Read the full judgment text of HCA 001904/2001 on BabelCite. This High Court CFI judgment was delivered on 8 November 2002 before Geoffrey Ma J.
Civil procedure – strike-out – RHC O.18 r.19 and inherent jurisdiction – loans – whether claims time-barred – Limitation Ordinance (Cap 347) s.23(3) and s.24(1) – whether estoppel can defeat limitation defence – forbearance as consideration – whether illegality/contrary to public policy renders loans for paying ballroom hostesses and prostitutes unenforceable – ex turpi causa – Pearce v. Brooks – whether loans effected through third parties (companies and individuals as agents) give rise to cause of action in lender – whether CU & D loan claim sustainable on the facts – whether agreement to pay interest supported by consideration – whether entire pleading should be struck out as abuse of process. The Plaintiff claimed recovery of about HK$7,495,171 in loans allegedly made to the Defendant between 1992 and 1996, including cash loans, hotel room charges at the Empire Hotel and Wharney Hotel, and payments made through Cuve Asset Management Ltd, CU & D Brokerage Ltd, Radford Developments Ltd, Mr Jacky Chau, Mr Benny Kwong, Dr Lam How Man and Hotch Group Incorporated. The Defendant applied to strike out the Amended Statement of Claim on six grounds. Held, allowing the appeal in part: (1) Limitation Ground – the Limitation Ordinance is not an exhaustive code; estoppel is capable of defeating a limitation defence (Halsbury's Laws of England, Vol. 28). The May 1997 postponement agreement is supported by consideration, comprising the Plaintiff's forbearance from suing and the practical benefit of waiting for the Defendant to cease to be a US citizen (Chitty on Contracts, paragraphs 3-056, 3-063, 3-064). The Defendant's request not to be sued must be taken to include a representation that no limitation point would be raised. Paragraphs 21, 21A and 21B are restored, with leave to amend paragraph 21A. Paragraph 21C (implied term that cause of action accrued on demand) was rightly abandoned and remains struck out. (2) Illegality Ground – paragraph 11 should not be struck out. The Plaintiff's knowledge of the alleged immoral purpose is disputed; modern public policy cannot be determined on a strike-out (Pearce v. Brooks (1866) LR 1 Ex. 213; Ki Hing Lau v. Shun Loong Lee [1910] 5 HKLR 83; Chitty on Contracts, paragraph 17-004). Prostitution and ballroom hostessing are not per se unlawful in Hong Kong. (3) CU & D Ground – paragraph 12 remains struck out; the undisputed facts show the HK$250,000 was withdrawn from Hotch's account at CU & D, not a loan by the Plaintiff through CU & D. (4) Third Party Ground – fails; where A lends to B via C, B's liability to A is unaffected by A's reimbursement of C, and the third parties were alleged to be the Plaintiff's agents or vehicles. (5) Consideration Ground – fails; the Plaintiff's forbearance from pressing for immediate payment is good consideration, and the agreed interest sum was mutually beneficial. (6) Residual Ground – fails; plausibility, changes in case and discovery complaints are generally matters for trial and do not amount to an abuse of process here. The Defendant's alternative application under O.14A and to strike out the whole Amended Statement of Claim was refused. Costs of the appeal in respect of paragraphs 12 and 21C to the Defendant; all other costs of the appeal to the Plaintiff; the Master's order as to costs below not disturbed.
Legal issues: Whether claims on loans advanced before April 1995 are time-barred by the six-year limitation period · Whether the paragraph 11 loans are unenforceable for illegality/contrary to public policy because they were used to pay prostitutes and ballroom hostesses · Whether the $250,000 CU & D loan claim is sustainable on the facts · Whether loans effected through third parties give rise to a cause of action in the Plaintiff rather than the third parties · Whether the $348,000 interest claim is supported by consideration · Whether the whole Amended Statement of Claim should be struck out under the inherent jurisdiction as vexatious, frivolous or an abuse of process
Outcome: Appeal allowed in part. Paragraphs 21 and 21B of the Amended Statement of Claim restored; paragraph 21A restored with leave to amend. Paragraphs 12 and 21C remain struck out. The Defendant's alternative application to strike out the whole of the Amended Statement of Claim and the relief under O.14A were refused.
Cited by 8 cases