Koo Dick Young Gudy and Others v. Chan Kin Hang Danvil and Others

HCA 1879/2017

[2024] HKCFI 377

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1879 OF 2017

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REASONS FOR DECISION

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1.At the hearing and having heard Ms Yan, counsel for the 2^nd Defendant (“Wong”), I dismissed Wong’s application by summons dated 13 April 2023 to adduce new evidence (“New Evidence Application”). Having further heard Ms Yan on the appeal, I also dismissed it. These are my reasons.

2.By her Notice of Appeal dated 2 November 2022, Wong appeals against the decision of Master Jeffrey Chau given on 21 October 2022 refusing to set aside the Default Judgment entered against her on 3 December 2021 for the sum of HK$4,487,123.60 (respectively “the Appeal” and “the Default Judgment”). On that occasion before the Master, both the Plaintiffs (“Ps”) and Wong appeared by counsel, and having heard them, the Master also varied the judgment sum to HK$2,594,923. The variation was not appealed against by Wong or by Ps.

3.It is trite that the Appeal will be conducted before this court by way of a rehearing.

4.At the hearing of this Appeal, the 1^st and 2^nd Plaintiffs (together “P1P2”) appeared in person while the 3^rd and 4^th Plaintiffs chose to be absent. With the express agreement of P1P2, I render this Reasons for Decision in English.

Ps’ claim and the relevant procedural chronology

5.For the present purposes, it would suffice just to summarize briefly matters relating to Ps’ claim, as Wong now does not seek to dispute Ps’ claim. The only defence Wong advances is that as a result of an alleged verbal agreement (“Alleged Verbal Agreement”) reached shortly before the signing of the settlement agreement on 12 July 2019 (“the Settlement Agreement”), Ps’ right “to recommence this action against [Wong] has been forfeited”[1] or that a promissory estoppel arose such that Ps have been estopped from further prosecuting this action thereafter, including estopped from obtaining the Default Judgment on 3 December 2022.

6.In a nutshell, Ps’ claim arose thus. In January 2016, upon certain fraudulent misrepresentations of the 1^st Defendant (“Chan”), the husband of Wong who was an accountant, Ps together sold and transferred the 100% shareholding (10,000 shares) of the 6^th Defendant (“the Company”) that they owned to Wong. In July 2016, Wong on-sold or transferred these shares to the 3^rd Defendant (respectively “D3” and “the July Sale”), but without paying Ps in full the agreed total consideration of HK$10,900,000, in that only HK$6,412,876.40 was paid leaving outstanding HK$4,487,123.60.

7.The Company owned was the registered owner of a property being a unit in Tower 1, Island Resort, 28 Siu Sai Wan Road, Hong Kong.

8.Ps commenced this action in August 2017 against 6 defendants - Chan, as the person making the fraudulent representations, Wong as the contracting party and the 5^th Defendant (“D5”) as the guarantor in the relevant share transfer agreement, D3 and the 4^th Defendant (“D4”) being persons involved in the July Sale which Ps claimed was a sham, and the Company in relation to the recission of the share transfer.

9.As is now not disputed by Wong, the Writ and the endorsed Statement of Claim was duly served to her, and she has not filed an Acknowledgment of Service within time or at all.

10.In October 2019, this action was discontinued as against D3, D4 and the Company upon, among others, their payment to Ps of an agreed settlement sum of HK$800,000.

11.As mentioned, on 3 December 2021, Ps obtained the Default Judgment, and upon abandoning a number of other reliefs claimed against Wong.

12.On 21 December 2021, Wong by summons applied to set aside the Default Judgment (“the Set Aside Summons”).

13.On 21 October 2022, Master Jeffrey Chau heard the application, and as said, refused to set aside the Default Judgment but varied the judgment sum.

Refusing the New Evidence Application

14.As the Appeal was brought under Order 58 of the Rules of the High Court, Order 58 rule 1(5) is engaged, which provides that:

“No further evidence (other than evidence as to matters which have occurred after the date on which the judgment, order or decision was given or made) may be received on the hearing of an appeal under this rule except on special grounds”.

15.The phrase “special grounds” is the same expression as in Order 59 rule 10(2) and requires the conditions laid down in Ladd v Marshall[2]to be satisfied, namely, (a) that the evidence could not have been obtained with reasonable diligence for use at the hearing below, (b) the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive, and (c) the evidence must be such as is presumably to be believed (§58/1/3 Hong Kong Civil Procedures 2024). Ms Yan did not dispute this.

16.The new evidence seeks to be introduced are 4 affirmations:

a.  The short 3^rd affirmation of Wong affirmed on 24 March 2023 consisting of 4 paragraphs in which she said she agreed with, and relied on, the evidence Chan has given in his 3^rd affirmation;

b.  The 3^rd affirmation of Chan also affirmed on 24 March 2023 (“Chan 3^rd Aff”);

c.  The affirmation of To Shuk Yee Suki (“Suki”) affirmed on 23 March 2023 (“Suki Aff”) consisting of 9 paragraphs. She purported to speak to a meeting in June 2019 in which she participated to corroborate Chan’s version that certain promises were made by Ps. In Chan’s affirmation filed on 14 April 2023 in support of the New Evidence Application (“Chan Supporting Aff”), Chan said Suki was his secretary[3] (without giving any details as to when) but in Suki Aff, Suki said that “I am a secretary of the 1^st Defendant”[4]; and

d.  The affirmation of Ho Sai Kwan, David (“Ho”) affirmed on 27 March 2023 (“Ho Aff”) consisting of 9 paragraphs. Ho is a practicing solicitor and a friend of Chan who has been giving Chan some legal advice on personal basis relating to this action. He said that he participated in the same meeting and he also corroborated Chan’s version relating to the alleged promises.

17.I note particularly the following 2 matters:

a.  Wong has already been given the opportunity to file 3 rounds of affirmations – the 1^st round was at the time when she filed the affirmations together with the Set Aside Summons, the 2^nd round was when Master Ho ordered on 31 December 2021 that Wong has leave to file a round of supplemental affirmations, and the 3^rd round was Wong filing affirmations in reply to Ps’ affirmations in opposition pursuant to the same order of Master Ho; and

b.  The main contents of Suki Aff and Ho Aff speaking to the alleged promises having been made in the meeting – namely §§5 to 7 in the respective affirmations – are identical verbatim. It strikes me as most surprising and incredible that 2 individuals remembering an event some 4 years ago would recount and describe events and conversations in the same exact sequence and with the same verbatim words.

18.In relation to why Wong could not have been obtained with reasonable diligence Suki Aff for use in the hearing before the Master, in Chan Supporting Aff Chan explained with one sentence that “Unfortunately, I had lost contact with her after she left employment”[5]. Chan then stated also in one sentence that “However, shortly after the hearing of the set aside application before Master Chau, I was able to locate Ms To [Suki]”[6]. No details whatsoever was given as to when Suki left her employment, as to why Suki could not have been otherwise located or contacted (for instance, by mobile phone or email or social media), as to what attempts and efforts Chan or Wong have made to try to contact Suki, and as to how suddenly Chan “was able to locate” Suki shortly after the hearing before the Master. All these would have gone to explaining why Suki Aff could not have been obtained with reasonable diligence. But none of these whatsoever was proffered.

19.Moreover, as mentioned, it is Suki’s own evidence that she is Chan’s secretary. Furthermore, as pointed out by P1P2 at the hearing, Suki’s address given in Suki Aff is the exact address given by one Ching Wan Wah Kitty (ex Chief Financial Officer of D5) in her affirmation filed on 28 January 2022 on behalf of Wong, who said there that she used to receive letters addressed to Wong at that address and that she “had not received any request from [Chan] to handle his wife’s correspondence”[7]. All these suggest that all along (particularly between December 2021, when the Set Aside Summons was issued, to October 2022 when the same was heard by the Master) Suki was still connected to Chan rather than completely “lost contact” as Chan alleged.

20.In sum, I am not at all satisfied that Wong has shown that Suki Aff, as a piece of new evidence, satisfies condition 1 of Ladd v Marshall.

21.Regarding Ho Aff, Chan or Wong did not explain at all why Wong could not have proffered it at the hearing before the Master.

22.Regarding Chan 3^rd Aff, this court asked Ms Yan at the hearing that as Chan by his 1^st affirmation filed on 28 January 2022 and 2^nd affirmation file on 16 June 2022, both filed in support of the Set Aside Summons, had already had two opportunities to speak about the Alleged Verbal Agreement and related matters, which Chan did in his 1^st affirmation, as such, how was it that Wong could not have proffered with reasonable diligence what Chan now said in Chan 3^rd Aff.

23.According to Ms Yan, Chan 3^rd Aff served to add in new additional matters, consisting of §§13(4), 14 and 15 therein, to boost the promissory estoppel defence (“Chan’s New Matters”). Notably, Chan’s New Matters consisted of a different version of the Alleged Verbal Agreement, namely, that (a) the new version now omitted the alleged term in the earlier version that any settlement sum Ps received from D3, D4 and the Company would be deducted from the settlement sum of HK$4,000,000 agreed to be paid by Wong under the Settlement Agreement, and (b) in its place now added after “… the 1^st Plaintiff would discontinue the action against the 1^st and 2^nd Defendant” the extra words “depending on our ability to pay at the time and the auditing work I had performed for him”.

24.As confirmed by Ms Yan, by this new version, Wong and Chan are now contending that Ps have promised that if Wong/Chan encountered financial difficulty and could not pay, Wong/Chan would no longer be liable to pay but the outstanding sum would be set off against the fees to be earned by Chan by performing work for Ps.

25.In Chan Supporting Aff, Chan did not explain at all why he did not depose to Chan’s New Matters in his earlier affirmations or why the same could not have been deposed to with reasonable diligence, or indeed, why he previously deposed to a different and inconsistent version. According to Ms Yan, the reason was explained in Chan Supporting Aff thus :

“I have briefly set out the verbal agreement between myself and the 1^st Plaintiff in the 1^st and 2^nd affirmations, I was advised by my then legal representatives that my own account of the verbal agreement would not be given much weight as there is no independent third party witness.”[8]

26.I find what Chan said does not amount to any explanation at all. In any case, his own evidence there that “there is no independent third party witness” is now directly contradicted by the fact that Ho is now being put forth by Wong as an independent witness and nothing whatsoever was said by Wong or Chan as to why Ho was unavailable to do so earlier.

27.Ms Yan relied on the Court of Appeal case of Johnson Electric International Limited v BEL Global Resources Limited[9] to submit that (a) there is a general proposition, or one that is applicable to the present facts, that in considering whether condition 1 under Ladd v Marshall is satisfied, the court would consider whether the party “have knowledge as to the significance of these information or documents which were accessible to that party”[10] at the time of the hearing before the Master, and (b) Wong did not have knowledge of the significance of the new evidence now sought to be adduced.

28.With respect and for these reasons, I have no hesitation in rejecting both limbs of the submission.

a.  Johnson Electric International Limited concerned an appeal against the summary judgment granted by the first instance judge. In §§13 and 14 of the judgment, the CA considered and then held that “in the context of an appeal from a first instance judgment granted under Order 14 (or Order 86)”[11] the rule of Ladd v Marshall required some modifications as spelt out by Lord Bridge in Langdale v Danby [1982] 1 WLR 1123 at p.1133D to F. The main rationale for such modifications is that the defendant in preparing his case in opposition to a summons for summary judgment is under pressure of time.

b.  Thus, the CA only held that the modifications are relevant to an appeal from a summary judgment, and that they are not modifications to be applied generally.

c.  Quite apart from the above, the part of the sentence set out in the paragraph 27 above and quoted by Ms Yan was the CA’s opinion, applying the principles to the facts of that case, as to what “the important issue” was on the facts of that case. In my view, the CA clearly was not laying down any new or general principle in respect of the consideration over condition 1 of Ladd v Marshall.

d.  On the present facts, it is idle to even suggest that Wong or Chan did not know the significance of the new evidence. They obviously knew about the significance as Chan actually spoke about the Alleged Verbal Agreement in his 1^st affirmation.

e.  Moreover, in Chan Supporting Aff (quoted in paragraph 25 above) Chan said that he was told by his lawyers, at the time of his 1^st and 2^nd affirmations, that his case of verbal agreement would lack weight as there was no independent third party witness. Thus and evidently, he well knew the importance of evidence from a third party.

f.  In my judgment, and evidently, what Chan and Wong are doing now, under the guise of adducing new evidence, is trying to change their evidence by introducing a new version to replace the earlier version of the Alleged Verbal Agreement.

29.For these reasons, I hold that the new affirmations sought to be adduced now do not satisfy condition 1 of Ladd v Marshall. I do not find it necessary to further consider the 2 other conditions of Ladd v Marshall. Accordingly, I dismissed the New Evidence Application.

Refusing to set aside the Default Judgment

30.Having refused the New Evidence Application, I considered the Appeal on the basis of the affirmations already filed when the matter was heard before the Master.

31.It is trite that as the Default Judgment was a regular judgment, the power to set it aside is discretionary, and the major consideration is whether Wong has shown a defence on the merits, which is one that has a real prospect of success (§§13/9/12 to 13/9/14 Hong Kong Civil Practice 2024).

32.It is common ground that the Settlement Agreement was entered into on 12 July 2019[12]. Wong’s case is that this was a second settlement agreement that replaced the first, but nothing turns on that.

33.The Settlement Agreement was a formal agreement consisting altogether 9 pages prepared by Messrs Chin & Associates. Wong, the 1^st Plaintiff and Chan Yui Hang (“YH”), the brother of Chan, were the contracting parties. YH signed the Settlement Agreement as a guarantor guaranteeing the liability of Wong. The signatures of all the parties were witnessed by a solicitor.

34.The pertinent part of the recital and terms in the Settlement Agreement, in short, are:

a.  The disputes arose from the sale of the shares in the Company and Ps’ claim for HK$4,487,123.60 (“the Claim”).

b.  In full and final settlement of all disputes, Wong agreed to pay the 1^st Plaintiff HK$4,000,000 (Clause 2.1) on or before 15 July 2021 (Clause 2.4), with interest at HK$15,000 per month to be paid on the 24^th day of each calendar month with 1^st payment on 24 May 2019, and upon default of payment of the said interest, additional interest would be payable (Clause 2.2).

c.  Legal proceedings for the Claim shall be withheld so long as Wong shall make the interest payments under Clause 2.2 and payment of HK$4,000,000 on or before 15 July 2021, failing which the 1^st Plaintiff shall have the right to commence proceedings (Clause 2.9).

d.  Under Clause 3, YH shall guarantee Wong’s obligations.

e.  Under Clause 4, the Settlement Agreement contained the entire agreement, and prior statements, representation or warranty are thereby excluded.

35.It common ground that Wong was in breach of Clause 2.2 in the payment of interest and in breach of Clause 2.1 and 2.2 as she has not paid the HK$4,000,000 on time or at all.

36.The 1^st affirmation of Wong filed on 21 December 2021 consisted of one page merely exhibited the Settlement Agreement and in it Wong said she was ill. Her 2^nd affirmation filed on 28 January 2022 deposed to matters relating to addresses and service, which are no longer relevant, and that Wong agreed with the defence put forth by Chan. Therefore, Wong’s defence was deposed to in the affirmations of Chan.

37.In the 1^st affirmation of Chan, he said that the Alleged Verbal Agreement was reached during the negotiation of the Settlement Agreement in which, among others and so far as relevant to an alleged defence, Ps verbally agreed that they would withdraw their complaint to the police against Wong “about the forged lease”. Chan then said that since the complaint has not been withdrawn as verbally promised “[he was] advised by [his] legal representatives that when the 1^st Plaintiff was in breach of the Verbal Agreement, his right to rely on clause 2.9 of [the Settlement Agreement] to recommence the legal action against [Wong] has been forfeited”[13] (“the Alleged Defence”).

38.This alleged promise to withdraw the complaint was not even mentioned in the Settlement Agreement, and nothing was said as to why the alleged promise was not so mentioned, when the Settlement Agreement clearly expressed that it was the entire agreement between the parties.

39.The remainder of Chan’s 1^st affirmation spoke about the deduction of HK$800,000 received from D3, D4 and the Company and potential disputes over quantum “depending on the results of discovery”[14].

40.Chan’s 2^nd affirmation deposed to matters concerning payments that were made but not taken into account and certain alleged dealings between Weizco and C&M, which were companies respectively owned by the 1^st Plaintiff and Wong. By all these Chan said that about 1.3 million odd ought to have been deducted.

41.The Alleged Defence only needs to be stated to be dismissed. It was not even said that the alleged consequence (“forfeiting the right to bring or continue proceedings”) was mentioned, not to say agreed, between the 1^st Plaintiff and Chan. Chan was barely asserting that thereby Ps completely lost their right to pursue their entire claim. Such bare assertion is simply absurd.

42.It is even more absurd in light of the fact that Wong, the 1^st Plaintiff and YH shortly after the Alleged Verbal Agreement signed the Settlement Agreement which provided in details the parties’ respective obligations and consequences of failure to perform and such, with YH signing as the guarantor of Wong.

43.The court has said time and again that the court will always view the allegation that there exists a collateral contract the sole effect of which is to vary or add to the terms of the written documents with suspicion, as any laxity would enable parties to escape from the full performance of the obligations of contracts unquestionably entered into by them (see Huang Mucai v Cheng Zhen Shu, HCA 1237/2011, 17 September 2012, DHCJ Lok (as he then was) at §§19-21 and the cases there cited).

44.In all, I have no hesitation in finding that the Alleged Defence is completely unmeritorious and has no prospect of success.

45.Next, Ms Yan boldly contended at the hearing that such alleged facts would found a defence on the merits based on promissory estoppel estopping Ps from further prosecuting this action. Such contention is clearly untenable.

46.The elements of promissory estoppel were succinctly set out by the oft-cited statement of Ribeiro PJ in Luo Xing Juan Angela v the Estate of Hui Shui See, Willy, deceased & Ors (2009) 12 HKCFAR 1, at §55 :

“55. A promissory estoppel may be said to arise where (i) the parties are in a relationship involving enforceable or exercisable rights, duties or powers; (ii) one party (“the promisor”), by words or conduct, conveys or is reasonably understood to convey a clear and unequivocal promise or assurance to the other (“the promisee”) that the promisor will not enforce or exercise some of those rights, duties or powers; and (iii) the promisee reasonably relies upon that promise and is induced to alter his or her position on the faith of it, so that it would be inequitable or unconscionable for the promisor to act inconsistently with the promise.”

47.As set out above, according to Chan’s allegation, all that Ps have promised was to withdraw the complaint, which allegedly was not performed. Thus, according to Chan, Ps never promised that they would not re-commence the proceedings in the event that Wong failed to pay. Therefore, to begin with, there was no promise not to enforce the right under the Settlement Agreement; not to mention that there was no alleged reliance or altering of Wong’s position and so on so that it would be inequitable or unconscionable for Ps to pursue the Claim. This allegation of promissory estoppel is utterly unmeritorious.

48.There is clearly no defence with real prospect of success shown by Wong.

49.For these reasons, I also dismissed the Appeal with costs to P1P2.

The 1^st and 2^nd Plaintiffs, acting in person, appeared in person

The 3^rd and 4^th Plaintiffs, acting in person, being absent

Miss. Scottie A. YAN, instructed by Messrs. Deannie Yew & Associates, for the 2^nd Defendant