Cheung Moon Hoi v. Chan Sing Chuen

DCCJ 4127 / 2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4127 OF 2007

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BETWEEN

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DECISION[1]

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Introduction

1.The Defendant Mr Cheung claims against the Plaintiff Mr Chan for damages arising from the breach of three alleged contracts.  Mr Chan now applies to strike out Mr Cheung’s claim on the following grounds:

(1)	Mr Cheung’s claim raises identical issues of facts as in the case of DCCJ 15756/2000 (“the earlier action”), where the trial judge had already made findings thereof.  As such, the claim should be struck out on the basis of res judicata or abuse of process.
(2)	For the same reasons, the claim is frivolous and vexatious.
(3)	Further, and in any event, according to Mr Cheung’s pleaded case, his claim is already time-barred under the Limitation Ordinance (Cap 347) when the present claim was brought in September 2007.

2.Mr Cheung contends that there is no basis to strike out his claim.  His principal arguments are that:

(1)	Although the issues in the present claim are the same as that in the earlier action, he was not a party but only a witness in the earlier action.  The findings in the earlier action are not binding on him.  There is no question of res judicata.
(2)	For the same reason, the present claim cannot amount to an abuse of process, and is not frivolous, scandalous or vexatious.
(3)	The contractual breach he relies on arises only in July 2007, and thus there is no question of limitation.

3.Before I deal with each of these issues, it is necessary for me to set out the relevant uncontroversial background below.

Background

4.Mr Chan’s wife is one Ms Yung (“the wife”).   Mr Chan was at the material times their friend.

5.In the earlier action, Mr Chan claimed against the wife for the sum of $135,816 on the basis that there was an agreement entered into between the wife and him in March and April 1999, whereby the wife agreed to act as his agent to trade Hang Seng index futures contracts.  It was Mr Chan’s case that his claimed sum represented the amount due to him in his account held by the wife on his behalf pursuant to the agreement.

6.The wife disputed the claim and alleged in her defence that the agreement was in fact entered into between Mr Chan and Mr Cheung (her husband), but not with her.  Moreover, by December 1999, the trading account in fact incurred a loss, and Mr Chan agreed to repay Mr Cheung the same. 

7.The trial of the earlier action went before Deputy District Judge W Chan in September and October 2002, and lasted for 10 days.  Mr Chan, the wife and Mr Cheung all gave evidence. 

8.As set out at paragraph 3 of the learned judge’s judgment dated 31 December 2002, the central issue between the parties in the earlier action was whether it was the wife or Mr Cheung who had agreed to and did in fact trade the HSI contracts on Mr Chan’s behalf.

9.The trial judge found in favour of Mr Chan.  Having considered the demeanour of the witnesses, the inherent probabilities and having balanced all the available evidence, he accepted at paragraph 123 of the judgment Mr Chan’s evidence and case, and rejected that of Mr Cheung and the wife.   In other words, he found as a matter of fact that the trading agreement was made between Mr Chan and the wife, but not Mr Cheung.  He therefore ordered that the wife be liable to repay Mr Chan his claimed amount.

10.The wife eventually paid the judgment sum with costs in September 2007, some four years after the judgment.

Relevant legal principles

Striking out

11.The Court will only strike out a claim when it is clear and obvious that the pleading discloses no reasonable cause of action, or that it is frivolous, scandalous or vexatious.  See: Hong Kong Civil Procedure 2008, para 18/19/4, 18/19/6-8.

12.It is also well established that a claim can be struck out if it is clear that it amounts to an abuse of process or res judicata in re-litigating matters which have, or could have, been decided in earlier proceedings: Hong Kong Civil Procedure 2008, para 18/19/10 – 18/19/11.

Res judicata

13.Res judicata is a form of abuse of process.  In it is classic and narrow sense, a party will not be permitted to re-litigate in subsequent proceedings issues which have been adjudicated upon in the previous proceedings by a court of competent jurisdiction.  In it is wider sense (often called “Yat Tung” principle because of the leading case decided upon this), the Court will also treat it as an abuse of process where a party seeks to raise in subsequent proceedings matters which could and therefore should have been litigated in the earlier proceedings. See:  Ray Chen v Anita Wan Ching Lam [2006]          HKC 454, at para 22-27 per Ma J (as he then was).

14.However, for the doctrine of res judicata to apply, the parties to the subsequent proceedings have to be the same as or to be privies of the parties in the previous proceedings:  Spencer Bower Turner and Handley, Res Judicata (3rd ed), paras 1, 6, 213.

Abuse of process

15.Abuse of process connotes that the process of the court must be used bona fide and properly and must not be abused.  The court will prevent the improper use of its machinery, and will, in a proper case summarily prevent its machinery from being used as a means of vexatious and oppression in the process of litigation.  The categories of abuse of process are not closed but depend on all the relevant circumstances, and for this purpose consideration of public policy and interests of justice may be very material:  Hong Kong Civil Procedure 2008, para 18/19/10 and the cases cited therein.

16.Abuse of process and the doctrine res judicata are two different and distinct concepts.  In determining whether there is an abuse of process, the Court can look at all the circumstances leading to the issue of the subject matter proceedings and to decide whether it would be unjust to allow one of the parties to be hounded by the proceedings.   As said by Auld LJ in Bradford v Seddon [1999] 1 WLR 1482, 1490-1491 as follows:

"In my judgment, it is important to distinguish clearly between res judicata and abuse of process not qualifying as res judicata, a distinction delayed by the blurring of the two in the courts' subsequent application of the above dictum. The former, in its cause of action estoppel form, is an absolute bar to re-litigation, and in its issue estoppel form also, save in "special cases" or "special circumstances:" see Thoday v Thoday [1964] P 181, 197-198, per Diplock L.J. and  Arnold v National Westminster Bank Plc  [1991] 2 AC 93.  The latter, which may arise where there is no cause of action or issue estoppel, is not subject to the same test, the task of the court being to draw the balance between the competing claims of one party to put his case before the court and of the other not to be unjustly hounded given the earlier history of the matter ...

Thus, abuse of process may arise where there has been no earlier decision capable of amounting to res judicata (either or both because the parties or the issues are different) for example, where liability between new parties and/or determination of new issues should have been resolved in the earlier proceedings. It may also arise where there is such an inconsistency between the two that it would be unjust to permit the later one to continue."

17.Moreover, in determining whether the issue and continuation of subsequent proceedings amounts to an abuse of process, the Court of Appeal recently summarizes the principles set out Johnson v Gore Wood & Co [2001] 2 WLR 72 in Ngai Few Fung v Cheung Kwai Heung  (unrep., CACV 147/2007, 7 December 2007, Cheung JA and Yam J) at para 16 as follows:

“16.	In Johnson v. Gore Wood & Co (a firm) [2001] 2 WLR 72 the House of Lords explained the rationale behind the Henderson ‘abuse of process’ principle:
(1)	The principle is to serve public interest in that there should be finality in litigation and that a party should not be twice vexed in the same matter.
(2)	This is reinforced by the current emphasis on efficiency and economy on the conduct of litigation, in the interests of the parties and the public as a whole.
(3)	The onus is on the party alleging abuse.
(4)	The bringing of a claim or the raising of the defence in later proceedings may, without more, amount to abuse if the Court is satisfied that the claim or defence should have been raised in the earlier proceedings if it was not raised at all.
(5)	It is, however, not necessary, before abuse may be found, to identify any additional elements such as collateral attack on a previous decision or some dishonesty.  But where those elements are present the later proceedings will be much more obviously abusive.
(6)	There will rarely be a finding of abuse unless the later proceeding involves what the Court regards as unjust harassment of a party.” (emphasis added)

The present application

Res judicata/abuse of process

18.By way of the present action, Mr Cheung now claims against Mr Chan on the basis that the same trading agreement (as contended in the earlier action) was entered into between him and Mr Chan, and that Mr Chan now owes him $231,171.00 because by the end of December 1999, the trading account had accumulated a loss of that amount.

19.Counsel for Mr Chan submits that by way of the present claim, Mr Cheung seeks to reopen and re-litigate exactly the same issues as in the earlier action, of which the trial judge had already made findings.  It is further submitted that this amounts to res judicata or an abuse of process.

20.Mr Cheung, although accepting that the issues are the same in these two actions, says there is no question of res judicata or abuse of process because:

(1)	He is not a party in the earlier action, and is not bound by those findings.
(2)	The trial judge only ruled against the wife’s case on balance of probabilities and therefore the judge was not saying that there is no possibility that Mr Cheung’s version be true and correct.  As such, he is entitled to claim again and to have his evidence tested out.

21.In my judgment, the present action does not fall within the doctrine of res judicata.  Applying the principles set out above, as fairly accepted by counsel for Mr Chan, Mr Cheung as a witness is not a party nor privy of the earlier action.  He is not bound by the findings of that action.  As such, the doctrine of res judicata (whether in the narrow or wider sense) does not apply.

22.On the other hand, I am of the view that the present proceedings do amount to an abuse of process in light of the following particular circumstances of the present case:

(1)	In the present case, it is Mr Cheung’s own evidence that in between April and September 2001, his solicitors together with counsel under his instructions had prepared various drafts of a statement of claim, for the purpose of claiming against Mr Chan under the agreements.  This is the period when the earlier action was still in the preparatory stage leading up to the trial in September and October 2002.  It is thus clear that Mr Cheung intended to bring his claim on the same agreements at the same time with the earlier action brought by Mr Chan.
(2)	It is also Mr Cheung’s evidence that after he had received a further revised draft of the statement of claim from his solicitors in early September 2001, his solicitor had fallen into serious illness and further communications were then only made by telephone.   However, Mr Cheung has not provided any evidence or explanation as to why then the intended claim against Mr Chan had failed to proceed.
(3)	In my view, the fact that his handling solicitor had become seriously ill could not explain why the intended claim against Mr Chan could not have proceeded, in particular when counsel had been involved in the drafting of the statement of claim, which according to Mr Cheung, had already been revised a few times.  Mr Cheung could easily have instructed another handling solicitor to proceed with the matter, albeit with some minor delay, had he wished to do so.
(4)	Given the above background and the lack of explanation, I am of the view that, without any good reasons, it was Mr Cheung’s conscious decision to withhold claiming against Mr Chan, and not to have the intended claim tried together with Mr Chan’s earlier action, in relation to the same trading agreements.  He was adopting a wait and see attitude as to the outcome of the trial of the earlier action vis-à-vis his wife.
(5)	In these particular circumstances and given that Mr Cheung and the defendant in the earlier action are husband and wife, in my judgment, Mr Cheung’s decision to wait, and to only bring his claim now to litigate again on the very issues where his wife has lost in the earlier action, amounts to an abuse of process.  It is oppressive and vexatious to Mr Chan.

23.For these reasons, I will strike out the claim on the basis it is an abuse of process. 

24.This would have been sufficient to dispose of the matter.  However, given Mr Chan also seeks to strike out the claim on the basis of time bar, and that this has been fully argued by the parties, for completeness, I would also deal with this below.

Is the claim time barred under the Limitation Ordinance

25.According to his pleaded case, Mr Cheung’s claim is based on three oral agreements in relation to (a) the agreement to operate the trading account for Mr Chan, and (b) Mr Chan’s subsequent agreement to repay Mr Cheung when he asked Mr Cheung to continue to trade despite the accumulated losses with the trading account.  These three oral agreements were respectively entered into in about March/April 1999, 19 April 1999 and late July 1999.  These three agreements are set out at paragraphs 3, 5 and 12 of the Statement of Claim and referred to as the “Agreement”, “the Second Agreement” and “the Third Agreement”.

26.Paragraphs 14 to 17 of the Statement of Claim then plead as follows:

“14.	By the end of December 1999, [Mr Cheung] informed [Mr Chan] on telephone about his decision to stop the Said Trading and demanded [Mr Chan] to repay him the sum of HK$231,171. [Mr Chan] orally agreed to repay [Mr Cheung] in due course.
15.	Wrongfully and in breach of the Agreement, the Second Agreement and the Third Agreement, [Mr Chan] refused, and still refuses, to repay the said sum of HK$231,171 to [Mr Cheung].
16.	Despite repeated demands and requests by [Mr Cheung], [Mr Chan] still fails to repay the said sum of HK$231,171 to [Mr Cheung]
17.	By reason of the aforesaid, [Mr Cheung] has suffered loss and damage”

27.In my judgment, it is clear from the above pleas that Mr Cheung’s present claim for the return of HK$231,171 is premised upon Mr Chan’s alleged breach of the three oral agreements in about the end of December 1999. 

28.As such, Mr Cheung’s claim for breaches of the three agreements would have been time barred 6 years from the end of December 1999 under section 4 of the Limitation Ordinance:  that is by the latest the end of December 1999 or early January 2006.

29.Since the present writ was issued on 17 September 2007, Mr Cheung’s claim is therefore time-barred.

30.In his opposing affirmation, Mr Cheung puts forward a case that there was a written agreement entered into between Mr Chan and his wife in June 2003, where he had agreed with Mr Chan that he would not sue Mr Chan to recover the said sum of HK$231,171, as long as Mr Chan would not enforce the judgment debt and the costs order under the earlier action.  Mr Chan however was in breach of the written agreement when he sought to enforce the judgment debt and costs orders against the wife on 24 August 2007. 

31.For today’s hearing, Mr Cheung submits that given Mr Chan’s breach of the written agreement arises only in August 2007, and it is only after that breach that he is entitled to claim against Mr Chan, there is thus no question of time bar, as his right to claim did not arise until August 2007, which is just a month or so before the present claim was brought.

32.I reject Mr Cheung’s submissions for the following reasons:

(1)	In considering whether to strike out the claim on the basis of time bar, the court looks only at the pleaded case.
(2)	In the Statement of Claim, as pointed out above, Mr Cheung’s claim is premised on the breach of the three oral agreements, not the written agreement.
(3)	Further, at paragraphs 18 and 19 of the Statement of Claim, the written agreement is pleaded as an agreement entered into between Mr Chan and the wife (but not Mr Cheung), and that the term of it is that Mr Chan would not enforce the judgment debt and costs order in the earlier action, in return for the wife not to report respectively to the police and the Law Society certain alleged irregularities of Mr Chan and his solicitor’s conducts in the earlier action.
(4)	In other words, it is never Mr Cheung’s pleaded case that he is a party to the written agreement or that there is a term of the written agreement that he would not sue Mr Chan for the sum of HK$231,171.
(5)	The same written agreement is in fact pleaded in the wife’s claim against Mr Chan under a separate action DCCJ 4126/2007.  In that case, the wife claims against Mr Chan for his breach of the written agreement in seeking to enforce the judgment debt and costs order under the earlier action in August 2007.  Again, in the wife’s pleaded case of the written agreement, there is no reference that Mr Cheung is a party to the written agreement, nor is it a term of the agreement that Mr Cheung would not sue Mr Chan for the sum of HK$231,171.
(6)	In the premises, it is my view that it is not part of Mr Cheung’s pleaded case under the present action that he is entitled to sue Mr Chan for the said HK$231,171 because Mr Chan is in breach of the written agreement.

33.After my indication of my above reading of his pleaded case at the hearing, Mr Cheung seeks to amend paragraph 21 of Statement of Claim as follows:

“21.     In breach of the terms of the said written agreement between the Plaintiff [Mr Cheung] and the Defendant [Mr Chan], on 24 August 2007, a period of 4 years and 2 months later, [Mr Chan] demanded [the wife] to settle the Judgment debt…”

34.The proposed amendments however do not assist Mr Cheung’s case.  Even in the proposed amended pleading, it is still not a pleaded term of the written agreement that, if Mr Chan did not enforce the judgment debt and costs order under the earlier action, Mr Cheung would not claim against Mr Chan for the sum of HK$231,171.  The plea of the written agreement (whether in its original form or the proposed amended form) is therefore unrelated to Mr Cheung’s right to claim against Mr Chan under the pleaded three oral agreements. It does not therefore take Mr Cheung’s claim within the time limit under the Limitation Ordinance.

35.In the premises, I will also strike out the present claim as being time barred under the Limitation Ordinance.

Conclusion

36.For the above reasons, I order that Mr Cheung’s claim under the present action be struck out on the basis of being an abuse of process or time barred under the Limitation Ordinance. 

37.I further make an order nisi that costs of the action and this application be to Mr Chan to be taxed if not agreed, with certificate for counsel.   The nisi order will be made absolute 14 days from the date of this judgment unless any party applies to vary it in writing.

Plaintiff, acting in person, present.

Mr. Anthony P.W. CHEUNG instructed by Messrs Kong & Chang for the Defendant.

[1] Although the Plaintiff acts in person, he has on objection to this decision being written in English.