Best Joint Investments Ltd v. Kagani Ltd and Another

HCA 2608/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2608 OF 2006

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Before: Hon Suffiad J in Chambers

Dates of Hearing: 20 December 2011

Date of Decision: 2 April 2012

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D E C I S I O N

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1.This is an application by the 2^nd defendant, Chan Siu Ling Betty (“Betty Chan”), by summons dated 29 September 2008 seeking that the name of the plaintiff in the Writ and in all documents filed herein by its solicitors for and in the name of the plaintiff be struck off the present proceedings and that the Action herein be stayed or dismissed on the ground that this Action and the proceedings herein were taken out without any or any valid or proper authority given by the plaintiff to the solicitors throughout (“the 2^nd defendant’s Authority Summons”).

INTRODUCTION

2.Central to the dispute herein is a subject property at Hanking Court in Cloudview Road, Hong Kong (“the Property”).

3.It is not in dispute that the plaintiff, Best Joint Investment Ltd is the registered owner of the Property.  The crux of the dispute between the parties is whether the shares in the plaintiff has been sold and validly transferred to one Lau Cheuk Nam (“C N Lau”).

4.To properly understand the matters in dispute, it is necessary to go into a large part of the background to this case.

BACKGROUND

5.In the 1980’s Lau Kwok Leung Ron (“Ron Lau”) carried on business as a trader and exporter of general merchandise under the names of a group of companies including Calgo Development Ltd and Calgo Asia Ltd.

6.These companies were managed and controlled by him and of which he was the principal shareholder and/or director.

7.In some of these companies, Wayne Lau, the brother of Ron Lau, was appointed as a nominal director and was issued a small allotment of shares but did not take any active role.

8.Ron Lau co-habited with Betty Chan since about 1982 and they lived at the Property since about 1987.

9.Betty Chan entered into a sale and purchase agreement purchasing the Property for $1.85 million and the Property was assigned to her in October 1987.  She was and is a director of the 1^st defendant, and a shareholder and director of Calgo Asia Ltd and Calgo Development Ltd.

10.In May 1999, the Betty Chan sold the Property to the plaintiff for $9.2 million and the Property was assigned to the plaintiff on completion on 15 July 1999.  On that same day, the Property was mortgaged to the Generale Belgian Bank by the plaintiff.

11.The plaintiff was incorporated in November 1998 and at all material times only two shares of $1 each were issued.  It was acquired as a shelf company in 1999 by Wayne Lau and a nominee company, Beauson Enterprises Ltd (“Beauson”) each holding one share.  Ron Lau and Wayne Lau were appointed as directors and Wayne Lau also as its secretary.

12.Both Beauson and Wayne Lau had signed a declaration of trust each declaring that each of them held their one share in the plaintiff on trust for Calgo Development Ltd.

13.By a facility letter dated 31 October 2003 from Citic Ka Wah Bank to Calgo Asia Ltd, general banking facilities were granted to the latter against a number of securities including a first legal charge of the Property and a joint and several personal guarantee from Ron Lau and the 2^nd defendant.  On 17 November 2003, the mortgage of the Property in favour of Generale Belgian Bank was released and the plaintiff executed a mortgage in favour of Citic Ka Wah Bank.

14.Between April 2005 and July 2006, Ron Lau caused the plaintiff to borrow money from Bestlite Industrial Ltd (“Bestlite”) on six occasions.  A second legal charge over the Property was executed by the plaintiff in favour of Bestlite to secure the credit facilities granted.  Bestlite is a licensed moneylender and C N Lau is one of its two shareholders and directors.

15.On 5 July 2005, C N Lau was appointed as a director of both Calgo Development Ltd and Calgo Asia Ltd.  The appointment was to facilitate C N Lau in arranging for further letter or credit facilities from banks for Ron Lau’s companies as requested by Ron Lau.  Ultimately no such facilities were arranged.

16.In early 2006, Calgo Asia was not able to repay the general banking facilities granted by Citic Ka Wah Bank.  As at 28 February 2006, the plaintiff owed the bank $7,294,117.52.

17.To repay the bank, Ron Lau had two alternatives – to sell the Property or to arrange for re-financing with other banks.  He sought the help of C N Lau.

18.On 3 March 2006, a provisional sale and purchase agreement was entered into by which the plaintiff agreed to sell the Property to Biotech International Ltd (“Biotech”) for $14 million.  Biotech is a company of C N Lau.  However, it is common ground that the provisional sale and purchase agreement was cancelled shortly thereafter.

19.It is Ron Lau’s case that instead of purchasing the Property, C N Lau agreed to arrange re-financing for the plaintiff with the Nanyang Commercial Bank Ltd using the Property as security.

20.C N Lau’s version was different.  C N Lau alleged that although the provisional sale and purchase agreement with Biotech was cancelled, it was agreed between him and Ron Lau that the sale of the Property would be effected by the sale and purchase of the plaintiff to him at a nominal sum, in return C N Lau would procure banking facilities from the Nanyang Commercial Bank to be granted for the repayment of the plaintiff’s indebtedness to Citic Ka Wah Bank.  Thereafter the plaintiff would become C N Lau’s company and the loans and interests owed by the plaintiff to Bestlite of over $3.6 million would no longer be repayable by Ron Lau.

21.The divergence in the two versions stated above by Ron Lau and C N Lau is the crux of the dispute herein.

22.On 4 July 2006, the Nanyang Commercial Bank issued a facilities letter to Biotech which was the borrower, not the plaintiff.  C N Lau provided a copy of it to Ron Lau on 6 July 2006.  By this letter, the bank advised Biotech that the facilities available to it had been revised on the terms and conditions set out.  One of the conditions was the execution of an all-money first legal charge on the Property.

23.On 16 August 2006, pursuant to a board resolution of the plaintiff signed by Ron Lau and Wayne Lau, C N Lau was appointed a director of the plaintiff and authorized to negotiate with the Nanyang Commercial Bank in using the Property to apply for a mortgage loan to pay off the existing loan with Citic Ka Wah Bank.

24.C N Lau gave instructions to a solicitor Cheng Chi Hung (“Mr Cheng”) of Messrs Cheng Chan & Co to prepare documents for the sale and purchase of the shares in the plaintiff to C N Lau which included a sale and purchase agreement of the shares in the plaintiff with Calgo Development Ltd as the vendor and a deed of assignment of the director’s loan to Ron Lau of $2,272,176.44.  The total consideration for the transfer of the shares and the assignment of the director’s loan was $100,000.

25.C N Lau and Mr Cheng say in their affirmations that the documents to give effect to the aforesaid transactions were executed by Ron Lau and C N Lau on 29 September 2006 and witnessed by Mr Cheng.

26.Ron Lau claimed he did not sign any of the documents allegedly executed by him that day.

27.Wayne Lau alleged that he did not sign on the minutes of the plaintiff’s board meeting on 29 September 2006 approving the said transaction and accepting the resignation of him and Ron Lau as directors with immediate effect and that his purported signature was a forgery.

28.Mr Cheng also prepared a tenancy agreement dated 28 September 2006 (“the Tenancy Agreement”) between the plaintiff and the 1^st defendant by which the Property was let to the 1^st defendant for two years from 1 August 2006 at a monthly rent of $60,000, the minutes of a board meeting of the plaintiff held on 28 September 2006 by which it was resolved that the plaintiff should enter into the Tenancy Agreement, and the minutes of a board meeting of the 1^st defendant held on the same date to like effect.  The 1^st defendant was by then a dormant company.

29.Mr Cheng had deposed that Ron Lau had signed these documents in his presence, took them away for other relevant parties to sign and that the documents were returned with the signatures of Wayne Lau and Betty Chan.

30.Ron Lau admitted that he had signed and placed the seals of the plaintiff and the 1^st defendant on the last page of the Tenancy Agreement when the agreement itself had not been prepared and that his signatures on the minutes of the plaintiff and the 1^st defendant were forgeries.

31.Wayne Lau and Betty Chan claimed that their signatures on all the aforesaid documents were falsified.

32.On 22 November 2006, C N Lau caused the writ in this action to be issued in the plaintiff’s name against the 1^st defendant.  The solicitors for the plaintiff at the time were Cheng Chan & Co.  The plaintiff sued on the Tenancy Agreement claiming that the 1^st defendant had defaulted on the payment of rent since the commencement of the tenancy on 1 August 2006.  The plaintiff claimed against the 1^st defendant vacant possession, arrears of rent for four months at $240,000 and mesne profits thereafter.

33.There was a deed of surrender by which the 1^st defendant agreed to surrender the tenancy of the Property to the plaintiff voluntarily and deliver up vacant possession and the minutes of a board meeting of the 1^st defendant authorizing the execution by a director of the deed of surrender.  These documents were prepared by Mr Cheng.  Both Ron Lau and Betty Chan denied that the signatures on these documents were signed by them.

34.Vacant possession of the Property was not delivered up to the plaintiff pursuant to the deed.  On 15 January 2007, the plaintiff entered judgment in default against the 1^st defendant as no notice of intention to defend was given.

35.On 17 January 2007, the plaintiff executed a mortgage of the Property in favour of the Nanyang Commercial Bank and on the same date the second legal charge in favour of Bestlite was released.  It is not in dispute that the plaintiff’s indebtedness to Citic Ka Wah Bank of about $7.3 million has been discharged with the facilities granted by the Nanyang Commercial Bank to Biotech.

THE EARLIER HEARINGS AND DETERMINATIONS HEREIN AS TO PLAINTIFF’S AUTHORITY

36.The 1^st defendant applied by summons on 5 February 2007 to set aside the default judgment.  That application was dismissed by Master Lung on 22 August 2007.  The 1^st defendant appealed to a judge against that order of Master Lung.

37.Before that appeal from the order of Master Lung was heard by a judge, on 27 October 2007 the 1^st defendant issued a summons to dismiss or stay this action on the ground that the plaintiff had no authority to bring the action (“the 1^st defendant’s Authority Summons”) claiming that the documents regarding the sale and purchase of the plaintiff’s shares were forgeries and that the plaintiff is still Ron Lau’s company.

38.On 4 December 2007, the 1^st defendant issued another summons seeking to cross examine C N Lau and Mr Cheng on their affirmations at the hearing of its appeal from the order of Master Lung, set down for hearing before Chung J on 13 December 2007.

39.In support of its various applications, the 1^st defendant filed a total of 12 affirmations of which five were made by Ron Lau.  The other affirmations were from Wayne Lau and Betty Chan.

40.The plaintiff filed five affirmations in answer.

41.The appeal from the order of Master Lung dismissing the 1^st defendant’s application to set aside the default judgment was heard by Chung J on 13 December 2007.  At the same hearing Chung J also dealt with the 1^st defendant’s Authority Summons as well as the summons seeking leave to cross examine.  After hearing arguments, Chung J dismissed the appeal by the 1^st defendant finding, in his written Decision, that Ron Lau’s story was, on the evidence before the court, “inherently impossible and is therefore not believable”.  Chung J also dismissed the 1^st defendant’s Authority Summons and the summons seeking leave to cross examine.

42.The 1^st defendant appealed against the decision of Chung J to the Court of Appeal.  That appeal was heard by the Court of Appeal (Kwan JA and Suffiad J) on 19 July 2011.  In its written Judgment handed down on 23 August 2011, the Court of Appeal dismissed the appeal by the 1^st defendant concurring with the findings by Chung J and saying in paragraph 72 of its written Judgment:

“For all the above reasons, the [1^st] defendant’s allegations of forgery in respect of the transfer of shares in the plaintiff and the Tenancy Agreement are quite simply unbelievable”

THE 2007 ACTION BY WAYNE LAU

43.On 16 January 2007 Wayne Lau commenced HCA 2602 of 2007 against the plaintiff and C N Lau seeking declarations against the authenticity of a number of documents bearing the signatures of Wayne Lau and also took out a summons challenging the authority of C N Lau to represent the plaintiff to defend HCA 2602 of 2007(“Wayne Lau’s Authority Summons”).

44.On 21 June 2011 Wayne Lau’s Authority Summons was heard by Chung J who adjourned the summons pending the determination of the Court of Appeal in the appeal by the 1^st defendant in the present case.

45.On 6 December 2011, the hearing of Wayne Lau’s Authority Summons resumed before Chung J.  At the same time, both the plaintiff and C N Lau took out a joint summons to strike out Wayne Lau’s claim in HCA 2602 of 2007 relying on the effect of the judgment of the Court of Appeal herein.

46.On 12 December 2011 Chung J dismissed Wayne Lau’s Authority Summons and allowed the striking out summons on the ground that the same issue has been decided by the Court of Appeal and that Wayne Lau was no more than a nominee of Ron Lau.

APPLICATION BY BETTY CHAN TO BE JOINED AS 2^ND DEFENDANT HEREIN

47.The Writ issued by the plaintiff herein only claimed against the 1^st defendant.

48.On 31 October 2007, Betty Chan issued a summons to be joined as the 2^nd defendant with leave to defend the action.  The basis of that application to be joined as a 2^nd defendant herein was that there was an agreement between the plaintiff and Betty Chan that she could stay in the Property until the $9.2 million purchase price was paid.

49.Betty Chan was added as a 2^nd defendant on 15 August 2008 by order of Chung J and pleadings have since been filed.

50.After being joined in as a 2^nd defendant, Betty Chan issued the 2^nd defendant’s Authority Summons on 29 September 2008.

51.By order dated 13 October 2008, Master Lung ordered that:

(a) The 2^nd defendant’s Authority Summons be adjourned sine die pending the appeal by the 1^st defendant;

(b)  There be liberty to apply.

52.After the appeal by the 1^st defendant to the Court of Appeal was dismissed, Betty Chan sought to restore the 2^nd defendant’s Authority Summons for hearing, which is the present application being dealt with in this Decision.

THE 2^ND DEFENDANT’S AUTHORITY SUMMONS

53.In this application, Betty Chan sought to put before the court further evidence as follows:

(a)  Expert opinion by way of a report from Patrick Cheng, handwriting expert, commenting on a number of signatures purported to be of Wayne Lau on the following documents –

(i) The Instrument of Transfer dated 21 September 2006;

(ii)  The Resolution of an EGM of the plaintiff;

(iii)  The Minutes of the plaintiff’s directors meeting dated 29 September 2006; and

(iv)  The Certified true copy of a “Companies Registry Form D4” dated 29 September 2006.

to be forgeries

(b)  Evidence from Ng Oi Che to the effect that –

((i)  The form of the Instrument of Transfer is not one usually used by Beauson;

(ii)  The signature on the Instrument of Transfer is not her signature;

(iii)  The stamp impression on the Instrument of Transfer bearing the name Beauson Enterprises Ltd is not the same as the one which has always been under her custody and control; and

(v)  The share number of the share alleged to have been transferred by Beauson Ltd is wrong; the correct and true number of Beauson’s share in the plaintiff is one.

(c) Evidence from Wayne Lau to the effect that –

(i) The documents purported to be made by the plaintiff and/or procured, made or signed by C N Lau in the capacity of the plaintiff’s director/shareholder submitted for filing in the Companies Registry were unauthorized, unlawful, invalid, void and of no effect because he had at no time authorized or agreed to or signed any of the documents including those dated 29 September 2006; and

(ii)  On 29September 2006 he had left his Tai Po home early in the morning for Shenzhen and did not return to Hong Kong until the evening of that day.  He went straight home and remained at home until the next morning, ie 30September 2006 when he took a flight out of Hong Kong which is supported by his passport and the Statement of Travel Records.

54.It was submitted on behalf of Betty Chan that when the 1^st defendant’s Authority Summons was heard (by the Master, the judge in chambers and the Court of Appeal) Betty Chan was not a party to that application and was not heard.

55.Reliance was also placed on the fact that when Master Lung made his order of 13 October 2008 adjourning sine die the 2^nd defendant’s Authority Summons pending the appeal by the 1^st defendant, the Master did not make any order to the effect that the parties would be bound by the decision of the appeal.

56.It was also submitted on behalf of Betty Chan that the further evidence which Betty Chan now wished to adduce was not before the court during the hearing and determination of the 1^st defendant’s Authority Summons and such further evidence clearly showed that a fraud was being perpetrated.

57.Lastly, it was said by counsel for Betty Chan that unlike the case of Wayne Lau, there is no evidence that Betty Chan is the nominee of Ron Lau and their relationship is not one which the court can find that Betty Chan is Ron Lau’s privy.

58.Accordingly, the decision of the Court of Appeal in upholding the order of Chung J and dismissing the 1^st defendant’s Authority Summons should not be binding on Betty Chan since she was not a party to that application arising from the 1^st defendant’s Authority Summons.  Therefore the decision of the Court of Appeal dismissing the 1^st defendant’s Authority Summons cannot be res judicata against Betty Chan.

PLAINTIFF’S OBJECTION TO THE 2^ND DEFENDANT’S AUTHORITY SUMMONS

59.The plaintiff’s objection to this application of the 2^nd defendant in a nutshell can be stated as follows:

(a) The judgment of the Court of Appeal herein dismissing the appeal by the 1^st defendant (inter alia) on the 1^st defendant’s Authority Summons is a judgment in rem which binds the whole world on the issue so decided;

(b) The 2^nd defendant is a privy to Ron Lau, the key figure to the judgment of the Court of Appeal; and

(c) The 2^nd defendant’s Authority Summons is an abuse of process.

(a)  Judgment in rem

60.In so far as it is submitted by the plaintiff that the matter is res judicata being a judgment in rem goes, the plaintiff submits that the core allegation in the 2^nd defendant’s Authority Summons is the same as the allegations made in the 1^st defendant’s Authority Summons as well as Wayne Lau’s Authority Summons in that the series of documents relied on by C N Lau to claim ownership of the plaintiff were all forged.

61.The decision of the Court of Appeal upholding the decision of Chung J is a determination of the authenticity of those documents relating to the transfer of shares in the plaintiff to C N Lau which the defence camp alleged to be forged.  By necessary extension, Chung J and the Court of Appeal has also determined C N Lau’s legal as well as beneficial ownership of the shares in the plaintiff thus falling within the classic definition of a judgment in rem on the issue of the authenticity of those documents and the ownership of the shares in the plaintiff.  That decision should bind the whole world and cannot be challenged in any subsequent proceedings.

62.Therefore given that the same subject matter has been conclusively decided by the Court of Appeal, that decision of the Court of Appeal is a judgment in rem and the 2^nd defendant’s Authority Summons is bound to fail.

(b)  Privy of Ron Lau

63.It was also submitted by the plaintiff that the only person who can make a rival claim to the beneficial ownership of the shares in the plaintiff was Ron Lau and given that Ron Lau’s version of events has already been rejected by both Chung J and the Court of Appeal, there can be no other person in the world who can have the necessary locus standi to challenge C N Lau’s ownership in the shares of the plaintiff.

64.As for Betty Chan being a privy of Ron Lau, the plaintiff relies on the fact that Betty Chan was a director of the 1^st defendant, the common law wife of Ron Lau and as being trustee of certain shares in Calgo Development Ltd, the original owner of the shares in the plaintiff before the plaintiff was sold to C N Lau.  It was also Ron Lau who caused Betty Chan to be appointed as a director of Calgo Development Ltd.

65.Given the above relationship, the plaintiff submits that Betty Chan is no more than a nominee of Ron Lau on the issue of the ownership of the plaintiff’s shareholding.

66.Therefore the doctrine of res judicata should bar the 2^nd defendant from further raising the issue of ownership of the plaintiff when that same issue has already been conclusively decided against Ron Lau.

67.In so submitting, the plaintiff relies on the decision of the Court of Appeal in China North Industries Investment Ltd v Chum [2010] 5 HKLRD 1 as to privity of interest.

(c)   Abuse of Process

68.The plaintiff submits that this further attempt by Betty Chan to raise the issue of forgery again when that same issue has already been determined against her principal is an abuse of process of the Court.

69.It is also submitted that even if the decision herein by the Court of Appeal dismissing the appeal by the 1^st defendant is not binding on Betty Chan, and hence res judicata in its strict sense does not apply, the attempt by Betty Chan to bring up the same issue for the third time by the defence camp is manifestly unfair to the plaintiff and C N Lau, thereby bringing the administration of justice into disrepute, thus a blatant abuse of process.

70.The Court of Appeal had before it 12 affirmations from Betty Chan, Ron Lau, Wayne Lau and Ng Oi Che all filed on behalf of the 1^st defendant.  The 1^st defendant’s application for further evidence to be adduced before the Court of Appeal was rejected in toto due to the failure to satisfy the test in Ladd v Marshall.

71.After the decision by the Court of Appeal, Betty Chan, Ron Lau, Wayne Lau and Ng Oi Che all filed new affirmations in an attempt to support the 2^nd defendant’s Authority Summons.  Those affirmations covered old grounds including the further evidence which had been rejected by the Court of Appeal but conveniently failed to deal with the Nanyang Bank facility letter (which was one of the main reason for Ron Lau’s story being disbelieved by the Court of Appeal).

72.The attempt by Betty Chan now to rely on the expert opinion evidence to reopen the whole issue and thereby to mount an attack on the decision of the Court of Appeal comes squarely within an abuse of process.

73.There is no explanation as to why this evidence could not have been adduced in the earlier application, namely the 1^st defendant’s Authority Summons.

74.The expert opinion relates to the signatures of Wayne Lau.  Similar expert evidence relating to the signatures of Wayne Lau had been refused admission by Chung J in HCA 2602 of 2007 brought by Wayne Lau.  To admit same herein would be another collateral attack on HCA 2602 of 2007which amounts to an abuse of process.

75.Once again relying on the decision of the Court of Appeal in China North Industries Investment Ltd v Chum, the plaintiff submits that to allow such collateral attack on the decision of the Court of Appeal in its dismissal of the appeal by the 1^st defendant herein as well as on the decision of Chung J in HCA 2602 of 2007 puts the administration of justice into disrepute and would constitute an abuse of process.

DECISION

76.This is the third attempt by the defence camp to challenge the authority of the plaintiff in bringing these proceedings.

77.The earlier two attempts (one by the 1^st defendant herein and the second by Wayne Lau in HCA 2602 of 2007) had both been unsuccessful.

78.The basis of all three attempts were the same, namely that all the documents relating to the sale and the transfer of shares of the plaintiff from Calgo Development Ltd to C N Lau were forgeries in that the signatures of Ron Lau, Wayne Lau and Betty Chan were all forged.

79.The court (Chung J as well as the Court of Appeal) have, in dismissing the application of the 1^st defendant in the 1^st defendant’s Authority Summons effectively rejected those allegations of forgeries by finding that those allegations were wholly unbelievable given all the circumstances of the case.

80.One of the main reason for the Court of Appeal to find that the allegations made by the defence and in particular that of Ron Lau was wholly unbelievable relates to the facilities letter of the Nanyang Commercial Bank to Biotech dated 4 July 2006.  This was what the Court of Appeal said at paragraphs 70, 71 and 72 of its judgment:

“70. In the facilities letter of the Nanyang Commercial Bank to Biotech dated 4 July 2006, one of the conditions provided that the banking facilities “shall be granted to [Biotech] after the shares transfer have been fully completed and a certificate confirming the transaction should have been produced by the solicitor to [the bank].” A copy of this letter was handed by C N Lau to Ron Lau on 6 July, according to Ron Lau’s 1^st affirmation. The “shares transfer” referred to must clearly be the transfer of the plaintiff’s shares, as, according to Ron Lau’s 5^th affirmation, when C N Lau approached the bank for re‑financing, Ron Lau had informed him Calgo Development Ltd. was the beneficial owner of the plaintiff’s shares and he had provided C N Lau photocopies of the two declarations of trust made by Beauson and Wayne Lau declaring that each held one share in the plaintiff on trust for Calgo Development Ltd., for production to the bank.

71. Ron Lau has not disputed there was an agreement for a tenancy of the Property to be granted by the plaintiff to the defendant at $60,000 per month. He made conflicting statements in his 1^st affirmation whether the tenancy was for two years or four. The major dispute was whether there was an agreement that the rental for two years were to be deducted from his loan to the plaintiff. Apart from the conflicts in the defendant’s own evidence regarding Ron Lau’s alleged loan to the plaintiff, it would be contrary to the conditions in the facilities letter of the Nanyang Commercial Bank dated 4 July 2006 for the plaintiff to permit the defendant to set off the rentals for the entire term against Ron Lau’s loan to the plaintiff. One of the documents Biotech was required to provide to the bank as a condition precedent prior to any drawing under the facilities was a rental assignment in respect of all rental properties duly executed by its owner in favour of the bank. Another condition provided that all rental incomes of the charged properties should be deposited into Biotech’s account with the bank.

72.  For all the above reasons, the defendant’s allegations of forgery in respect of the transfer of shares in the plaintiff and the Tenancy Agreement are quite simply unbelievable….”

81.The basis for this application by Betty Chan in the 2^nd defendant’s Authority Summons is once again the forged signatures in the documents relating to the transfer of the plaintiff’s shares including the minutes and resolutions.  Again those signatures related to Ron Lau, Wayne Lau and Betty Chan.

82.As for the new evidence which the 2^nd defendant wished to adduce, they also cover the same area.  Moreover, there is no reason why that new evidence which Betty Chan now wish to adduce, could not have been obtained or adduced in the earlier applications challenging the authority of the plaintiff.

83.As such it is no more than an attempt to have a third bite of the cherry because the two earlier applications challenging the authority of the plaintiff were not successful.

84.The 2^nd defendant has not sought to put forward any explanation or to adduce any evidence to explain away the point made by the Court of Appeal in paragraphs 70, 71 and 72 of its judgment cited above, namely the Nanyang Commercial Bank facility letter.

85.As for the first point taken by the plaintiff, namely, that the judgment of the Court of Appeal in upholding the decision of Chung J and dismissing the appeal by the 1^st defendant being a judgment in rem, the plaintiff relies on the following passage from Res Judicata, Estoppel, and Foreign Judgments by Peter R Barnett (at para 3.35) which states:

“Whilst a judgment in rem affects and binds the immediate parties to it (and, indeed, all persons who may be interested in the res), such a judgment nonetheless has for its primary object the determination of the title to property or status of a person, property or thing and, more particularly, the jural relation of that person, property or thing to the world generally. Provided that the court had jurisdiction over the res, the judgment in rem will be conclusive against all the world in respect of the questions of title or status (of those persons or that property) so determined, and will bind ‘the whole world’ even though the facts on which it necessarily proceeds are not established against the world.”

There is no dispute as to the law as stated above.

86.However, I do have the greatest reservation as to whether the judgment of the Court of Appeal herein is a judgment in rem.

87.It is trite law that whilst judgments in rem determine the jural relationship of a person, property or thing to the world generally, judgments in personam determine the jural relation of persons to one another.

88.The decision of the Court of Appeal herein has determined no more than the relationship between Ron Lau and C N Lau in so far as the sale and transfer of the shares in the plaintiff are concerned.

89.I am therefore not persuaded that the decision of the Court of Appeal can be said to be a judgment in rem as submitted by the plaintiff.

90.As for the second point taken by the plaintiff, namely that Betty Chan is a privy of Ron Lau, once again I do not accept that submission by the plaintiff.

91.What can amount to privity was made quite clear by Stock JA in the case of China North Industries Investment Ltd v Chum [2010] 5 HKLRD 1 in paragraph 81 of his judgment at page 30 when he said:

“The required commonality is a direct interest in the subject matter of the litigation, a parallel or corresponding interest in that subject matter and not simply a financial interest in the result of the action: Genesee Enterprises Ltd v Abou-Rached, so that:

Privies include any person who succeeds to the rights or liabilities of the party upon the death or insolvency, or who is otherwise identified in estate or interest.  It is essential the party to be stopped by privity must have some kind of interest, legal or beneficial, in the previous litigation or its subject matter.  Privity was described by the US Supreme Court as a mutual or successive relationship to the same right of property, although this cannot be exhaustive.”

92.In the present case, Betty Chan does not enjoy such an identity of interest with Ron Lau in the subject matter of the action if by that what is referred to are the shares in the plaintiff.

93.The fact that Betty Chan was a director of the 1^st defendant, the common law wife of Ron Lau and that she was a trustee of some of the shares in Calgo Development Ltd, which she held for Ron Lau does not give her the necessary interests to make her a privy of Ron Lau in so far as the subject matter of the action is concerned.

94.From the submission made by the plaintiff, I cannot help but feel that counsel for the plaintiff has confused privity of interest on the one hand with factors which make Betty Chan no more than a nominee of Ron Lau.

95.I am therefore unable to accept the plaintiff’s submission as to privity of interest in respect of Betty Chan.

96.Having said the above, on the point of Betty Chan being a nominee of Ron Lau, (which is altogether a different point from privity of interest) Betty Chan, in her affirmation dated 20 October 2011, at paragraphs 11 and 13 thereof stated as follows:

“Businesses of Ron Lau

11. During the decades of the 1980s and 1990s, Ron Lau, a businessman, was carrying on his businesses as a trader and exporter of general merchandise under a group of several companies acquired and operated by him including Calgo Development Ltd. (“Calgo Development”) (acquired in 1987), Calgo Asia Ltd. (“Calgo Asia”) and as a travel agent under the name of the 1^st Defendant, Kagani Limited (“Kagani”) (acquired in 1987), all of which were managed or controlled by him and of which he was the principal and controlling director/shareholder (“the Group”). Since the inception of Kagani, Ron Lau and I were appointed as and were the directors of Kagani.

……

13.  Ron Lau caused me to be appointed a nominal director of Calgo Development and to be allotted a large number of shares therein but in fact, I was holding the said shares as a trustee for Ron Lau under a trust document and took no active or executive role therein.  Also, in some of the companies in the Group, Ron Lau caused me to be appointed as a nominal director and to be allotted a small number of shares therein.”

97.There is here clear admissions by Betty Chan that she was no more than a nominee of Ron Lau in so far as the subject matter of the crux of the dispute is concerned (ie the ownership of the shares of the plaintiff).

98.Once that issue has been decided by both Chung J and the Court of Appeal in favour of C N Lau and against Ron Lau, Betty Chan (like Wayne Lau in HCA 2602 of 2007) can have no locus standi in seeking to re-litigate that issue concerning the authority of the plaintiff in bringing this claim.

99.As for the point taken by the plaintiff as to abuse of process of the court, what we have here is a third attempt by the defence camp to overturn the decision of Chung J and the Court of Appeal when it dismissed the 1^st defendant’s appeal on the very same issue and identical question, namely the lack of authority of the plaintiff due to the fact that the sale and transfer of the shares in the plaintiff to C N Lau were as a result of forged signatures on the relevant documents.  An issue which has already been rejected by the courts in the earlier decisions, albeit to which Betty Chan was not a party.

100.This third attempt by Betty Chan to re-litigate such issue is not even a collateral attack on the earlier decisions of the court but a third bite of the same cherry.

101.In these circumstances such third attempt constitutes not only harassment but is also manifestly unfair to the plaintiff. It puts the administration of justice into disrepute.  As such the court has inherent power to prevent abuse of its process.

102.The fact that Betty Chan now seeks to rely on expert opinion evidence relating to the forged signatures is neither here nor there since that evidence could have been adduced before the court by the 1^st defendant on the 1^st defendant’s Authority Summons but was not.

103.What seems to me to be more pertinent is the fact that nothing has been put forward by Betty Chan in response to the point raised and relied on by the Court of Appeal in respect of the Nanyang Commercial Bank facility letter.

104.In the absence of any cogent response to that point relied on by the Court of Appeal concerning the Nanyang Commercial Bank facility letter, this application of the 2^nd defendant’s Authority Summons is bound to fail for that same reason expressed by the Court of Appeal.

105.That is a further reason for dismissal of this application by Betty Chan, quite apart from the abuse of process point.

106.One further matter which I should put on record is the point made by Mr Remedios that when Master Lung made the order on 13 October 2008 to the effect that the 2^nd defendant’s Authority Summons be adjourned sine die pending the decision by the Court of Appeal, there was nothing in that order to the effect that the parties to the 2^nd defendant’s Authority Summons be bound by the decision of the appeal.  (para 12 of Mr Remedios’ skeleton submissions).

107.The 1^st defendant’s Authority Summons was heard by Chung J on 13 December 2007.  After that hearing, the 1^st defendant had filed its Notice of Appeal dated 28 December 2007.

108.The 2^nd defendant’s Authority Summons was only issued on 29 September 2008 after she was ordered to be added (on her application) as a 2^nd defendant by order of Chung J dated 15 August 2008.

109.With respect to Mr Remedios, the point taken by him is not a good point.  It would not have been possible for the Master to have made an order to the effect that the parties to the 2^nd defendant’s Authority Summons be bound by the decision of the appeal, since Betty Chan was not and could not have been a party to the appeal by the 1^st defendant, not having been a party in these proceedings when the 1^st defendant’s Authority Summons was heard by Chung J on 13 December 2007.

110.Accordingly, and for the reasons given, the 2^nd defendant’s Authority Summons must be dismissed.

COSTS

111.There will be a costs order nisi that Betty Chan pays the costs of the 2^nd defendant’s Authority Summons to the plaintiff to be taxed and paid forthwith if not agreed.

Mr Issac Chan, instructed by Tung, Ng, Tse & Heung, for the plaintiff

Mr John Ip, of John Ip & Co, for the 1^st defendant (As an observer)

Mr Leo Remedios, instructed by K H Yuen & David Cheung, for the 2^nd defendant

Please refer to HCMP1548/2012 for the relevant appeal(s) to the Court of Appeal.