Chan Sunny As Executor of the Estate of Deceased Kam Shan Lin v. Chen Min Chun and Others
Read the full judgment text of HCA 708/2018 on BabelCite. This High Court CFI judgment was delivered on 7 June 2022.
1. In respect of substantially similar dispute, the plaintiff’s side has previously initiated two actions in 2015 and 2017 against the defendants’ side, but the same have been struck out/dismissed and discontinued respectively. The present action is effectively the third attempt, which caused the defendants’ side to apply to have it struck out and dismissed.
Cited by 2 cases · Cites 19 cases
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HCA 708/2018 [2022] HKCFI 1659 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 708 OF 2018 ________________________ BETWEEN
________________________ Before: Deputy High Court Judge Leung in Chambers Date of Hearing: 23 September, 5 November 2021 Date of Decision: 7 June 2022 ________________________ D E C I S I O N ________________________ 1.In respect of substantially similar dispute, the plaintiff’s side has previously initiated two actions in 2015 and 2017 against the defendants’ side, but the same have been struck out/dismissed and discontinued respectively. The present action is effectively the third attempt, which caused the defendants’ side to apply to have it struck out and dismissed. BACKGROUND 2.The plaintiff (“Sunny”) and the 1st defendant (“Min Chun”) are two of the children of the Mr Java Chen (the “Father”) and Madam Kam Shan Lin (“the Mother”), both deceased. The other children in the family are Yuan Chu Chen, Nian Chun Chen Tai and Le Chun Chen (collectively “the Other Siblings”). 3.The major dispute concerns the FNT Foundation, which the defendants say is the trust created by the Father in 1983 (the “FNT Trust”). Through its trustees, the FNT Trust holds the right and interest in the shares of FNT Foundation Corp (formerly known as Overseas Dynamics Ltd), which is a company incorporated in Panama (“FNT Panama”). 4.FNT Panama is the 5th defendant in the present case. It in turn holds the shares in the 7th defendant (“FNT”), the 8th defendant (“FNE”) and the 9th defendant (“Raffle”) in Hong Kong. In addition, the shares in the 6th defendant (“Seven Holding”) are held by a nominee for the trustees of the FNT Trust. That way, the FNT Trust, through the trustees, indirectly holds the beneficial interest in the shares of all these companies. These companies in turn holds various substantial properties. 5.Min Chun and the 3rd defendant (“Chung”) are the directors of FNT Panama. Chung was the secretary employed by the Chen family. Together with the 4th defendant (“Shang”), the three are the current trustees of the FNT Trust. The 2nd defendant (“Petrie”) was at the material times a former trustee of the FNT Trust who resigned on 9 September 2020 due to his advanced age and deteriorating health. Min Chun acts as his guardian ad litem in the present action. For the present purpose, the former and current trustees of the FNT Trust are generally referred to as “the Trustees”. 6.The FNT Trust was established by the Father pursuant to a declaration of trust which he executed on 20 April 1983 in New York, USA(the “Declaration”)[1]. Article III of the Declaration provides that the FNT Trust was created, administered and operated by the Trustees exclusively in aid of educational or charitable uses and purposes as the Trustees may select. 7.In view of what the claim herein targets, it is necessary to explain how the FNT Trust came to hold its assets mentioned above. This was documented as follows:
8.Since its formation, the FNT Trust has indeed transacted, and administered its assets, for such charitable uses and purposes in accordance with the Declaration. Insofar as the evidence before this court shows, this continued until at least the latter half of 2020, ie even after the commencement of the present litigation between the two sides. 9.The Mother passed away on 13 February 2000. On 2 April 2001, probate in respect her estate was granted to Sunny as the executor named in her will. 10.In July 2015, HCA 1714/2015 (“the 2015 Action”) was commenced. Sunny and the Other Siblings were the plaintiffs but separately represented. Min Chun together with Petrie and Chung were named the defendants. 11.In the 2015 Action, Sunny and the Other Siblings, amongst other things, claimed as follows:
12.Min Chun and the defendants in the 2015 Action requested for further and better particulars of Sunny’s pleaded claim, which he answered in late 2015. In January 2017, Min Chun took out an application to strike out the claims of Sunny and the Other Siblings in the 2015 Action. 13.In response, Sunny reformulated his claim by commencing another action, namely HCA 705/2017 (“the 2017 Action”), against the same defendants, and applied to withdraw his claim in 2015 Action. As for the Other Siblings, they applied to further amend their claim in the 2015 Action. Sunny’s application and Min Chun’s application, insofar as this concerns Sunny’s claim, were heard separately and prior to the applications concerning the Other Siblings. 14.Insofar as Sunny’s claim in the 2015 Action was concerned, Hon Chow J (as he then was) handed down his decision on 24 July 2017 whereby he found that such claim was plainly unsustainable. Sunny apparently did not seriously argue otherwise. As mentioned, he sought to withdraw his claims in that action, with a view to proceeding with his new 2017 Action. His Lordship decided that instead of allowing Sunny to withdraw his claim, he should instead strike it out in the circumstances. Hence the dismissal of Sunny’s action against Min Chun and the other defendants (“the 24 July 2017 Decision”). 15.Regarding the Other Siblings’ claims in the 2015 Action, the outstanding applications were heard before Hon Chow J on 8 December 2017. In line with the 24 July 2017 Decision, His Lordship found that the Other Siblings’ claims were plainly unsustainable, and liable to be struck out. His Lordship proceeded to consider if the Other Siblings’ application for amendment managed to salvage their claims. 16.The proposed further amended claim, as Hon Chow J summarised in his reasons for decision dated 13 March 2018 (“the 13 March 2018 Reasons”), was as follows:
17.After hearing, Hon Chow J concluded that the Other Siblings’ claims, even if further amended as proposed, would disclose no reasonable cause of action, and were plainly and obviously unarguable. He therefore dismissed the application for amendment. It followed that all their claims were struck out, and the action dismissed. In explanation of his decision, His Lordship handed down the 13 March 2018 Reasons afterwards. 18.In the same month, Sunny commenced the present action. He also discontinued the 2017 Action in May 2018. 19.In the present action, Sunny now claims in his capacity as the executor of the estate of the Mother for the benefit of its beneficiaries under her will or, in other words, himself and the Other Siblings. As mentioned, the Trustees are the main defendants together with Shang. The corporate bodies involved, namely, FNT Panama, Seven Holding, FNT, FNE and Raffle were all joined in order to be bound by the outcome of the action. Whilst claiming on behalf of the Mother’s estate, Sunny will be referred to by his name only for the present purpose. 20.The 10th defendant (“KSLD”) was not asset in the FNT Trust. Sunny and Chung hold 50% each of its shares. Sunny claims that it was involved as a company set up on the instruction of the Mother to hold assets for her, and the beneficial entitlement to such shares also vests in the Mother’s estate. 21.It should however be noted that FNT Panama, which is a Panamanian company, and KSLD, which is a BVI company, have not actually been served during the validity of the concurrent writ for service overseas. 22.At one point, the proceedings in the present action have been stayed pending the payment of the defendants’ costs in the previous two dismissed actions. The stay was finally uplifted in August 2020. 23.In the present action, the Trustees have requested for further and better particulars of Sunny’s pleaded claim. Sunny provided his answers and further answers in October 2020. Taking the view that they do not improve Sunny’s claim herein, the Trustees took out their summons on 7 December 2020 to strike out the claim and to dismiss the present action. THE CLAIM IN THE PRESENT ACTION 24.In the present case, Sunny, now in his capacity as the executor of the Mother’s estate, advances essentially similar factual allegations made in the previous actions in 2015 and 2017, and seeks to:
PRINCIPLES FOR STRIKING OUT 25.The Trustees’ application is made pursuant to O18 r19(1)(a)-(d) of the Rules of the High Court (Cap. 4A) (“RHC”)and the inherent jurisdiction of this court. 26.The applicable principles in relation to a striking out application are trite, which are summarised in Hong Kong Civil Procedure (“HKCP”) 2021[4] at§18/19/4. Striking out is for plain and obvious cases. Where the application proceeds on the ground of lack of reasonable cause of action, only the pleading will be scrutinised, and evidence is not admissible. 27.If a statement of claim, however complicated, shows that there is no cause of action, a court will order it to be struck out: see for instance Cheung Chui Sou-ying v the Personal Representatives of Cheung Yuk-luen[1981] HKLR 585 at 588H-J; Byjoy Ltd v Thorogood Estates[1985] 2 HKC 746 at 758F-I. 28.Disputed facts are to be taken in favour of the party at the receiving end of the application to strike out. That said, if a plaintiff pleads as a fact something which can clearly be shown to be incontrovertibly without solid foundation or actually false, then on an application to strike out on that basis the court is not bound to accept the allegation as true and to proceed on a fictional basis: see Lam Kit Sing v Chungshan Commercial Association Hong Kong HCA 2011/2014 (29 June 2016) at §18. The totality of the evidence, in particular, that which is undisputed or indisputable, should be looked at: see Chu Yue Bun v Lai Shiu Woon[2020] HKCFI 2195at §25. 29.Proceedings are frivolous when they are not capable of reasoned argument, without foundation or where they cannot possibly succeed. Proceedings are vexatious when they are oppressive or lack bona fides: see HKCP 2021 §18/19/7. 30.A claim which is absolutely groundless or the pleading which is a sham or entirely without substance, or a claim which is used as a means of vexation and oppression in the process of litigation is liable to be struck out for abuse of process: see HKCP 2021 at§18/19/9; 18/19/11 and 18/19/20. So is a claim which is statute-barred: see Ronex Properties Ltd v John Laing Construction Ltd [1983] 1 QB 398 at 408B-D. THE MAJOR GROUNDS FOR STRIKING OUT 31.The Trustees say that the claim as pleaded (even with the further and better particulars provided as mentioned above) discloses no reasonable cause of action, and the same is unarguable, frivolous, vexatious and/or otherwise an abuse of process of the court. In particular:
THE 1983 TOS 32.As pleaded, Sunny claims that the 1983 TOS is “void, invalid or unenforceable”. At the same time, Sunny pleaded an alternative case in the event that the court finds that the 1983 TOS was valid. In that event, he contends that the transfer by way of the 1983 TOS was to the Mother’s Trust instead of the FNT Trust. 33.Based on the aforesaid allegations, Sunny seeks the following relief:
34.The Trustees argue that Sunny’s claim to impugn the 1983 TOS is time-barred, whether according to Panamanian law (as the lex situs of the shares in FNT Panama transferred under the 1983 TOS) or Hong Kong law (as the lex fori). LIMITATION 35.The following principles were summarized in China Agri-Products Exchange Limited v. Wang Xiu Qun & Anor [2021] HKCFI 137 (at §§516-517):
Panamanian law 36.The Trustees have adduced expert evidence in respect of Panamanian law. Article 1151 of the Articles of the Civil Code of the Republic of Panama provides that “absolute nullity may not be requested or declared when a term of fifteen years has elapsed after the act has been performed or the null contract has been executed”. As such, the Trustees argue that the effect of Article 1151 is not merely a procedural bar but extinguishes the right of a person to request and to be granted a declaration of nullity. Such statute of limitation is substantive in nature. It follows that the issue of limitation in Sunny’s claim concerning the validity of the 1983 TOS should be determined by Panamanian law. 37.According to that, applying the limitation periods stipulated in Articles 1701 and 1151 of the Panama Civil Code mentioned above as well as Articles 1650 and 1652 of the Commercial Code of the Republic of Panama, the claim in the present action for declaration that the 1983 TOS is null and void can no longer be made after 15 years of the execution of the contract. Even in the case of fraud or falsehood, the right of action would have been barred after 4 years from the consummation of the contract being impugned. 38.Sunny criticises that the expert evidence on Panamanian law was adduced in the absence of prior leave of the Court. As the Trustees rightly point out, leave of the court is not required for adducing expert evidence by way of affidavit for the present purpose: see O38 r36(2) of the RHC. 39.Sunny also argues that Panamanian law does not apply as the 1983 TOS was executed in Hong Kong. The Trustees are equally right in that property and contractual claims to shares in a company should be determined by its lex situs, which in the present case is where FNT Panama was incorporated: see Chen Hongqing v Ds [2018] HKCFI 1170 at §§33, 35. Panama it is. 40.Counsel for Sunny also seeks to advance in submission his reading and interpretation of the relevant Panamanian law as well as his criticism about the expert’s analysis, but none of those is backed by actual relevant contrary expert evidence. On the face of it, they are not particularly analytical or convincing. 41.Evidence on foreign law is that of fact. One recalls judicial comment that issues that warrant such evidence are probably those that could not be resolved to the standard for striking out: see for instance, Polyline Development Ltd v Ching Lin Chuen & Ors [2021] HKCFI 1437 at §12. However, I do not accept that there is hard and fast rule. Circumstances dictate. Here in the present case, there is no contesting expert evidence on the applicable foreign law and its effect, as Sunny chose not to adduce any such evidence. The evidence is therefore un-contradicted for the present purpose. 42.However, it is argued on behalf of Sunny that the court is entitled to reject even un-contradicted expert evidence of foreign law. This goes without saying, and counsel for the defendants accept that the court is not bound to accept such expert evidence. Yet as explained in Traffic Stream Infrastructure Co Ltd & Ors v Full Wisdom Holdings Ltd & Ors (2004) 7 HKCFAR 442, this happens if the circumstances so warrant. That case was one instance where no weight should be attached to the opinion evidence since it involved no more than a bare conclusion without analysis or explanation. Hong Kong law 43.The Trustees are prepared to argue, assuming that the Panamanian statutes of limitation are regarded as procedural in nature so that Hong Kong law on limitation should apply instead. They say Sunny’s claims are nonetheless time-barred pursuant to the Limitation Ordinance, Cap 347 (“LO”). 44.Hon Chow J in the 13 March 2018 Reasons in 2015 Action observed that the case pleaded by Sunny and the Other Siblings was difficult to follow. That said, the claim for reversion of interest in the shares in FNT Panama transferred pursuant to the 1983 TOS, which is said to be a nullity, back to the Mother’s estate could only be understood to be restitutionary in nature: see Goff & Jones: The Law of Unjust Enrichment(9th ed)at §13-25. Indeed, the pleaded case in the present case and that in the 2015 Action share the same genesis, namely the alleged misappropriation of assets of the Mother’s estate or the Family Trust and the unjust enrichment of the Trustees (for the FNT Trust). 45.As such, the claim in the present case is subject to the 6-year limitation period as an action founded on contract pursuant to section 4 of the LO: see Goff & Jones(above) at §§33-07 to 33-08; The New China Hong Kong Group Limited & Ors v Ernst & Young & Ors, HCCL 41/2004 & HCCL 2/2005 (29 August 2008) at §§153-154. 46.The next question is when time limitation of such cause of action started to run in the present case. This must be when the right of action accrued. The Trustees argue that it started after the 1983 TOS. This must be right. That Sunny is claiming for the Mother’s estate does not mean the cause of action accrued only upon the Mother’s demise, let alone the grant of probate that put him in such capacity to sue for the Mother’s estate. In other words, the cause of action accrued during the lifetime of the Mother being the transferor of her right to the 2 shares in FNT Panama: see Williams, Mortimer and Sunnucks on Executors, Administrators & Probate(21st edn) at§61-02. 47.In the premises, the claim to nullify the 1983 TOS and for the reversion of the right and interest in the 2 shares of FNT Panama has prima facie been time-barred before the commencement of the present action. 48.It seems Sunny seeks to invoke section 26 of the LO for postponing the running of the time limitation, as he contends that he first knew about the 1983 TOS on 20 October 2016 when the same was disclosed by the Trustees in the 2015 Action. 49.Section 26(1) of the LO provides that:
50.It is for Sunny to show that the circumstances of this case fall within the section, namely fraud, concealment or mistake: see Hotung Investment (China) Ltd v Ernst & Young (a firm)[2012] 5 HKLRD 421 at §35. However, he apparently leaves it to his opponents and the court to figure out precisely which subparagraph of section applies to the present case. One thing is clear. The applicability and application of each subparagraph must be considered with reference not merely to the state of knowledge of Sunny as the executor of the Mother’s estate but also that of the Mother during her lifetime after the 1983 TOS. 51.The concept of fraud needs no introduction. It is equally clear that allegation of fraud is not to be lightly made or by way of inference or innuendo. It must be properly pleaded with particulars on solid and cogent evidential basis: see Chinachem Charitable Foundation Limited v Chan Wai Tong, HCCL 6/2020 (11 May 2021) at §§22, 30. 52.Deliberate concealment involves either positive concealment or withholding of material facts with the intention of concealing them. However, intention is proved where the concealment is a matter of conscious decision: see Lee Tsan Sum v. David Wong Pui Hon & Ors, HCA 308/2004 (7 July 2010) at §§71-72. 53.If the concealment or mistake could have been discovered with reasonable diligence at a certain moment, the time for taking action starts to run from that moment. The burden of showing that such could not have been discovered despite reasonable diligence rests on the party relying on the provision for postponing the running of time limitation: see Paragon Finance plc v DB Thakerar & Co (a firm)[1999] 1 All ER 400 at 418a-c. 54.Sunny’s case is that he came to know of the 1983 TOS on about 20 October 2016 in the course of the 2015 Action. However, nothing was said at all about the Mother’s state of the relevant knowledge since the execution of the 1983 TOS and her inability to discover the truth notwithstanding reasonable diligence, if indeed the case. 55.Insofar as the Mother is concerned, as mentioned, the allegation is that the 1983 TOS was “not authentic”. Had the plea ended there, it would have been treated as nothing more than non-admission. However, Sunny went further, but by pleading that he reserves the right to examine the handwriting on the document. Such pleading is embarrassing, if not illegitimate, when there is no actual plea of forgery or fraud or other factual basis for questioning authenticity. The fact is that the question about the handwriting has not been pursued even for the present purpose. 56.The Trustees indeed requested for further and better particulars of such plea, specifically whether forgery is alleged and, if yes, what particulars of the alleged forgery there are. Somehow Sunny answered the request by deferring his answer until after discovery. As mentioned, no evidence suggesting forgery was adduced for the present purpose. Directly contrary to the principles mentioned above, the attempt to merely suggest forgery or fraud by inference or innuendo per se is liable to be struck out. 57.The existence of any solid basis for suggesting forgery of the 1983 TOS is further weakened by Sunny’s own purported alternative plea of non est factum on the part of the Mother. Sunny suggests that the Mother signed the instrument of transfer for the 1983 TOS without understanding its contents. She allegedly would not have done so, had she realised the consequence of that. Such case could not co-exist with the suggested forgery as a matter of fact. The nature of the plea of forgery does not permit the inconsistent plea of non est factum as an alternative, being both allegations of fact, in the absence of justification: see Pako Enterprises Ltd v Tse Yuet Toa[2020] 5 HKC 578 at §13. Such plea is therefore also liable to be struck out. 58.A party is not permitted to absolve himself from the binding effect of a document that he has signed merely because he did not intend to sign a contract or a contract of the type she has in fact signed: see Chitty on Contracts(33rd Ed) at§3-049. However, it does not appear that the alleged mistake took the form of the Mother signing the 1983 TOS believing that it contained different terms or served a different purpose from what the instrument provided and served. No such suggestion was made anyway. Nor was such evidence adduced. Rather the alleged mistake took the form of the Mother signing the document without understanding its contents. Specifically, it is pointed out that the document was written in English. 59.The relevant principles are trite. That a document is written in a language with which she is not familiar does not suffice unless she did not have reasonable opportunity of taking precaution or ascertaining the nature and content of the document before signing: see Chitty at§3-055. No such allegation was pleaded. Nor was such evidence adduced for the present purpose. 60.The Trustees point to the contemporaneous documentary evidence that is said to be indisputable, which only shows that the Mother was at all material times aware of the FNT Trust as well as the vesting of the shares in FNT Panama in the Trustees for the educational and charitable purposes of the trust. The evidence includes the letter from the Father to the Mother dated 28 January 1983 whereby the Father recounted the Mother’s support for the educational and charitable purpose as well as spirit behind the FNT Trust. The FNT Trust has since been administered in the open with record of the businesses transacted by the Trustees, including the charitable donations and activities in the following decades. There are photographs depicting the Mother’s attendance in a dinner on 26 November 1984 with the original trustees of the FNT Trust as well as the 30th anniversary celebration of the FNT Group. 61.After the passing of the Mother, the obituary was advertised by the FNT Trust. Nian Chun Chen, one of the Other Siblings, in her fax dated 17 February 2000 suggested that a hospital to be opened (with the financial support of the FNT Trust) should be named in memorial of the Mother as the donor of the trust. The minutes of meeting of the FNT Trust dated 1 August 2000 specifically referred to the Mother as one of the founders. Further, the Mother’s will made no specific mention of the shares in FNT Panama. More importantly, the grant of probate did not include the right to the shares in FNT Panama as assets in the Mother’s estate. 62.Sunny himself did not actually explain why he managed to be allegedly kept in the dark until his alleged discovery in October 2016 after the commencement of the 2015 Action. He would have had a hard time explaining, in view of the contemporaneous documents. He himself was a trustee and served as secretary of the board of trustees of the FNT Trust from 1988 to 1991. His participation in the businesses transacted by the FNT Trust was documented by the minutes, which he also signed as secretary. This lasted until his resignation in 1991 as mentioned above. 63.In terms of documentary evidence in support of his case, Sunny essentially relies on the 1974 Agreement and the 1986 Agreement. He says that in view of them, the Mother could not have knowingly executed the 1983 TOS in its terms. Self-contradiction, as he is apparently suggesting. The defendants’ dispute in respect of the authenticity of these documents aside, that does not serve to negate what was mentioned in the preceding paragraph. 64.The difficulty of placing reliance on these alleged agreements has been explained by Hon Chow J in the 13 March 2018 Reasons in the 2015 Action. The shares and interests in FNT Panama were never even mentioned in the 1974 Agreement and never held by the Father. The agreement only refers to the Father’s companies in Hong Kong and United States, and is not applicable to the shares in FNT Panama, which was incorporated in Panama. The 1986 Agreement post-dates the transfer to the Trustees of the rights to the shares of FNT Panama pursuant to the 1983 TOS. Neither the FNT Trust nor its trustees then were parties to that agreement and could not be bound by it. The contention that the interest in the shares were “reverted back” or remained with the Mother’s estate is hardly comprehensible as a matter of law. In the absence of proper basis for contending that the rights to the shares of FNT Panama was understood to be vested in the Mother’s estate, the question as to the existence of the 1983 TOS by reference to these alleged agreements lacks basis as well. 65.Sunny now has a further alternative contention. That is in the event that the court finds that the 1983 TOS is authentic, the transferee of the shares in FNT Panama should be the Mother’s Trust (for the benefit of him and the Other Siblings) instead of the FNT Trust. Such purported alternative contention is problematic in a few ways. 66.To begin with, the purported alternative contention hits the same rock prohibiting unjustifiable inconsistent plea discussed above. Entirely inconsistent with his case that the 1983 TOS was either not signed or signed by the Mother under factual circumstances that would vitiate it, it is impermissible for him to run the further purported alternative case in the absence of justification: see Pako Enterprises Ltd (above). 67.Then, the factual basis for the purported alternative contention in respect of the Mother’s Trust is inconsistent with the case put forward in the 2015 Action. In the 2015 Action, the contention of Sunny and the Other Siblings was that the transferee of the 1983 TOS could only be referring to the trust allegedly declared by the Mother and the Father pursuant to agreements reached in the numerous family meetings and the 1974 Agreement. The purported alternative contention now is that the transferee was allegedly the Mother’s Trust, which was apparently a tailored transformation in view of the rejection by Hon Chow J of their contention that a trust was created as a result of the 1974 Agreement. 68.When it came to submission at the hearing, counsel for Sunny came up with yet another formulation of his case on when the time limit started to run in the present case. Contrary to his affirmation, it is now argued that the time started to run not from 20 October 2016 but 15 January 2016, which was the date of the board resolution of FNT Panama to formally issue the 2 shares to the Trustees of the FNT Trust to formalize their status as the holder of the shares and for them to be registered as such. It is argued that a fresh cause of action in tort or restitution accrued on that date. 69.The argument and cause of action newly advanced by counsel in submission is more artificial than real. 70.Transfer of the right to and interest in the 2 shares in FNT Panama to the Trustees for the FNT Trust happened upon the 1983 TOS, and the 2016 issuance of the shares served to formalize the status of the Trustees as legal holder. The issuance of the shares, in a sense, merged with that, and did not give rise to a new cause of action in tort. 71.As discussed, the cause of action must come from the pleaded case, properly understood. As such, one simply cannot deduce any cause of action in substance other than restitution of the interest in the shares in FNT Panama on the basis that the 1983 TOS is allegedly void ab initio. Sunny never seeks to impugn the 1983 TOS on tortious basis. That Sunny claims for declaratory relief in respect of validity of the January 2016 Resolution does not give rise to a separate cause of action for the purpose of the limitation issue: see P&O Nedlloyd BV v Arab Metals Co & Ors [2005] 1 WLR 3733 at §20; McGee, Limitation Periods (8th ed) at §3.005. 72.Hence the accrual of such cause of action after the transfer in 1983, subject to the 6-year limitation. As discussed, Sunny fails to plead and to establish that the present case falls within any of the limbs under section 26 of the LO. 73.It should be reiterated that instead of trying the merits of the case on affidavits, this court is considering the above contentions of Sunny, pleaded or otherwise, for the purpose of his answer to the limitation defence, specifically, his attempt to resort to section 26(1) of the LO. I find that he simply fails to do so. 74.In the circumstances, that the claim is liable to be struck out for being time-barred cannot be salvaged. LACHES 75.This is an equitable consideration. Where there is a substantial lapse of time coupled with the existence of circumstances which make it inequitable to enforce the claim, or practically unjust to give a remedy because one party has by his conduct and neglect put the other party in a situation in which it would not be reasonable to place him if the remedy was afterwards to be asserted: see Tsao Chin Lan v. Tin Ka Kung & Ors [1995] 2 HKC 671 (CA) at 675-676; Spry, Equitable Remedies (9th Ed) at pp.232-233. 76.A claim that, if entertained, would give rise to such practical injustice to the defendant due to laches is liable to be struck out: see The Estate of Yang Sen Hui (Decd) & others v Pao Yuen Tung Hsing Yieh Co Ltd [1983] HKLR 124 at p.147. 77.Practical injustice may result from, eg, disturbing dispositions made for a long time or loss of access to evidence that would substantially affects a party’s position to advance his case: see Spry (above) at pp.238-240. The Trustees say both types of prejudice exist in the present case. 78.First, it is never the case of Sunny that the Trustees have acted contrary to the FNT Trust, though the trust is being impugned. The undisputed fact was that the FNT Trust has been administered, and donations and activities have been carried out, over decades since its formation. As mentioned, the allegation of concealment is very flimsy. This continued after the death of the Mother and, as continuation of pre-existing projects in progress, even after the commencement of litigation between the parties. As mentioned, the evidence shows such businesses transacted and activities carried out in August 2020. The undisputed charitable donations and activities at least up to 2015 carried out in accordance with the charitable and educational purposes of the FNT Trust have led to third party interests which, the Trustees argue, it would be wholly inequitable to allow the Mother’s estate to seek restitution of. 79.Second, with the substantial lapse of time since the 1983 TOS until at least 2015, the Trustees’ position and ability to defend the action is substantially prejudiced in terms of loss of witnesses, including the former trustees of the FNT Trust who were the transferees under the 1983 TOS. In the 13 March 2018 Reasons, Hon Chow J did point out the relevance of these individuals in the previous action. 80.Whilst the consideration of laches is fact sensitive, the circumstances of the present case are such that the Trustees’ complaint is rather clear and obvious. 81.In the context of limitation and laches, counsel for Sunny refers to the Malaysian appellate case of Leo Leslie Armstrong v Jawatan Kuasa Kerja Tanah Wilayah Persekutuan Kuala Lumpur [2014] 5 AMR 1 essentially for two points. First, it is argued that limitation does not apply to a void contract: see §38; and second, laches does not apply where the claim is not for equitable remedy: see §53. As pointed out on behalf of the defendants, the facts, context, issues and jurisprudence considered in that case hardly cast relevant light on the applicable law in Hong Kong and the circumstances of the present case in any event. THE JANUARY 2016 RESOLUTION 82.By the January 2016 Resolution, the Trustees as directors of FNT Panama resolved to issue and allot two shares in perfecting the legal ownership of the same as transferred to them for the FNT Trust by the Mother by the 1983 TOS. As pleaded, Sunny claims that the January 2016 Resolution was passed by the Trustees whilst the entitlement of the 1983 TOS of the FNT Panama was in dispute (being after the commencement of the 2015 Action). He contends that that was not legal and amounted to wrongful deprivation of the Mother’s Estate by the Trustees, and therefore claims for those shares to be reinstated. Consequentially, as mentioned, Sunny seeks a declaration that the January 2016 Resolution is null and void, and that any change in the record of the share register of FNT Panama as a result of the issuance of the shares is null and void. 83.The Trustees have requested for further and better particulars of the factual basis for the alleged illegality and wrongful deprivation of the Mother’ estate. Sunny’s answer to the request added nothing material to the pleaded contention. 84.Insofar as the challenge against the January 2016 resolution per se is advanced as a standalone claim, it is plainly liable to be struck out for the want of a reasonable cause of action. 85.Insofar as the challenge against the resolution is founded on the existence of the claims in the 2015 Action, such basis ceased to exist upon the same being struck out and the action wholly dismissed. 86.Insofar as the contention is to challenge the resolution to formalise the status of the Trustees’ status as legal shareholders of FNT Panama pursuant to the 1983 TOS, which would have made the only real sense, it stands and falls together with the validity of the 1983 TOS. If the claim to nullify the 1983 TOS is liable to be struck out for being time-barred and/or laches discussed above, so should the challenge in respect of the January 2016 Resolution be. THE MAY 1995 RESOLUTION 87.The documents recorded that the Father attended the shareholders’ meeting of FNT Panama on 1 May 1995 as the authorized representative of the Trustees of the FNT Trust, which hold the right to the shares of FNT Panama. He had the authority to vote on behalf of all the Trustees at the meeting. The May 1995 Resolution was passed so that Petrie was appointed as director and president of FNT Panama in place of the existing one, and Chung was appointed as director and secretary in place of Sunny. The resolution was duly registered by a Panama Public Deed dated 8 June 1995. 88.As pleaded, Sunny challenges his removal as a director of FNT Panama, and alleges that the episode was part of a premeditated plan of the Trustees to control and misappropriate his family assets. The subsequent resolutions passed by such a board of FNT Panama are said to be invalid by reason of the improper appointments. However, it does not appear any relief such as declaration to such effect is actually sought. 89.Insofar as the challenge against the May 1995 Resolution per se is advanced as a standalone claim, it lacks reasonable cause of action. 90.First, Sunny is claiming solely in his capacity as the executor of the Mother’s estate in the present action. As such, he has no locus standi in the present action to make claims in respect of his removal as director of FNT Panama, which concerns him in his personal capacity. 91.Second, further and better particulars were requested of the factual basis for the claim in respect of the alleged premeditated plan of the Trustees. Sunny again referred to his right to plead further after discovery. He also referred to inference that the minutes of the meeting and the appointment were forged documents and therefore void ab initio. The discussion above in respect of what is expected of proper pleading of fraud and forgery refers. Such plea in respect of the alleged fraud here is liable to be struck out. 92.The internal management of FNT Panama is governed by the law of its place of incorporation: see DP World Djibouti FZCO & Ors v. China Merchants Port Holdings Co Ltd[2019] HKCFI 3104 at §§102-103. According to the Panamanian law expert evidence, any challenge in respect of the validity of the May 1995 Resolution would be time-barred. As discussed, Sunny adduced no contrary evidence. Advancing a claim that is time-barred is abuse of process. OTHER CAUSES 93.As continuation of his contention so far discussed, Sunny further pleads that:
94.Insofar as the above causes are no more than variations of the challenge in respect of the 1983 TOS and the FNT Trust and consequential relief, they stand and fall together with the striking out of the challenge as discussed above. As standalone contentions, none of them manage to found a sustainable cause of action. 95.First, the contentions in respect of the commission of mala fide and tortious acts or act in concert on the part of the first 4 defendants are embarrassing and not particularised. Nor do they constitute any legally recognised cause of action. 96.Second, the plea of unjust enrichment entails the necessary particularisation of its components such as the alleged unjust element: see Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79 at §67. None was pleaded. Nor is the apparently contingent contention that the first 4 defendants herein were somehow unjustly enriched in their personal capacity, when it was clearly documented that all the transfers and allotments since and including the 1983 TOS were made to the Trustees of the FNT Trust. The same were entered as a matter of public record in Panama. 97.Third, in the same vein as his plea of fraud or forgery, Sunny’s plea that the first 4 defendants herein acted in concert falls short of a properly pleaded claim of conspiracy. This is regrettable, in view of the observation already made by Hon Chow J in respect of the conspiracy claim advanced in the Other Siblings’ claims in the 2015 Action. 98.As pointed out by the Trustees, conspiracy must be distinctly pleaded with utmost particularity and distinctly proved. There must be pleading of the overt acts carried out by each alleged co-conspirator which show the existence of an agreement, the implementation of the agreement and that caused the loss complained of: see ADS v Wheelock Marden & Co Ltd [1994] 2 HKC 264 at 272D-G. Sunny’s pleading falls far short of that. The suggestion of leaving it to be inferred from the facts is embarrassing: see ADS (above) at 269-270G; Ng Fui v. Kam Chi Ming & Ors, HCA 739/2011 (23 April 2012) at §70. 99.Pleading of such other causes are plainly liable to be struck out. SEVEN HOLDING & KSLD 100.The claim is for declarations that the beneficial interests in the shares and/or the assets of Seven Holding and KSLD belong to the Mother’s estate; and for orders that the Seven Holding and KSLD (via their directors) rectify their respective share registers to give effect to the declarations. 101.As mentioned from the outset, neither Seven Holding nor KSLD, the former being Bermudan company and the latter being a BVI company, has actually been served during the validity of the concurrent writ for service on them. Those acting for Sunny confirmed by letter dated 3 August 2020 that service on these overseas corporate defendants had not been effected. By letter dated 11 August 2020, those acting for the first 4 defendants confirmed that they had no instruction to accept service on behalf of these overseas corporate defendants and put on record that the concurrent writ had not been served within its one-year validity. 102.In the circumstances, there is strictly no issue of whether the claims against Seven Holding or KSLD are liable to be struck out, when neither of them has entered appearance and engaged those acting for the first 4 defendants herein for such purpose. That said, they are right in pointing out that as the case now stands, there is no way that Sunny may proceed with the claims in respect of these overseas corporate defendants that would bind them. What remains is the claim in respect of them but directed against Min Chun, Petire, Chung and Shang. Seven Holding 103.As mentioned, the contemporaneous documentary evidence shows that Seven Holding (formerly named as First National Foundation Company Limited) was acquired by the FNT Trust to satisfy the latter’s funding requirements. Pursuant to the Seven Holding Agreement dated 2 December 1985, Coson became the sole shareholder as nominee on trust for the Trustees. 104.The claim in respect of Seven Holding apparently concerns Petrie. As pleaded, the claim is based on the alleged conversation in 1985 between Sunny, the Father and Petrie, during which Petrie is said to have explained how to set up a Bermudan company to hold the assets of the Chen’s family for the Mother and the children. It is said that Seven Holding was set up by Petrie pursuant to the alleged conversation. 105.It is plain that the pleaded claim in respect of the beneficial interest of Seven Holding is unsustainable. 106.First, it is unclear from the pleading how the alleged conversation, even if true, gave rise to any trust in favour of the Mother’s estate. As explained by Hon Chow J in the 13 March 2018 Reasons in the 2015 Action, a trust cannot be created out of mere intention. The Father and Petrie did not hold any interest in Seven Holding, and neither of them was in a position to create any trust over it. Coson is not a party to the alleged conversation and therefore could not be bound by that either. 107.Second, insofar as it is contended that the 1986 Agreement gave rise to what is labelled as the Family Trust which should receive all the assets of the Chen family, including Seven Holding, the 1986 Agreement was alleged to be one between the Father and the Mother, who did not hold any interest in Seven Holding. The absence of Coson as a party to the 1986 Agreement also rendered it impossible for any trust to be created in respect of the beneficial interests in Seven Holding. KSLD 108.As mentioned, KSLD was set up by Sunny, and he and Chung holds 50% each of its shares. 109.As pleaded, Sunny contends that KSLD was “set up by on the instruction of [the Mother] to hold assets on trust for her”, and that Min Chun had admitted that both Sunny and Chung “were and are nominee shareholders and held/hold the shares of KSLD on trust for [the Mother]”. In answer to request for further and better particulars of such plea, Sunny claimed that Min Chun made the alleged admission by mentioning in her email that KSLD is the “small treasure trove of the Mother”. 110.The claim on the basis of the alleged trust is plainly unarguable. 111.The above discussion in respect of what is required of a plea of trust in respect of certain property refers. The plea lacks mention of the constituents of the creation of a trust. 112.Further, Min Chun holds no interest in KSLD, so that she was not in a position to make any representation in such alleged communication with Sunny that could give rise to any trust in respect of KSLD. There is no suggestion that Chung, the other 50% shareholder, was a party to such alleged communication or how he is said to be bound by such alleged communication, even assuming that it existed as a matter of fact. ORDER FOR AN ACCOUNT 113.Sunny seeks an order that the directors of FNT Panama, Seven Holding and KSLD to account to the Mother’s estate the assets of the respective companies, and that the first 4 defendants herein to pay equitable compensation. The remedies sought lack basis when the causes of claim are liable to be struck out. RETURN OF THE COMPANY KITS 114.As pleaded, Sunny contends that Min Chun has taken the company kits of FNT Panama, Seven Holding and KSLD, which is said to contain, amongst other things, the book of blank share certificates, shareholder and director registers, company seal and company chop as well as the originals of the 1974 Agreement and the 1986 Agreement. He claims for their return. 115.Such claim is plainly unsustainable. 116.Whether this is a claim by Sunny, which he has no locus in this action to lodge in personal capacity, or on behalf of the Mother’s estate, he is not entitled to claim any right to the company kits of any of these companies. These are the properties of the respective companies. The Mother’s estate has no entitlement even assuming for argument’s purpose that it is entitled to beneficial interest of any of these companies. ABUSE OF PROCESS 117.The obvious complaint of the defendants is that this is effectively the third attempt of Sunny and the Other Siblings, now by Sunny for the Mother’s estate for the benefit of himself and the Other Siblings, to vex the Trustees and the FNT Trust. They say this is an abuse of process. 118.The relevant principles should not be in dispute: see Michael Wilson & Partners Limited v Sinclair [2017] 1 WLR 2646 (CA) at §48. Abuse of process exists even in the absence res judicata in the strict sense. The court may strike out proceedings for abuse of process to safeguard the private interest of a party not being vexed twice for the same reason and the public interest of the state in not having issues repeatedly litigated. 119.To determine whether proceedings are abusive, the court will engage in a close merits-based analysis of the facts. That the parties may not have been the same in the two proceedings is not dispositive. The circumstances may be such as to bring the case within the spirit of the rules. It may be an abuse of process where the parties in the later civil proceedings were neither parties nor their privies in the earlier proceedings, if it would be manifestly unfair to a party in the later proceedings that the same issues should be re-litigated, or if there is an element of vexation in the use of litigation for an improper purpose. In other words, the jurisdiction is broad enough to allow the court to decide that raising a particular issue or cause is an abuse of process notwithstanding that it was not determined by a previous final judgment on the merits. 120.The Trustees are parties common in all the actions, while Shang and FNT Panama were parties to the 2017 Action. Differences in formulation aside, the previous 2015 Action and the 2017 Action as well as the present action were all initiated on the basis that the transfer of the shares in FNT Panama to the FNT Trust by the 1983 TOS should be impugned, and that such interests are the assets of Chen’s family for the benefit of Sunny and the Other Siblings pursuant to the 1974 Agreement and the 1986 Agreement. Short of making material differences, the different formulations of the claims on such basis in one action after the other actually highlight the abusive nature of subjecting the defendants, the Trustees in particular, to these litigations. 121.It is argued that Sunny should be allowed to correct the flaws in the cases presented to the court on previous occasions. He relies on Total Lubricants HK Ltd v De Chanterac (No 2) [2013] 2 HKLRD 838 at §31, but this was not exactly endorsed by the appellate court there, which basically found no sufficient reason to interfere with the first instance exercise of discretion to allow that. In the present case, as their answer to the previous rulings of Hon Chow J against them as mentioned above, Sunny (and the Other Siblings) purported to reformulate the claims against the defendants on the basis of similar factual allegations, which not only amounted to repetitive but also inconsistent claims. The case of Tang Kin Wah v Cheng Choy Kam Chee Connie & Anor [2002] 1 HKC 552 relied on by Sunny is therefore distinguishable from the circumstances of the present case. 122.Salvaging the pleading by way of further amendment was suggested, albeit not generally. However, in view of the problems discussed above, Sunny may not realistically expect such leeway from the court. 123.The present action is plainly an abuse of process, and is liable to be struck out on this ground as well. CONCLUSION 124.The claims in the present action against the defendants are struck out for the lack of reasonable cause of action, vexatious, frivolous and abuse of process. 125.The defendants shall have the costs of this action, including any costs reserved and those of the present application. The circumstances are such that this court is minded to award costs on an indemnity basis. Considering the matters that need to be covered for the purpose of the present application and the assistance from counsel that accorded with that, I certify the engagement of two counsel. A nisi order as to costs is accordingly made in these terms, which will become absolute without further order in the absence of application in 14 days to vary.
Mr Roger So, instructed by Lawrence K Y Lo & Co, for the plaintiff Ms Sara Tong and Ms Esther Mak, instructed by William W L Fan & Co, for the 1st - 4th, 6th - 9th defendants [1] Though the first paragraph of the declaration refers to it being as of 31 December 1983. [2] The written articles of the alleged foundation were disputed in terms of authenticity by the Min Chun and the other defendants there. [3] The validity of such appointment was disputed. [4] The version current at the time of the hearing and as cited by counsel. |
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