HSBC PRIVATE TRUSTEE (HONG KONG) LTD v. HO YUEN PING DOROTHY

HCA2717/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2717 OF 2008

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J U D G M E N T

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Introduction

1.  This is an application for leave to appeal from an order made by me on 26 January 2010 by which the plaintiff was allowed to re-re-amend its statement of claim.

2.  A brief word first about the nature of the action.  The plaintiff is the administrator of the estate of the late Madam Chan Ho Lai Kuen who was born in 1915 and who died in 2005 aged 90.  The defendant, Dorothy Ho, is her niece, for whom the deceased had stood in loco parentis and with whom she had lived since she was 12 years old.  As such, they enjoyed a very close relationship.  And on 29 January 2005, six months before she died, the deceased gave the defendant a general power of attorney to act on her behalf.  The deceased had been widowed for a number of years and was a person of considerable wealth.

3.  The plaintiff in its administration of her estate wishes to collect together, if I can so express it, all that is due and owing to it.  Its case is that by virtue of her close relationship with this very elderly lady, the defendant enjoyed a position of trust and confidence with her in circumstances that she exercised undue influence over her with all that this implies.

4.  The plaintiff’s investigations have shown that the deceased and the defendant held joint bank accounts in addition to accounts that existed in the deceased’s sole name.  Put shortly, the case against the defendant is that by virtue of her undue influence, the deceased permitted the transfer of funds in her sole account into their joint accounts and that the defendant has then transferred amounts from those joint accounts into her own bank accounts.  These transactions can be seen in the statement of claim subsequently amended and then re-amended without objection by the defendant.

5.  The Defendant’s case is that under the general power of attorney, she was entitled to act as she did, which in any event she did with the deceased’s consent, and that upon the deceased’s demise, by virtue of the right of survivorship, she is now the sole beneficiary of the various joint bank accounts and any funds that may have originated from them.  All of this will be determined at the trial.

6.  Subsequently, in following this trail of funds, the plaintiff has discovered a bank account in Hong Kong belonging to a British Virgin Islands company called Angel Dream International Limited. [“Angel Dream”], of whom the deceased was an authorised signatory.  By its re-re-amended statement of claim, the Plaintiff now seeks by the same route adopted in respect of the other bank accounts and the inflow and outflow of funds from those accounts to achieve the same result with funds going into Angel Dream’s account and going out of that account.

7.  It is alleged that the payment into and out of Angel Dream’s account were instigated by the defendant and carried out by virtue of the sway that she held over the deceased in respect of these transactions.  As with the other accounts, the plaintiff is asking for the defendant to provide an account of where the money has gone from the Angel Dream account which now has no money in it.  Angel Dream itself is also no longer, it having been struck off the Companies Register in the British Virgin Islands.

The Original Hearing

8.  It was this application that I heard and allowed on 26 January.  The matter had been listed for three minutes.  The solicitor for the defendant asked for an adjournment to enable him to file evidence in reply to that of the plaintiff’s solicitor, Mr Hanusch, and to instruct counsel to oppose the application.  I took the view that this was a relatively straightforward matter which did not require the defendant to file evidence.  I refused the application for the adjournment and heard argument on the summons which lasted some 30 minutes, after which I ruled that the re-re-amendments could be made.  I gave brief reasons for my decision.

9.  Today there is no transcript of those proceedings, and I have no recollection of what I said in allowing the amendments to be made.  Of course, any appeal from this order will be mounted based on my reasons on 26 January, and so the failure to call for a transcript is an important omission.  I could have adjourned today’s application but, given the fact that the trial is fixed for May, I did not wish to cause further delay.

10.      Mr Chan Chi Hung, SC in asking for leave to appeal, has in effect conducted the application as if this was the hearing of the application to amend because he is not aware of my reasons for allowing the amendments.  In such cases, it really is the duty of the party seeking leave to appeal to ensure that the transcript of the reasons from which the order was made should be available to the judge.  Indeed, it is difficult to see how grounds of appeal can be drafted, as they have been in this case, without a sight of the judge’s reasons.

11.      Be that as it may, I must now consider Mr Chan’s argument to see whether the defendant’s proposed appeal “has a reasonable prospect of success”, this being the test to be applied on occasions such as this.  He has put forward three principal grounds of appeal:  firstly, that on the basis of this amendment, it is Angel Dream and only Angel Dream that is the appropriate plaintiff and that this plaintiff  has no locus standi to advance the pleaded cause of action; secondly, that the existing plea of undue influence is a defective one, it being advanced that the defendant had taken care of the deceased’s financial affairs since around 2002 or 2003, which Mr Chan says is not the same as saying that a relationship of trust and confidence existed between them; and, thirdly, that this claim is out of time.  He submits that if he can show that he has a reasonable prospect of success on any one of these complaints, then he should have his leave. I must now deal with each of these matters in turn.

Wrong Plaintiff

12.      Mr Chan says the point is a basic one. Where the factual basis of the re-re-amendment is that the monies, over $15 million, went in and out of Angel Dream’s account the claim for its return must be by Angel Dream and not by the administrator of the deceased’s estate.  Is there a reasonable prospect of this submission finding favour on appeal?  Mr Shaw says that there is none whatsoever.

13.      The whole point of the pleaded case, as in the case of the other bank accounts and funds, is that what went into Angel Dream’s bank account, as one can see from the trail of funds, is undoubtedly the deceased’s money and what came out the other end was the deceased’s money for which the defendant is being asked to account.  The fact that the money went in and out of Angel Dream’s account has no legal consequence in the way that Mr Chan is suggesting.

14.      The transactions were instigated by virtue of the defendant’s undue influence, which will be a matter for the trial judge.  And once the money left the account at the behest of the defendant, who was a signatory on that account, then the administrator of the deceased’s estate is entitled to know what has happened to it, which can be established when the court orders an account.  It strikes me that this is the correct analysis and that Mr Chan has not been able to show a reasonable prospect of successfully mounting this argument on appeal.  Accordingly, I decline to give him leave on this ground.

Defective plea of undue influence

15.      The re-re-amended statement of claim adopts the same particulars of undue influence as are relied on in respect of the other bank accounts which include amendments which the defendant had consented to.  Mr Chan submits that the new case based on Angel Dream is different and that these particulars of undue influence cannot stand in support of this new case.  Mr Shaw says that the conduct by the defendant is identical throughout the pleading and the issue of undue influence is common for the whole case against her.

16.      The administrator cannot succeed on part of the case on this issue and fail on other parts.  Undue influence as pleaded is the foundation of the whole of this action.  It seems to me that this also is a correct analysis.  The removal of funds from the various bank accounts are the alleged consequence of undue influence.  As a plea, it is in my judgment a good plea and it remains to be seen whether this stands up on the evidence ,which will be for the trial judge.

17.      Mr Chan has also said, and this relates to the plea of undue influence, that the relief sought is insufficient because there is no prayer for a rescission of the transactions.  He submits that it is not enough just to call for an account and for consequent relief to have any money found owing to be repaid to the deceased’s estate.

18.      For my part, I do not consider that this is fatal for the plaintiff’s case.  As matters stand at present, whilst it may have been better to have asked for rescission in addition to an account, this can be easily rectified by yet another amendment being sought.  The argument is highly technical and, even if correct, it is something that could easily be put right with costs consequences against the plaintiff.   So, I do not believe that on this ground, leave to appeal should be granted.

Limitation

19.      Mr Chan says that the claim is time barred, reliance being placed on the fact that the amendment would take effect not from the date of the application to amend but from the date of the order itself.  Mr Shaw relies on the Court of Appeal’s decision in Bowardley Enterprises v Millennium Group CACV242/2005 handed down on 11 July 2006, which ultimately decided that the current law in Hong Kong is that amendments take effect from the date of the application which, in the case before me, occurred before the limitation period expired.

20.      There was much discussion in that case as to whether and in what circumstances the Court of Appeal was bound by its own previous decisions on which various views were expressed by the Justices of Appeal.  The effect of their decision was that the court was bound in those circumstances by its own previous decision and that the law in Hong Kong, as opposed to that of England and Wales, is that an amendment takes effect from the date of the application to amend.  This being so, Mr Chan has also failed on this proposed ground.

21.      Mr Shaw has also provided other reasons why the amendment is not time barred, the principal one being that in a case of undue influence, being a species of fraud, there is no limitation period save that the action must be brought within a reasonable time of the discovery of the fraud.  Given the chronology of the discovery of the Angel Dream account, the speed of the plaintiff’s solicitors’ investigations of it and the nature of the defendant’s responses to their requests, including a blanket refusal to provide fundamentally important information, it cannot be said that the plaintiff has been unreasonably dilatory.  At the very least, the matter is sufficiently arguable for the issue to merit further investigation at the trial.

22.      Failing all of this, Mr Shaw also rightly points out that of 19 pleaded transactions, only eight are caught by a strict application of the limitation period.  So, Mr Chan’s complaint can only relate to those eight earlier transactions, but as I am satisfied that he has no reasonably arguable appeal based on limitation, I propose to refuse him leave on this ground as well.

23.      For these reasons, therefore, I decline to give leave to appeal, and the defendant must pay the plaintiff’s costs of the application on a party and party basis.