Chiu Ming Sun v. Michael Ma Wing and Others
Read the full judgment text of HCA 3981/1985 on BabelCite. This High Court CFI judgment.
1. On the 27th June 1985, the plaintiff ("Mr. Chiu") issued a writ endorsed with a Statement of Claim by which he sought certain declarations, damages and other relief, principally on the basis that, in August 1978, he had been induced to sign certain documents as a result of allegedly fraudulent misrepresentations by the defendants. Having acknowledged service of the writ, solicitors acting for each of these defendants, on separate days between the 6th and 30th July 1985, took out summonses to
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HCA003981/1985 ------------------- Headnote -------------------
1985, No. A3981 IN THE SUPREME COURT OF HONG KONG HIGH COURT ___________ BETWEEN
____________ Coram: His Honour Judge Downey, sitting as a Deputy High Court Judge Date of delivery of judgment: 30th April, 1986 ___________ JUDGMENT ___________ 1. On the 27th June 1985, the plaintiff ("Mr. Chiu") issued a writ endorsed with a Statement of Claim by which he sought certain declarations, damages and other relief, principally on the basis that, in August 1978, he had been induced to sign certain documents as a result of allegedly fraudulent misrepresentations by the defendants. Having acknowledged service of the writ, solicitors acting for each of these defendants, on separate days between the 6th and 30th July 1985, took out summonses to strike out or stay the action on the grounds that it is frivolous, vexatious and an abuse of the process of the court. On the 26th October 1985, Mr. Chiu's solicitors took out a summons for leave to amend the Statement of Claim in terms of the draft copy ("A.S.C. 1") delivered with the summons. Eventually, all four applications came before me. In the course of a lengthy hearing, spread over several days, I gave leave to the plaintiff to amend his summons by substituting a further draft of his proposed amendments ("A.S.C. 2") for the original draft ("A.S.C. 1"), for reasons and in circumstances which will later appear. 2. For the purpose of these proceedings, the parties' legal advisers prepared two bundles of documents which I have found extremely useful. The first (Bundle "A") consists of various affirmations and affidavits filed in this action. The second (Bundle "B") contains various documents relating to previous proceedings in the High Court and the Court of Appeal. Their contents will be cited : (A p.....) and (B p....) respectively. I must also express my gratitude to counsel for their detailed and able arguments, which, have ranged over wide and disparate legal fields, such as res judicata, issue estoppel, limitation of actions, fraud, conspiracy and certain areas of public policy. The fact that I do not deal with every point made in the course of those submissions or the Socratic dialogue between bench and bar does not mean that I have overlooked them. With the exception of my own notions, which have been shown to be unsound as a result of counsel's analysis or further consideration, I hope that my reasons will implicitly, if not expressly, indicate the extent to which I have accepted or rejected particular submissions. 3. The present action, and the previous proceedings, concern a dispute over ownership of the 5002 issued shares of Yat Ming Investment Co. Ltd. ("Yet Ming"), whose sole asset was a couple of Letters of Entitlement, issued in respect of land in the New Territories. In May 1978 Mr. chiu acquired these shares for a price of $15,000,000. In order to finance this acquisition, and with a view to obtaining a very substantial profit from a realisation of Yat Ming's sole asset, Mr. Chiu entered into an agreement, and related legal transactions, with Romulus Co. Ltd. The second defendant ("Mr. Mark") acted as Mr. Chiu's solicitor in these transactions. To comply with the law relating to limited companies, one of the shares was transferred to the first defendant ("Mr. Ma") as Mr. Chiu's nominee. In 1978, the third defendant ("Mr. Fong") was apparently "a good and/or close friend" of Mr. Chiu. It is alleged that he advised Mr. Chiu to appoint Mr. Ma as a consultant, because of his "connections and experience" in applying for re-grants of land in exchange for Letters of Entitlement, on which the expected substantial profit of more than $150,000,000 depended. 4. I fully realise that, as between the present adversaries, the divergent versions of the facts alleged at various points in time have not been fully adjudicated upon, and have not resulted in any judicial finding after hearing evidence from all parties. I emphasise that point in order to remind myself that the discretion, which the defendants invite me to exercise, is one which should be exercised, if at all, only in the clearest of cases, and in a manner which does not usurp functions which, under our system, are normally reserved to the judge at the trial. Notwithstanding that reservation, I do not think that anyone could deny that a dramatic turn of events occurred in the summer of 1978. Early in August, Mr. Chiu, Mr. Ma and Mr. Fong came together in Mr. Mark's office. On this occasion, Mr. Chiu signed various documents. Ostensibly, at least, their effect was to transfer 5000 shares in Yat Ming from Mr. Chiu to Mr. Ma, and to give Mr. Fong a Power of Attorney, which enabled him subsequently to sell the plaintiff's remaining share in Yat Ming to one Tang Wai for an unspecified, but valuable consideration. 5. That is a very brief summary of the early history of this dispute. As the details have been set out more fully in the documents contained in bundle "B", and more particularly in the reserved judgments of O'Connor, J. and Rhind, J. (B pp. 190-201; B pp. 309-319), delivered in December 1980 and January 1982, I do not think that it is necessary to repeat them for the purposes of dealing with the applications now before me. Putting aside, for the moment, all legal and factual refinements, Mr. Chiu complains that the defendants have cheated him by inducing him to part with his shares in Yat Ming, and have themselves taken the substantial profits obtained as a result of the subsequent sale of Yat Ming's sole asset. Save that Mr. Fong was not made a party to previous legal proceedings concerning these shares, that, in essence, has been Mr. Chiu's complaint ever since 1979, when he first commenced legal proceedings over these shares. In order to appreciate the matters now before me, and the submissions of counsel, it is, in my view, useful to examine more closely the manner and circumstances in which this dispute over Yet Ming's shares has been presented to this Court at various times. 6. Having discovered that the documents he signed in August 1978 effectively gave Mr. Ma complete control of Yat Ming, Mr. Chiu issued a writ (HCA 1600/79) on the 20th April 1979 against Mr. Ma, Mr. Mark and Yat Ming. A Statement of Claim (B pp. 65-70) was filed on the 15th May 1979. In paragraph 10 of that pleading it was alleged :-
In the prayers of that pleading, Mr. Chiu sought, inter alia, an injunction to restrain disposal of Yat Ming's only asset, and declarations to the effect that Mr. Chiu was the legal and beneficial owner of the shares in Yat Ming. Although Mr. Chiu alleged (in paragraph 11 of that Statement of Claim) that the documents he had signed in blank "were completed at some time" without his knowledge, he did not directly point to any impropriety on the part of Mr. Ma or Mr. Mark, or anyone. Indeed, Mr. Mark had ceased to be a party as a result of a consent order made on the 17th July 1979 (B p. 83). But, Mr. Chiu did deny ever receiving 96500,000, the stated consideration for the transfer of the shares to Mr. Ma. 7. That pleading was signed by counsel who also represented Mr. Chiu at the trial before Mr. Commissioner Gittins, Q.C. in July 1980. Mr. Chiu's case was opened by his learned leader, Mr. Charles Ching, Q. C. Mr. Ma, who contended that he had bought the shares for $500,000 and lent $1.5 million to Mr. Chiu at a time when he was in financial difficulties, had a similarly formidable team of experienced counsel. On the third day of the trial, instead of continuing with the cross-examination of Mr. Chiu, counsel indicated that they were having "fruitful discussions" and sought an adjournment until the following day, the 11th July 1980. On that day, a copy of a Memorandum of Agreement (A pp. 85-87) was handed to the learned trial judge, and in due course he made certain declarations and entered formal judgment (Bp. 95-96) ("the first judgment") in accordance with some of the terms of the settlement. The principal effect was that Mr. Ma was declared to be the beneficial owner of 5001 shares in Yat Ming at all material times since the 8th August 1978. The sale of the remaining share by Mr. Fong to Tang Wai, under the Power of Attorney, dated the 5th August 1978, was confirmed as "Lawful and valid in every respect" (ref. C1.4 of the Memorandum of Agreement : A p.85). Mr. Chiu also obtained certain indemnities from Mr. Ma, as well as a payment of $1. 5 million and waiver of his counterclaim for a like sum which he had allegedly lent to Mr. Chiu in August 1978. Furthermore, Mr. Mark was released from his undertaking of the 20th April 1979 not to sell the Letters of Entitlement belonging to Yat Ming. 8. Although subsequent events, including lengthy interrogatories delivered to his solicitor and leading counsel, suggest that Mr. Chiu was not entirely happy with the result of these proceedings ("the first action"), the outcome cleared the way for Mr. Ma's contemplated realisation of Yat Ming's valuable asset. It also offered Mr. Chiu some relief from sums which he might be liable to pay to Mr. Fong and a Mr. K.K. Wong for "introducing" him to Yat Ming and its valuable asset. It may be significant that at no stage of these proceedings was there any reference to Mr. Fong having any beneficial interest in any of the shares of Yat Ming. In any event, it would seem that Yat Ming's Letters of Entitlement were sold to Celberg Investment Co. Ltd. ("Celberg") in October 1980 for some $113 million, and subsequently re-sold by Celberg for $168 million. 9. Whether he was seething from the outcome of the first action or from news of the sale to Celberg, I do not know. But, on the 4th December 1980, Mr. Chiu brought his complaint again before the Court by issuing a writ (A7013 of 1980; the "second action") against Mr. Ma, Mr. Mark, Yat Ming, Celberg and Mr. Foo, his solicitor in the first action. Mr. Chiu was by then represented by a different firm of solicitors. They prepared a Statement of Claim, which was, in my view, extremely prolix, irregular, contradictory, and contained the seeds of its own destruction. Phind, J. had a few kind words to say about it in 1982. He described it as "not an easy document to follow". It asserted that Mr. Chiu was the holder of 5001 shares in Yat Ming, and beneficially entitled to all shares in Yat Ming, and sought a declaration to that effect. These were the same allegations which had been made in the first action. But, in this second action, Mr. Chiu went further. He alleged that, if there had been a sale of the shares to Mr. Ma, the same was void or voidable because it was unconscionable or procured by the undue influence of Mr. Ma or as a result of his breach of fiduciary duty to Mr. Chiu. He also sought to have the Memorandum of Agreement and the judgment in the first action set aside on the ground of mistake. Curiously, he did not pray for rescission of the alleged sale, but that was presumably implied by the prayer for a declaration that he was beneficially entitled to all the shares in Yat Ming. He also sought damages against both of his former solicitors for their alleged negligence in relation to the transactions in August 1978 and the terns for settling the first action. 10. The defects in this pleading and the extent to which the second action was vexatious, because of the application of the doctrine of res judicata in its narrow and wider application, were fully exposed by O'Connor, J. in his judgment, dismissing Mr. Chiu's application for an interlocutory injunction. No attempt was made to overcome the various problems by way of amendment of the pleading. It is not, therefore, surprising that some 13 months later Rhind, J. came to the conclusion that the pleadings should be struck out for roughly the same reasons. Indeed, having had the benefit of reading their considered judgments, and having been taken over the same ground on which they were based, I have asked myself whether, in spite of the additional evidence and submissions placed before me, these decisions oblige me to strike out the present claim. I do not think that they have that compelling effect, simply because Mr. Chiu's case before me is somewhat differently pleaded and presented. Firstly, Mr. Fong Ming was not a party to the previous actions. Furthermore, in so far as Rhind, J. held that certain admissions made by Mr. Chiu in the first action created an estoppel in favour of Mr. Mark, that aspect of the second action must, in my view, be reconsidered in the light of the decision of the House of Lords in Hunter v. Chief Constable of West Midlands Police [1982] A.C.529. 11. Before I turn to the case before me, I should mention certain other proceedings subsequent to the decision of Rhind, J. in the second action. In February 1982, Mr. Chiu, then acting in person, sought to appeal against the last-mentioned decision. On the 31st March 1983, Mr. Chiu's Notice of Appeal was struck out on technical procedural grounds. Counsel have not contended that the order of the Court of Appeal has any real hearing on the matters which I must deal with. On the other hand, much has been said about another action in the High Court (A10014 of 1983). I have not seen the writ or the pleadings in that action. I have not been referred to any reasoned judgment therein. However, an extract of some of the evidence given at the trial of that action, and the formal judgment of Jackson-Lipkin, J. dated the 6th December 1984, have been drawn to my attention (A pp. 63-68). The latter, inter alia, declared that Mr. Ma was Mr. Fong's trustee in respect of a one-third interest in the 5002 shares in Yat Ming and their proceeds. The significance of this action ("the third action") is that Mr. Fong, in the course of giving evidence therein, admitted that, before the hearing of the first action, he and Mr. Ma had put their heads together and had agreed to give evidence which was "not entirely true". It has been contended on behalf of Mr. Chiu that Mr. Fong's evidence in the third action disclosed for the first time the existence of a conspiracy and fraud by Mr. Ma, Mr. Mark and Mr. Fong to cheat Mr. Chiu out of the shares in Yat Ming by various means or devices. The first was to induce him in August 1978 to sign various documents which resulted in the shares being transferred from him to Mr. Ma and Mr. Fong. The second took the form of a conspiracy to put pressure on him to settle the first action by threats to give evidence corroborating Mr. Ma's contention that he had purchased the shares from, and lent money, to Mr. Chiu. This overt act of alleged wrong doing on the part of the three defendants must have taken place in or about July 1980. 12. Some six months or more after the conclusion of the third action, Mr. Chiu commenced the present proceedings. To anyone familiar with the history I have previously set out the Statement of Claim indorsed on the writ has certain dejà vu characteristics. Mr. Chiu was again complaining about the events of August 1978. But, now, and for the first time, he was alleging that the nature and purposes of the documents, which he had signed, had been fraudulently misrepresented to him by Mr. Ma and Mr. Mark. Fraud apart, this was, in my view, either a third version of the material facts known by Mr. Chiu in 1978 or 1979 or a repetition of the allegations pleaded in the first and/or second actions. It is, in my view, very significant that no reference was made to these previous proceedings. There is an express reference to the third action in paragraph 21 of the pleading, but its relevance to, or connexion with, the other matters pleaded, or the relief sought, is not indicated. The reader is left to assume that Mr. Fong thereby became a constructive trustee for Mr. Chiu of the one-third interest in the shares of Yat Ming, which he acquired as a result of the judgment in the third action. 13. Given this history, it is not surprising that the defendants immediately responded with their applications to strike out the Statement of Claim. With the exception of the vague liability of Mr. Fong as a constructive trustee of one-third of the shares in Yat Ming, it was apparent that the only other cause of action relied upon accrued in August 1978. Prima facie, that cause of action became "statute-barred" in August 1984. At one stage Mr. Bernacchi did contend that the relevant period of limitation was 12 years, because it arose out of the execution of documents which are "specialties". That is true, but that does not make the present litigation an "action upon a specialty" within the meaning of section 4(3) of the Limitation Ordinance (Cap. 347). Mr. Chiu is not seeking to enforce any obligation created by these specialties. On the contrary, he is seeking damages and other relief for having been tortiously induced to execute them. When I indicated that I was against him on this point, Mr. Bernacchi did not press the matter. But, in so doing, he must not be regarded as conceding the point. A courteous submission to the expression of a firm view from the bench should not, in my view, be treated as a concession, possibly resulting in some future estoppel. Cf. Union (V-Tex) Shirt Factory Ltd. v. Union V-Tex Realty Ltd. [1985] HKLR 152. 14. Mr. Chiu's application to amend this pleading made approximately 3 months after notice had been given that it would be subjected to a vigorous assault intended to destroy it completely, has been criticised and opposed in the course of these proceedings on various grounds. It has been suggested, inter alia, that the proposed amendments are immaterial and useless and should not be allowed at this late stage. I have not overlooked these criticisms. In particular, I am far from convinced that the amendments constitute no more than further and better particulars of causes of action already alleged in the original pleading. It seems to me that they are clearly intended to be answers to the two basic objections raised by the defendants, i.e., "statute-barred" and res judicata. As presently formulated, they may be imperfect in various respects. But, since the discretion, which the defendants invite me to exercise in their favour, is one which should only be exercised in plain and obvious cases, and should not be exercised if the defects in the plaintiff's case can be cured by legitimate amendments, I consider that I should display a favourable disposition towards these requests for amendments. If Mr. Chiu's case can be improved or perfected, even at this apparently late stage, without inflicting injustice on others, I conceive that I should allow it to be done. For these reasons, I allowed Mr. Chiu's summons to be amended by substituting the further draft ("A.S.C. 2"), and to be further amended by adding (in prayer (5)) a further or alternative claim to damages for conspiracy. For convenience, initially I will deal with the various contentions of the defendants on the basis that these amendments are incorporated into the Statement of Claim. 15. The defendants recognise that the date when the period of limitation in this case began is to be determined in accordance with section 26 of the Limitation Ordinance, which reads :-
Although the defendants contend that Mr. Chiu's only cause of action arose in August 1978, they submit that the period of limitation began to run in April 1979, when he clearly discovered (if he did not already know) that the documents, which he had signed in August 1978, were a transfer of shares to Mr. Ma, and a power of attorney in favour of Mr. Fong. Mr. Bernacchi, on the other hand, stressed that Mr. Chiu did not discover the fraud until the end of 1984, i.e., during or at the conclusion of the trial of the third action. Before that time he had no more than a suspicion of fraud and/or conspiracy on the part of the defendants, but no, or no sufficient, knowledge to enable him to allege fraud. It was only when he learned that Mr. Fong and Mr. Ma had put their heads together and concocted a false version of the events, in anticipation of the trial of the first action, that Mr. Chiu knew of Mr. Fong's involvement and the depth or extent of the fraud or the conspiracy. Such issues of fact, furthermore, could only be resolved after a trial in the ordinary manner. They could not, and should not, be resolved on the basis of a microscopic and protracted examination of affidavit evidence or other documents. Furthermore, reliance on the Limitation Ordinance is a matter which should be pleaded by way of defence, and not used as a basis for striking out a Statement of Claim. 16. I accept all of these propositions, supported as they are by authorities cited to me. Cf. Wenlock v. Molone [1965] 1 WLR 1238; Ronex Properties Ltd. v. John Laing Construction Ltd. [1983] 1 QB 398. However, in the latter case, the application to strike out the third party notice was made on the ground that it disclosed no reasonable cause of action, in that, inter alia, it was barred by the expiration of the limitation period. If it had been made on other grounds, e.g., abuse of the process of the court, the outcome might have been different. As Donaldson, L. J. said (at 404) :
Where it is manifest that there can be no answer to a claim that the period of limitation has expired and that such defence will be relied on, it would, in my view, be an abuse of the process of the court to allow the action to continue. In these circumstances, the court will be prepared to drive a claimant from the seat of judgment without a trial. See Riches v. D.P.P. [1973] 1 WLR 1019; The Estate of Yang Sen-hui v. Pao Yuen Tung Hsing Yeh Co. Ltd. (Civ. App. Nos. 77 and 79 of 1981; 12th March 1982). 17. There are, in my view, many indications that the present case falls into the latter category. Assuming that Mr. Chiu was led, like an innocent lamb to the slaughter, into signing the documents, which he undoubtedly signed in August 1978, he must have realised by April 1979, when the true nature of these documents was revealed to him, that he had been the victim of individual and concerted action on the part of Mr. Ma and others, which was not merely the result of some mistake or ignorance on the part of Mr. Chiu or others, but fell to be characterised as fraud, conspiracy, or similar gross and tortious conduct. In my view, there really was no middle ground for the operation of the more amorphous concepts of mistake or negligence. In August 1978, Mr. Chiu either signed documents with full knowledge of their contents and effect, or, he did so ignorantly, as a result of fraudulent and reprehensible conduct on the part of Mr. Ma and others. 18. I realise that the conclusions expressed in the preceding paragraph are not reached after hearing evidence on both sides, or after it has been subjected to the customary methods for testing its veracity or cogency. But, with two possible reservations, I cannot see that any useful purpose could be achieved by allowing the present action to proceed beyond its present stage. It may be the case that Mr. Chiu did not fully appreciate the extent or depth of his legal claims against Mr. Ma or Mr. Fong until the judgment of Jackson-Lipkin, J. was delivered in the third action. But, commencement of the limitation period is not postponed because a victim does not have the evidence, or sufficient evidence, to prove his claim. Nor, in my view, is it postponed because the length, depth or breadth of the legal wrong is not fully known or appreciated. It may be the case that, before the first action was listed for hearing, Mr. Ma and Mr. Fong conspired to conceal their alleged fraudulent behaviour by preparing to give false evidence at that trial. However, section 26 of the Limitation Ordinance does not provide that the Limitation period is not to run during times when the right of action is concealed by fraud. Once the victim has discovered the fraud or mistake, or could with reasonable diligence have discovered it, the period begins to run. It is not, in my view, brought to a halt by some subsequent concealment. 19. The two reservations I mentioned earlier relate to the sale of one share by Mr. Fong to gang Wai and the alleged activities of the defendants in July 1980, prior to and during the first action. I have called these possible reservations, because it is not, in my view, entirely clear from A.S.C. 2, whether these are regarded as separate tortious acts or other breaches, or merely aspects of a conspiracy or fraud hatched in 1978. The sale of the remaining share is, strictly speaking, not the subject of a separate claim or cause of action. It is pleaded merely as part of the damages for fraudulent misrepresentations. But, as it is one of the 5002 shares, as to which a declaration as to ownership and an account are sought, it is, perhaps, arguable that the limitation period, in respect of that one share, did not begin to run until it was sold by Mr. Fong. Unfortunately, I do not know when that share was sold. The validity of that sale was acknowledged by Mr. Chiu in paragraph 4 of the Memorandum of Agreement made on the 10th July 1980 (B p. 86). But it is possible that the sale occurred within the 6 years before the writ in the present action was issued. The other aspect is the claim to set aside the judgment in the first action on the ground that it was obtained by fraud. If the fraud relied on is the alleged conduct of the defendants in July 1980, again it is arguable that Mr. Chiu was just in time with his third attempt to bring his longstanding complaint before the Court. These features may suggest that it is not manifest that there is "an answer immediately destructive of whatever claim to relief is made" (per Shaw, IJ in Ronex Properties Ltd. v. John Laing Construction Ltd. [1983] 1 Q.B. 398 at 408). Whether, as Mr. Bernacchi submitted, this aspect of the defendants' response should be left to be dealt with later, if and when it is pleaded by way of defence, depends largely upon the question whether Mr. Chiu is given leave to amend his Statement of Claim in terms of the amended draft or any other terms. There is also the possibility that Mr. Mark may change his mind, and abandon his intention to rely on the Limitation Ordinance, if, upon further reflection, he should consider or be advised that pleading the statute would or might be incompatible with his professional obligations as a solicitor and officer of the Court. I refrain from expressing any opinion on that aspect of the matter. The possibility is relevant to Mr. Bernacchi's submission that the "wait-and-see" principle should be adopted. On the evidence before me, I must assume that Mr. Mark still adheres to the intention clearly declared in paragraph 2 of his affidavit, sworn on the 24th September 1985. (A p. 98) For these reasons, which I readily acknowledge to be replete with speculation, resort to the Limitation Ordinance may not be a complete answer to the present action. I, therefore, turn to consider the defendants' contentions on the second basis of their objections, viz. res judicata and issue estoppel. 20. In many respects, this second line of attack by the defendants is the more important feature of their strategy, because it focusses attention upon the basic fact that. Mr. Chiu is effectively seeking to litigate the same matter for the third time. The present proceedings, however, cannot be disposed of on the basis of that simple and robust view of the situation. Mr. Fong was not a party to the previous actions. Mr. Mark was only a temporary and somewhat formal or nominal, party to the first action. As I have already indicated, the nature of the claims and alleged causes of action have undergone certain shifts and changes, some of which may be due to developments in the history of this matter. The declaration in paragraph 1(i) of the judgment of Mr. Commissioner Gittins Q.C., entered on the 11th July 1980 in the first action (B p. 95), that Mr. Ma "is and was at all material times as from 8th August 1978 the beneficial owner of 5,001 shares" in Yat Ming appears to have been modified by the declaration, made by Jackson- Lipkin, J on the 6th December 1984 in the third action, that Mr. Ma is the trustee of [Mr. Fong] in respect of a one-third interest in the 5,002 shares in Yat Ming. 21. Mr. Ma was a party to each of the previous actions. Not surprisingly, Mr. Remedios submitted on his behalf that the present action is really no more than the first action now dressed up as fraud, and relied on what Lord Halsbury L.C. said in Reichel v. Magrath (1889) 14 App. Cas. 665 at 668 :
The speeches of their Lordships occupy about one page of the law reports. This brevity was perhaps due to the fact that they had earlier dismissed an appeal by the appellant in the previous action against the Bishop of Oxford and the Provost and Scholars of Queen's College in the University of Oxford. (See (1889) 14 App. Cas. 259.) Mr. Remedios also sought to buttress his case by relying on the wider application of the doctrine of res judicata to be found in the decision of the Privy Council in Yat Tung Investment Cc Ltd v. Dao Hung Bank Ltd [1975] A.C. 581 at 590. This applies estoppel per rem judicatam not only to the points or causes of action placed before the competent court in the first action, but also to other points or causes of action, which properly belonged to the subject of the first action and should have been brought forward at the same time, or could have been so brought before the tribunal after the exercise of reasonable diligence. Indeed, Mr. Mark and Mr. Fong also rely on this wider operation of the doctrine. I will consider their claims later. But, in my view, the fact that Mr. Ma has been a party to each of the previous actions places him in a very strong position to contend that the present action is an abuse of the process of the court. 22. In my view, he can assert with considerable force that the present Statement of Claim alleges the same cause of action as that relied on in the first, with the addition of the feature of fraud, which could and should have been brought forward in the first action. The same applies to the proposed amendments, in so far as they seek to allege a conspiracy or other wrong doing, unless the "undue pressure" allegedly put on Mr. Chill "prior to and during" the trial of the first action is relied on as a separate point or cause of action. But, assuming that does constitute a separate cause of action, it could have been "brought forward" in 1980 and before the first action was brought to a conclusion. Even if that was not then possible or convenient, it could have been raised in the second action. Assuming that Mr. Chiu was told by Mr. Fong that he and Mr. Ma, and possibly Mr. Mark, were going to give false evidence to support Mr. Ma's defence and counterclaim in the first action, and assuming that such conduct would amount to fraud or collusion, sufficient to enable any judgment obtained thereby to be set aside, Mr. Chill must have been in possession of sufficient facts to enable those steps to be taken before the second action was finally dismissed. Yet, between December 1980, when O'Connor J. refused interlocutory relief, and the end of 1981, when Rhind, J. heard the applications to strike out the claims, Mr. Chiu made no attempt to have the Memorandum of Agreement or the consent judgment in the first action set aside for fraud or collusion. Unless he can show that there are "special circumstances", he is, in my view, clearly estopped by the wider application of the doctrine, as explained in Yat Tung Investment Cc Ltd v Dao Heng Bank Ltd [1975] A.C. 581, at 590, by reason of the decision of Rhind, J. in the second action. 23. Although Mr. Mark ceased to be a party to the first action before the Memorandum of Agreement was signed and before the consent judgment was entered therein, he is, in my view, now in the same position as Mr. Ma regarding the claims now brought or sought to be made, against him in the present action. They could and should, have been brought forward at the time of the second action, to which Mr. Mark was very much a party. Subject again to the possible existence of "special circumstances", Mr. Mark can rely on the judgment of Rhind, J. as a complete answer to Mr. Chiu's present claims. From time to time, Mr. Bernacchi reminded me of the view expressed by Lord Upjohn in Carl Zeiss Stiftung v. Rayner & Keeler Ltd (No. 2) [1967] 1 A.C. 853, at 947, that estoppel must be applied "so as to work justice and not injustice", a view which I venture to suggest is held by every judge. Justice, however, is not one-sided. In the absence of special circumstances, it must surely be unjust to allow a disappointed litigant to raise charges of fraud, conspiracy or collusion against his former solicitor some five years or more after the relevant events, and long after an action based on his alleged professional negligence and breach of fiduciary duty has been dismissed by the court. 24. The exception based on alleged "special circumstances" extends to all of the defendants in so far as they are able to rely on estoppel per rem judicatam. I will, therefore, postpone my consideration of this aspect, until the position of Mr. Fong has been examined. He does not obviously share the "advantages" which Mr. Ma and Mr. Mark are able to derive from having been parties to the earlier proceedings, in 1979 or 1980. In addition to adopting the submissions of Mr. Chan and Mr. Remedios, Mr. Bell advanced three separate grounds to support his contention that Mr. Fong could also rely on estoppel per rem judicatam, although he was not a party to the previous actions. Firstly, he submitted that the judgment in the first action was a judgment in rem, binding all the world as to the status of the shares in Yat Ming, viz that Mr. Ma was the beneficial owner thereof. Secondly, he submitted that Mr. Fong could take advantage of the estoppel arising against Mr. Chiu as a result of the judgment in the first action, because he became the privy of Mr. Ma as a result of the judgment of Jackson-Lipkin, J. in the third action. Finally, he relied upon issue estoppel, founded on the judgments of Lord Denning M.R. and Sir George Baker in McIlkenny v. Chief Constable of the West Midlands [1980] Q.B. 283. 25. Having regard to the obvious caution or reluctance on the part of the House of Lords to settle the precise limits of issue estoppel in civil cases (Cf Carl Zeiss Stiftung v. Rayner & Keeler Ltd (No.2) [1967] 1 A.C. 853; Hunter v. Chief Constable of the West Midlands [1982] A.C. 529, at 540-541), and its apparent unwillingness to extend it beyond the parameters indicated in Mills v. Cooper [1967] 2 Q.B. 459 at 468-9, I doubt whether, as a matter of law, I can, safely rely on Mr. Bell's first ground. The concept of a judgment in rem must in my view, now be confined to a narrow range of matters, which have some permanent quality or features susceptible of some public form of unambiguous acceptance and recognition by complete strangers to the proceedings of a precise state of affairs. If Mr. Bell is correct in his submission that the judgment in the first action was a judgment in rem, affecting the beneficial ownership of the shares in Yat Ming, it seems to me that this would have been a complete answer to Mr. Fong's claims against Mr. Ma in the third action. With respect to Mr. Bell, I consider that, in this regard, he may have unwittingly invited me to sit upon another of Lord Denning's "rickety chairs", to be found in the house of Estoppel. 26. His second ground invites me to settle myself in a deceptively familiar and comfortable chair. But, upon further inspection, I fear that this is no more than a three-legged stool, having only one sound leg. As far as I can see, the judgment in the third action only related to one-third of the shares in Yat Ming. Accordingly, I do not think that Mr. Fong can rely on this aspect of the doctrine of res judicata as a complete answer to Mr. Chiu's claims to damages and other relief relating to all of the shares in Yat Ming. At best, it could only afford a defence to the claim that he is a constructive trustee of the shares which came to him as a result of the third action, and a partial defence to Mr. Chiu's claims which sound in damages. 27. Mr. Bell's third ground for saying that Mr. Fong could rely on an issue estoppel arising from the result of the first action was heavily dependant upon the views of Lord Denning, M.R. and Sir George Baker in McIlkenny v. Chief Constable of the West Midlands, supra. and the reliance placed thereon by Rhind, J. in his judgment in the second action (see B p. 316). In my respectful view, it seems to be clear that Rhind, J. was unaware of the views expressed by members of the House of Lords in the appeal which was eventually dismissed on the 19th November 1981. (Cf [1982] A.C. 529). It is not apparent that they were drawn to his attention. In all probability, they were not available in Hong Kong when the matters were argued before him. Accordingly, his view that Mr. Chiu's admissions in the first action created an estoppel in favour of Mr. Mark must now, in my respectful view, be regarded as no longer tenable. Their Lordships' refusal to extend the scope of "issue estoppel" to cover the instant case forms part of the obiter dicta in that case. But, having regard to the terms in which they are expressed (at 540-541 of the report), I consider that I should treat them for the time being as settled principles of law, binding upon me for all practical purposes. For these reasons, I do not think that Mr. Mark or Mr. Fong can succeed in their present applications simply by relying upon any issue estoppel arising out of the agreement or circumstances leading up to the judgment in the first action. However, that does not mean that Mr. Fong cannot rely upon the doctrine of res judicata in its wider application. In his case, it is particularly important to consider the "special circumstances" which Mr. Bernacchi has sought to advance for excluding or limiting the operation of the doctrine, in relation to all of the present defendants. 28. Drawing together the various strands of Mr. Bernacchi's submissions, he contends that there are "special circumstances" in the present case which would make it manifestly unjust to apply the strict or wider doctrine of estoppel per rem judicatam against Mr. Chiu. Firstly, it is said that, until the trial of the third action, he did not know that Mr. Fong was involved in any scheme to cheat him; nor did he know the real extent of the conspiracy between the defendants to defraud or injure him. Secondly, it is contended that, for the first time, he is now in a position properly to take action to set aside previous judgments as having been obtained, directly or indirectly, by fraud or collusion, and, thereby, remove the basic props upon which all forms of estoppel now rest. Thirdly, as a result of the third action, Mr. Chiu now has cogent evidence that Mr. Fong and Mr. Ma, and possibly others, conspired together to concoct and give false evidence to defeat his legitimate claims in the first action, and managed to conceal those objectives until in or about December 1984. The fact that Mr. Fong has not been made a party to the previous actions is relied on as an indication of Mr. Chiu's ignorance of his involvement in the elaborate fraud, as well as a procedural reason for not allowing him to rely on the wider application of the res judicata doctrine. 29. For the reasons I have stated, when considering the defendants' first line of attack, I do not think that there is any merit in the first two grounds. Mr. Chiu became aware of all the relevant circumstances of the conduct of the various defendants, relating to the events in August 1978 and July 1980, well before he began his second action. Furthermore, with the exercise of reasonable diligence, he could have re-formulated his complaints and reliefs long before the second action was struck out by Rhind, J. In my view, only the third contention is capable of being regarded as a "special circumstance" in this context. 30. A very real suggestion that a judgment has been obtained as a result of perjury, an individual's threat to commit perjury, or a conspiracy to pervert the course of justice, must evoke feelings of extreme concern and condemnation on the part of any judge. It would be a gross injustice to apply principles devised for introducing the laudable element of finality to litigation in ordinary circumstances to the wholly exceptional situation where the well of justice has been polluted or poisoned by false testimony or similarly reprehensible behaviour. Mr. Chan submitted, on behalf of Mr. Mark, that public policy, nevertheless, dictated that such conduct should not be actionable as a civil wrong. (There are, of course, various criminal offences which deal with such behaviour). For this, he relied upon Marrinan v. Vibart [1963] 1 Q.B. 235. In the circumstances before me, I consider that that authority is distinguishable or its precise scope should be further examined. It is one thing to promise complete immunity to ordinary citizens for coming forward to give evidence voluntarily, or in obedience to some form of lawful process. It is, in my view, a wholly different matter to extend the same immunity to unscrupulous persons, who resort to violence or threats, as the main or sole consideration for giving or withholding their evidence in particular cases. In the context of circumstances in Hong Kong, this is a twilight area which, in my respectful view, calls for a more careful and intensive study of many aspects of policy and legal principles. For my own part, a solitary decision of an English Court, given more than 20 years before, in wholly different circumstances, should not be regarded as decisive of the question now before me. 31. In McIlkenny v. Chief Constable of the West Midlands [1980] Q.B. 283 (at 320) Lord Denning, M.R. stated :
This, in my view, is a clear indication that all aspects of estoppel Per rem judicatam can be avoided if it can be shown conclusively that the previous decision was wrong. Adopting the most generous approach to all the evidence before me, I am unable to say that I, or any other and supposedly mere reasonable tribunal, would take the view that the essential conclusions reached or orders made by Mr. Commissioner Gittins, Q.C., O'Connor, J. or Rhind, J. in the first and second actions were wrong. Such material as has been adduced from the trial of the third action merely demonstrates that Mr. Ma and Mr. Fong are not truthful witnesses. It is, in my view, almost impossible to tell, from the limited material relating to the third action now before me, whether the lies which Mr. Ma and Mr. Fong had agreed to tell in 1980, bore directly on the matters which were resolved by apparent concessions and agreement in July 1980. An agreement to give evidence which was "not entirely true", (Cf para. 28(iii) of A.S.C.2) is all that is alleged. That, in my view, lacks sufficient particularity to enable Mr. Chiu to get to first base in his endeavour to upset by lawful means and procedures the previous decisions of this Court which so obviously stand in his way. 32. I have endeavoured to avoid commenting on the merits of the case because there has been no full or completed trial in the usual sense, and all the evidence before me is in the form of affidavits. But, on the basis that Mr. Chiu knew that he had been cheated into signing certain documents by April 1979, or the following year when the pleadings in the first action were closed, I consider that it is legitimate to ask the following questions : why did he agree, in the middle of his evidence at the trial, to accept Mr. Ma's offers to settle the case on the basis that he would withdraw his claim for repayment of an alleged loan of $1.5 million and pay the same amount to Mr. Chiu as well as giving him various indemnities in respect of other obligations, including an alleged debt of $3 million, owed to K.K. Wong and Mr. Fong? Some might think that these offers were, in themselves, good evidence to corroborate Mr. Chiu's then or present claims, in the sense that they could be construed as acknowledgements that Mr. Chiu had not received a fair deal from Mr. Ma. I realise that the offers were no doubt made on a "without prejudice" basis, and could not be introduced as evidence. But, if Mr. Chiu genuinely believed that he had been cheated out of an opportunity to make enormous profits out of his acquisition of shares in Yat Ming, one wonders why these supposedly charitable offers by Mr. Ma did not encourage Mr. Chiu to press on with the first action. He would, of course, have to endure further cross-examination by Mr. Ma's counsel. But, there was always a prospect that Mr. Ma would have to undergo a similar ordeal, and possibly, be exposed in the way in which he seems to have been exposed in the third action. I repeat that I fully realise that matters of this kind are best kept until after a full hearing of the evidence in a trial conducted along the usual lines. But, when one is faced with a situation with a considerable historical background of litigation on the same basic topic or subject matter, I consider that such circumstantial evidence is very material to the exercise of a discretion to allow fresh litigation to proceed, when it appears to be governed by well-established principles, designed to do justice and introduce a desirable degree of finality to a process, which is extremely expensive in terms of money and injury to health, especially if it is allowed to reach a stage of creating expectations which cannot, or are unlikely to be fulfilled. 33. In my view, the only basis upon which Mr. Chiu can arguably contend that he should be given another chance to litigate the events of 1978 and 1980 is the fact that Mr. Fong was not joined as a party to the first and second actions. Mr. Bernacchi's submission that this feature constitutes a "special circumstance", excluding the wider application of res judicata, finds considerable and respectable support from the case of Gleeson v. J. Wippell & Co. Ltd. [1977] 3AU ER 54. That was a case involving infringement of copyright, brought by the plaintiff after she had unsuccessfully sued the company ("Denne"), which had manufactured the garment in question at the request of the defendant. In the course of his judgment, refusing to strike out the claim, Megarry, V-C said (at 61-62):
I have given considerable attention to this case, because it also goes on to emphasise that the discretion to strike out a claim should only be exercised in plain and obvious cases. However, I do not think that it is sufficient to divert me from what I consider to be the just method of disposing of the various applications now before me, for the reasons stated below. 34. Firstly, I do not consider that Mr. Fong should be regarded as a mere link in "a chain of possible defendants", having regard to the allegations which are now made, and were made in the earlier actions. Whichever view of the facts one accepts, he was equally involved in the alleged tortious conduct of the other defendants in 1978 and 1980, long before Rhind, J. dismissed the second action. Secondly, Mr. Chiu had ample time to consider whether he should sue Mr. Fong. There may have been sound reasons for not making him a party to the first action. But, in view of his alleged conduct prior to the trial of that action, it is odd that he was not made a party to the second action before it was finally laid to rest by Rhind, J. in January 1982. 35. My third reason for considering that the views expressed by the Vice-Chancellor in the case in question do not really assist me in the exercise of the discretion presently under consideration is simply that, in my respectful view, they are based upon a misunderstanding of an authority, which clearly binds me, but is only persuasive in England. With the greatest respect to the Vice-Chancellor, I am unable to accept his characterisation of Yet Tung Investment Co. Ltd. v. Dao Heng Bank Ltd. [1975] A.C. 581 as a case in which the question was one of failure to advance a contention, as distinct from failure to add a party. Furthermore, I regret that I do not understand the statement that there "was a sufficient identity of parties in the two sets of proceedings", because the "new" or "additional" party, i.e., the second respondent ("Choi Kee") was never a party to the original action (No. 969 of 1969). He was a party to another action (No. 909 of 1970), but it is, in my view, obvious that the Judicial Committee did not base its advice on this aspect of the case. It is clear that its advice was based upon the fact that the appellant's claim against Choi Kee could have been made by way of counterclaim to the bank's counterclaim in the first action (No. 969 of 1969). Indeed, it is in my view obvious that the Judicial Committee considered that the estoppel arose from the state of the pleadings in the first action (See [1975] A.C. 581 at 589 G-H, 590 A-F). For these reasons, I do not consider that the fact that Mr. Fong was not a party to the previous actions brought by Mr. Chiu, prevents him relying on the wider application of res judicata; or is a special circumstance which would make it unjust to apply it against Mr. Chiu. 36. For all of these reasons, I am left in no doubt that it is pointless to give Mr. Chiu leave to amend his Statement of Claim, that the latter should be struck out, and the action dismissed on the ground that it is a clear abuse of the process of the court, and I so order. 37. Having come to that conclusion, it is strictly not necessary for me to deal with the other submissions of counsel. I would merely make a few observations on them. There is, in my view, considerable merit in the detailed submissions that the Statement of Claim, original or amended, does not disclose a cause of action against some defendants. There is also some force in the complaint that charges of fraud or similar wrong doing should not be brought by way of amendment. Nevertheless, I do not regard these criticisms as sufficient to justify the drastic measure of preventing a litigant from having his day in Court. Mr. Chan did point to certain procedural and substantive obstacles which might prevent Mr. Chiu getting the previous judgments set aside or the ground that they were obtained by fraud. In particular, he pointed to the fact that Yat Ming, though a party to the previous action was not made a party to the present action. For this he relied on the very complicated case of Kinch v Walcott [1929] A.C. 482, which Mr. Chan succeeded in explaining to me with commendable skill. But, apart from thinking that it is a case which turned on its own special facts and might be distinguished, I am not persuaded that the failure to join Yat Ming as a party to the present action would be fatal to the attempt to set aside previous judgments. Insofar as the judgment of Rhind, J. in the second action creates an estoppel against Mr. Chiu, I consider that such fetter can only be removed by way of an appeal the time for which expired some 4 years ago. In those circumstances, Mr. Chiu would be faced with an uphill task of persuading the Court of Appeal to entertain an application for leave to appeal. But, if he succeeded in setting aside the judgment of Mr. Commissioner Gittins, Q.C., any application to the Court of Appeal might receive favourable consideration. For my own part, I do not think that this procedural question is sufficient, on its own, to justify the order which I propose to make in this case.
Representation: Mr. B. Bernacchi, Q.C. and Mr. H.L. Wong (Messrs. Peter Lo & Co.) for Plaintiff Mr. Leo Remedios (Official Receiver) for 1st Defendant Mr. Edward Chan (Messrs. Lo & Co.) for 2nd Defendant Mr. Adrian Bell (Messrs. John Ip & Co.) for 3rd Defendant |