The importance of pleadings in opposing summary judgment applications

Generally speaking, a party is bound by his pleaded case at trial and cannot rely on points or facts which have not been pleaded. While this is certainly the case at a trial, the traditional approach on summary judgment applications was generally to allow the defendant some leeway to rely on facts and/or points which have been disclosed on affidavit, albeit not in his pleadings: see Tso Yuk Yin v Wan Wai Hung [2018] HKCFI 2798; Parklane Mortgage Services Ltd v Li Ho Jacob [2021] HKCFI 537.

In a series of recent decisions starting from Kaefer AG v Winfield Marine Services Co Ltd [2022] HKCA 807, and applied by the Court of First Instance in Incu Global Ltd v D’Aguilar Capital Management Ltd [2022] HKCFI 3214 and Hong Kong Topkey Limited v Wintac (Hong Kong) Limited [2023] HKCFI 1711, there has been a marked and important shift away from this old approach. Now, as clarified in Hong Kong Topkey, where the defendant has already filed a Defence, the “general principle” is that the defendant cannot rely on points and/or defences which are not pleaded in the Defence, in opposition to a summary judgment application.

This  recent shift in emphasis highlights the need for practitioners, when dealing with a summary judgment application, to carefully examine and, if necessary, amend the defendant’s pleaded case when preparing his evidence in opposition.

In Kaefer, the plaintiff, a company incorporated in Germany, is the victim of an email fraud. 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, Tangxin transferred HK$785,889 (the “Sum”) out of the €987,026 received to a bank account of the defendant in Hong Kong.

The defendant contended that the Sum was received by it pursuant to an order from a Mainland customer to supply fuel to certain Mainland vessels. In its Defence, the defendant raised 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.

The plaintiff launched an application for summary judgment. The District Court Judge granted the application and entered judgment in favour of the plaintiff for the amount claimed. Importantly, the Judge refused to consider the defence of bona fide purchaser for value without notice (the “BFP Defence”), which was newly raised by the defendant shortly before the commencement of the hearing. This was notwithstanding that the elements or ingredients which constituted the BFP Defence might have been mentioned “in passing” or “accidentally” in the pleadings or affirmations in the context of a different plea.

The defendant applied for leave to appeal against the Judge’s decision to grant summary judgment. In particular, the defendant contended that the Judge ought to have considered the BFP Defence and concluded the case raised triable issues. This was rejected by the Court of Appeal. Chu JA, giving the judgment of the Court, held that the BFP Defence is a separate and distinct defence from the defence of change of position. The two defences are different in nature, and are not interchangeable. The defendant could not rely on facts that were specifically pleaded as particulars for the change of position defence to support the BFP Defence.

In Incu Global, the 1st defendant (“D’Aguilar”) sought recovery from the 1st plaintiff (“Incu”) of certain fees for trading services which were allegedly due and owing. D’Aguilar applied for summary judgment in the amount of those fees.

In opposition to the application, Incu alleged that D’Aguilar’s pleaded case was incomplete, because while a specific clause of the parties’ investment advisory agreement required parties to have a written and signed agreement on the fees, there was no proper subsequent agreement to activate such a contractual obligation.

DHCJ H. Au-Yeung rejected this argument. Amongst other things, his Lordship noted that it had never been Incu’s pleaded case that the fees were not payable for want of formality. Applying Kaefer, it was held that Incu could not rely on an unpleaded case in opposition to D’Aguilar’s application for summary judgment.

In Hong Kong Topkey, the plaintiff sought to recover from the defendants the outstanding principal and interest owed to the plaintiff under two loan agreements. The defendants had filed a Defence, in which they put forward various defences to the plaintiff’s claim.

The plaintiff applied for summary judgment. Judgment was entered against the defendants by Master Alexander Tang. The defendants appealed against the decision to a Judge.

Before DHCJ MK Liu, the defendants relied on various defences which had not been pleaded, including collateral contract and promissory estoppel. Applying Kaefer, his Lordship refused to allow the defendants to rely on these defences, and focused on the defendants’ case as pleaded in the Defence.

The following points made by the Judge in his written decision are particularly noteworthy:-

In Kaefer, “the Court of Appeal has laid down a general principle that while the defendant has already filed a defence to the plaintiff’s claim, the defendant cannot rely upon an unpleaded defence to resist an application for summary judgment”. The Judge rejected the defendants’ submission that the decision in Kaefer turned on its specific facts.

Tso Yuk Yin v Wan Wai Hung [2018] HKCFI 2798 and Parklane Mortgage Services Ltd v Li Ho Jacob [2021] HKCFI 537 are decisions predating Kaefer, and are decisions by the Court of First Instance. These decisions must be read subject to Kaefer, which is a recent decision by the Court of Appeal and an authority binding upon the lower courts.

Following Kaefer, if the defendant intends to raise a matter which has not been pleaded in his Defence to resist the plaintiff’s application for summary judgment, the defendant should seek leave from the Court to amend his own pleading.  After considering all the circumstances, including the importance of the proposed amendment to the defendant and whether the proposed amendment would cause any prejudice to the plaintiff, the Court would determine whether leave would be given to the defendant to amend his pleading. If leave is granted, the defendant may rely upon the new matter to resist the plaintiff’s application for summary judgment.  If leave is refused, the new matter would remain as an unpleaded matter, and the defendant cannot rely upon the same to resist the plaintiff’s application.

This article was co-authored by Jenkin Suen SC, Joseph Wong and Howard Wong.