Choi Yuk Ying v. Ng Ngok Chuen

HCA 1853/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1853 OF 2014

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R E A S O N S   F O R   D E C I S I O N

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1.The first thing on the first day of trial which requires resolution is the plaintiff’s oral application for leave to amend the Statement of Claim.

2.Paragraph 7 and prayer (1) contain the proposed amendments as shown below:

“7. Further or alternatively, these transactions in themselves amounted to an assignment to the plaintiff of all rights, interests and entitlement in respect of all future income of the Property from the date of transfer of the Property to the defendant for the duration of her lifetime. In the further alternative, by reason of the facts and matters pleaded in paragraphs 3, 4 and 6 above: (i) the defendant’s title and interest in the Property is and was at all material times subject to the plaintiff’s right to the income of the Property during her lifetime; and (ii) the defendant, since 24 October 1986, held and continues to hold the Property on constructive trust to give effect to such right.”

3.The first paragraph of the prayer proposes as follows:

“(1) A declaration that the plaintiff is solely and beneficially entitled to all the income from the Property during her lifetime and that the defendant, since 24 October 1986, held and continues to hold the Property on constructive trust to give effect to such right.”

4.There is another proposed amendment under paragraph 21, but I was told by Mr Wong SC (together with Mr Pao) on behalf of the defendant that they do not take issue with the same.  So I do not have to deal with paragraph 21 of the amendment.

5.It is obvious that as regards the amendment under paragraph 7, the focus of the argument is on paragraph 7(ii), it being obvious that paragraph 7 (i) is almost identical with paragraph 3 (1). It is repeated in paragraph 7 simply for the sake of completing the plaintiff’s case on her life interest in the rental income on both the assignment and under the principles of constructive trust.

6.Mr Shieh SC (leading Miss Tong) argues that the plaintiff’s amendment is necessitated by paragraphs 36.3.7 and 36.3.8 of the defendant’s Opening Submission which read as follows:‑

“36.3.7 further, as stated at Madam Choi’s Opening Submissions §§55(2) and 67, the chose in action purported to be assigned must be in present existence. That cannot be the case for any rental income to be derived in future as at October 1986, at least for income under leases not in existence as at the time of any such alleged assignment/agreement, and any such future right can only be the subject of an agreement to assign but not of an actual assignment. Any such agreement (if existed at all which is denied), as between the purported assignor (Ngok Chuen) and the purported assignee (Madam Choi) must, however, be supported by consideration from Madam Choi but there was none from her. See Chitty on Contracts (23nd ed, 2015) at §§19-028 — 19‑029; Guest on the Law of Assignment (2^nd ed, 2015) at §1‑11. (For rent to be paid under whatever lease that was in existence in October 1986, Madam Choi must have received the same (as she had been up to 1996)).

36.3.8  It is suggested that Ngok Chuen made a binding promise to Ng Senior that Madam Choi would be entitled to the future income, and that, upon execution of the 1986 PA (as well as the assignment of the Property from Ng Senior to Ngok Chuen), there was an equitable assignment of Ngok Chuen’s right to rental income.  See Madam Choi’s Opening Submissions §§75‑76.  But, at the execution of those documents, as stated above, rental income under future leases not yet in existence could only be the subject matter of an agreement to assign, but not of an actual equitable assignment.  Thus, at most, which is not accepted at all, the execution of those documents gave rise to an agreement to assign as between Ngok Chuen (as the purported assignor) and Madam Choi (as the purported assignee) which must, as submitted, be, but was not, supported by any consideration from Madam Choi.”

7.In Guest on the law of Assignment, 2^nd ed, 2015:‑

“Existing and future choses.  A distinction must be drawn between an existing chose, being a right that presently exists and is in the ownership of the assignor, and a future chose (or “expectancy”), that is, a right which does not yet exist or which the assignor has not yet acquired but which may be acquired by him in future.  The importance of the distinction lies in the fact that an existing chose is capable of being the subject of a present assignment whereas the assignment of a future chose cannot take effect as a present assignment because the assignor has nothing presently to assign.  A future chose cannot be assigned at law under section 136 of the Law of Property Act 1925.  In equity, the assignment of a future chose can, however, have an effect, but as an agreement to assign.  Such an agreement may be effective to transfer the chose once it comes into existence and is acquired by the assignor.  But, being an agreement to assign, it requires consideration to be enforceable by the assignee.  ...  On the other hand, the law treats as an existing chose a present contractual right to receive some performance in the future, for example, the right to future payments of rent under an existing lease or future instalments payable under a hire-purchase agreement already made.  ...”

8.Mr Shieh contends there is obviously a distinction between an existing chose and a future chose.  He complains that the defendant has not articulated their case on “all future income”, and there was no specific plea of future chose which is as direct and clear as they now assert in their Opening Submissions, thus necessitating the plaintiff’s present proposed amendment alleging constructive trust whereby it is averred that the defendant holds all future rental income on trust for the plaintiff.

9.I do not agree with Mr Shieh.  The plaintiff has the carriage of the action and should plead and be able to prove each and every averment on their pleading, regardless of what defence the defendant raises.  Even if, as contended by Mr Shieh, the defendant should plead the point regarding future chose in action, the plaintiff’s amendment should be one relating to the assignment issue.  But instead, what is now proposed to be amended is the point on constructive trust. 

10.I do not think there is much dispute that the issue of constructive trust is brand new and only arose for the first time in the proposed Amended Statement of Claim.  It is a completely new cause of action and it certainly is not obvious from the pleadings.  In Suen Shu Tai v Tam Fung Tai [2014] 4 HKC 537, at paragraph 9.3, it says:‑

“9.4 The extent of the pleading, which serves to identify the issues, must depend on the context of an individual case. In my view, the parties in this case could not have been unable to focus on the issues that required consideration at the trial.”

11.It is highly undesirable, to say the least, that a new cause of action was proposed to be inserted in the pleading at such a late time.  I was told by Mr Wong that he was being given copy of the proposed Amended Statement of Claim in the afternoon of Saturday (11 February 2017).  An absence of justifiable explanation for the delay alone is a highly relevant consideration when the court considers how to exercise its discretion on an application to amend pleadings: Hesson Development Ltd v Tang Ki Fan Tso, HCA 5584/1998 paras 5 and 7; DBS Bank (Hong Kong Limited) v Sit Pan Jit, HCA 382/2000 paras 20‑27.

12.Moreover, I am inclined to agree with Mr Wong that the pleading at paragraph 10 of the Defence and Counterclaim is sufficient to put the plaintiff on notice that the plaintiff’s entitlement to all future income is challenged:‑

“10. As to paragraph 5:-

(1) it is denied that Ng Senior and/or the defendant assigned and/or agreed to assign to the plaintiff all rights, interests and entitlement in respect of all future income of the Property to the plaintiff from the date of transfer of the Property to the defendant for the duration of her lifetime.

(2) without prejudice to the denial above, the plaintiff is put to strict proof as to the validity and enforceability of the alleged assignment and/or agreement to assign vis‑à‑vis the defendant as a matter of law.

(3) except pleaded above, paragraph 5 is denied.”

13.The defendant is entitled to put the plaintiff to strict proof of each and every aspect of his case. 

14.On the facts, the plaintiff had received rental income for at least ten years from 1986 to 1996.  It is unlikely that she is unaware of the fact that there was only one lease governing all future rental income or there were leases for rental income after 1986.  Being aware of the facts, it follows that she (and her lawyers) must be or ought to be acutely aware of the legal point that there may be issues of present chose or future chose.  Indeed, Guest cited by Mr Shieh has made it very clear the distinction between the two. 

15.Even if I were to hold that the defendant ought to have pleaded their case on future chose in action, which I did not, this still does not detract from the fact that the plaintiff has to plead her case, including all causes of action, fully and properly.

16.Of importance to note is that it is now trite and very well settled that post‑CJR, late application for leave to amend is to be avoided at all costs. 

17.Mr Shieh submits that the pleading on constructive trust is based on the same material facts which have already been pleaded under paragraphs 3 and 4. 

18.Mr Wong argues that the plea of constructive trust appears to be defective as there is no pleading or no particulars of unconscionability affecting the plaintiff.  Mr Shieh submits that this is not required for cases where constructive trust on assignment of life interest are in question.

19.It is unnecessary for the court, especially in view of the fact that the arguments came before the court in such a hurried fashion, to decide whether unconscionability needs to be particularized. 

20.However, it must be right that the defendant is entitled to research the issue, take instructions on the facts relevant to unconscionability and reply thereto.

21.Suffice to say that if the amendment is allowed, an adjournment to the defendant is inevitable.

22.I agree with the defendant’s submission that the adjournment in itself is sufficient prejudice to the defendant. The defendant has cited many cases in support of this point, but I only need to cite one.  In Jose Miranda Da Costa Junior Miranda Gems E Mine Ltda v Lorenzo Yih & others HCA 156/2010, at paragraph 18:‑

“18. ... Such a last-minute manoeuvre creates a dilemma for the innocent party: to seek an adjournment which would mean having to derail the hearing (when the innocent party was anxious to have its summons heard as soon as possible) or to live with it and doing what was possible within the limited time available. It has been said that “[t]he unenviable position that such a party finds himself in it is itself a prejudice:: see per A Cheung J (as he then was) in Wise Union Industries v Hong Kong Science and Technology Parks Corporation, unreported, HCAL 12/2009, 21 September 2009 at §9.”

23.By reason of the aforesaid, I dismiss the application for leave to amend the Statement of Claim.

24.The next issue is a more difficult one. 

25.If I refuse the plaintiff’s application to amend, is she nonetheless entitled to rely on the principles of constructive trust.  Mr Wong asks the court to rule that the plaintiff is disentitled to rely on constructive trust during the trial or in closing submissions.

26.Mr Shieh relies on In re Vandervell’s Trusts (No 2) (1974) 1 Ch 269.  At p. 321G, it was said:‑

“Mr Balcombe for the executors stressed that the points taken by Mr. Mills were not covered by the pleadings. He said time and again: “This way of putting the case was not pleaded.” “No such trust was pleaded.” And so forth. The more he argued, the more technical he became. I began to think we were back in the bad old days before the Common Law Procedure Acts 1852 and 1854, when pleadings had to state the legal result; and a case could be lost by the omission of a single averment: see Bullen and Leake’s Precedents of Pleadings, 3^rd ed. (1868) p. 147. All that has been long swept away. It is sufficient for the pleader to state the material facts. He need not state the legal result. If, for convenience, he does so, he is not bound by, or limited to, what he has stated. He can present, in argument, any legal consequence of which the facts permit. The pleadings in this case contained all the material facts. It does appear that Mr. Mills put the case before us differently from the way in which it was put before the judge: but this did not entail any difference in the facts, only a difference in stating the legal consequences. So it was quite open to him.”

27.Mr Shieh further submits that, despite its age, In re Vandervell remains good law.

28.That may be so.  But I cannot ignore the fact that the approach in an elderly case such as In re Vandervell is out of step with the way pleadings are treated now, especially in at least two of the CFA cases cited by Mr Wong.

29.In Sinoearn International Ltd v Hyundai-CCECC Joint Venture (2013) 16 HKCFA 632 at para 27, it says:‑

“27. We have been faced with the extraordinary situation of a plaintiff being allowed at trial to run two alternative unpleaded cases without being required even to formulate a proposed amendment setting out what exactly those alternatives are. We face the even more extraordinary situation of the plaintiff succeeding on appeal on the basis of the alternatives still not pleaded by way of amendment — and succeeding on one of those alternatives. The position remained the same with nothing formulated in writing even when the case came on for hearing in this, the Court of Final Appeal. This has given rise to confusion and a real likelihood of procedural unfairness.

...

30. ... A party must raise all the issues he wishes to raise to be dealt with at the trial. Parties are not entitled to have issues recently thought up dealt with separately and piecemeal. The other party is entitled to know from a clear pleading what is the entire case he has to meet so that he can decide whether particulars should be sought; how he should plead in response; what discovery he is entitled to; what evidence he should adduce to meet it; and what points of law should be taken. ...

...

34. Pleadings are not mere formalities.  They impose a necessary discipline and are fundamental to enabling every procedural facet of the adversarial system to operate fairly.”

30.In Kwok Chin Wing v 21 Holdings Ltd (2013) 16 HKCFAR 663, the following are said by Ma CJ:‑

“23. The purpose of pleadings, in clearly and unambiguously setting out the true extent and nature of a dispute not just for the benefit of the parties but also for the Court in managing and trying cases, remains important under our system of civil justice. The retention of the old rules as to pleading as well as the introduction of new provisions over four years ago under the Civil Justice Reform, reinforce this.

...

27. The failure properly to raise a cause of action based on joint and several liability would have been enough to dispose of this appeal.  For the sake of completeness, however, I should also mention that the case was all the more hopeless when one examined the evidence.”

31.Furthermore, as Mr Wong submitted, to disallow the plaintiff to amend but nevertheless permit the plaintiff to run the constructive trust point is simply to let the plaintiff have the best of both worlds, the obverse side of which is to mete out the worst of both worlds to the defendant.  I agree.

32.Thus, it harks back to the same point that unless an adjournment is granted to the defendant, they would be prejudiced in the same way that a late application to amend is allowed, remediable only by an adjournment. 

33.I bear in mind that the case was set down for trial as early as March 2016.  Post‑CJR, moving the milestone dates such as trial dates should be avoided if at all possible.  The prejudice to the defendant will not be fully compensated by payment of costs, even on an indemnity basis.  They have waited for long for the trial to come on.  It would be an extremely unsatisfactory state of affairs if having declined the plaintiff leave to amend, the plaintiff is nonetheless at full rein to run the same point without pleading it.  The same surprise and prejudice would visit upon the defendant. 

34.Accordingly, I hold that the plaintiff is debarred from running the constructive trust issue during the trial or at closing submissions.

35.As for costs, I see no reason why the plaintiff should not pay the defendant’s cost of his application for leave to amend in any event and I so order.

Mr Paul Shieh, SC leading Ms Sara Tong, instructed by William W L Fan & Co, for the plaintiff

Mr Stewart Wong, SC leading Mr Jin Pao, instructed by P C Woo & Co, for the defendant