Chao Yue Wah v. Mo & Co (Hong Kong) Ltd and Others

Case No.HCA 2326/2001

Court

High Court CFI

Date14 Jan 2004

Judge—

Case Document

100%Judiciary

HCA002326B/2001

HCA2326/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.2326 OF 2001

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BETWEEN
	CHAO YUE WAH	Plaintiff

	AND

	MO & COMPANY (HONG KONG) LIMITED	1st Defendant
	WONG POH WENG	2nd Defendant
	TONG YAT HUNG	3rd Defendant
	WU WAN HAI	4th Defendant

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Coram: Hon Burrell J in Chambers

Date of Hearing: 7 January 2004

Date of Decision: 14 January 2004

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D E C I S I O N

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1.This is an application by the 1st defendant to strike out the plaintiff's Amended Statement of Claim. The matter has a fairly long and complex history involving litigation in New York and Hong Kong. The central figure in the litigation is a Mr Zee Lig Shing who died in 1998. The plaintiff was his common law wife for many years.

2.The plaintiff, in this action, sues as the executrix of his alleged will. This is her second claim in Hong Kong. Her first claim contained a variety of causes of action and reliefs. It was struck out by Deputy High Court Judge A. Ho SC after a three-day hearing. That judgment, dated 5 August 2003, granted the plaintiff leave to file a new claim by way of an amendment to the first which the plaintiff's counsel produced to the court on the third and final day of the hearing.

3.The defendant now seeks a similar strike out in relation to the amended claim. The amended claim concerns two properties in Hong Kong. The plaintiff claims that "there was an agreement or alternatively, there is to be inferred a common intention of Zee and the 1st Defendant that the 1st Defendant should hold the two properties upon trust for Zee".

4.The 1st defendant however (a company of which Zee was a director and 30% shareholder) says that the properties belonged to it.

5.The 1st defendant, in order to succeed, must show that the claim is bound to fail either because it discloses no reasonable cause of action or it is incapable of reasoned argument and oppressive and/or lacks bona fides.

6.When Deputy High Court Judge A. Ho SC struck out the original claim but granted leave to file the new different claim he also ordered that a directions hearing should take place to determine the exact terms of his proposed order. That hearing took place on 24 September 2003. Since the new claim, based on a trust, has been formulated the defence have located further document which, they say, support their application that this new amended claim should also be struck out. At the directions hearing the defence informed the court of their intention to issue another summons relying, largely, on documents not before the first court (because such documents were not relevant to the issues in the original Statement of Claim).

7.The key paragraphs of the amended Statement of Claim are :

" 4 In or around 1968 when Zee was still the majority shareholder of the 1st Defendant he purchased with his own money, in the name of the 1st Defendant, two properties in Hong Kong which were thereafter being used as warehouses for products traded by the 1st Defendant (the 'Two Properties') :

a) Nos.2-24 Man Yuen Street; and

b) The ground floor Nos.1-23 Man Wai Street.

5 The conveyance of the Two Properties was to the 1st Defendant alone.

6 In the premises there was an agreement or alternatively, there is to be inferred a common intention of Zee and the 1st Defendant that the 1st Defendant should hold the Two properties upon trust for Zee.

7 In or around 1993, the 1st Defendant, without the approval and consent of Zee, sold the two Properties. The 1st Defendant failed and still fails to pay over to Zee and/or his estate any part of the net proceeds of sale from the Two Properties (the 'Net Proceeds of Sale'). In the premises the Net Proceeds of Sale belong beneficially to the estate of Zee. The 1st Defendant was and still is holding the Net Proceeds of Sale on trust for the estate of Zee."

8.Mr Jason Pow, counsel for the 1st defendant, submits that the cumulative effect of the following factors satisfies the test for striking out. I agree.

(1)

The addresses pleaded in the above claim are not the addresses of the two properties in question. The only two properties in dispute, being those registered in the 1st defendant's name are, according to the Land Registry description :

(i)	Flat 9 (No. 15 Man Cheong Street) on 1/F, Man Wai Building, No. 1-23 Man Cheong Street and Nos. 2-24 Man Wai Street, Kowloon

(ii)	Shop No. 9 (No. 15 Man Wai Street) on G/F Man Yuen Building, No. 2-24 Man Yuen Street and No. 1-23 Man Wai Street, Kowloon.

It is true that an incorrect address can always be amended and that there is no dispute as to which are the two properties in question. However, the pleaded addresses are hopelessly inadequate and wrong.

(2)

Property (i) above was purchased in 1976 and not in 1968 as claimed.

(3)

Property (ii) was mortgaged to a bank on the same day as it was purchased for about 80% of its value.

Property (ii) was mortgaged to a bank, again for 80% of the purchase price, about two months after the purchase.

It cannot, therefore, be truly said that "he purchased with his own money ...." as claimed.

(4)

In both cases the registered owner at the time of purchase was the 1st defendant.

(5)

Mr Pow points to the following documents which directly contradict the plaintiff's latest case.

(i) Minutes of a meeting held on 10 March 1976 :

"It was resolved that Mr. T. C. Poo, a Director of our Company, is authorized to purchase on behalf of the Company, a flat located at No. 15, Man Wai Building, 1st Floor, Man Cheong Street, Kowloon, Hong Kong at the total value of HK$151,200.00 (Hong Kong Dollars One Hundred Fifty One Thousand Two Hundred Only.)."

Mr T.C. Poo was a shareholder and director of the Company. The minute was signed by Mr Zee as Chairman.

(ii) Minutes of a meeting held of 6 September 1976 :

"It was resolved that Mr. T. C. Poo, a Director of our Company, is authorized to negotiate with Heng Sang Bank Limited, Hong Kong and to hand to them the undermentioned Title Deeds as security against banking facilities they have been granting to our company:-

(1)	Company's property situated at No. 15, Man Yuen Building, Ground Floor, Man Wai Street, Ferry Point, Kowloon, Hong Kong.

(2)	Company's property situated at No. 15, Man Wei Building, First Floor, Man Chong Street, Ferry Point, Kowloon, Hong Kong."

Both properties are referred to as the "company's".

(iii) The company's annual financial statements.

The combined purchase price of the two properties was $210,200.00 ($59,000.00 + $151,200.00). The audited accounts for 1987 and 1991 were produced to the court which revealed that this exact sum, under the heading of Fixed Assets represented the value of the company's "Leasehold Land and Buildings in Hong Kong".

(6)

Contrary to the plaintiff's present claim that the properties were held by the company on trust for Zee, Mr Zee's own case during the New York litigation was that the properties were assets of the company. His complaint was that the assets were sold without the company's approval and without proper procedures being followed, as the following extracts from his correspondence show :

(i) In April 1994 he wrote to the liquidator of the 1st defendant :

"I hereby put the directors of the Company and the liquidators ... on notice that any resolutions purportedly adopted or any actions taken for the purposes of winding-up the Company or otherwise to terminate the Company's business or to sell its assets will be illegal and against my wishes and therefore illegal under law as an affirmative vote of shareholders who holds 75% of the issued and outstanding stock is required to pass any such resolution."

"Furthermore, the 1993 annual report shows that the Company illegally sold assets in May, 1993, without convening a meeting of the shareholders to consider such action, and this illegal action must be withdrawn..."

(ii) In May 1994 he wrote :

"The Company unlawfully sold Company assets in 1993 without any notice at all to Lig Shing Zee."

(iii) In September 1997 he again wrote to the liquidators :

"You yourself have previously admitted to us, which admission we have on audio tape, that the 1993 sale of real property in 1993 by the Company was made without any authorization by the members, and that a meeting of the members should have been called prior to making any such sale."

10.Throughout this campaign it was never suggested that he was the beneficial owner or that his, rather than the company's, approval should have been sought. The plaintiff's latest case that the 1st defendant was holding the properties on trust for Mr Zee is diametrically opposed to Mr Zee's complaint at the time, that the sales should have been validated by a members' resolution of the company. The notion of an agreement that the properties were purchased with his own money and held on trust for his benefit is conspicuously absent from contemporaneous documents (other than the one document upon which the plaintiff relies to which I shall refer later).

Lack of bona fides

11.A brief appraisal of the plaintiff's recent conduct in the prosecution of her case suggests a lack of bona fides which may be taken into account when deciding if her claim is bound to fail.

12.On 24 September 2003 Deputy High Court Judge A. Ho SC granted her 30 days to file an affirmation in support of her new claim of an "agreement" or "inferred common intention". A draft affidavit was served on 31 December 2003, over two months late and about one week before this hearing. In that affidavit she stated that she believed a written agreement would be found inside a bank safe deposit box to which she had lost the key. It seems that this "belief" first came to her mind in about mid-December 2003. No explanation is given as to why she did not instruct the bank to break open the box immediately. A the time of the hearing it remained unopened.

13.Two days before the hearing, the plaintiff (from New York) informed her solicitors that she had found a copy of the agreement, the original of which she believed to be in the locked box, in a drawer in an apartment that she used to live in. The copy document was couriered to Hong Kong and shown to the court.

14.A high degree of scepticism is inevitable in relation to a document of great importance to the plaintiff's case which only came to her mind about three to four weeks ago, which possibly remains in a locked box which could have been opened and of which a copy comes to light two days before the hearing.

15.The copy document is curious. It is in the following terms and is dated 29 October 1979 :

"

AUTHORIZATION AGREEMENT

L. S. ZEE hereby instructs and authorizes MO & COMPANY (H. K.) LIMITED AND MO & COMPANY (H. K.) LIMITED hereby accepts the said authority to act on behalf of L. S. ZEE to perform the following duties:

1. MO & COMPANY (H. K.) LIMITED shall hold the below specified real estate parcels in trust for the sole interest and benefit of L. S. ZEE unless and unitl such a time L. S. Zee advises MO & COMPANY (H. K.) LIMITED to act otherwise.

2. MO & COMPANY (H. K.) LIMITED shall disburse funds on behalf of L. S. ZEE to pay for mortgage and other expenses incurred on these real estate parcels. Said disbursements shall be deducted from rents due and owing L. S. Zee from MO & COMPANY (H. K.) LIMITED.

3. MO & COMPANY (H. K.) LIMITED hereby acknowledges that L. S. ZEE is the true owner of (1) No. 15 Man Wai Street, Ground Floor, Man Yuen Building, Ferry Point, Kowloon, Hong Kong; and (2) No. 15 Man Cheong Street, First Floor, Man Wai Building, Kowloon, Hong Kong.

4. L. S. ZEE and MO & COMPANY (H. K.) LIMITED hereby acknowledge that the above real estate parcels, which were purchased with funds and/proceeds belonging to and contributed by L. S. ZEE, are owned by L. S. ZEE only. MO & COMPANY (H. K.) LIMITED shall be a nominal title holder to these parcels only. At no time shall MO & COMPANY (H. K.) LIMITED shall assert ownership and/or fee interest in the aforementioned real estate parcels against L. S. ZEE, who is the true owner, to whom the parcels belong with all the rights, interest, claims, legal or equitable.

AGREED."

16.It entirely encapsulates the plaintiff's case clearly and succinctly. It is stated to be an agreement and yet bears one signature, purportedly that of Mr Zee, under the heading "Lig Shing Zee a/k/a L. S. Zee Director and Chairman of the Board on behalf of Mo & Company (HK) Limited". On a brief analysis it is more of an instruction than an agreement.

17.Its provenance is strongly challenged by the 1st defendant. Apart from the fact, already referred to, that it contradicts Mr Zee's stance when he was alive, the 1st defendant has filed two affirmations in reply within the two days available to them. Mr Tse Show Yan, the company accountant from 1965 to 1992 has affirmed that he had never seen such a document and that such a document had never been recorded in company minutes. Mr Pang Chi Kwong who worked for the 1st defendant from 1971 to 1992 and was a company manager from 1980 also stated that he had never seen such a document.

18.The court will not strike out a claim on affidavit evidence alone. However, such evidence can be considered and given some weight as part of the overall picture. In the same vein, Mr Pow points out that in the New York proceedings a finding of forgery has been made in relation to a different document. It was not an allegation that the plaintiff had forged Mr Zee's signature and consequently is of only small weight in the present matter. It is however a small piece in a much bigger picture when considering bona fides. It is an admissible fact even though the whole picture is still discernible without it.

19.The plaintiff's conduct in relation to her new claim is not novel. When Deputy High Court Judge A. Ho SC struck out her first claim he said as follows :

" The strike out application was taken out on 9 November 2002. Despite the directions given by the Registrar for the filing of evidence, no evidence was adduced by the Plaintiff. On the first day of the hearing before me, an application was made by her counsel, Mr Yeung (who was not involved in the drafting of the Statement of Claim) for an adjournment to enable her to file evidence. The application was refused. As time had been taken up by arguments on adjournment, the hearing of the substantive application was not completed within the day allotted for it. In the course of Mr Yeung's submissions on the second day, in response to a query from the Court, it transpired that Mr Yeung did not in fact wish to defend the Statement of Claim as it then stood. Despite his indication how he would like the Statement of Claim to be amended, no draft amendment was produced for consideration at that stage. A draft of the proposed amendment was finally produced at the third day of the hearing whereby the original Statement of Claim was completely abandoned. In its place was substituted the proposed Amended Statement of Claim, which itself was further revised in the course of Mr Yeung's submissions."

20.In all the circumstances it is safe and proper to conclude that the present claim is vexatious and bound to fail. Accordingly I strike it out and dismiss the claim, as sought by the summons.

21.Both counsel have been given an opportunity to address me as to costs. I therefore make a final order that there be an order in terms of paragraphs 1-3 of the 1st defendant's summons dated 30 September 2003.