not capable of belief because:

(a)  firstly, the allegation that the oral condition was only raised subsequently in the amended defence but not in the first place in the defence where the defendant only pleaded that the money was advanced as an unconditional gift; and

(b)  secondly, the oral condition was plainly illogical as it would mean that the defendant is able not to repay forever if she decides not to sell the flat.

7.The judge dismissed the summary judgment application as he concluded that it was triable as to whether there was the oral condition.  In particular, in rejecting the plaintiffs’ contentions, he was of the view that:

(a)  first, there was no clear inconsistency in the defendant’s initial plea made in the initial defence that the money was given to her as a gift and the present defence that the loan was made subject to the condition.  In any event, the judge was of the view that it was a matter of cross‑examination as to why the oral agreement was not raised in the pleading in the first place; and

(b)  secondly, the condition was not plainly illogical in light of the fact that the 2^nd plaintiff and the defendant were not lawyers or professional lenders and thus might not have thought of every possible scenario in the future.  The judge was also of the view there was nothing to suggest that the people could not behave illogically or had not thought out of the terms clearly.

8.In this present application, the plaintiffs have raised two proposed grounds of appeal.  First, it is submitted that the judge erred in not making a finding in relation to the inherent inconsistency between an unconditional gift and a loan to be repaid when the condition arises.  It is the plaintiffs’ contention that it is clearly an inconsistent position between an unconditional gift as pleaded in the original Defence and with the position that it is a loan subject to the oral condition as subsequently pleaded in the Amended Defence and advanced in the defendant’s affirmation.

9.As such, the subsequently raised defence of oral condition is clearly incredible or not capable of belief.  The plaintiffs also said that the judge further erred in speculating without basis that the defendant might have an explanation for such inconsistency at trial.

10.The second ground of appeal is that the judge erred in not finding the defence not capable of belief by reason of the illogical arrangement as newly alleged by her.  Although accepting that an irrational and illogical arrangement by itself does not necessarily mean it is not credible, the plaintiffs submit that the more illogical and irrational the arrangement is, the more incredible it is.

11.In the present case, the plaintiffs say the subsequently raised oral condition is clearly not capable of belief because:

(a)  it is extremely illogical to suggest that the plaintiffs would have agreed to a condition where they would never know when the loan will be repaid, as it is entirely up to the defendant to decide whether and when she would sell the flat, if at all; and

(b)  the allegation that the oral condition is nothing more than a bare assertion which is wholly unsupported by evidence.

12.The judge was therefore plainly wrong to have rejected this contention on the only basis that the parties were not lawyers or professional lenders.

13.For the purpose of this application, the well-established applicable principles are these.  First, for an out of time leave application where there is no satisfactory explanation for the delay, the applicant must show his intended appeal has a real prospect of success (as opposed to reasonable prospect) before the court will consider exercising its discretion in his favour (see Secretary for Justice v Hong Kong & Yaumatei Ferry Co Ltd, [2001] 1 HKC 125). 

14.Secondly, for an appeal against the first instance judge’s exercise of discretion in effectively granting unconditional leave to defend in an Order 14 application on the basis that there is a triable issue on the facts or evidence, the Court of Appeal would only interfere with the said exercise of discretion in exceptional circumstances (see Hong Kong White Book, 2022, paragraph 14/4/48).

15.Bearing these principles in mind, for the following reasons, it is plain to us that the plaintiffs’ present re‑application for leave to appeal out of time should be dismissed.

16.As rightly pointed out by the defendant, the plaintiffs have not provided any reason, let alone any satisfactory reason, for the 46‑day delay in taking out the leave application.  As such, they must show that the intended grounds of appeal have a real prospect of success.  In our view, the intended grounds of appeal as advanced have no merits at all in justifying this court to disturb the judge’s exercise of discretion.

17.First, in relation to the inconsistency ground, it is pertinent to note that the defendant did in fact plead in her original Defence that the money advanced by the plaintiffs was a loan as an alternative case to her primary plea that it was an unconditional gift (see paragraphs 9(2)(b) of the Defence).

18.Perhaps the real complaint of the plaintiffs in this ground in this appeal is that there was not a plea of the oral condition in the original Defence.  However, the defence must be understood in the context that it was filed in defence to the then Statement of Claim, where the only relief claimed by the plaintiffs was for the declaration that the flat was held on trust by the defendant for the plaintiffs and that the defendant shall assign the interest or title in the flat to them, on the basis of the pleaded fact that the defendant agreed to so hold the flat on trust for them.  There was no claim for the return or repayment of the $1.7 million (see the original Statement of Claim, paragraphs 4, 5, 8, 9, 14 and 16).

19.Once understood in that context, it is sufficient for the defendant in answer to the then basis of the plaintiffs’ pleaded claim to plead the relevant facts (and only the relevant facts) that the money advanced was either an unconditional gift or a loan, without the need to plead the detailed repayment terms of the loan.  The defendant’s explanation at paragraph 29 of her affirmation for the failure to plead the condition in the first place is thus not unreasonable.

20.In the premises, the inconsistency ground is simply not made out.  In any event, given the above reasons when the asserted inconsistency is understood in its proper context, it does not amount to clear error on the part of the judge to justify this court’s interference with his conclusion that there is a triable issue on the fact as to the existence of the oral condition.

21.Second, as to the illogicality ground, the defendant’s evidence is that the condition was agreed as the plaintiffs knew at that time she would not be able to repay the loan in a short period of time given the context and basis that:

(a)  her reluctance in making the purchase and receiving the loan;

(b)  her concern over her inability to finance herself for the purchase at that time (see paragraph 22 of the defendant’s affirmation).

22.These dispositions are also on the face of it supported by the various WhatsApp messages exhibited to the defendant’s affirmation (see paragraphs 18 to 21 of the defendant’s affirmation).

23.In our view, this evidence is at least capable of belief in particular in light of the undisputed fact that at the time, the 2^nd plaintiff and the defendant were in an intimate relationship and the defendant was also apparently in a good relationship with the 1^st plaintiff and hence, the plaintiffs would not be insisting on the defendant repaying the loan in any specified period and agreeing that its repayment, if necessary, would be arranged through the disposition of the flat (see also the 2^nd plaintiff’s own WhatsApp message on 8 November 2020 mentioning about the disposition of the flat in relation to the loan even after they had by then broken up).

24.Given this state of the evidence, it cannot be said, as submitted by the plaintiffs, that it is plainly illogical for the parties to agree to such a condition. Thus the illogicality ground is also not made out.  Quite to the contrary, in light of the evidence and objective context mentioned above, we agree with the judge that whether the parties did agree to the condition is clearly a matter for trial.

25.For the above reasons, the intended appeal grounds have no merit, let alone a real prospect of success.

26.For the same reasons, it is also reasonably open to the judge to dismiss the Order 14 summons on the basis that it was an abuse of process as the plaintiffs should have known that there was a triable issue after seeing the defendant’s affirmation.

27.The judge was therefore not plainly wrong to award costs of the Order 14 summons to the defendant (see paragraphs 26 and 27 of the leave application decision of the judge[2], and also paragraphs 14/7/3 and 4 of the Hong Kong White Book, 2022).  Therefore there is also no basis for this court to interfere with the learned judge’s exercise of discretion in relation to costs.

28.We will therefore dismiss this application.

(Submissions re costs)

29.I think both Madam Justice Cheng and myself have looked at the skeleton bill and we think it is overstated in the bill as lot of the works are duplicated and some of them may not have been incurred.  On that basis and having considered the costs already incurred in the court below, we will reduce the costs to $60,000 summarily.

30.So the plaintiffs should pay the defendant costs of this re‑application for leave to appeal out of time, the amount being summarily assessed at $60,000. 

(Submissions re costs)

31.It is, of course, to be paid forthwith.

Mr Conan Tsang, instructed by Wong & Co, for the 1^st and 2^nd plaintiffs

Mr Victor Yuen, instructed by C F Lee & Co, for the defendant