Eaa Securities Ltd v. Chan Lin Mui and Another

DCCJ 4015 of 2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4015 OF 2003

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BETWEEN

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Coram: Deputy District Judge K.W. Wong in Chambers (open to public)

Date of Hearing: 27^th June 2006

Date of Handing Down Reasons for Decision:  11^th July 2006

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REASONS FOR DECISION

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1.This is the Defendants' application by summons dated 26^th May 2006 for leave to appeal to the Court of Appeal against my decision handed down on 25^th April 2006 (“ my said Decision”) ordering, inter alia, that 24 out of 28 paragraphs (paragraphs 4 to 24 and 26 to 28) of the witness statement of So Tai Fai (“Anita So”) filed herein on 3^rd May 2005 on the Defendants' behalf be struck out.

2.Mr. Simon Lui, counsel for the Defendants submitted the test for granting leave was whether or not the grounds of appeals as set out in skeleton submission dated 22^nd June 2006 were “arguable”. Miss Eling Lee, counsel for the Plaintiff, however contended that the proper test should be “realistic prospect of success” as set out in Smith v Cosworth Casting Processes Limited [1997] 1 WLR 1538. Mr. Lui said that although the phraseology employed by them was different, he submitted that the two tests referred to the one and the same test. He conceded that the principles in Smith v Cosworth, the case often cited with approval in decisions of many similar applications in the District Court, were the correct ones.

3.The realistic prospect test stated by Lord Woolf in Smith v Cosworth Casting Processes Limited [1997] 1 WLR 1538 and cited with approval by Leong CJHK in Ma Bik Yung v Ko Chuen, unreported, HCMP4303 of 1999, 8^th September 1999 is set out below:

“(1)    The Court will only refuse leave if satisfied that applicant has no realistic prospect of succeeding on the appeal. The test is not meant to be any different from that which is sometimes used, which is that the applicant has no arguable case. Why however this court has decided to adopt the former phrase is because the use of the word “realistic” makes it clear that a fanciful prospect or an unrealistic argument is not sufficient.”

4.The other limbs of the test, e.g. public interest or unsettled law grounds referred to in Smith v Cosworth were not relied on by Mr. Lui.

5.Mr. Lui has helpfully summarized his grounds of appeal as this: the principles as set out in my said decision are correct but their application to the facts of this case is wrong. What he submitted was that although the Defendants had not pleaded a specific case of fraud, and had no intention to so doing, the evidence in Anita So's statement could still be adduced pursuant to the principles set out in my said Decision to support a broader case of unauthorized transactions on the ground of relevance. The Defendants were entitled to show how and why these unauthorized transactions came about. What the Defendants were prohibited to do is to argue or raise an issue of fraud by such facts.  In any event he argued that the threshold for leave to appeal was low. The Defendants should be given an opportunity to argue the same in the Court of Appeal. He nevertheless agreed that a better pleading should state that these unauthorized transactions were done by an employee of the Plaintiff and at the Plaintiff's direction.

6.I have reconsidered the argument of Mr. Lui. As I have pointed out in my said Decision, the Defence is simply a denial of all transactions save and except three (paragraph 5 of my said Decision). As can be seen in my said Decision, Anita So's evidence went further than merely stating that it was she who did the transactions without the Defendants' instruction. She went a lot further and said all these transactions were done upon the Plaintiff's direction and suggested that these were with the Plaintiff's express consent and assistance. Although the Defendants said that they are not going to raise fraud, it will be unrealistic to expect these factual issues be left unchallenged because highly controversial factual evidence by Anita So is introduced. These factual issues will inevitably be hotly contested. Yet hardly anything about the role played by the Plaintiff was pleaded. In fact the amendment option was expressly ruled out by the Defendants.     

7.Order 18 rule 8(1) of the Rules of District Court stipulates clearly that apart from fraud, any fact showing illegality which he alleges makes any claim of the opposite party not maintainable or which raises issues of facts not arising out of the preceding pleading (my emphasis) have to be pleaded: see paragraph 23 of my said Decision. I do not intend to repeat the principles stated in my said Decision. I simply do not understand how this dissection of issues and facts as advanced by Mr. Lui can help the Defendants. With due respect, I find his argument artificial and difficult to accept.    

8.In my judgment, I do not consider that there is any realistic prospect for the Defendants' argument to be accepted by the Court of Appeal. I therefore dismiss the Defendants' summons for leave to appeal with costs to the Plaintiff, with certificate for counsel, to be taxed if not agreed. I also order that that Defendants' own costs be taxed in accordance with the Legal Aid Regulations.

Miss Eling Lee instructed by M/s Woo, Kwan, Lee & Lo for the Plaintiff.

Mr. Simon Lui instructed by M/s Fairbairn Catley Low & Kong (DLA) for the Defendants.