Ng Yat Chi and Another v. China Resources (Holdings) Co Ltd and Others

Court of Appeal granted leave to 4th Defendant to amend its summons to increase the amount of security for costs. Please refer to CACV263/2005 dated 16 November 2005

Case No.HCA 424/2005

Court

High Court CFI

Date12 Aug 2005

Judge—

Case Document

100%Judiciary

HCA 424/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 424 OF 2005

____________

BETWEEN

	NG YAT CHI	1st Plaintiff
	CHOY BING WING	2nd Plaintiff
	and
	CHINA RESOURCES (HOLDINGS) COMPANY LIMITED	1st Defendant
	MAX SHARE LIMITED	2nd Defendant
	CHINA RESOURCES ENTERPRISES LIMITED
	(STOCK CODE 291)	3rd Defendant
	SECURITIES AND FUTURES COMMISSION	4th Defendant

____________

Before: Hon A Cheung J in Chambers

Date of Hearing: 23 June 2005

Date of Judgment: 12 August 2005

________________

J U D G M E N T

________________

Background

1.On 3 March 2005, the Court of Final Appeal made an extended Grepe v. Loam order, otherwise known as a restricted proceedings order, against Mr Ng Yat Chi (the 1^st Plaintiff in this action), in FACV 5/2004 (“the RPO”). The relevant parts of the RPO read as follows:

“ 3. The Appellant [i.e. Mr Ng] be prohibited from commencing any fresh proceedings, by whatever originating process, in the High Court or District Court concerning any matters involving or relating to or touching upon or leading to the proceedings in HCCW No. 321 of 1996, HCA No. 2039 of 2002, and HCSD No. 22 of 2002, without the leave of the Court of First Instance;

4. All applications for leave under paragraph 3 be made by the Appellant ex parte in writing to the designated judge, namely:

(a) the Honourable Mr Justice Cheung; or

(b) the Honourable Mr Justice Lam; or

(c) in the event of their unavailability, such other Judge or Judges of the Court of First Instance as the Chief Judge of the High Court may designate;

5. At least 7 days before filing any application for leave under paragraph 3, the Appellant do notify in writing each intended defendant of its intention to make such application, enclosing a copy of the draft document by which the fresh proceedings are intended to be commenced, and if any response is received by the Appellant from any such intended defendant, that the Appellant do file a copy of each such response together with its said application for leave;

6. Any intended defendant having notice of such intended proceedings be entitled, but under no obligation, to place before the court written representations regarding the same;

7. All applications made pursuant to this Order and all ancillary matters be dealt with by the court on the papers and without any oral hearing unless the designated judge should otherwise direct;

8. If the Appellant should issue fresh proceedings falling or which may fall within the terms of paragraph 3 without first seeking the court’s leave, and if such fact should come to the notice of the Registrar of the High Court or any Master or Judge, such fresh proceedings be referred to the designated judge for a decision as to whether they should be permitted to continue or should be dismissed;

9. Notice of each decision by the designated judge made pursuant to this Order be given in writing to the Appellant and to each intended defendant named in the fresh proceedings;

10. Whether or not any fresh proceedings are brought to the notice of the designated judge, if a defendant is served with such proceedings without the relevant documents being accompanied by either an Order giving leave to commence such proceedings or a Direction that leave to commence such proceedings is not required, such defendant be entitled to make no response to such service pending notification of the court’s decision in relation to those proceedings; and that time for acknowledging service or for otherwise responding to such proceedings be deemed extended accordingly.”

2.On 10 March 2005, Mr Ng, together with Mr Choy Bing Wing as co-plaintiff, commenced the present action against 4 defendants. The 1^st and 2^nd Defendants (“CRH” and “Max Share” respectively) were also the defendants/ respondents in FACV 5/2004 where the Court of Final Appeal made the RPO, whereas the 3^rd and 4^th Defendants (“CRE” and “the SFC” respectively) are new parties.

3.Mr Ng did not seek leave from me or Lam J or indeed any other judge of this court pursuant to paragraph 4 of the RPO, before he commenced the present action together with Mr Choy. The action has since been brought to my notice.

Issues before the Court

4.Amongst the questions before me are whether the present action commenced by Mr Ng falls within the specified class of proceedings set out in paragraph 3 of the RPO, and if it does, whether the action should be permitted to continue or should be dismissed as per paragraph 8 of the RPO.

5.The Defendants naturally contend that the present action by Mr Ng is caught by paragraph 3 of the RPO and moreover, it should not be permitted to continue. Not only that, as Mr Choy is not a party to FACV 5/2004, and doubts have arisen as to whether the RPO prohibits Mr Choy from bringing the present action as co-plaintiff and whether the same may be proceeded with by him even if the court should be of the view that Mr Ng should not be permitted to continue with the action (as per paragraphs 3 and 8 of the RPO), the Defendants have also by summonses applied for a restricted proceedings order in terms similar to the RPO against Mr Choy.

6.Although their summonses do not specifically say so, it is implicit in the Defendants’ identical applications that they also apply for the dismissal or stay of Mr Choy’s claim against them in this action, which as a matter of logical sequence, should precede a restricted proceedings order against Mr Choy – which really looks to the future. That was also apparent from the evidence and written submissions filed by them before the hearing. During the oral hearing, those representing the Defendants expressly and specifically invited this Court to exercise its power and discretion to strike out Mr Choy’s pleading and dismiss his claim. I specifically explained the position to Mr Choy before he made his submission and invited him to address me on the question of strike-out and dismissal. In his oral submission (as well as his affirmations and the correspondence preceding the hearing before me), he dealt with the supposed merits of his claim and the objections that had been raised against it.

7.As the above matters raise common questions, I have directed that they be heard and dealt with together, although so far as the position of Mr Ng is concerned, but for the complication brought about by Mr Choy’s presence as co-plaintiff in the present action, the questions of whether his claim in the present action falls within paragraph 3 of the RPO and (if it does) whether permission should be granted for its continuance pursuant to paragraph 8 of the RPO, could otherwise have been dealt with on paper.

History of previous proceedings

8.The events leading to the making of the RPO against Mr Ng have been set out succinctly in two judgments, both given by Ribeiro PJ, in Ng Yat Chi v. Max Share Ltd [2001] 3 HKLRD 299 and Ng Yat Chi v. Max Share Ltd (i.e. FACV 5/2004) [2005] 1 HKLRD 473 respectively, which I will gratefully adopt. At pages 300F to 301I/J of the first judgment and pages 489E to 491H/I of the second judgment, his Lordship wrote:

“ 2. The company which is the subject of these proceedings [i.e. Max Share] was formed in 1986. Its capital was $200,000 divided into shares of $1 each. At the outset, the petitioner [i.e. Mr Ng] held 49% of the shares. The remaining 51% were allotted to certain individuals who held them as nominees for a company called Strong Progress Ltd. Strong Progress was in turn a 100% subsidiary of a state-owned corporation, namely, China Resources (Holdings) Ltd, the second respondent.

3. The Judge found that the petitioner, with connivance of one of the nominee shareholders, committed a series of defalcations against the company by causing it to enter into transactions with entities which they owned or controlled, thereby siphoning off company funds for their own benefit.

4. At the end of November 1990, the petitioner entered into an agreement to sell his shares in the company to Strong Progress. This required a valuation to be conducted. The factual basis of the valuation was not called into question by the Judge. It showed that the company was in a dire financial condition …

5. The report therefore concluded that the value of the petitioner’s shares was nil and recommended that the shares should be transferred at a nominal value of $1. Furthermore, since the transferee of the shares was to take over the company’s financial burdens proportional to the shares transferred, it recommended that the transferee ought to be compensated for the capital deficiency and for the negative goodwill.

6. The agreement for transfer of the shares by the petitioner to Strong Progress was never completed.

7. On 1 May 1992, the second respondent [i.e. CRH] caused the company’s share capital to be increased by 50 million shares ranking pari passu with the existing 200,000 shares.

8. Meanwhile, in separate litigation between the petitioner and a Mr Bing Choy [i.e. Mr Choy Bing Wing – the 2nd Plaintiff herein], Mr Choy obtained a charging order on the petitioner’s shares, followed by an order for their sale and Mr Choy’s acquisition of such shares in August 1992. The company has however refused to register Mr Choy as owner. Previously, by June 1991, the petitioner had left the company and, by January 1992, he had left Hong Kong.

9. The petitioner evidently considers himself aggrieved by what had transpired and commenced proceedings to wind-up the company on the just and equitable ground. Proceedings started by him in May 1992 proved abortive for procedural reasons. The present petition was issue in June 1996 [i.e. HCCW 321/1996]. It seeks in the alternative a just and equitable winding-up order or relief under s.168A of the Companies Ordinance. After further interim challenges and appeals, it came to trial before Yuen J in September 1999.

10. Numerous grounds were relied on by the petitioner but only one succeeded before the Judge. She found that the purpose of increasing the company’s share capital in May 1992 had been to dilute Mr Ng’s shareholding “at a time when he would have been unable to subscribe for more shares and to render the shares unattractive and worthless to Mr Choy”. Her Ladyship considered this to be unfairly prejudicial to the interests of the petitioner as a minority shareholder. She decided that the appropriate remedy was an order winding-up the company on the just and equitable basis.

11. That decision was reversed by the Court of Appeal on two major grounds.

…”

“ 35. The respondents [i.e. Max Share and CRH] succeeded in the Court of Appeal. Rogers V-P held that the Judge’s conclusion had been arrived at without examining the effect of the increase in capital on the underlying value of the appellant’s [i.e. Mr Ng’s] shares when, on the evidence (which he reviewed in detail), those shares had been valueless or of negative value so that the injection of capital could only have increased their worth. As the share valuation report had made plain, the increase in capital was essential if Max Share was to avoid a compulsory winding-up. Accordingly, the Judge’s conclusion regarding unfair prejudice to the appellant was factually unsustainable.

36. The appellant sought leave from the Court of Appeal to appeal to this Court. When that application failed, he unsuccessfully renewed his application to the Appeal Committee. By its Determination dated 17 September 2001 (FAMV 19/2001), the Appeal Committee endorsed the approach of the Court of Appeal, holding that they were clearly entitled to substitute their finding that there had been no unfair prejudice. No question of great general or public importance was found to arise on the proposed appeal.

37. By s.18 of the Hong Kong Court of Final Appeal Ordinance (Cap. 484), the Appeal Committee exercises the power of the Court to determine any application for leave to appeal. Its decision is final and not subject to appeal. Accordingly, the Petition proceedings ought to have come to a definitive end with the Appeal Committee’s refusal of leave to appeal.

38. However, the appellant was not prepared to accept that result. Between October 2001 and May 2002, he, together with Mr Choy Bing Wing and a Mr Brumen Li, sent a barrage of letters to, among others, the Chief Executive, the Chief Justice, all 60 members of the Legislative Council, the Bar Association, the Law Society, the President and Prime Minister of China, and the Prime Minister and Lord Chancellor of the United Kingdom. In those letters, he accused the Court of Appeal and the Appeal Committee of “inventing facts”, “cheating”, “dishonesty” and “fraudulent conduct” in reversing Yuen J’s decision and refusing leave to appeal to the Court of Final Appeal.

39. On 29 May 2002, he issued the Writ in the Action [i.e. HCA 2039/2002]. The Statement of Claim repeated the allegations of fraud against the two tribunals concerned and sought, by way of relief, declarations aimed at undoing the increase in share capital of Max Share, nullifying the orders of the Court of Appeal and the Appeal Committee and restoring Yuen J’s order in the Petition proceedings.

40. On 14 June 2002, the respondents [i.e. Max Share and CRH] served on the appellant [i.e. Mr Ng] a statutory demand in the sum of $1,432,994.23 in respect of part of their taxed costs in the Petition proceedings. Simultaneously, they took out a summons to strike out the Action as frivolous, vexatious or an abuse of the court’s process on the basis that it was an unsustainable attempt at re-litigating those proceedings.

41. The appellant applied to set aside the statutory demand [i.e. HCSD 22/2002] contending again that the relevant tribunals had acted fraudulently so that the judgments were incapable of founding the statutory demand. Refusal of that application by Deputy High Court Judge Woolley on 15 July 2002 led to an appeal against that decision, lodged on 23 July 2002.

42. In the meantime, the respondents’ striking out summons came on for hearing and, as indicated above, on 28 October 2002, Deputy High Court Judge Carlson made the striking-out and subject orders. He held that the allegations of fraud against the two appellate tribunals were without foundation and continued:

Stripped of its invective by the plaintiff, this is a straightforward case of res judicata. The plaintiff had applied for a winding-up of the 1st respondent. He succeeded at first instance, lost on appeal and the Court of Final Appeal has refused to take it further. This must be the end of the matter. These identical proceedings, for this is what they are, must be struck out as an abuse of the process of the court.

43. The Judge, in making the subject order, commented as follows:

I was concerned that where this is the first of such actions by him, it might be going too far to suggest that there might be more to come. I had wondered whether it might be premature to make the strong order asked for by the defendants. But given the nature of the correspondence and the allegations to the effect that the highest courts of Hong Kong and their judges have conducted themselves fraudulently and have played fast and loose with the legal system since 1 July 1997, which it seems to me are allegations made without any pause for reasoned reflection by the plaintiff, that there is every prospect that he will seek to revisit again the issues raised in this action and in the action tried by Yuen J. Some restraint should be applied now so that at least he has to show merit before the defendants are required to expend time and costs to defend and the wider public interest should also be addressed in the sense that the court’s time and lists should not be burdened with thoroughly unmeritorious claims.

44. The appellant appealed (CACV 414/2002) against Deputy Judge Carlson’s orders. This was heard on 10 September 2003 by the Court of Appeal (Yeung JA, Stone and Lugar-Mawson JJ) simultaneously with his appeal against Deputy Judge Woolley’s refusal to set aside the statutory demand (CACV 306/2002). The Court of Appeal unanimously dismissed both appeals, holding that the allegation of fraud was manifestly unfounded, as was an allegation that the Appeal Committee had acted ultra vires. It held that:

In view of the background of the case as outlined in this judgment, a Grepe v Loam order is a proper order to make in order to avoid further abuses of the process of the court.

45. Not satisfied with that result, the appellant applied to the Court of Appeal for leave to appeal to the Court of Final Appeal. That application was dismissed on 28 November 2003 and, on 17 December 2003, the appellant renewed that application before the Appeal Committee.

46. … When the application was referred to it in the usual course, the Appeal Committee dismissed the application for leave to appeal except in respect of the subject order. Leave to appeal to this Court was granted on the sole question of whether there was jurisdiction to make the subject order [i.e. FACV 5/2004].”

9.As mentioned above, the Court of Final Appeal eventually made the RPO against Mr Ng in FACV 5/2004, which gave rise to the matters dealt with in this judgment.

Statement of claim in present action

10.The relevant parts of the statement of claim in the present action read as follows:

“ 2. The 2^nd Defendant was incorporated on the 4^th day of February, Hong Kong under the Companies Ordinance, Cap 32 as a private company limited by shares.

The registered office of it is situate at Rooms 1001 – 1005, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong.

2.1 The nominal capital of the 2nd Defendant was, until August, 1992 HK$200,000 divided into 200,000 shares of HK$1.00 each. The amount of the capital paid up or credited as paid up is HK$200,000. The nominal capital of the Company has then been purportedly increased to HK$50,200,000 divided into 50,200,000 shares of HK$1.00. The amount of capital purportedly paid up now is HK$25,700.00.

2.2 The Initial 200,000 issued shares of 2nd Defendant were held in a manner as follows:-

Kei Wong Chuen 51,000

Wang Hong Ling 25,500

Bao Feng 25,500

Ng Yat Chi 98,000

200,000

The shares in the names of Kei Kwong Chuen, Wang Hong Ling and Bao Feng have been at all material times held by them upon trust of the 1st Defendant’s then subsidiary Strong Progress Co Ltd.

2.3 The beneficial interest of the 98,000 shares held in the name of the 1st Plaintiff aforesaid was later acquired by the 2nd Plaintiff and the 1st Plaintiff has held the same in trust for the 2nd Plaintiff. The 1st and 2nd Defendants have been well aware of such a trust.

3. At all material times, the 4th Defendant is the Authority established under the Securities and Futures Ordinance Cap 571 for regulating and enforcing the laws that assure for an orderly securities market in HKSAR, China post 1997 under the 1984 Joint Declaration enabling HKSAR China the status as an International Financial Centre recognized by Overseas Stock Exchanges. His office is situate at 8/F, Chater House, 8 Connaught Road Central, Hong Kong.

4. By about mid 1992, the 2nd Defendant brought the listed company, Winland Investment Limited and changed its name to the name of China Resources Enterprises Limited (which became the 3rd Defendant herein) on 24/9/1992 as its holding company. A nominee company was put in place in between the 2 to conceal the true ownership of the shares owned by the 2nd Defendant in the list of shareholders in the 3rd Defendant which has been a public listed company trading its shares in Hong Kong Stock Exchange as stock code no. 291 under Cap. 571. The total number of shares issued is 2.131 billion shares.

5. The 2^nd Defendant committed corporate frauds in her Reports and Financial Statements for the years 1992 up to 2003 concealing its ownership in the 3^rd Defendant as one of its subsidiaries to the Plaintiffs enabling the cover up of embezzlement/disappearance of dividends paid by the 3^rd Defendant to its shareholders for such ownership in the 3^rd Defendant by the 2^nd Defendant as its holding company for the years 1992 to 2003 despite the declaration of dividends by the 3^rd Defendant in the last 11 years to its shareholders in general annual meetings and annual reports of about $1.89 per share altogether.

6. The 3^rd Defendant since 1992 despite being a public listed company has continuously made false representation to the public that the holding company of itself was and is the 1^st Defendant owning about 55% of its shares issued and further corporate fraud has been committed by the 1^st, 2^nd and 3^rd Defendants cheating the New York Stock Exchange in about mid-2002 in an attempt for the sale of the 2^nd Defendant’s shares in the 3^rd Defendant through American Deposit Receipt (ADR) system for local listed shares in the name of the 1^st Defendant.

7. The Plaintiffs wrote to Authorities in United States in 2003 to 2004 and alerted them of such corporate frauds endorsed and cleared by the Hong Kong Stock Exchange and/or Hong Kong Securities and Futures Commission under Cap 571 in the application by the 1^st Defendant to obtain the approval of the New York Stock Exchange prior to trading in USA stock markets.

8. The trading of the said local listed shares of stock code 291 in the form of ADR certificates in USA was subsequently nailed to death for the corporate frauds made known to USA Authorities including Federal Investigation Bureau committed by the 1^st to 3^rd Defendants.

9. Securities and Futures Commission the 4^th Defendant, has aided and abetted the 1^st to 3^rd Defendants to cheat the public and the Plaintiffs to conceal the corporate frauds of the embezzlement, false accountings and false disclosure for failing his duty to order suspension of the sales of the stocks (Stock no. 291) in the correspondences exchanged between the plaintiffs and the Commission :-

Commissions’ letters of 26/4/2003, 12/5/2003, 21/5/2003, 15/3/2004, 26/3/2004, 8/4/2004, 29/4/2004, 10/5/2004, 24/5/2004, two letters of 11/6/2004, Ng Yat Chi’s and/or Choy Bing Wing’s letters of 13/5/2003, 11/3/2004, 15/3/2004, 17/3/2004, 2/4/2004, 13/4/2004, 14/4/2004, 26/4/2004, 4/5/2004, 12/5/2004, 17/5/2004, 26/4/2004, 27/5/2004, 2/6/2004, 15/6/2004, 17/6/2004 and 23/6/2004.

10. The 4^th Defendant has completely misled the public and the Plaintiffs by his correspondences aforesaid and press releases dated 15/6/2004 and 16/6/2004 to cover up the corporate frauds committed by the 1^st to 3^rd Defendants in an attempt to obstruct justice by claiming the Managing Director of Charles Smitt and Associates (CSA) had been involved in embezzlement which in fact was related to the ADR deal and earlier embezzlement to cover up crimes.

11. In the premises, the 1^st Defendant herein is liable to the Plaintiffs by reason of false representation as the holding company to own the 2^nd Defendant’s shares in the 3^rd Defendant. The 2^nd Defendant herein is liable to the Plaintiffs by reason of concealing the true ownership of its controlling shareholdings in the 3^rd Defendant by using a nominee company (CSA) to siphon off the dividends away from the Plaintiffs while the 3^rd Defendant made false disclosure of its holding company in publications and general meetings to cheat the public and the Plaintiffs and the 4^th Defendant aided and abetted the 1^st to 3^rd Defendants to cover up the corporate frauds.

And the Plaintiffs Claim:-

(i) Damages caused by conduct as pleaded in paragraphs 4 to 9 herein;

(ii) Aggregated damages;

(iii) Exemply damages;

(iv) Interest;

(v) Cost;

(vi) Further or other relief.”

Is Mr Ng’s claim caught by paragraph 3 of the RPO?

11.The first question to ask is whether the present action falls within paragraph 3 of the RPO, which prohibits Mr Ng from commencing any fresh proceedings “concerning any matters involving or relating to or touching upon or leading to the proceedings in HCCW No. 321 of 1996, HCA No. 2039 of 2002 and HCSD No. 22 of 2002” without leave.

12.Undoubtedly, this is a wide formulation, even though the actual abuse that gave rise to the Court of Final Appeal making the RPO in FACV 5/2004 was the re-litigation by Mr Ng of the question of validity of the 1992 increase in share capital that resulted in a substantial dilution of Mr Ng’s shareholding in Max Share. Ribeiro PJ explained the use of the wide formulation at page 512F to J (paragraph 120(a)):

“ 120. A further consequence of the need for a qualitative assessment relates to the drawing up of the extended order. It is essential that there should be clarity in defining the class of proceedings where leave must be obtained.

Plainly, an order may disallow any attempt to re-litigate without leave a cause of action disposed of as res judicata or a matter which comes within the principle explained in Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1973 – 1976] HKC 194. However, experience shows that this may not give sufficient protection. The abuse may, for instance, involve the vexatious addition of defendants (such as witnesses who gave evidence for the other side, the lawyers, or even the judges, involved). Spurious new elements may be introduced into the case, perhaps hoping to disguise the fact that it is in reality no more than an attempt at re-litigating a lost cause. It is therefore legitimate for the order to be drawn so as to cover not merely the immediate subject-matter of the concluded proceedings but, for instance, also matters “involving or relating to or touching upon or leading to those proceedings” (as suggested by Lord Phillips MR in Bhamjee (No 2) at p.102). It is possible that non-abusive proceedings might be caught by some such wider formulation. However, in such cases the court could be expected to grant leave for the new proceedings to proceed.”

13.Judging from the content of the statement of claim as well as the correspondence between Mr Ng and/or Mr Choy and the SFC and other related parties, it is plain that the present action is caught by the wide formulation set out in paragraph 3 of the RPO. The present action concerns Mr Ng’s shareholding in Max Share, Max Share’s shareholdings and share capital increase, the alleged assets of Max Share (i.e. the shares in CRE and the dividends declared thereon), the alleged fraudulent misappropriation of assets belonging to Max Share by CRH and people running the same, and the public announcements that have been made relating to shareholdings in CRE and related companies (see paragraph 14 of the statement of claim in HCA 2039/2002: infra). The correspondence emanating from Mr Ng and/or Mr Choy, which contained the complaints that eventually became the subject matters of the present action, made repeated references to the previous proceedings set out in paragraph 3 of the RPO and the alleged misconduct of members of the Judiciary in their handling of those proceedings, as material events leading or relating to the current subject matters of complaint.

14.As I said, it is plain beyond argument to the contrary that the subject matters raised by the present action are matters “involving or relating to or touching upon or leading to” the previous proceedings set out in paragraph 3 of the RPO.

15.In those circumstances, at least in relation to Mr Ng’s claim in this action as co-plaintiff, that claim is subject to the leave requirement under paragraph 3 of the RPO and, the action having been commenced without leave, the permission requirement under paragraph 8 of the order.

Basis of granting leave/permission

16.On what basis should the designated judge determine whether leave or permission should be granted? In paragraph 13 of his judgment in the Court of Final Appeal, the Chief Justice explained the requirement for leave (pages 483J to 484E):

“ 13. The requirement for leave is of course a central feature of an extended order, as it is for a Grepe v Loam order. It is a mechanism to prevent further abuse as well as a safeguard to ensure that meritorious claims are not shut out. In relation to an extended order, the leave requirement would be dealt with as follows:

(1) Where leave is sought, the first question for the court to determine is whether the new proceeding is within the prohibited class of proceedings specified in the order. In consideration this question, the court should look at the substance of the matter.

(2) Where the court concludes that the new proceeding is not within the specified class, it directs that leave is not required, allowing the proceeding to be issued. An extended order does not envisage the court scrutinizing a new proceeding outside the class to decide whether it is arguably meritorious. The defendant could of course take such steps as is considered appropriate after the institution of the new proceeding, such as applying to strike it out.

(3) Where the court concludes that the new proceeding is within the specified class, the court should proceed to consider whether it is arguably meritorious, that is, whether there is a reasonably arguable case.”

17.At paragraph 120(a) of his judgment (already reproduced above), Ribeiro PJ further explained the inter-relationship between the wide formulation and the question of leave. His Lordship recognised that the wide formulation used in a restricted proceedings order might, by definition, catch some “non-abusive proceedings”. In such cases, “the court could be expected to grant leave for the new proceedings to proceed”.

18.As I read the judgment of the Court of Final Appeal, when a wide formulation is used in a restricted proceedings order that was prompted by a vexatious attempt to re-litigate a lost cause (like what happened in FACV 5/2004), the position is as follows:

(1) If in substance, the new action is an attempt to re-litigate a lost cause (including re-litigation in the Yat Tung sense), it is directly caught by the restricted proceedings order. Unless a new action is “arguably meritorious, that is, … there is a reasonably arguable case” (per Li CJ at page 484D/E), leave should not be granted.

(2) Since, by definition, in the preceding scenario, what is being attempted by the new action is the re-litigation of a lost cause, it would be only in rare and highly exceptional circumstances that the designated judge would find the new action arguably meritorious or reasonably arguable, justifying the grant of leave for it to proceed.

(3) If the new action does not involve or amount to, in substance, an attempt to re-litigate a lost cause, but is nonetheless abusive for some other reasons, the designated judge is equally entitled not to grant leave for the action to proceed – by definition, that action cannot be arguably meritorious or reasonably arguable.

(4) If the new action does not involve or amount to, in substance, an attempt to re-litigate a lost cause, and is otherwise not abusive, then even though it is caught by the wide formulation used in the restricted proceedings order, “the court could be expected to grant leave for the new proceedings to proceed”.

19.The last two sub-paragraphs require elaboration.

Re-litigation and other abuses – use of wide formulation

20.As I observed above, the actual abuse faced by the Court of Final Appeal in FACV 5/2004 was Mr Ng’s attempt to re-litigate a lost cause, i.e. the validity of the 1992 share capital increase. That was the abuse that prompted the Court of Final Appeal to make the RPO. That (i.e. re-litigation) is often the abuse that a court is faced with when it finds it necessary to consider making a restricted proceedings order against a plaintiff. But that is not the only abuse that is imaginable. A party is as much vexed by an opponent who repeatedly drags him to court for the same old subject matter that has been decided in previous proceedings between themselves, as by an opponent who, having lost in a previous piece of litigation to him in relation to one subject matter, repeatedly drags him back to court in relation to some other frivolous or vexatious complaints, which cannot be said to be the same subject matter that has been previously litigated on or a matter that could and should have been raised in the previous action as per the Yat Tung principle (Yat Tung Investment Co. Ltd v. Dao Heng Bank Ltd [1975] AC 581). From the perspective of the court, the court is no less vexed, and its limited valuable judicial resources drained, by new actions that seek to vex successful parties in previous litigation with spurious new matters that cannot be said to be the same as the old subject matters of litigation or matters caught by the Yat Tung principle, than by abusive proceedings that seek to re-litigate decided matters.

21.In those circumstances, if the new matter complained of in the new action is caught by the wide formulation in a restricted proceedings order, I do not see why the designated judge should turn a blind eye to the fact that the new matter so raised is frivolous or vexatious or otherwise abusive, even though it is, strictly speaking, not the same as the old subject matter that has been adjudicatedon or a matter that could and should have been raised in the previous litigation as per the Yat Tung principle (which has been significantly narrowed down by the House of Lords in Johnson v. Gore Wood & Co. [2002] 2 AC 1 and other subsequent cases). I do not see why in such a case, where the new action is caught by the wide formulation in the restricted proceedings order, the designated judge should give leave to the commencement of the action or permission for the action to proceed, leaving it to the defendant to fend for himself, with its attendant waste of time and resources. Whether the defendant applies to strike out the claim or simply defends it in the normal way, the proceedings will entail a wholly unjustified drain on valuable yet inevitably limited judicial time and resources, which could otherwise be made available to genuine and bona fide litigants before the court.

22.In my judgment, the court and the designed judge should take a firm and robust, sensible, approach towards the question of leave/ permission in relation to a restricted proceedings order. When it comes to curbing vexatious proceedings and abuses of the court’s own process, I see little place for technicalities and formalism that is devoid of substantive or procedural justification.

23.Of course, the above observations are made in the context that the new action is caught by the wide formulation in a restricted proceedings order. If it is not, the question of leave or permission to proceed does not arise in the first place. However, if it is caught by the wide formulation, I can see no justification for prolonging the vexation or abuse by granting leave or permission to proceed, when by definition, the inevitable outcome is that the new claim will be struck out and/or the action dismissed (or stayed) upon subsequent application (or after trial).

24.Riberio PJ, in discussing the use of a wide formulation in a restricted proceedings order, said that some such wider formulation might catch “non-abusive” proceedings and in such cases the court “could” be expected to grant leave for the new proceedings to proceed. His Lordship did not say all new proceedings that did not involve an attempt to re-litigate a lost cause could be expected to be permitted to proceed. Rather, his Lordship said that “non-abusive” proceedings could be expected to be permitted to proceed. Moreover, the learned judge only said that in such cases involving non-abusive proceedings, the court “could” be expected to grant leave for the new proceedings to proceed. Quite obviously, the learned judge was leaving it to the unfettered discretion of the designated judge to determine whether to grant leave in accordance with the actual circumstances of the case that he or she might have to face.

25.I am not, by my above observations, extending the scope of a restricted proceedings order beyond its intended ambit. Any such suggestion begs the question of what the intended ambit of a restricted proceedings order is. As I said, while re-litigation is a common type of abuses faced by the court, it is by no means the only known type of abuses. Other types of abuses may also call for the making of a restricted proceedings order. Moreover, although a particular restricted proceedings order may have its genesis in a particular type of abuses, its ambit of operation need not be directed towards that particular type of abuses only. One of the functions of a wide formulation in a restricted proceedings order is precisely to draw the boundary of the ambit of operation of the order. That boundary has to be justified by the facts and evidence that have been placed before the court making the restricted proceedings order and the court’s judgment (based on the facts and materials before it as well as the inferences that it can draw from the same) on what the vexatious litigant might do in future. However, once the boundary is drawn, it settles the ambit of the order. I fail to see anything wrong for the designed judge to require an arguably meritorious claim to be present before giving leave/permission to the commencement or continuation of the new action that falls within the boundary so drawn.

Striking-out of the court’s own motion

26.In this regard, it is important also not to forget that in the court’s arsenal of weapons against attempts to abuse its own process is the power to strike out a claim on its own motion. Order 18 rule 19(1), the Rules of the High Court (Cap. 4), providing for the court’s power under the statutory rules to strike out pleadings and indorsements, does not specifically require the application of a party as a pre-condition to the court’s exercise of its power. Rather it provides that the court “may at any stage of the proceedings order to be struck out” any pleadings based on the usual grounds – including that the claim is frivolous or vexatious and that it is otherwise an abuse of the process of the court, and order the stay or dismissal of the action.

27.Moreover, apart from the statutory power to strike out, there is also the parallel power under the inherent jurisdiction of the court to strike out or stay proceedings before it, which are obviously frivolous or vexatious, or are otherwise an abuse of process of the court. In fact, the power to make a restricted application order or a restricted proceedings order stems from the same inherent jurisdiction of the court to protect its own process from abuses.

28.Further, whether under the statutory power or the inherent jurisdiction to strike out, the court may consider exercising its power on its own motion, even in the absence of any application.

29.The position has also been explained by Hong Kong Civil Procedure 2004, vol. 1, para. 18/19/12, which points out that from time to time such power to strike out has been exercised by the court in personal injuries cases of its own motion:

“The current personal injuries Judge, Seagroatt J considers that this is a much misunderstood provision and is often overlooked in practice. In personal injury actions, particularly running down and employer’s liability actions, many accidents are so self-evidently the consequence of negligence on the part of the defendant that no sensible defence can be maintained. Where there is no plea of contributory negligence, or no evidence of it, or where such a contention is manifestly contrary to common sense and known principles of law, the court has power to strike out the defence and enter judgment accordingly, even in the absence of a specific application by the plaintiff. Further the inherent jurisdiction of the court enables it to make decisions for the economic, expeditious and just disposal of actions. Spurious defences such as tactical or holding defences, are regarded as wasting costs, causing the parties to prepare cases on liability where there can be no such issue. This involves use of court time and resources as well as the use of public funds and resources in cases where the Legal Aid Department, Department of Justice, Labour Department and Police Force are concerned.”

See also Lam Kai v. Official Receiver,HCMP 3905/1999, Rogers JA (26 July 1999), para. 11.

30.Nor are these instances limited to personal injuries cases. My own limited research reveals that in CS Low Investment Ltd. v. Freshfields [1991] 1 HKLR 12, a professional negligence case, the Court of Appeal of its own motion struck out the entire statement of claim as being “incurably bad”, even though the application to strike out taken out by the defendant, which led to the appeal, was restricted to certain parts of the pleading only. The court, citing Huntly v. Gaskell [1905] 2 Ch. 656, emphasised that it had inherent jurisdiction to strike out the pleading of its own motion (at pp. 26H/I and 27B). Fuad VP said that the court “cannot allow the machinery of the court to be used as a means of vexatious oppression” (at p. 26H/I). He went on to say that the proceedings in that case “should never have been launched and … [they had] been allowed to remain alive for too long as it [was]” (p. 26H/I).

31.In Dragages et Travaux Publics v. Hong Kong Housing Authority, Civ. App. No. 87 of 1984 (7 June 1984), the Court of Appeal heard an appeal from the refusal of a judge to discharge an ex parte injunction. Sir Alan Huggins, Ag. CJ with whom Yang and Baker JJA agreed, found that the action could not possibly succeed in face of the evidence filed by the plaintiff and of the court’s own motion struck out the writ.

32.The court’s power to strike out has been touched on by Riberio PJ in paragraphs 55 to 57 of his judgment in Ng Yat Chi (at page 494B to I). It is true that in paragraph 57 (at page 494H), his Lordship referred to the need for the party being vexed by the abusive proceedings to make an application to strike out and for the court to entertain an inter partes hearing before the abuse can be brought to an end by a strike-out order. There, I believe his Lordship was focusing on the normal type of situations where the court deals with an application to strike out. As I have sought to demonstrate above, the power to strike out has been exercised on the court’s own motion, even in the absence of a specific application, provided that a fair opportunity to be heard has been afforded to the party affected. As has been pointed out by Earl of Selborne LC in Metropolitan Bank v. Pooley (1885) 10 App. Cas. 210, the power to strike out or stay a manifestly vexatious suit which is plainly an abuse of the authority of the court is “inherent in the jurisdiction of every Court of Justice to protect itself from the abuse of its own procedure” (at page 214). As the protection of the court’s own procedure and interest is at stake, it seems to me that the exercise of the power to strike out or to stay the abusive proceedings so as to protect the court’s own procedure and interest cannot be dependent upon the making of an application by the opposite party. The court must have, as part of its inherent jurisdiction to protect itself from the abuse of its own procedure, the power to act on its own motion. Of course, the power must be exercised carefully and resorted to only in exceptional circumstances where it is a plain and obvious case of abuse. But that is quite another matter distinct from the one under discussion.

33.In the court’s combat against abusive proceedings brought by vexatious litigants, not only should the court be flexible in developing remedies which are proportionate to the abuse that has to be dealt with in exercising its statutory and inherent jurisdiction (paragraph 6 of Li CJ’s judgment in Ng Yat Chi at page 482A-C), a fortiori, it should also have no hesitation in putting to best and most efficient use of existing weapons already in its possession to prevent or curb abuses of process. Amongst others, the statutory and inherent jurisdiction to strike out on the court’s own motion, even in the absence of a specific application, should be resorted to unhesitantly, where appropriate.

34.Of course, before the court should decide to exercise its power to strike out, a fair opportunity must be given to the potentially affected litigant to be heard. But subject to that procedural safeguard, I am of the view that the court clearly has the power to strike out a frivolous or vexatious claim or proceedings that are an abuse of the process of the court, on its own motion, and in the absence of a specific application.

35.That being the case, I fail to see why a designated judge must give leave or permission for an abusive claim to be commenced or proceed, which is caught by the wide formulation in a restricted proceedings order that has its genesis in an attempt to re-litigate an old matter, if the new claim does not involve an attempt to re-litigate but is otherwise abusive. As a matter of substance, not giving leave/permission is the same as striking out the claim of the court’s own motion.

36.If I am wrong and a designated judge must adopt a compartmentalised or blinkered approach to the question of leave and permission, I would venture to suggest that he or she could consider, at the same juncture of his or her giving leave/permission to commence/continue the abusive claim, exercising the court’s undoubted power to strike out the claim, provided that a fair opportunity to be heard should first be given to the vexatious litigant.

37.So much for the principles. They have been discussed in some detail because questions have been raised in the present case as to (a) whether the new action commenced by Mr Ng, though caught by the wide formulation used in paragraph 3 of the RPO, is in substance an attempt to re-litigate old matters; (b) if the answer is “no”, whether it is otherwise abusive so that the court should nonetheless not permit the same to proceed, and (c) if the permission has to be granted, whether there is really nothing that the court can of its own motion do about the situation.

Claim in the present case

38.On the face of it, Mr Ng’s and Mr Choy’s complaint in the present action is as follows: The shares in CRE are owned by Max Share through a nominee (CSA?). However, that fact has been concealed in the reports and financial statements of Max Share for the years 1992 to 2003. Furthermore, CRE itself has since 1992 continuously made “false representations” to the public that its holding company was and is CRH (rather than Max Share). As CRE has been declaring dividends on its shares, the above concealment and misrepresentations have served to enable dividends that should have been received by Max Share as shareholder to be “embezzled” or otherwise misappropriated. “Corporate frauds” have thus been committed. Furthermore, there has been an attempt (that has been thwarted by Mr Ng and Mr Choy) to dispose of Max Share’s shareholding in CRE in the United States in the name of CRH. The SFC has aided and abetted the corporate Defendants to cheat the public and Mr Ng and Mr Choy in the concealment of the alleged frauds and by failing to order the suspension of trading of CRE’s shares in the stock market. Mr Ng and Mr Choy thus claim damages against the Defendants.

39.At the hearing, Mr Choy told the Court in no uncertain terms that this is not a derivative action. Rather he and Mr Ng rely on the cause of action of intentional interference with economic interests (or deceit). They personally claim damages for the tort.

40.On a superficial reading of the pleading, the claim does not turn on the validity of the share capital increase of Max Share in 1992, the subject of re-litigation that gave raise to the RPO in the first place. Whether Mr Ng legally (and Mr Choy beneficially) own 49% or 0.38% (after the increase in share capital) in the share capital of Max Share does not affect the substance of the claim in the sense that dividends due to Max Share (as per the matters pleaded in the statement of claim) have been misappropriated, and as Max Share’s shareholder Mr Ng (as trustee for Mr Choy) has thus suffered a financial loss – whether that would give rise to a personal action in tort is quite another matter. Furthermore, Mr Choy has in his 9^th affirmation claimed that the subject matter of complaint only came to his knowledge shortly before the commencement of the present action – presumably he speaks for Mr Ng as well; in other words, it was not a matter that could and should have been raised in the earlier proceedings, particularly the winding-up proceedings (HCCW 321/1996) where a number of complaints of misconduct had been levelled against CRH and those behind it, and thus the wider principle of issue estoppel under Yat Tung does not apply.

Present claim is an attempt to re-litigate in disguise

41.In my judgment, on closer examination, the present action is an attempt to re-open the question of validity of the share capital increase in 1992 or a collateral attack against the court’s conclusion in relation to the validity of the same that has been reached in the previous proceedings.

42.First, paragraph 2 specifically pleads the shareholdings in Max Share. It refers to the 1992 share capital increase as a “purported” increase only. It therefore raises an issue on the validity of the 1992 share capital increase.

43.Second, Mr Ng and Mr Choy sue for damages based on the tort of intentional interference, as per Mr Choy’s submission. The pleading is plainly defective in that loss and damage have not been particularised. Leaving that aside, it is plain that the quantum of damages – assuming for the sake of argument that the cause of action is viable – will depend on Mr Ng’s percentage of shareholding in Max Share. Given the way paragraph 2 of the statement of claim has pleaded the shareholdings in Max Share and its reference to the 1992 increase in share capital as merely a “purported” increase, and in the absence of any express and specific disclaimer by Mr Ng and Mr Choy that their claim is by reference to Mr Ng’s 0.38% shareholding in Max Share only, one can only conclude that the claim for damages is again an attempt to re-litigate the validity of the 1992 increase in share capital through the backdoor. Put another way, the claim for damages will raise immediately the issue of Mr Ng’s percentage of shareholding in Max Share.

44.Third, it should be remembered that in the winding-up proceedings commenced in 1996 and tried in 2000, Mr Ng (holding his shares as bare nominee for Mr Choy) made a number of complaints of misconduct and misappropriation of assets against his fellow shareholder, CRH. The latest complaint of misconduct and misappropriation of assets allegedly belonging to Max Share against CRH is plainly a matter of similar nature, and if it was known to Mr Ng (or Mr Choy) at the time when the winding-up petition was still on, on the materials before the court, there would be no reason why Mr Ng should not have raised it in the winding-up proceedings, bearing in mind that the alleged concealment complained of in the present action spanned 13 years, from 1992 to 2003. It was not so raised, and the only explanation given – and given by Mr Choy only – was that “the deception was only discovered by the Plaintiffs shortly before commencement of [the present action]” (paragraph 2 of Mr Choy’s 9^th affirmation). The only evidence Mr Choy relied on in support of his assertion was a letter he wrote to the Chief Judge of the High Court on 15 June 2005 where he made the same bare assertion.

45.I note that Mr Ng himself has not gone on oath to say anything. He has not even bothered to appear before this Court at the hearing. So far as the position of Mr Ng is concerned, in my view it is for him to persuade the Court, given my conclusion that the action is caught by the wide formulation in paragraph 3 of the RPO, that the new action is not an attempt to re-litigate a lost cause or a matter that could and should have been raised in the previous proceedings under the Yat Tung principle, as per paragraph 120(a) of the judgment of Riberio PJ already reproduced above. The burden is on him to satisfy the designated judge of the (arguable) merits of his new claim.

46.I am far from persuaded by the bare allegation of Mr Choy (none came from Mr Ng) that the two of them only discovered the alleged concealment and deception “shortly before” the commencement of the present action on 10 March 2005. In my judgment, not only is such a bare assertion wholly inadequate, it is also contradicted by the correspondence emanating from Mr Ng and Mr Choy themselves, which have been referred to in paragraphs 9 and 10 of the statement of claim and have been placed before me.

47.The correspondence clearly shows that Mr Ng and Mr Choy were aware of the alleged concealment and deception well before the commencement of the present action in March 2005. Thus, for instance, in Mr Choy’s letter dated 22 April 2003 that he wrote to the Chief Justice of the Court of Final Appeal, he said –

“ Dear Sir,

Cheatings in Our Courts Enabling Cheatings in International Financial Markets/Institutions World Wide Like the Spread of Atypical Pneumonia (SARS) worldwide out from Hong Kong Special Administrative Region, China (SAR)

I refer to my letter dd 15/4/03 pointing out to you urging for your urgent action to withdraw all the fraudulent verdicts which have been used by local company to cheat international financial institutions to raise money in the overseas open money market and to your bare denial of cheatings in our Courts.

I now enclose herewith clear evidence of cheatings committed by our Courts enabling a company, Max Share Limited, which should have been wound up by our Courts used by China Resources (Holdings) Ltd to cover up the fraud of false disclosure in concealing that Max Share Limited holds the shares of the publish listed Company No. 291, the China Enterprises Co Ltd and not China Resources Holdings Co Ltd in US money raising cheating international investors.

You will be condemned by the whole World like the spread of atypical pneumonia for the cheatings by our Courts once the same can be clearly seen by the World.

I honestly believe that you must take immediate action to withdraw all the fraudulent verdicts and sack the judges as what have been done by the Central Government in the dismissal of the Health Minister and Mayor of Beijing couple days ago due to the false reporting of the atypical pneumonia.

Yours faithfully,

[Signed]

B.W. CHOY ”

48.The burden being on Mr Ng to persuade me that permission should be granted for his claim in the present action to proceed as per paragraph 8 of the RPO, I am not convinced that the subject matter of complaint raised in the present action is not one which, in any event, could and should have been raised in the winding-up proceedings. In other words, this is an attempt to re-litigate caught by the wider doctrine of issue estoppel as per Yat Tung.

49.Fourth, paragraph 6 of the statement of claim refers to false representations made since 1992 regarding the holding company of CRE.

50.Paragraphs 6 to 8 go on to plead the unsuccessful sale of the relevant shareholding in CRE in the United States. The correspondence emanating from Mr Ng and Mr Choy shows clearly the true nature of the two gentlemen’s complaint. Their letter dated 2^nd April 2004 to the SFC (paragraph 3) and another letter dated 13 April 2004 also to the SFC (paragraph 2.1) refer to paragraph 14 of the statement of claim in HCA 2039/2002 as setting out their case, and as being instrumental in stopping the alleged attempt to sell the relevant shareholding in the United States. It should be noted that HCA 2039/2000 is itself one of the previous proceedings included in paragraph 3 of the RPO.

51.The reference to “false representation” in paragraph 6 of the statement of claim is a reference to the public announcements that have been pleaded in paragraph 14 of the statement of claim in the previous action (HCA 2039/2000).

52.Paragraph 14 of the statement of claim in that earlier action reads:

“ 14. (a) On 22/12/1995, China Resources Enterprises Limited (“CREL”) a listed public company, at the time beneficially 56.5% owned by the 2nd Defendant made public disclosure on related parties transaction to the effect that the 1st Defendant and/or TSW was 99.60% owned by the 2nd Defendant.

(b) On 11/9/1996, after HCCW No. 321/1996 had been commenced CREL by then 53.1% beneficially owned by the 2^nd Defendant, made similar public disclosure as pleaded in sub-paragraph (a) hereinabove.

(c) On 10/11/1997, CREL by then 52.2% beneficially owned by the 2^nd Defendant, made similar public disclosure.

The Plaintiff avers that such public disclosures were incorrect in that the share capital increase had been invalid and the 2nd Defendant merely owned 51% of the 1st Defendant and/or TSW at all material times.”

53.It is plain that paragraph 14 of the statement of claim in the earlier action seeks to re-litigate the validity of the 1992 share capital increase. The attempted sale of the shareholding in CRE in the United States complained in paragraphs 6-8 of the current statement of claim is, according to the correspondence, thwarted by paragraph 14 of the previous statement of claim. Thus paragraph 3 of the letter dated 2 April 2004 reads:

“… The logical action you should have taken earlier for thorough investigation would reveal (i) a huge sum of involving $30 billion disappeared in the matter for which Madam Chu Y L an protégé of Li Peng must have to explain, (ii) why all the shareholdings of Max Share in stock code 291 taken to USA in 2002 for HK$20 billion in ADR fund raising to cover up the $30 billion in (i) and (iii) such fraud raising was stopped due to paragraph 14 of the statement of claims in HCA 2039/2002 which was noted by authorities in USA copy of the statement of claim was enclosed in Appendix (ii). For your reference, a warning letter to overseas investor was sent by us on 16/9/03. See Appendix (iii).”

54.Further, paragraph 2.1 of the letter dated 13 April 2004 to the SFC reads:

“ 2.1 Our complaint regarding the three announcements made by China Resources Enterprises Company Ltd (CRE) of Stock Code 291 on 22/12/1995, 11/9/1996 and 10/11/1997 was as clearly stated in paragraph 14 of the Statement of Claim dated 21/5/2002 that the true position was China Resources Holdings Company Ltd (CRH) did not own 99.60% of Max Share Ltd. (MS) and/or MS’s Construction Company TSW but 51% and not what you have said that our complaint had been that CRE was not 99.6% owned by CRH. How could you confuse yourself with such simple matters to the relationship of ownerships between CRH, MS and CRE if not out of your deliberate intent to mislead?”

55.It can thus be clearly seen that paragraphs 6 to 8 of the current statement of claim are directly related to and indeed raise the question of validity of the 1992 share capital increase. Mr Ng and Mr Choy have said so in terms in their correspondence.

56.Indeed in Mr Ng’s and Mr Choy’s long letter dated 16 September 2003 to various securities authorities and the New York stock exchange, they alleged that “MSL [i.e. Max Share] is 49% owned by Ng Yat Chi and 51% owned by CRHC [i.e. CRH]” (paragraph 3.1) and went on to complain bitterly about the “fraudulent” judgments of the courts in Hong Kong by which their initial success in the winding-up proceedings before the trial judge was reversed on appeal and the validity of the 1992 share capital increase upheld.

57.Patently paragraphs 6 to 8 of the statement of claim seek to re-open a lost cause.

58.As Riberio PJ has anticipated in paragraph 120(a) of his judgment reproduced above, spurious new elements may be introduced into the new action, perhaps hoping to disguise the fact that it is in reality no more than an attempt at re-litigation. Paragraph 13(b) of the latest Practice Direction on restricted application orders and restricted proceedings orders (Practice Direction 11.3 dated 18 March 2005: [2005] 1 HKLRD 548, 552G-J) gives a similar warning. Judging on the materials before the Court, I have no doubt whatsoever that as a matter of substance, the present action is an attempt by Mr Ng and Mr Choy to re-litigate a lost cause, or matters that could and should have been raised in the earlier proceedings within the meaning of the Yat Tung principle.

Addition of three new parties irrelevant

59.Having come to the conclusion that in substance, the present action is an attempt in disguise to re-litigate a lost cause or matters that could and should have been raised in the earlier proceedings, the fact that three new parties are involved in the present action that were not parties to FACV 5/2004 where the RPO was made or the other proceedings mentioned in paragraph 3 of the RPO is neither here nor there, as again has been anticipated by Riberio PJ in paragraph 120(a) of his judgment. In any event, CRE was actually referred to in paragraph 14 of the statement of claim in HCA 2039/2002, which led to FACV 5/2004 and was one of the proceedings specified in paragraph 3 of the RPO. The joinder of CRE as a co-defendant in the present action does not save it from being caught by the RPO at all.

60.As regards the SFC, its alleged liability in the present action is parasitic on the claim against the other defendants. It is said to have “aided and abetted” the other defendants in their alleged wrong-doings. The joinder of the SFC as a defendant does not alter the true nature and substance of the present action.

61.As regards Mr Choy as co-plaintiff, as will be discussed below, his presence does not affect the question of whether Mr Ng’s claim is caught by the RPO or should be permitted to continue.

No merits in Ng’s claim

62.Having come to the above conclusion, I need to apply the arguably meritorious test set out in the judgment of the Court of Final Appeal. There can be only one answer. The present action is plainly unarguable and wholly devoid of merit. As I already concluded above, it seeks to re-litigate a matter that was or could and should have been raised and dealt with in the previous proceedings. That amounts to an abuse of the process of the court. There are no exceptional circumstances justifying the re-opening of the matter.

63.Furthermore, the statement of claim as a pleading is hopelessly defective. Serious allegations of fraud are made against the Defendants, including the SFC. The material facts pleaded are vague and not easy to understand. More objectionably, the requisite particulars of the Plaintiffs’ case on fraud are wholly missing, contrary to the specific requirement under Order 18 rule 12(1) of the Rules of the High Court.

64.Last but not the least, the claim against the SFC is equally unsustainable and bad.

Abuses must be stopped as soon as possible

65.But not only that. The present claim is plainly an abusive one in every sense of the word. It is a culmination of a whole series of correspondence that preceded its commencement, to which the pleading specifically refers. The correspondence contains countless wholly unjustified and unfounded allegations and abuse levelled at the court leaders as well as members of the Judiciary involved in hearing the previous litigations. The correspondence was copied or purportedly copied to authorities and persons holding high positions not only in Hong Kong, but also in the Mainland, the United Kingdom and the United States. Mr Choy went so far in his oral submission before this Court as to suggest that the “disclosure” by him of the alleged embezzlement of dividends in question in the correspondence that was purportedly copied to, amongst others, the President as well as the Premier of the People’s Republic of China led to the “downfall” of the former Chief Executive of the Hong Kong SAR. The suggestion is no doubt absurd. But more importantly for our present purposes, that highlights the need to stop all these abuses and nonsense as soon as possible.

Ng’s claim not permitted to proceed

66.In those circumstances, I have come to the firm conclusion that the claim made by Mr Ng against the Defendants in the present action is totally devoid of merit and is indeed abusive. I therefore refuse to grant permission to Mr Ng to continue with his claim in the action.

67.If I had concluded that the present claim is not an attempt to re-litigate old matters, for the reasons explained above, I would still have applied the arguably meritorious test and refuse permission to continue.

Alternatively, Ng’s claim should be struck out

68.Alternatively, if I am wrong and – (a) the present action is not an attempt by Mr Ng to re-litigate a matter that was or could and should have been raised and decided in the earlier proceedings, and (b) in that event the designated judge has no discretion to look into the merits of the claim but must permit the claim to proceed, I would without hesitation exercise the court’s undoubted power both under the statutory rules and its inherent jurisdiction to strike out the pleading and dismiss the claim as being an abusive one. I have already explained above that even leaving aside the question of re-litigation and Yat Tung, the present claim as formulated is plainly bad and unsustainable. It is an abusive claim. I will not repeat myself here. For that reason, the pleading should be struck out and the claim dismissed.

Position of Choy vis-à-vis the RPO

69.Turning to the position of Mr Choy, there is no need to decide whether the RPO made by the Court of Final Appeal in FACV 5/2004 to which Mr Choy was not a party is binding on him as such, so that he cannot commence the present claim without first getting the leave of the court to do so. Arguments to that effect have been advanced by the Defendants in the present action, principally on the ground that ever since the acquisition of Mr Ng’s shares in Max Share by Mr Choy back in 1992, Mr Ng has been holding the shares as bare trustee for Mr Choy, as Max Share has refused to register Mr Choy as shareholder. This has been indeed Mr Choy’s own argument before the Court of Appeal in Ng Yat Chi v. Max Share Ltd (CACV 252/1996) [1997] HKLRD 663, 666 H/I, and remains his contention in this action as per paragraph 2.3 of the statement of claim. Thus the argument runs that the RPO imposed by the Court of Final Appeal against Mr Ng is in truth and in substance a restricted proceedings order made against Mr Ng as trustee for Mr Choy as beneficiary at whose direction Mr Ng must have brought the previous proceedings. I can see much force in the argument.

70.On the other hand, I bear in mind the consideration that a court order, particularly an order of the present type, must be clear and unambiguous. As Mr Choy has not been named in the RPO, nor did he have an opportunity to address the Court of Final Appeal whether in person or by representation, I can see the counter argument that he is not bound by the RPO as such – particularly considering that whilst the fact that Mr Ng had prosecuted the various previous proceedings, including those before the Court of Final Appeal in FACV 5/2004, for the benefit of Mr Choy, was well-known to the Court of Final Appeal itself, it however did not see fit to name specifically Mr Choy in the RPO that it made.

71.As I say, I do not need to decide this interesting but academic point, because I have come to the view that (a) the present claim by Mr Choy should be struck out as being an abuse of the process of the court for the same reasons that I have given above in relation to Mr Ng’s claim, and (b) a similar restricted proceedings order should be made against Mr Choy personally.

No merits in Choy’s claim

72.In relation to the first point, what I have said in relation to Mr Ng’s claim applies equally to Mr Choy’s. So far as re-litigation and the Yat Tung principle is concerned, as beneficiary suing by his trustee (Mr Ng), Mr Choy is as much bound by the doctrine of res judicata as well as the wider doctrine in Yat Tung, as Mr Ng himself: see Halsbury’s Laws of England (4^th ed. re-issue), vol. 16(2), para. 1004; Re Defries (1883) 48 LT 703.

73.Leaving re-litigation and Yat Tung aside, the same criticisms against the claim pleaded in the statement of claim that have been pointed out in relation to the position of Mr Ng apply equally to the claim pleaded by Mr Choy as co-plaintiff in the same statement of claim.

74.Mr Choy’s claim, like that made by his co-plaintiff Mr Ng, is plainly bad. His pleading should be struck out and his action dismissed.

A new restricted proceedings order against Choy

75.As regards the making of a new restricted proceedings order against Mr Choy, it cannot be argued otherwise that Mr Choy was and is the main instigator behind all the previous proceedings as well as the present action. Not only is Mr Ng merely a bare trustee holding no beneficial interest in the shares, the court records as well as the correspondence and documents concerned all bear witness to the fact that Mr Choy was and is the prime mover behind all the proceedings that have been seen by the courts thus far.

76.Even without making any reference to what has happened in the present action and the correspondence preceding its commencement, it is clear that in the previous proceedings identified in paragraph 3 of the RPO, all the reasons that have been given for the making of the RPO against Mr Ng by the Court of Final Appeal in FACV 5/2004 apply equally, if not with greater force – bearing in mind that Mr Choy was in fact the main instigator behind Mr Ng – to Mr Choy. See in particular paragraph 51 of Ribeiro PJ’s judgment (at p. 493A to C).

77.And if the present action as well as the correspondence preceding its commencement are taken into account as well, the picture cannot be clearer. Many of the blatantly abusive letters that have been written were penned by Mr Choy himself. After action was commenced, many of the letters and most of the responses in relation to whether the present action is caught by the RPO and whether permission should be given for it to continue were written or made by Mr Choy himself. Mr Choy has filed no less than 11 affirmations in this action. Furthermore, as a common hallmark of vexatious litigants and abusive proceedings and applications, an application was made by Mr Choy alone to disqualify and discharge me from hearing the present matter. The application, which was made on spurious grounds, was duly dismissed by me, for which I have handed down a separate reasons for judgment in open court.

78.By way of contrast, Mr Ng has not put in any affirmation in this action, and has made little if any substantive response of his own in relation to the issues arising out of the RPO against him. He did not join Mr Choy in his application by motion to discharge me from hearing the case and indeed, as I mentioned above, he did not even bother to appear before me.

79.The inescapable conclusion is that Mr Choy is the main instigator behind the present action and the preceding correspondence.

80.All this is more than sufficient to justify the imposition of a restricted proceedings order against Mr Choy personally covering all previous proceedings covered by paragraph 3 of the RPO made by the Court of Final Appeal against Mr Ng, as well as the present action.

81.The fact that formally, this is only the first time that Mr Choy is suing in his own name (leaving aside the winding-up proceedings in which Mr Choy was at one stage a co-petitioner) does not make any difference. As a matter of substance, he has been involved in all the previous proceedings. In my judgment, it is important to look at substance rather than form, and to assess the probabilities of a vexatious litigant seeking to bring further vexatious proceedings in future after the dismissal or stay of his current action.

No wavier of RPO

82.Mr Choy argued that the Defendants had taken steps in the present action after service of the writ of summons on them, and had thereby waived their rights or protection under the RPO, or are otherwise estopped from seeking protection under it.

83.There are quite a number of good answers to this argument. I would only mention one, which is, from the perspective of the court, amongst the most important ones. A restricted proceedings order is not there only to protect innocent parties from wholly unmeritorious claims made by vexatious litigants, or vexatious proceedings. It is made also for the protection of the court against wholly unwarranted drain of its valuable yet limited judicial time and resources. Furthermore, it safeguards the public interest in having genuine litigations dealt with and adjudicated upon by the court without undue delay. A drain on the Judiciary’s time and resources by vexatious litigants and proceedings is a loss to the genuine litigants in terms of the court’s handling of their proceedings. There is a much wider public interest perspective to restricted application orders and restricted proceedings orders than the personal interests of the immediate parties to vexatious or abusive proceedings, important though they themselves are or may be. Riberio PJ has explained the public interest dimension of abusive proceedings in paragraphs 52 and 53 of his judgment in Ng Yat Chi (at page 493C/D to J). See also paragraph 4 of the judgment of Li CJ in Ng Yat Chi (at page 481F to G/H).

84.Thus analysed, it can be plainly seen that the protection afforded in a restricted proceedings order cannot be “waived” by a party to abusive proceedings brought subsequently to the order. The court’s as well as the public’s interests are at stake. The court has its own process to protect against abuses. The protection afforded by a restricted proceedings order to the court’s own process cannot be waived by any party to a subsequent abusive litigation or proceedings.

85.I reject Mr Choy’s argument.

A further restricted proceedings order against Ng

86.For similar reasons, not only do I as designated judge not permit the claim of Mr Ng in the present action to continue (paragraph 8 of the RPO order), I also make a new restricted proceedings order against Mr Ng covering the present action specifically (for the avoidance of doubt – as the RPO, for obvious reasons, did not include the present action in paragraph 3 thereof ).

Suing as co-plaintiff

87.In the present case, Mr Ng and Mr Choy sue as co-plaintiffs. As the RPO, at least on the face of it, only covers Mr Ng, that gave rise to difficulties on the part of the Defendants in that understandably they (i.e. the 1^st to 3^rd Defendants) did not find it safe to simply ignore the action and file no acknowledgement of service (as definitely would and should have been the case as per paragraph 10 of the RPO if Mr Ng alone were suing), apparently for fear that Mr Choy might seek to enter default judgment against them if no acknowledgement of service was filed. Instead they were forced to take steps to respond to the action, and besides the expenditure of time and costs, that gave rise to Mr Choy’s argument of waiver. (As for the SFC, it was not aware of the RPO at all until sometime after taking some steps in the action.)

88.The procedural difficulties that have thus arisen have been described in Lam J’s judgment given on 13 May 2005, in which his Lordship gave some guidance for handling similar situations in future: see paragraph 16.

89.In order to prevent the same problem from arising again, in the restricted proceedings orders against Mr Ng and Mr Choy that I am going to make, I would specifically make all new proceedings, whether commenced by them as the sole plaintiff or as a co-plaintiff, subject to the leave/permission requirement, so as to ensure that the defendant(s) in those proceedings need not respond to them at all unless and until leave/permission is given (or it is directed that leave is not required).

90.I am not suggesting that this should be a standard requirement for all restricted proceedings orders. Obviously the question depends on the facts of each case. But in the present case, on the facts, I find the imposition of such a requirement to be wholly justified. I do not think the right of anyone who should have any legitimate reason to commence a new action together with Mr Ng or Mr Choy (that may fall within the ambit of the restricted proceedings orders that I am going to make) will be unduly compromised or otherwise affected by my orders. If the cause of action is several, such a person could always commence a separate action by himself in which event my orders will not affect his action at all. If he has a joint cause of action with Mr Ng or Mr Choy, then I am afraid on the facts and past history of the present case, the balance obviously lies in favour of making the new action that such a person may commence jointly with Mr Ng or Mr Choy subject to the leave/permission requirement. But even then, the safeguard to that co-plaintiff’s interest is that the court could be expected to grant leave/permission to his claim if it is arguably meritorious and is not abusive – which is by no means unfair in the light of the court’s jurisdiction to strike out an unmeritorious or abusive claim of its own motion in any event.

Outcome

91.In summary, I would order as follows:

(1) Pursuant to paragraph 8 of the RPO, permission to continue the claim by Mr Ng against the Defendants in the present action be refused, and the claim be dismissed instead.

(2) A further restricted proceedings order be made against Mr Ng in the same terms as paragraphs 3 to 10 of the RPO made by the Court of Final Appeal, with the following changes: the order shall apply to all new proceedings to be commenced by Mr Ng whether as the sole plaintiff or a co-plaintiff; and the previous proceedings covered by the restricted proceedings order that I am making are the proceedings in the present action (HCA 424/2005).

(3) The statement of claim in this action, insofar as it is the pleading of Mr Choy, be struck out and his claim against the Defendants in the present action dismissed on the ground that the same is an abuse of the process of the court.

(4) A restricted proceedings order be made against Mr Choy in the same terms as paragraphs 3 to 10 of the RPO made by the Court of Final Appeal against Mr Ng with the following changes: the order shall apply to all new proceedings to be commenced by Mr Choy whether as the sole plaintiff or a co-plaintiff; and the previous proceedings covered by the restricted proceedings order against Mr Choy are the proceedings in the HCCW No. 321 of 1996, HCA No. 2039 of 2002 and HCSD No. 22 of 2002 (i.e. the proceedings specified in paragraph 3 of the RPO) as well as HCA 424/2005 (i.e. the present action).

92.I make a costs order nisi giving the costs of the present action, including the costs of the Defendants’ two respective summonses for a restricted proceedings order against Mr Choy, as well as the costs in all the other interlocutory proceedings that have been put on hold pending my decision herein, to the Defendants against the two Plaintiffs, to be taxed on an indemnity basis if not agreed. Any party seeking a different costs order must make an application to that effect in the form of a written submission lodged with this Court within 14 days after this judgment is handed down, failing which the same shall become absolute upon the expiry of the 14 days period.

93.Given the nature of my decision, and the facts that one is concerned with the abuse of the process of the court and that there has been a breach of the RPO (in not seeking leave from the designated judge before commencement of the present action), there is ample justification for an indemnity order. The Court has been much assisted by the participation of the Defendants at the hearing and generally and they should be indemnified for costs in the present action against the Plaintiffs. I have taken the trouble to outline my preliminary views on costs here in advance, with a view to providing the parties with a realistic assessment of whether to make any application to seek to vary the costs order nisi.

94.I wish to thank Mr Kenneth Ng, appearing for the 1^st to 3^rd Defendants, and Ms Wacker, appearing for the 4^th Defendant, for their assistance at the hearing.

(Andrew Cheung)
Judge of the Court of First Instance
High Court

Mr Ng Yat Chi, the 1^st Plaintiff, acting in person, absent

Mr Choy Bing Wing, the 2^nd Plaintiff, appearing in person

Mr Kenneth Ng, instructed by Johnson, Stokes & Master, for the 1^st, 2^nd and 3^rd Defendants

Ms Donna Wacker of Clifford Chance, for the 4^th Defendant

Court of Appeal granted leave to 4th Defendant to amend its summons to increase the amount of security for costs. Please refer to CACV263/2005 dated 16 November 2005

Cites 10 cases

Cases cited in this judgment

Ng Yat Chi v. Max Share Ltd and Another

High Court CFI16 Dec 2005

Ng Yat Chi v. Max Share Ltd. and Another

FAMV 19/2001

FAMV

Full analysis