Polyline Development Ltd v. Ching Lin Chuen and Others
Read the full judgment text of HCA 2319/2019 on BabelCite. This Court of First Instance judgment was delivered on 3 March 2021 before Mr Recorder Manzoni SC.
Civil procedure – strike out application – statement of claim – reasonable cause of action – resulting trust – constructive trust – breach of fiduciary duty – sham transactions – claim for account – unlawful means conspiracy – fraudulent trading – knowing receipt – dishonest assistance – limitation – laches – contractual estoppel – plaintiff Polyline Development Limited (in liquidation) – defendants including former directors, individuals and various corporate entities – business of developing Ding Houses in the New Territories – 9-step business model involving transfer of land to SPVs and then to Dings at nil or nominal consideration – plaintiff was wound up by order on 25 June 2003 – liquidators appointed in 2003 – writ issued 16 December 2019 – Schedule 1 and 3 properties transferred from plaintiff to D12 on 30 May 2001 for nil consideration – subsequent multi-layer transfers through various defendants – whether statement of claim disclosed a reasonable cause of action for resulting trust, constructive trust, breach of fiduciary duty, sham transactions, claim for account, unlawful means conspiracy, intent to defraud creditors and knowing receipt/dishonest assistance – whether the only reasonably pleaded claim, a resulting trust based on nil consideration to D12, was bound to fail due to contractual estoppel from the receipt clauses in the assignments – whether s.26 of the Limitation Ordinance extended the limitation period based on fraud or deliberate concealment – whether the equitable doctrine of laches barred the claim – held: only the resulting trust claim based on nil consideration to D12 reasonably pleaded, all other claims struck out as disclosing no reasonable cause of action – held: directors' first-layer transfers to D12 were expressly pleaded as made pursuant to the plaintiff's own business model and could not simultaneously be in breach of fiduciary duty – held: subsequent transfers after 23 December 2002 could not be breaches by directors who had ceased to be directors – held: constructive trust claim based on bare unconscionability did not arise from the business model – held: unlawful means conspiracy plea lacked particulars of the agreement – held: fraudulent trading cause of action vests in the liquidator or creditors, not the company – held: s.60 of the Conveyancing and Property Ordinance applies only to dispositions by the company, not subsequent transfers – held: knowing receipt and dishonest assistance claims collapsed with the breach of fiduciary duty – held: resulting trust claim bound to fail due to contractual estoppel from the receipt clauses acknowledging payment of consideration, following Prime Sight Ltd v Lavarello – held: limitation defence not 'manifestly and immediately destructive' of the claim; actual discovery of fraud could not be determined on a strike-out given disputed facts on affidavit – held: laches not 'plain and obvious' at this stage because it depended on a multi-factorial balance of justice assessment – statement of claim struck out and action dismissed as against the WG defendants and the 4th defendant – costs to defendants to be taxed if not agreed.
Legal issues: Whether the statement of claim discloses a reasonable cause of action for the various claims pleaded · Whether the resulting trust claim is bound to fail due to contractual estoppel from receipt clauses · Whether the limitation period under s.26 of the Limitation Ordinance can be extended · Whether the equitable doctrine of laches bars the claim
Outcome: Statement of claim struck out and action dismissed as against the WG defendants (1st, 6th to 12th, 14th to 16th and 18th defendants) and the 4th defendant. Plaintiff to pay the costs of the WG defendants and D4 of the action, to be taxed if not agreed.
Cited by 22 cases · Cites 14 cases
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HCA 2319/2019 [2021] HKCFI 483 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 2319 OF 2019 ________________________ BETWEEN
________________________ Before: Mr Recorder Manzoni SC in Chambers Dates of Hearing: 16 to 17 February 2021 Date of Judgment: 3 March 2021 ________________________ J U D G M E N T ________________________ Table of Contents
A. Introduction 1.This is an application by the 1st, 6th to 12th, 14th to 16th and 18th defendants (“the WG defendants”) and the 4th defendant to strike out the statement of claim. I hope that the individual parties will not take offence if I do not continuously refer to them by name, but by the epithet D1, D2 etc. 2.The WG defendants’ summons, dated 21 August 2020, seeks, amongst other things, the following relief[1]:
3.The summons goes on to seek security for costs in the alternative. 4.D4’s summons, dated 20 August 2020, is somewhat simpler. It seeks that the statement of claim be struck out on the basis that it discloses no reasonable cause of action, is scandalous, frivolous, or vexatious, and/or is otherwise an abuse of the process of the court. 5.By Summons dated 27 October 2020 the plaintiff applied for leave to amend its statement of claim in accordance with the amendments shown in the draft attached to that summons. By order of Mr Registrar Kwang, the various strike out summonses and the amendment summons were adjourned, with directions, to be heard before a judge in chambers, with 1½ days reserved. It is that hearing to which this judgment relates. 6.As is normal within a strikeout summons hearing, I will consider the strikeout by reference to the draft amended statement of claim (which I will refer to simply as the statement of claim). 7.Mr Barlow SC, counsel for the plaintiff, who was not the drafter of the statement of claim save for some proposed further amendments to paragraphs 49 and 50, confirmed that his client would stand or fall on the draft, together with the further alteration to paragraphs 49 and 50 concerning D4 which I will address below. The plaintiff did not seek to make further amendments to the statement of claim and did not suggest that further amendments or further particulars would be forthcoming. Therefore, I deal with the matter on the basis of the draft statement of claim only, and do not consider the question of whether it may be improved by further amendment or by the provision of further particulars. 8.At the outset I note that for the purposes of assessing the strikeout applications the court has been provided with:
9.It may be thought that if such voluminous material is necessary in order to persuade the court that the claim is obviously unsustainable, the application is somewhat ambitious. Notwithstanding that, I address the application on its merits, based upon the way it has been argued. Unfortunately however, the length and complexity of the propositions put forward has led to a very long judgment, and I apologise to the readers for that length. B. The Principles Applicable to Strike Out Applications 10.As a matter of general principle, it is trite that[2]:
11.Insofar as the application is premised upon the proposition that there is no reasonable cause of action, I must proceed on the basis that the facts alleged in the statement of claim will be established. No evidence is admissible in relation to this limb of the applications and I must address the matter simply on the basis of what is pleaded. Where a pleading is defective only in not containing particulars to which the other side is entitled the correct approach is to order particulars rather than strikeout the pleading[5]. 12.Insofar as the pleading is alleged to be scandalous, it will only be struck out if it is degrading, indecent and irrelevant to matters which are material[6]. 13.Insofar as “frivolous or vexatious” is concerned[7], the object of the rule is to stop cases which ought not to be launched. A proceeding is frivolous when it is not capable of reasoned argument or is without foundation or cannot possibly succeed. A proceeding is vexatious when it is oppressive or lacks bona fides. In Yifung Properties Ltd v Manchester Securities Corp (unreported., HCA 1341 and 1359/2014) Au-Yeung J stated:
14.Insofar as it is said that the statement of claim may “prejudice, embarrass or delay the fair trial of the action”, the court will generally[8] give a liberal interpretation to these words but they are aimed at identifying pleadings which are unnecessary in a way which will cause undue difficulty at trial or undue difficulty to the other side because it is unable to understand the case that it has to meet. However, it is not the purpose of this rule to dictate to a party the way in which it should frame its case, and the court will generally not strikeout a claim on this ground merely because it is unnecessarily long or complicated provided that it pleads the necessary elements of the relevant causes of action and does not offend against the general rules of pleading. The rule is therefore aimed at genuine embarrassment in dealing with the case or at matters which are wholly immaterial or irrelevant and which may involve expense trouble or delay in the overall resolution of the action. 15.Insofar as “Abuse of the process of the court” is concerned[9] , this is designed to ensure that the machinery of the courts is used for a bona fide purpose, and is not abused. A claim can be struck out as an abuse of the process of the court where it is groundless, including where the claim is obviously and plainly time-barred: see Ronex Properties Ltd v John Laing [1983] QB 398 at 408B-D, per Stephenson LJ:
16.This approach was endorsed by Kwan JA in Yanfull Investment Limited v Datuck Ooi Kee Liang [2017] 5 HKC 42 at [41] where she said:
17.The relevant test in this context was concisely stated by McHugh NPJ in Kensland Realty v Tai Tang & Chong (2008) 11 HKCFAR 237 at [153], quoting from Ronex Properties, where he stated that:
18.It is logical to start with the question of whether a reasonable cause of action has been pleaded, or exists, and only if that is shown to be the case, to move on to decide whether the other grounds for striking out have been made out, albeit that, in such circumstances, they can not be made out on the basis that no reasonable cause of action has been pleaded. However, even if a reasonable cause of action is disclosed in the statement of claim, the other grounds might be made out because, for example, any cause of action is hopeless due to limitation problems. 19.As a result it is necessary first to analyse in some detail the statement of claim. C. The Statement of Claim 20.The statement of claim has been described by the WG defendants as being a “kitchen sink”, containing every possible cause of action that the pleader could think of. I summarise the material averments that it contains: C.1 The Parties 21.The plaintiff was incorporated in Hong Kong on 8 August 1991 and was wound up by order made on 25 June 2003. Between 8 August 1991 and 25 June 2003 it was a developer of small village houses in the New Territories known as Ding Houses[10]. 22.D1, Madam Tam Shui (who is deceased, but whose personal representatives are D2, and who I shall refer to as D2) and D3 were the directors between 8 August 1991 and 23 December 2002[11], and they owed various fiduciary duties to the plaintiff[12]. I shall refer to them as the directors. The date that they ceased to be directors is relevant to the causes of action alleged. 23.It is pleaded that:
24.D1 then replaced Chi Tat Hong Development Limited as a director D12 from 18 July 2003 and D4 replaced Heng Yu Holdings Limited as a director of D12 from 30 June 2008. 25.Of the other personal WG defendants:
C.2 The Fiduciary Duties 26.Paragraph 17 sets out the fiduciary duties which D1, D2 and D3 owed to the plaintiff in their capacity as directors of the plaintiff. The precise content of the duties alleged is not particularly important, but the allegations follow broadly the normal fiduciary duties that are considered to be owed by directors to a company. 27.However it is significant to note that there are no fiduciary duties alleged to be owed:
C.3 The Business Model 28.Paragraphs 18A and 18B of the statement of claim set out 9 steps which the plaintiff would take to develop Ding Houses, which effectively sets out the business model of the plaintiff. 29.Without repeating the statement of claim verbatim, the steps to be taken include land acquisition, the assignment of the land to a special purpose vehicle which would then transfer the land to a Ding for no, or a nominal, consideration. There was then the creation of the necessary trusts and other documents from the Dings to ensure that the profits were channelled back to the plaintiff or its SPVs, applications for the necessary licences including the necessary (albeit false) declarations by the Dings as to legal and beneficial ownership, then construction of the house, and ultimately lease or sale. 30.The proceeds of any sale of the Ding Houses would be channelled back to the plaintiff or the SPVs. If the Ding House was not sold, it is said that at some unspecified point in time (and in some unspecified manner) the property would be transferred back to the plaintiff. C.4 The Transactions 31.Paragraph 19 of the statement of claim then sets out a large number of particulars of acquisition, assignment and transfer of land made by the plaintiff, to various parties, including various of the defendants, and further transfers from, in many cases, one defendant to another. The full particulars of the transfers are set out in Schedules 1, 2 and 3 of the statement of claim, and the various parcels of land are referred to by reference to which schedule they are found in. It is to be noted that:
C.5 Resulting Trust 32.Based on the facts and matters pleaded in paragraphs 1-19, paragraphs 20 to 21B of the statement of claim make a claim for a resulting trust. They contend that:
C.6 Constructive Trust 33.Paragraphs 22 – 23 of the statement of claim make a claim for a constructive trust. They contend that:
34.The transfers and conspiracy are to the detriment of the plaintiff such that it is unconscionable for D7, D12 to D16 to deny the plaintiff’s beneficial interest in the Schedules 1 and 3 properties. 35.Consequently, it is said, D7, D12 to D18 hold the properties, or their proceeds on constructive trust for the plaintiff. C.7 Breach of Fiduciary Duty 36.Paragraphs 24 to 28 plead breaches of fiduciary duty owed by each of the directors to the plaintiff, that being the only fiduciary duty alleged in the statement of claim:
C.8 Sham Transactions 37.Paragraph 29 alleges that all of the Schedule 1 and Schedule 3 transfers were sham transactions, because it was the common intention of the plaintiff, through its directors, and D12, that they would not create legal relations, but were intended to give the appearance of transfers to third parties. The actual legal relationship between the plaintiff and D12 was one of trusteeship as previously pleaded. C.9 Claim for an Account 38.Paragraphs 30 to 32 plead that as a result of the breaches of fiduciary duty, and the sham transactions the directors and D7 and D12 to D18 have an obligation to account, and the plaintiff is entitled to an account of the lots and any proceeds arising therefrom. 39.A claim for an account is not a remedy for a wrong, but is a claim as of right once a trust or fiduciary relationship is established: See Libertarian Investments Ltd v Hall (2013) 16 HKCFAR per Lord Millett NPJ at [167]. Consequently, whilst it is correct for the statement of claim to plead the entitlement, as it is not a cause of action in itself I do not need to address it further. It will stand or fall with the other causes of action pleaded. C.10 Unlawful Means Conspiracy 40.Paragraphs 32A to 32D plead an unlawful means conspiracy between the directors, D7 and D12 to D16 to defraud the plaintiff and misappropriate the Schedules 1 and 3 lots. The unlawful means was the transfers previously pleaded as being for no consideration or at a gross undervalue. The particulars of each transaction identify the acts which are said to have been unlawful, and the way in which each defendant has been involved in that unlawful act. Thus in order to understand the conspiracy claim it is necessary to look at each individual transaction. No particulars have been given of how or when the alleged conspiracy arose, or, insofar as the corporate defendants are concerned, between which human agents it arose. 41.Paragraph 32B(3) pleads that each of D7 and D12 to D16 have acted dishonestly and with knowledge that the transfers to them had been effected in breach of fiduciary duty owed by the directors to the plaintiff. The paragraph goes on to plead particulars of the knowledge alleged to have been held by each of the relevant defendants. 42.Paragraph 31B(4) pleads that “throughout” the directors and D7 and D12 to D16 have concealed, and continue to conceal all of the matters pleaded in paragraph 31, and the whereabouts of the proceeds. 43.Paragraph 32D then expands the plea to say that:
C.11 Intent to Defraud Creditors 44.Paragraphs 33 to 42A are under the heading “Dispositions to Defraud Creditors, Fraudulent Trading and Knowing Receipt”. They allege that:
C.12 Dishonest Assistance and Knowing Receipt 45.Paragraphs 43 to 73 then plead, as against each of D1 to D11 (with the exception of D2) some particulars of the knowledge alleged to have been possessed by each such defendant and the proposition that, in the light of that knowledge, they each acted dishonestly in assisting the breaches of trust by the directors in the transfer of the various relevant properties for no consideration or at a gross undervalue. C.13 Limitation 46.Paragraphs 74 to 78 plead that there is no limitation defence available to the defendants:
D. No Reasonable Cause of Action 47.The WG defendants have addressed this aspect of the strike out application last in their skeleton argument, but it seems to me to be logical that it should be addressed first. I am not entitled to look at any evidence to assess the extent to which the claim discloses a reasonable cause of action, and I must look only to the statement of claim, assuming that all facts set out in the statement of claim will be made out. Further, if I am of the view that there is no reasonable cause of action, it becomes strictly unnecessary to assess the other grounds for striking out, because the claim will have been struck out in any event. The plaintiff has endorsed this approach in its skeleton argument. D.1 Pleading Fraud 48.The WG defendants start off by reminding me of the principles relating to the pleading of fraud, including that fraud must be distinctly alleged and proved, and sufficiently particularised and that allegations of “ought to have known” are inadequate to support allegations of dishonesty. 49.If the allegations of dishonesty are made without a cogent evidential basis then they ought to be struck out. 50.As to this last point, which is one the WG defendants press upon me, in my view this does not address the question of whether a reasonable cause of action is made out, because the court cannot look at evidence for that purpose. Thus, the proposition that there is inadequate evidence to support a claim for fraud is to be considered when making an assessment under the other limbs of a strike out application, and not under the limb of no reasonable cause of action. 51.Of course, I bear the general propositions about pleading fraud in mind. However, in my view there is a danger of misconception in the simple use of the word “fraud” without referring it back to the particular cause of action alleged. In both civil and criminal cases the courts have been slow to define “fraud”, and in England it was not defined in a criminal statute until the Fraud Act 2006, which gave a broad definition insofar as a criminal action is concerned. The concept of fraud has a long and complex history in common law and equitable civil actions. I refer to it as a concept, rather than a specific cause of action, because overall that is what it is. It is not a specific cause of action, save where it is expressly referred to in statutes conferring a cause of action, but it is related to a type of behaviour which prompts the law to respond both in terms of formulating forms of action and fashioning remedies. That is why one finds the word used in many and diverse cases, albeit as a shorthand expression, to refer to the different types of behaviour which are under scrutiny in each case. 52.Overall therefore, it is a portmanteau expression with different meanings in different contexts, and is descriptive of a range of acts, behaviours or omissions which the law characterizes to a greater or lesser degree as unconscionable or dishonest. The law proceeds and develops, in relation to both the overall portmanteau and the individual causes of action which are included within it, incrementally on what has been described as the “hard anvil of facts”, rather than setting out a prescriptive set of rules that must inevitably be followed every time an allegation of “fraud” is made. 53.Thus, when a cause of action can be considered as coming within the portmanteau of fraud, the court will be astute to ensure that the necessary particulars of that individual cause of action are distinctly set out in the pleading, and are distinctly proved. What is necessary will depend upon each individual cause of action and cannot be globally identified. 54.The WG defendants also urge upon me the proposition that when the cause of action requires dishonesty, a plea of facts which are consistent with honesty is unsustainable and must lead to a conclusion that the action should be struck out. For that proposition they rely upon Fok JA sitting as a judge of the court of first instance in The New China Hong Kong Group Limited & Another v Ng Kwai Kai Kenneth & others HCA 519/2010 (unreported 11 February 2001) and Sakhrani J in Krassel v Chu Vincent [2010] 2 HKLRD 937, which was not a strike out case, at [44], in which both judges described the proposition as “trite”. They also rely upon Au-Yeung J in Li Shiu To v Cheung Pik Ng (No 2) [2018] 1 HKLRD 934 (not a strike out case) at [55], where she quoted the passage from Lord Millett’s judgment in Three Rivers District Council v Bank of England No 3 [2003] 2 AC 1 at [184] to [187]. 55.In the context of a strike out, Fok JA put the matter this way at [65]:
56.The proposition stems from the dissenting judgment of Lord Millett in Three Rivers. Three Rivers was a strike out case, but nonetheless it seems to me that the proposition needs careful consideration by reference to what the other judgments in that case say, and what Lord Millett stated, in order to understand the proposition fully, particularly at the interlocutory stage: 57.At [55], Lord Hope of Craighead stated the principles as follows:
58.At [122] Lord Hutton quoted the well known passage from Davy v Garrett (1878) 9 Ch D 473-489:
59.At [160] Lord Hobhouse, also in a dissenting judgment, stated:
60.The fullest statement of the relevant principles is that of Lord Millett, in his dissenting judgment, from [184] onwards:
61.His Lordship then analysed the judgment of Thesiger LJ in Davy v Garrett and the judgments of the court of Appeal in Armitage v Nurse and continued at [189]:
62.On a full reading, Lord Millett has not said that the plaintiff must plead primary facts which are consistent only with dishonesty. That much is made clear by the majority judgment of Lord Hope at [55] quoted in paragraph [57] above. The correct test is whether or not, on the basis of the primary facts pleaded, an inference of dishonesty is more likely than one of innocence or negligence. As Lord Millett put it, there must be some fact “which tilts the balance and justifies an inference of dishonesty”. That is also recognised by the oft stated proposition that dishonesty will be found if the act is not one that “any honest man would undertake”. 63.At the interlocutory stage, when the court is considering whether the plea of fraud or dishonesty is a proper one, or whether to strike it out on the basis of it disclosing no reasonable cause of action, the court is concerned only with whether facts are pleaded which would justify the plea of fraud. If the plea is justified, then the case must go forward to trial. An assessment of whether the evidence ultimately justifies the inference is a matter for the trial judge. It is axiomatic within that principle that after trial a judge may take the view that the facts do not demonstrate dishonesty, in which case it must follow that they are consistent with honesty. But the possibility of such a finding does not lead to the conclusion that the pleading is bad, and yet that is the proposition which the WG defendants appear to urge upon me. I do not agree with it. 64.In my view this approach is consistent with the majority of the opinions in Three Rivers. Thus I take the view that, at least where dishonesty is expressly pleaded, the necessary particulars of facts for the relevant cause of action do not need to be in themselves consistent only with a conclusion of dishonesty or fraud for the pleading to be legitimate. 65.Thus, I do not accept that it is a trite proposition that a pleading which expressly pleads dishonesty needs also to plead facts which are consistent only with dishonesty and which cannot themselves permit of an innocent explanation, and that if it does not it should be struck out. If Fok JA (as he then was, albeit sitting as an additional judge of the court of first instance) has indeed expressed the contrary view (which is not entirely clear given the limited scope of his analysis of the point), with the greatest of respect to his seniority and experience, I do not consider myself to be bound by it and I do not consider it to be right. 66.With those introductory remarks, I turn then to the statement of claim in this case. D.2 Overall Comments 67.At its heart, as described by Mr Barlow during oral submissions, this case concerns what is said to be a scheme to strip the assets of the plaintiff, leaving the creditors with no remedy, and leaving the assets that would rightly belong to the plaintiff in the hands of others who, it is said by Mr Barlow, are owned or controlled by D1, a director of the plaintiff until 23 December 2002[20]. 68.The business model of the plaintiff was that it would purchase land in villages, would pass that land to an SPV, who would then pass it at nil or nominal consideration to a Ding, who would sign various declarations of trust in favour of the SPV or the plaintiff such that any costs incurred by the plaintiff in developing the Ding House would then be recovered by the plaintiff through either the transfer of the land (and house) back to the plaintiff if it was not sold, or through the Ding passing the proceeds of any sale back to the plaintiff by virtue of the trust which had been established. That business model is pleaded in paragraph 18B of the statement of claim. 69.Mr Barlow says that this has not happened, and that the assets have been transferred away, but nothing has come back. Essentially what he contends (at least orally) is that there was an overall scheme, in which all of the defendants have played some part, by which the assets have been passed to others without the proceeds being passed back to the plaintiff. When looked at in this light, and with the pleading of the business model as set out in paragraph 18B, one can see that the real complaint is not the passing of the properties to persons or entities for no or no adequate consideration; indeed the business model itself anticipates that the properties will pass to at least 2 persons other than the plaintiff for no or no adequate consideration. The real complaint is that the plaintiff has not retained a trust interest in either the land or the proceeds of any sale throughout the transfers, and thus has been deprived of the rewards that it was otherwise expecting and (it says) was entitled to. 70.But the difficulty for the plaintiff is that most of the statement of claim does not reflect that description of the case. 71.The thrust of the statement of claim is that D1, D2 and D3 have acted in breach of their fiduciary duties owed to the plaintiff as directors of the plaintiff by causing the transfer of the properties out of the ownership of the plaintiff for no, or no adequate, consideration (see paragraphs 24 to 27 of the statement of claim). It is this alleged breach by the directors of the plaintiff which is the foundation of all of the subsequent causes of action, other than possibly the resulting trust claim. And yet from the statement of claim it is clear that:
72.There is no plea of how D1, D2, D3 are said to have caused D12 to have transferred the properties to others, and there is no pleading that D12 owes any fiduciary duty to the plaintiff pursuant to the business model or otherwise, or that D12 has breached any such duty. 73.The closest that the statement of claim gets to making an assertion that D12 owes any duties to the plaintiff is in paragraphs 20 to 21B, where the claim is made for a resulting trust. But that resulting trust is said to arise because of the fact that D12 was assigned the properties at no, or no adequate, consideration and not because D12 owed fiduciary duties to the plaintiff as a result of the plaintiff’s business model. 74.D1, D2 and D3 were still directors of the plaintiff when D12 effected the Schedule 1 and Schedule 3 Second Layer Transfers to D13 and D15, but there is no pleading as to how D1, D2 and D3 caused D12 to effect those transfers, or how such transfers by D12 might breach the fiduciary duties owed by D1, D2 and D3 to the plaintiff. All that is said is that they were done for no, or no adequate, consideration and that in itself does not demonstrate a breach of any fiduciary duty. It is pleaded that Step 4 of the plaintiff’s business model expressly anticipates that the land passed to the SPV would be passed to a Ding and a nominal, or at zero, consideration. Thus it cannot be said that the mere fact of nil consideration is a breach of fiduciary duty owed to the plaintiff. Something more is necessary. 75.It may be that the something more would consist of a separate and distinct allegation that the transfers were effected without the establishment of a trust over the land or the proceeds of any further sale, but that is not expressly pleaded. The only way in which one could arrive at a conclusion that the plaintiff maintained any interest in the properties would be by reference to the resulting trust, which is pleaded and which I consider below. 76.D1, D2 and D3 were not directors of the plaintiff at the time of any of the Schedule 1 and Schedule 3 Third Layer Transfers, and it is difficult to see how those transfers of themselves can have been made in breach of the fiduciary duty of D1, D2 and D3 owed to the plaintiff. Again, it may be that such transfers were simply a further part of the overall scheme, so that the real complaint is not in the transfer at no or no adequate consideration, but lies in the fact that the plaintiff did not retain some residual beneficial interest in either the land or the proceeds. But that is not pleaded, other than possibly by reference to the resulting trust. 77.As a result, taking an overall view of the statement of claim, it seems to me that there is a fundamental problem with it, in that the only transfer of any land out of the ownership of the plaintiff was done expressly pursuant to the plaintiff’s own business model and cannot be said to have been done in breach of fiduciary duty, whether it was done for nil consideration or not. No allegation is made that the directors of the plaintiff at the time breached their duty by failing to ensure that the plaintiff retained some beneficial interest in either the land or the proceeds. The only allegation is that no or no adequate consideration was paid, and that fact is not at all inconsistent with the business model of the plaintiff. The same is true for all subsequent transfers pleaded. They also suffer from the additional problem that there is no pleading that, and indeed no discernible way by which, the plaintiff is owed any duties by any person concerned with those subsequent transfers, other than possibly as a result of the resulting and constructive trusts alleged to have arisen during the initial transfer, because that transfer was at no or no adequate consideration. 78.Against that background I turn to assess the detail of the statement of claim to see whether there is any reasonable cause of action contained within that detail which might survive the problems that I have just identified. D.3 Resulting Trust 79.The resulting trust is alleged to arise because the transactions were undertaken at no, or no adequate, consideration. 80.A resulting trust may arise if there is a gratuitous passing of property such that the transferor is presumed not to have parted with the beneficial ownership. The presumption is easily rebutted: see Westdeutsche Landesbank v Islington LBC [1996] AC 699 per Lord Browne-Wilkinson at 708:
81.That statement has been applied in Hong Kong in the context of a transfer of property from A to B: see Ng J in Law Pak Fun v Tai Lee Fat International Limited [2015] 4 HKLRD 339 at [26] to [27]:
82.The existence of a resulting trust is consistent with the plaintiff’s case that the intention of its business model was that the plaintiff would retain a beneficial interest in the property or the proceeds of sale, and so the pleaded facts are not inconsistent with a resulting trust arising in the manner just described. 83.The statement of claim is not perfect in this regard, but I accept that the statement of claim is sufficiently particularised such that it has pleaded a reasonable cause of action for a resulting trust of the Schedule 1 and Schedule 3 properties in the hands of D12 to the extent that there was no consideration paid. 84.As a result, I am satisfied that, based on the statement of claim alone, a reasonable cause of action arises in respect of the Schedule 1 and 3 properties in the hands of D12, based on a resulting trust if no consideration was paid as alleged. 85.Insofar as the resulting trust said to arise in the event that an inadequate consideration was paid, I do not think that a resulting trust is adequately pleaded. The presumption which I have referred to would not arise if consideration was paid, and so a resulting trust would have to arise on a different basis. Whilst I can foresee circumstances in which such a resulting trust might arise (for example in the form of a Quistclose trust, which would be included within the second limb of trusts referred to by Lord Brown Wilkinson in Westdeutsche Landesbank), that would have to be expressly pleaded and it has not been. Hence I strike out the claim insofar as the resulting trust is said to be premised upon some, albeit inadequate, consideration having been paid. 86.Once a resulting trust is established the plaintiff would be entitled to trace the trust property into the hands of others, subject to the normal defences that others may bring. Those defences do not mean that there is no cause of action, and hence I accept that there is a properly pleaded cause of action in respect of all Schedule 1 and Schedule 3 properties in the hands of all relevant defendants based upon the proposition that D12 held those properties on resulting trust for the plaintiff because no consideration was paid by D12. 87.No such allegation is made in respect of the Schedule 2 properties and hence no cause of action for a resulting trust arises in respect of those properties. 88.I note that the WG defendants contend that any claim that no consideration was paid is bound to fail because it is built on what the WG defendants have described as mere conjecture. I do not address that proposition under the heading of “No Reasonable Cause of Action” as it requires evidence to assess it and therefore it should be assessed under one of the other heads of strike out. As will become clear from paragraphs [126] to [130] below, I actually have formed the view that even this resulting trust claim should be struck out because, based on the evidence, it is bound to fail. D.4 Constructive Trust 89.If there is a resulting trust of the properties then no constructive trust would arise. 90.The pleaded basis of the constructive trust is simply unconscionability based upon the lack of adequate consideration. For reasons that I have already identified in paragraphs 67 to 78 above, in the circumstances of the business model I do not think that, beyond a resulting trust, complaint can be made about the lack, or inadequacy, of consideration. Therefore, I do not think that any unconscionability can arise simply as a result of that fact. If there are particular aspects of the transactions other than the inadequacy of consideration, which are complained about and which might give rise to a constructive trust, they have not been pleaded and I cannot consider them. 91.A second pleaded basis for the constructive trust is the conspiracy alleged between D1, D2 and D3 to cause:
92.It is said that as a result of that conspiracy the plaintiff has been stripped of its assets. 93.There is no detail of the alleged conspiracy pleaded and there is no detail of the way in which the directors have caused D12 to effect the subsequent transfers. 94.In my view this pleading does not disclose a reasonable cause of action in conspiracy. Nor does it identify any basis on which a constructive trust may arise. Consequently it should be struck out. D.5 Breach of Fiduciary Duty 95.The breaches of D1, D2 and D3 are pleaded as being the transfers of each of the Schedules 1, 2 and 3 properties to D12 to D18 for no consideration. 96.Insofar as D12 is concerned given the plea in paragraph 19(5) that these transfers were pursuant to the business model, the plea that it was also in breach of fiduciary duty is demurrable and should be struck out. It cannot be both pursuant to the business model and yet still in breach of fiduciary duty. 97.Insofar as the subsequent transfers of the Schedules 1 and 3 properties are concerned:
98.Very similar points apply to the other alleged breaches of fiduciary duty pleaded. 99.In my view the statement of claim does not identify any basis for a breach of fiduciary duty claim based upon the facts alleged. It should be struck out as disclosing no reasonable cause of action. D.6 Sham Transactions 100.The only transactions which are said to be sham transactions are those between the plaintiff and D12. I do not think that the plea of the transfers being sham transactions demonstrates a reasonable cause of action. 101.It is well settled that the essential ingredients for a transaction to be a sham are that:
102.The statement of claim makes an averment of a common intention, but beyond that mere averment, the only particulars that are given are the reckless indifference or blind-eye knowledge of D1, D2 and D3 pleaded elsewhere. 103.The reckless indifference and blind-eye knowledge are vague and inadequately particularised but at best they relate only to the “stripping of assets” from the plaintiff and do not show a common intention that the relationship between the parties should be anything other than that which is shown by the document alleged to be a sham. 104.Further, there is nothing which identifies where or how D12 formed that common intention and the plea of a common intention that the transactions are sham transactions is inconsistent with the plea that the transfers to D12 were legitimately part of the 9 step process which comprised the business model of the plaintiff. 105.In my view this plea does not demonstrate a reasonable cause of action that can be established on the facts alleged in the statement of claim. It should be struck out. D.7 CLAIM FOR AN A ccount 106.I do not address this separately, as the claim for an account follows from the other causes of action alleged. D.8 Unlawful Means Conspiracy 107.In my view there is no reasonable cause of action pleaded. The requirements for pleading a conspiracy have been set out in ADS v Wheelock Marden & Co Ltd [1994] 2 HKC 264 per Bokhary JA ar 272D-G
108.In the statement of claim there is no pleading of the conspiratorial agreement between each of D1, D2, D3, D7, D12, D13, D14, D15, D16, other than the mere assertion that they conspired together, or as between 2 or more of them. There is no suggestion as to when the agreement was reached, or between whom or how it was reached, and there is no indication of the nature of the agreement other than that it was to “defraud Polyline and/or misappropriate the Schedules 1 and 3 lots and to conceal such fraud and/or misappropriation and the proceeds thereof from Polyline”. In my view that is not sufficient. 109.The unlawful means alleged are pleaded, but without a pleading of the nature of the agreements pursuant to which those unlawful means were undertaken, the pleading of conspiracy must fail. 110.I strike out this claim. D.9 Intention to Defraud Creditors 111.This is a claim which is made without direct reference to Section 275(1) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32), but which by its nature is clearly intending to engage that section. The section provides that:
112.Thus it is clear that the statutory cause of action for fraudulent trading does not vest with the company itself, but vests in the Liquidator, or any creditor or contributory. As a result, the Company does not have a cause of action for fraudulent trading, or carrying on the business of the company with an intent to defraud creditors. Therefore such a claim should be struck out. I am not aware of any common law cause of action of similar effect. 113.As for the claim within this section of the statement of claim relating to s60 of the Conveyancing and Property Ordinance (Cap 219), the only relevant transfer within the pleaded Schedules 1 and 3 can be that made by the plaintiff to D12. Subsequent transfers are not a disposition of property by the Company, and hence would not fall within s60. To the extent that the claim is intended to apply to subsequent transfers, then does not fall within the statute and must be struck out. 114.As for the transfers to D12, they are pleaded as having been made for the purposes, and expressly with the intent, of permitting the business model of the plaintiff to operate. In those circumstances, it is not possible to say that they were made with an intent to defraud creditors, and the claim must fail on the pleaded facts. It should be struck out. D.10 Dishonest Assistance and Knowing Receipt 115.A necessary element of each of the causes of action of knowing receipt and dishonest assistance is that there has been a breach of fiduciary duty. It is necessary to plead that breach of fiduciary duty. 116.In each case the plaintiff has pleaded that the relevant breach of fiduciary duty which has given rise to the unconscionable receipt or which the relevant defendant has dishonestly assisted is the breaches of fiduciary duty alleged as against D1, D2 and D3 owed to the plaintiff in their capacity as directors of the plaintiff. 117.For the reasons that I have already articulated, any claim in respect of those breaches is to be struck out as failing to disclose a reasonable cause of action. It follows that each of the causes of action of knowing receipt and dishonest assistance must also fail on the facts and premises pleaded. Hence I strike out those claims. 118.I must however also deal with the proposed further amendment to paragraphs 49 and 50 which relate to the case against D4. The proposed amendments materially allege that:
119.This pleading purports to go wider than any other part of the statement of claim has done, and I suspect that this was a deliberate decision of Mr Barlow who clearly knows this area of the law and understands the overall scheme that he contends for. As a result, he has pleaded a “breach of trust” rather than the more limited plea of breach of fiduciary duty that the remainder of the statement of claim makes. But in my view the problems remain, despite Mr Barlow’s attempt to overcome them:
120.Consequently I do not think that the proposed new paragraphs 49 and 50 save the pleading as against D4. D.11 Summary of Reasonable Cause of Action 121.To summarise my findings so far, I find that the only reasonable cause of action pleaded is the claim for a resulting trust arising out of the Schedule 1 and Schedule 3 lots to D12 for nil consideration. All other claims are demurrable. E. The Case is mere Conjecture 122.In their skeleton argument, the WG defendants argue that the entire case is based on the proposition that the properties were transferred either at nil consideration or at a gross undervalue, and that as a result the directors are in breach of their fiduciary duties. They argue that a sale at a gross undervalue does not (without more) identify a breach of fiduciary duty and that, based on the evidence, the claim that there was a nil consideration is hopeless. As a result the WG defendants contend that the claims are based on mere conjecture and should be struck out. 123.I find the phrase “mere conjecture” to be somewhat misleading as to the relevant test. The fact that something is conjecture is no bar. What must be shown is that the claim is bound to fail, and it is only if this can be shown that the claim can be struck out as an abuse of the process of the court or as being frivolous (and both of these limbs of the rule appear to be used interchangeably for this purpose). 124.The only cause of action which is reasonably disclosed in the statement of claim is the resulting trust claim based on nil consideration. As a result I only need consider whether the resulting trust claim should be struck out on this basis, and I do not go further to address other claims. 125.If the WG defendants are correct in this assertion, then the resulting trust claim would be bound to fail because it cannot be made out on the facts, and it would be an abuse of process. 126.The WG defendants contend that the claim of nil consideration cannot succeed because each transaction contains a clause which acknowledges receipt of the consideration thereby creating a contractual estoppel to the effect that the consideration was paid and received. They also rely upon an estoppel by deed. The receipt clause is in the following terms (using B1/34/617 as an example):
127.In Prime Sight Ltd v Lavarello [2014] 436 the Privy Council confirmed the concept of contractual estoppel could apply to a contractual receipt clause. The clause in question in that case included the words “In consideration of the sum of £499,950 now paid by the assignee to the assignor (receipt and payment of which the assignor hereby acknowledges) …”. However it was common ground that no payment had in fact been made. Lord Toulson identified the position at [45] and [46] as follows:
128.The principle has been upheld in Hong Kong in Asgain Co Ltd v Cheng Yan Kan (No 2) [2018] 2 HKLRD641 (court of appeal), Chung Pui Tong v Qian Zhen [2020] HKCFI 187 per Mimmie Chan J at [69] and [70], Szeto Wing Hong v Maintown Industries Ltd v Another [2021] HKCFI 179 per Linda Chan J. 129.The plaintiff contends that the whilst the principle may apply as between the contracting parties (subject to the ordinary rules of contract law which might undermine the estoppel), it cannot apply to prevent a claim by a company against a director for a breach of fiduciary duty in entering into the contract in the first place, or as against any accessories to that breach of fiduciary duty. Without a detailed analysis of that proposition I accept that it may well be correct, but it does not assist the plaintiff in the circumstances of this case. I have struck out all claims other than the resulting trust claim based on nil consideration, and have allowed that claim only on the basis that the statement of claim pleads enough facts to justify the presumption of a resulting trust arising out of the gratuitous passing of the property from the plaintiff to D12. Therefore there is no claim left for breach of fiduciary duty and no claim left for any accessorial liability. The only question is whether the receipt clause creates a contractual estoppel as between the parties to the very contract in which it is contained so as to prevent the plaintiff from asserting as against D12, that no consideration was paid. 130.In my view the receipt clause does create a contractual estoppel such that the plaintiff cannot now contend, as against D12, that there was a gratuitous passing of the properties. Hence, whilst the statement of claim pleads sufficient facts to establish a reasonable cause of action in this respect, when the evidence is taken into account it is clear that those facts cannot be established, and hence the claim must be struck out as bound to fail. F. Limitation 131.In the light of my conclusions it is not necessary for me to address the limitation and laches arguments that have been raised. However, much time has been invested in them by the WG defendants and in case I am subsequently shown to be wrong in my analysis above, I think that it is appropriate for me to set out the conclusions that I reach on these arguments. 132.I do not need to consider the question of limitation in respect of the resulting trust claims against D12, because the WG defendants accept that no period of limitation applies to the resulting trust claims made against D12. However they contend that as a result of s20(2) of the Limitation Ordinance, a limitation period of 6 years from any breach of trust would apply to all subsequent holders of the property. In my view that is the correct position despite Mr Barlow’s attempt to persuade me otherwise. I agree with the WG defendants that all subsequent holders of the property beyond D12 are not trustees of the first type described by Millett LJ in Paragon Finance v Thakarar [1999] 1 All ER 400 at 414, and Lord Hoffmann in Peoconic Industrial Development Ltd v Lau Kwok Fai (2009) 12 HKCFAR 139 at [17]-[19], and s20(2) of the Limitation Ordinance therefore applies a 6 year limitation period to any claims against them. 133.The WG defendants allege that even those claims against which no limitation period applies are still to be barred by the doctrine of Laches, and as a result, similar considerations apply as arise when considering whether an extended limitation period applies under s26 of the Limitation Ordinance. As a result, I must to consider those similar questions in any event for the purpose of addressing the doctrine of Laches. F.1 Primary Limitation Periods 134.As can be seen from the statement of claim, the plaintiff’s claims stem from the transfer from its ownership of the various properties listed in Schedules 1, 2 and 3 of the statement of claim, either for no consideration or at a gross undervalue. The transfers from the plaintiff’s ownership all occurred on or prior to 30 May 2001. 135.The writ was issued on 16 December 2019, and there is an immediately obvious limitation issue to be considered on the basis that the primary limitation period is generally 6 years from the accrual of the cause of action. 136.However, given the numerous causes of action which have been pleaded, the WG defendants have addressed each one separately in order to ascertain the date on which the cause of action accrued, and the relevant limitation period. This exercise is set out in great detail in paragraphs 43 to 78 of their skeleton argument. 137.Their concluding submissions on these issues can be summarised as follows:
138.Hence other than the claims in respect of which there is no limitation period, and subject only to one or two further arguments which do not affect the overall conclusion, the primary period of limitation in respect of all claims has expired as against all defendants. For the purpose of this hearing I accept that as correct. F.2 The Extended Limitation Periods 139.Section 26 of the Limitation Ordinance provides as follows:
140.The WG defendants suggest that my task is therefore to examine whether on the basis of the statement of claim and evidence the plaintiff has an arguable case that section 26(1)(a) and/or (b) of the Limitation Ordinance is made out. It suggests that the answer is “a resounding No”. 141.I accept that what I must do is make an assessment as to whether or not there is an arguable case for extension of the limitation period based upon the grounds for an extension in s26. However, I must bear in mind that whilst the burden rests on the plaintiff to prove that its case comes within the limitation period, at this stage it does not have go further than to demonstrate that it has an “arguable case” that it does. Further, there should be no trial upon affidavit and disputed facts should be taken in favour of the plaintiff. The limitation defence has to be “manifestly and immediately destructive to the plaintiff’s claim”. 142.S26(1)(a) requires that the claim must be based on the fraud of the defendant. 143.It is well settled that a cause of action for dishonest assistance amounts to fraud for these purposes (See China Medical Technologies Inc v Wu Xiaodong [2019] HKCFI 1266 at [82]) 144.By the same token, s. 26(1)(a) will apply to a claim for fraudulent trading, which also requires a plaintiff to show that the defendant was knowingly party to the carrying on of the business in a fraudulent manner and also to a claim under s60 of the Conveyancing and Property Ordinance. 145.The essential ingredient required to establish liability for knowing receipt is unconscionability. Unconscionability in this context is arguably sufficient to constitute fraud for the purpose of bringing knowing receipt within the ambit of s. 26(1)(a): Williams v Central Bank of Nigeria [2014] AC 1189 at [119] per Lord Neuberger; Yeu Shing Construction Co Ltd v Attorney General [1988] HKC 710 at 714C per Godfrey J. Similar arguments will apply to the claim for a constructive trust based on unconscionability. 146.I have not been addressed on any authority as to whether s26 may apply to the cause of action for unlawful means conspiracy, but it is certainly at least arguable that it does, particularly when the unlawful means alleged is a fraudulent breach of fiduciary duty as in this case. I am aware of several authorities which suggest this to be the case: see for example Galsworthy Ltd v Liu Por [2019] HKCFI 2397 at [398]-[399] per Marlene Ng J and the authorities she there cites. There are also several UK authorities to similar effect. However, as I have not been addressed on them, I do not deal with the principle other than to say that I am of the view that it is certainly arguable that s26 can apply to a claim for unlawful means conspiracy. 147.In my view a similar position is also likely to apply to a claim that transactions are a sham transaction, and hence the proposition that s26 can apply to such a claim is arguable. 148.Consequently I am satisfied that it is at least arguable that s26(1)(a) is capable of being activated in respect of all causes of action. 149.But in addition, it has to be arguable that the plaintiff could not, with reasonable diligence have discovered the fraud of the relevant defendant. In paragraph 85 of their skeleton the WG defendants set out 8 sub-paragraphs as to why the plaintiff could, with reasonable diligence, have discovered the fraud more than 6 years prior to 16 December 2019. 150.The WG defendants rely upon the fact that the liquidators are officers of the court who have a positive duty to investigate the affairs of the company and to do so with all due speed. 151.They rely upon the 64 page expert report of Mr Arab, together with his two affirmations, to suggest that it is unarguable that the liquidators did not do so in this case. Further they suggest that there is evidence that the liquidators had actual knowledge of the impugned transactions in 2007, because they wrote a letter to the Official Receiver suggesting that the transactions were made “at very low value to a closely related company [D12]”, and that the plaintiff had sold the properties “to a related company at grossly undervalue”[23]. They contend that the claim for an extension under s26(1)(a) must inevitably fail. 152.In response the Liquidators, both in the statement of claim and in the affidavits of Mr William Leung dispute what Mr Arab says, and dispute what the WG defendants say that they knew, and what Mr Arab says they ought to have known had they acted with reasonable diligence. Insofar as the alleged knowledge evidenced by the letters to the official receiver in 2007 are concerned, the Liquidators say that they knew that properties had been sold at a gross undervalue, and that may have given rise to suspicion of fraud, but it does not give rise to knowledge of fraud for the purposes of s26. 153.The Liquidators say that it was not until Madam Lam Ching Sheung came to see them in 2013, and brought to the attention of the liquidators two Judgments on related matters that they “have gained further information on how, when and what the defendants have defrauded Polyline’s creditors”[24]. 154.The pleading on limitation states that the date of knowledge relevant for s26 purposes is 16 November 2016, and it sets out the following factors as being relied upon to extend the limitation period:
155.There is no doubt in my mind that the delays in bringing this action are extraordinary. I am very troubled by the fact that the Liquidators were appointed in 2003 and yet did not commence this action until nearly 2020. 156.However, irrespective of my very considerable scepticism, my role is limited. I must be satisfied that the limitation defence is “manifestly and immediately destructive of the plaintiff’s claim”. In that regard, I take the view that unless I can say with certainty that the Liquidators had knowledge that would start time running, it is not open to me to strike out the claim on a limitation ground. 157.Despite the attractive way in which Mr Horace Wong SC, Counsel for the WG defendants, has put the case on limitation, I cannot resolve disputes on affidavit, and I cannot take the voluminous expert evidence as to what a reasonable liquidator ought to have done, and ought to have known, as being manifestly and immediately destructive of the plaintiff’s plea of ignorance. Within the boundaries of the rules of procedure in Hong Kong, I take the view that I have no choice other than to let the matter go to trial, because I cannot pin point an indisputable moment when time started to run. 158.The closest that one can get to such a moment is the letter to the Official Receiver in August 2007, and its follow up in September 2007 in which the Liquidators have said that the sales were at “ridiculously low prices” and “the whole circumstance looks like fraudulent preference transactions[25]. 159.The parties have not made submissions to me as to exactly what is meant by the phrase “has discovered the fraud” within s26 of the Limitation Ordinance and in those circumstances I will assume that it means that all necessary elements of the fraud have been actually discovered. I accept that there may be lesser thresholds of “discovery” which are equally consistent with the wording and purpose of the statute, and I also accept that the court of appeal has indicated that s26 ought to be strictly construed against a plaintiff: see Kwan JA in Hotung Investment (China) Ltd v Ernst & Young (a firm) [2012] 5 HKLRD 421 at [35], where interestingly she also said that time would run when “the truth” was discovered, which may be thought as being consistent with my approach. However, absent detailed submissions on this point I proceed on the basis that I have identified. 160.I do not think that the letters in 2007 demonstrate an actual discovery of the fraud. What the letters demonstrate is suspicion. But on the basis that I am proceeding upon, that is not enough. The letters may allow one to say that the Liquidators could, with reasonable diligence at some point thereafter have discovered the fraud, but it is disputed that they could have discovered the fraud until 16 November 2016, and I cannot determine that dispute on a strike out application. 161.Consequently having read everything that has been said in the statement of claim and in the evidence, and being mindful of the very limited scope that I have to strike out a statement of claim in respect of which there are disputes on material facts, I do not believe that this is a case in which I can strike out the statement of claim on this basis. I must take any disputes as being resolved in favour of the plaintiff, and I should not in any event strike out a claim, the legal viability of which is factually dependent. 162.In the circumstances, I believe that it is not appropriate for me to say anything further about the facts or the disputes, that have emerged from my reading of the evidence. I must leave any consideration of those matters to the ultimate trier of those matters, and the less I say the better. I limit myself to saying that the WG defendants, and D4, have failed to establish that the limitation period for all claims has unquestionably and inevitably expired. As a result, the claim would have to proceed to whatever resolution of those issues as is appropriate. G. Laches 163.The WG defendants rely upon the doctrine of Laches so as to prevent the bringing of the action in respect of any claim which is not already time barred by virtue of the Limitation Ordinance. 164.Operation of the doctrine depends upon an assessment of all of the circumstances in order to reach a conclusion that in all of those circumstances it would be “practically unjust” (per Sir Barnes Peacock in Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221 at 239) or “where the balance of justice lies” and whether it would “in all the circumstances be unconscionable for a party to be permitted to assert his rights” (per Recorder Yuen SC in Hollywood Shopping Centre Owners Committee Ltd v Incorporated Owners of Wing Wah Building Mongkok Kowloon HCA 1582/2007 (unreported 16 August 2010 at [95]). Sir Barnes Peacock emphasised that:
165.The WG defendants rely upon The Estate of Yang Sen Hui (Decd) & others v PaoYuen Tung Hsing Yieh Co Ltd [1983] HKLR 124 per Kempster J at page 147 to demonstrate that the court can allow a defence to laches to determine a strike out application:
166.Accepting that guidance, it would be necessary for the WG defendants to demonstrate a “plain and obvious” case. For the same reasons that I have identified in relation to s26 of the Limitation Ordinance, I do not consider that this case is plain and obvious. It depends upon the assessment that a court will take as to the expert evidence which has been adduced, and that is not something that can be done at this stage. 167.Further, in relation to Laches, it depends upon the overall balance of justice and when the knowledge and understanding of the Liquidators is disputed, the question of where the balance of justice lies is not plain and obvious. 168.Therefore, I do not think that I can strike out the claim based on the defence of Laches being plain and obvious, or manifestly and immediately destructive of the claim. H. Conclusions and The Way Forward 169.In conclusion therefore:
170.In the circumstances, I strike out the statement of claim as against each of the WG defendants and D4. 171.Those defendants also ask that I dismiss the action as against them. This does not automatically follow from my striking out the statement of claim, and I must make a separate decision as to whether or not to do so having regard to all the circumstances. 172.On the basis that the plaintiff has chosen to stand or fall on the statement of claim as produced to me, I do not look to the possibility of further amendments being forthcoming. Consequently, without the statement of claim, the case is bound to be dismissed ultimately, and thus, I agree with the WG defendants and D4 that the case against them ought to be dismissed. 173.It follows that I do not need to make any assessment of the WG defendants’ application for security for costs, and I do not do so. 174.Costs should follow the event, and I make a costs order Nisi that the plaintiff is to pay the WG defendants and D4 their costs of the action to be taxed if not agreed. If either party wishes to seek a variation of this order they may apply in writing within 7 days of the handing down of this judgment, limited to 5 pages. The other parties may reply within 5 days thereafter, limited to 3 pages, with a final rejoinder of the applying party 3 days thereafter, also limited to 3 pages. 175.The parties are to draw up an appropriate order to reflect this decision for the court’s approval. 176.Finally, I thank all parties and their counsel for the very helpful and clear analysis and assistance that they have provided me throughout this hearing. I am indebted to them all.
Mr Barrie Barlow SC, instructed by William K W Leung & Co, for the plaintiff Mr Horace Wong SC and Mr Michael Lok, instructed by Wilkinson & Grist for the 1st, 6th to 12th, 14th to 16th and 18th defendants Mr Anson Wong SC and Mr Martin Kok, instructed by Chungs Lawyers, for the 4th defendant [1] Bundle A2/22/334 [2] These principles are generally summarized from the Hong Kong Civil Procedure 2021 Edition at Note 18/19/4 et seq, but without the detailed citations given therein. [3] The New China Hong Kong Group Ltd & Another v Kwai Kai Kenneth & Others HCA 519/2010, unreported decision dated 11 February 2011 Per Fok JA at [40] [4] Kensland Realty Ltd v Tai Tang & Chong (2008) 11 HKCFAR237 per McHugh NPJ at [153]. [5] See Hong Kong Procedure 2021 Edition, at note 18/19/5. [6] See Hong Kong Procedure 2021 Edition, at note 18/19/6. [7] See Hong Kong Procedure 2021 Edition, at note 18/19/7. [8] See Hong Kong Procedure 2021 Edition, at note 18/19/8. [9] See Hong Kong Procedure 2021 Edition, at note 18/19/9. [10] Paragraph 6 at A2/23/342, a Ding being a male villager in the New Territories. [11] Paragraph 7 at A2/23/342. [12] Paragah 17 at A2/23/345. [13] Paragraph 10. [14] Paragraph 24. [15] Paragraph 25. [16] Paragraph 26. [17] Paragraph 27. [18] Paragraph 34. [19] Paragraphs 36 and 37. [20] There is a dispute concerning the precise date, because Mr Barlow says that the document was not received by the Companies Registry until March 2003, but I do not consider anything turns on this so I do not address it further. [21] See paragraph 19(5). [22] Per Coleman J in Poon Ka Man Jason v Cheng Wai To [2019] HKCFI 1141 at [100] [23] B16/96/4293 and B16/97/4295 [24] Paragraph 30 of Mr Leung’s 4th Affirmation at A3/32/587. [25] B16/96/4293 and B16/97/4295 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
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