Re Hy & Ht Lee Brothers & Co. Ltd.

HCCW000275/1998

HCCW275/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP NO.275 OF 1998

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Coram : The Hon Mrs Justice Le Pichon in Chambers

Dates of Hearing : 15 June 1999

Decision Handed Down : 22 June 1999

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D E C I S I O N

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1. This is an application by the Petitioner to strike out parts of (1) the 7th Affirmation of Lee Chai Cheong, the 1st Respondent; (2) Exhibit "LCC-14" to the 6th Affirmation of the 1st Respondent; and (3) Exhibit "LCC-19" to the 7th Affirmation of the 1st Respondent. The 1st Respondent's evidence was filed in opposition to the Petitioner's minority shareholder's petition to wind-up the Company on the just and equitable ground. The Petitioner's case is that the mutual trust and confidence upon which the existence of the Company is founded has irretrievably broken down. The Petitioner's complaints include an attempt to exclude him from acting as a director of the Company.

2. The Respondents' answer is that the efforts to change the number of directors permitted by the Articles were brought about by the Petitioner's "disruptive" behaviour, being the large number of legal disputes and proceedings involving the Petitioner and other members of the Lee family to achieve what the Respondents allege to be the Petitioner's ulterior motive or purpose, namely the control of one of the family companies.

3. I now turn to consider the passages sought to be expunged.

Exhibit LCC-14

4. This is a summary of facts relating to on-going litigation between members of the Lee family. Paragraphs 1 to 7 describe the shareholding structure in family companies, how the parties are related as well as their interests in the estates of Lee Man Wah and Ng Chan Wah, respectively the father and mother of the Petitioner and the 2nd Respondent. Paragraphs 8 to 29 contain summaries of the various on-going proceedings involving the Petitioner and other members of the Lee family. LCC-14 was exhibited to the 6th Affirmation of the 1st Respondent, affirmed on 11 November 1998. The Petitioner seeks to strike out paragraphs 8 to 10 (inclusive) and 25 to 27 (inclusive) which describe certain on-going proceedings involving the Petitioner and other members of the Lee family, viz. caveat proceedings No.358/1995 and HCA No.A9522/1997 and HCA No.A12428/1998 on the basis that they are irrelevant.

5. Given the Respondents' answer to the issue raised by the Petitioner as to efforts to exclude him from the board, they are plainly relevant to the Respondents' case. Whether the defence will ultimately succeed is another matter, but unless the passages objected to are plainly and obviously irrelevant to the Respondents' case, striking out is not appropriate.

6. It would appear that the Petitioner may be overly sensitive. For example, objection was made to the last sentence of paragraph 8 which reads as follows :

"Between 1995 and 1997, parties were in negotiation trying to resolve the matter."

The Petitioner objected to this statement because the negotiations were "without prejudice" and evidence as to "without prejudice" negotiations are, as a general rule, inadmissible. For my part, I fail to see how that statement can be objectionable when there was no reference at all to the content of those negotiations.

The 7th Affirmation and Exhibit "LCC-19"

7. The Petitioner objects to paragraphs 8, 9, 10, 11 and 13 of the 7th Affirmation in whole or in part. Emotive words such as 'intimidation tactics', 'threat', 'harass', 'undue pressure' and 'exploit' are to be found in these passages. Shorn of emotive language, the allegations made come to this : the Petitioner's ulterior purpose is to seize control of a family company and the numerous legal proceedings launched or threatened by him was a means to that end.

8. The Respondents submitted that the "clean hands" doctrine and thus the Petitioner's conduct is relevant since the court is being asked by the Petitioner to exercise its equitable jurisdiction to wind-up the company on the just and equitable ground and, further, evidence of the Petitioner's collateral purpose cannot be resolved summarily and must be a matter which has to be determined at trial.

LCC-19 is described in paragraph 9 of the 7th Affirmation as "a detailed summary setting out the actions which the Petitioner has taken to intimate or pressurize other Lee family members into submitting to his demands". Objection was taken to selected passages of the exhibit which is some 10 pages in length on a number of grounds.

9. The Petitioner submitted that by referring to actions or proceedings that have been settled the Respondents are seeking to reopen them. It is difficult to see how that can be so. Indeed, leading counsel for the Respondents confirmed to the court at the hearing that they are not seeking to relitigate. In my judgment, the Petitioner's complaint is misconceived. Given the Respondents' case (and I express no views as to its merits which are for adjudication at trial), the fact of such litigation must be relevant backdrop.

10. The Respondents may or may not make good their allegations but that must be a matter for determination at trial. In this application, the court is being invited to undertake a microscopic examination of the way in which the Respondents have chosen to express their allegations, and the language and phraseology used to characterize certain events that have occurred. Where what is relied on is relevant to the Respondents' case, the exercise is not only not a productive use of the court's time, it is also wholly inappropriate. The test is relevance. Once that test is satisfied, that is the end of the matter. It is not the function of the court to undertake detailed scrutiny of each word used and as leading counsel for the Respondents put it, to perform 'micro-surgery'.

11. As to the Petitioner's contention that some of the passages sought to be expunged are "scandalous", again the test is relevance. Allegations of outrageous conduct are not scandalous if relevant to the issue. In Rossage v. Rossage [1960] 1 WLR 249 Hodson LJ stated at 252 :

"... It is quite clear that we cannot strike out matters in a pleading or an affidavit simply because they are scandalous, because scandalous matter may be relevant, and may be the very matter which have to be investigated by the court..."

See also The Supreme Court Practice 1999 at 18/19/15 and the cases therein cited. In view of the conclusion I have reached on the relevance of what is sought to be expunged, the objection has no merit.

12. Both parties cited Goldsmith v. Sperrings Ltd. [1977] 1 WLR 478 in relation to the question as to when the use of legal proceedings amounts to an abuse of process. The starting point is the dictum of Lord Evershed in In re Majory [1955] Ch 600 at 623 :

" The so-called 'rule' in bankruptcy is, in truth, no more than an application of a more general rule that court proceedings may not be used or threatened for the purpose of obtaining for the person so using or threatening them some collateral advantage to himself, and not for the purpose for which such proceedings are properly designed and exist; and a party so using or threatening proceedings will be liable to be held guilty of abusing the process of the court and therefore disqualified from invoking the powers of the court by proceedings he has abused."

In Goldsmith v. Sperrings Ltd., Bridge LJ expanded upon the meaning of "collateral advantage". He stated (at 503E-G) :

" For the purpose of Lord Evershed's general rule, what is meant by a 'collateral advantage'? The phrase manifestly cannot embrace every advantage sought or obtained by a litigant which it is beyond the court's power to grant him. Actions are settled quite properly every day on terms which a court could not itself impose upon an unwilling defendant. An apology in libel, an agreement to adhere to a contract of which the court could not order specific performance, an agreement after obstruction of an existing right of way to grant an alternative right of way over the defendant's land - these are a few obvious examples of such proper settlements. In my judgment, one can certainly go so far as to say that when a litigant sues to redress a grievance no object which he may seek to obtain can be condemned as a collateral advantage if it is reasonably related to the provision of some form of redress for that grievance. On the other hand, if it can be shown that a litigant is pursuing an ulterior purpose unrelated to the subject matter of the litigation and that, but for his ulterior purpose, he would not have commenced proceedings at all, that is an abuse of process."

Although the two cases he referred to were plain, he acknowledged (at 503G) that :

".. there is ... a difficult area in between."

As to how abuse of legal process can be established, Lord Denning MR noted (at 489E and H) that sometimes abuse can be shown by the very steps taken in court. But :

" [a]t other times the abuse can only be shown by extrinsic evidence that the legal process is being used for an improper purpose. On the face of it, in any particular case, the legal process may appear to be entirely proper and correct. What may make it wrongful is the purpose for which it is used. If it is done in order to exert pressure so as to achieve an end which is improper in itself, then it is a wrong known to the law."

13. At this interlocutory stage, the court cannot embark on any inquiry as to whether the extrinsic evidence relied on by the Respondents is or is not sufficient. It follows that it would not be appropriate for the court to draw a conclusion one way or the other, without going into the merits and hearing the evidence. The striking out of the passages which the Petitioner finds offensive at this stage would emasculate the Respondents' case in a summary fashion. Goldsmith v. Sperrings Ltd. is not an authority for so doing.

Conclusion

14. For the reasons set out above, the Petitioner's application is dismissed.

15. I would add that resort to the use of emotive language is of no assistance to the court. It serves no purpose save to raise the temperature of the litigation between the parties. It cannot improve the quality of the evidence : unless there is sufficient evidence to substantiate the Respondents' allegations, the Respondents cannot hope to pull themselves up by their own bootstraps simply by deploying emotive epithets.

Representation:

Mr Ronny Tong, SC and Mr E. Fung, inst'd by M/s Denton Hall, for the Petitioner

Mr Daniel Fung, SC and Mr Johnny Mok, inst'd by M/s Liu Choi & Chan, for the 1st Respondent