XCHRX CHAN CHI NGON v. HUNG LING CHUN FELICIA

HCA16885/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 16885 OF 1998

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R U L I N G

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1. There was originally two summonses before me. However, at the start of the hearing, I was told by Mr Chan for the Defendant that the summons dated 20th May 1999, taken out by the Defendant, asking for leave to file the Defence within 14 days after disposal of the striking-out summons has already been dealt with by a Master and that such leave has already been granted. Accordingly, I shall only concern myself with the Defendant's summons dated 10th February 1999.

2. I have also been informed by Mr Chan that insofar as that summons is concerned, he no longer pursues the application for joinder of Kurena Inc. ("Kurena") and/or Kamliease International Limited ("Kamliease") because these two companies have not been served with that summons.

3. Accordingly, the only contentious matter between the parties with which I need to concern myself is the application by the Defendant that the Statement of Claim herein be struck out on the grounds that it discloses no reasonable cause of action and/or is frivolous of vexatious or may prejudice or embarrass the fair trial of the action. This application is, needless to say, opposed by the Plaintiff.

The Plaintiff's claim as pleaded

4. There are three separate and distinct claims by the Plaintiff. The basis of these claims are that pursuant to various oral agreements made between the Plaintiff and one Albert Young ("the deceased") before his death in November 1995, the Plaintiff had made over various sums of money to the deceased, which sums he now seeks to claim back from the estate of the deceased.

5. The first of these claims is pleaded as follows :-

(a) The Plaintiff and the deceased came to be acquainted in about 1973 and from that time until the death of the deceased in 1995, they became close friend and business associates.

(b) In early 1993, pursuant to oral representations made by the deceased to the Plaintiff, the Plaintiff had made over a sum of HK$11,570,000 to the deceased to be invested in the King Fook Gold & Jewellery Company Limited of which the deceased was a director and had an interest.

(c) That money was paid over to the deceased by means of a cheque drawn by Kurena, a Liberian company solely owned and controlled by the Plaintiff and used by the Plaintiff for his own business transaction. It was also pleaded that Kurena was and is the agent of the Plaintiff in issuing this cheque in favour of the deceased, as well as issuing the debit notes referred to hereafter.

(d) Up to April 1995, it was agreed between the Plaintiff and the deceased that the deceased will continue to take charge of the sum of money (and the interest earned up to that date).

(e) Prior to the death of the deceased, debit notes had been issued from time to time by Kurena to the deceased in respect of this sum and the interest earned thereon.

(f) After the death of the deceased, a debit note dated 8th April 1996 was also issued by Kurena to the executors of the estate of the deceased for the return of the money with interest, totalling HK$14,372,439.

(g) Despite letters written by the Plaintiff in the name of Kurena in August 1996, as well as by the Plaintiff's solicitors in 1998, claiming such sum and interest from the executors of the estate of the deceased, no part of this money had been repaid to the Plaintiff.

6. The second claim is pleaded on the following basis :-

(a) In 1992, the Plaintiff had intended to invest in a real estate development project in Guangzhou, known as Kwong Fat Garden.

(b) The Plaintiff participated in this development by his corporate vehicle Kurena and to facilitate matters had set up a working office in Guangzhou known as Hong Kong Kamliease International Limited Guangzhou Office ("Kamliease Guangzhou Office") of which the Plaintiff's wife, Yung Ying Foon, was the chief representative and the Plaintiff's authorised agent.

(c) In mid 1992, the Plaintiff had orally invited the deceased to also invest in the same project.

(d) In August 1992, the deceased orally agreed with the Plaintiff to invest in that project subject to a number of conditions, one of which was that the Plaintiff would provide money for the use by the deceased from time to time as the deceased requested not exceeding a certain agreed amount.

(e) Pursuant to such oral agreement, the Plaintiff had advanced to the deceased between September 1992 and November 1993, totally the amount of HK$15,086,473.36 as well as an amount of RMB1,200,000 in January 1994. Of the HK$15,086,473.36, $8,886,473.36 was paid by two cheques drawn by Kurena at different times to persons designated by the deceased and $6.2 million of that sum was paid at various times from the account of Yung Ying Foon, again to various persons, as directed by the deceased. The RMB1,200,000 came from Kamliease Guangzhou Office and was paid to Guangzhou Military Zone as directed by the deceased.

(f) In June 1993, the deceased had repaid $8 million of the money advanced by a cheque of King Fook made payable to Kurena. Now owing to the Plaintiff is therefore the amount of HK$7,086,473.36 as well as the RMB1,200,000.

(h) Despite letters of demand written by the Plaintiff in the name of Kurena as well as letters from the Plaintiff's solicitors to the Defendant, no part of the sums owed to the Plaintiff has been repaid by the estate of the deceased.

7. The third claim is pleaded as follows :-

(a) In June and September 1993, at the oral request of the deceased, the Plaintiff had made over totally to the deceased RMB7,133,600. This money came from an account of the Kamliease Guangzhou Office with Guangdong Development Bank and was paid at the deceased's request to a limited company in Mainland China.

(b) On another two occasions in November 1995, again at the oral request of the deceased, the Plaintiff had paid totally RMB5 million to another limited company in Mainland China from the Kamliease Guangzhou Office bank account. However, this sum of RMB5 million had been repaid by the deceased to Kamliease as directed by the Plaintiff by an equivalent amount in Hong Kong Dollars on 14th November 1995.

(c) Despite demand made by the Plaintiff in the name of Kamliease Guangzhou Office, as well as demands by the Plaintiff's solicitors, both to the executors of the deceased's estate and to the solicitors representing such executors in 1996, 1997 and 1998, no part of this outstanding sum of RMB7,133,600 had been repaid.

8. The above is a summary of the Plaintiff's claims in a nutshell as pleaded in the Amended Statement of Claim. The amendments to the Statement of Claim were made after the summons to strike out had been issued by the Defendant. Such amendments were made pursuant to O.20, r.3 of the Rules of High Court before the close of pleadings and therefore leave of the Court was not needed. Apart from correcting certain facts wrongly pleaded in the original Statement of Claim, these amendments also put the Plaintiff's case on the footing that Kurena, and also the Kamliease Guangzhou Office were the agents of the Plaintiff, not only in making the loans to the deceased but also in issuing the debit notes and in the demands for repayment of such loans from the deceased and/or from the executors of the deceased's estate.

The application to strike out

9. It is submitted by the Defendant that the present Plaintiff, Chan Chi Ngon, is not the proper plaintiff to pursue these claims if they exist. The proper plaintiff, says the Defendant, would be Kurena and the Kamliease Guangzhou Office but who are not presently parties to this action.

10. In so far as the first claim is concerned, Mr Chan points to the fact that the money was paid by cheques drawn by Kurena; the debit notes were issued to the deceased before his death from time to time by Kurena and that letters of demand were written in the name of Kurena to the executors of the estate after the deceased's death.

11. As to the second claim, Mr Chan relies upon the fact that payments for the loans were made from Kurena's account and that partial repayments were paid back by the deceased to Kurena. He also points to the fact that it was Kurena who demanded repayment from the executors in 1997 and 1998 for the amounts outstanding.

12. As for the third claim, Mr Chan points to the fact that the advances came from Kamliease Guangzhou Office and that the demand for repayment was also made in the name of Kamliease Guangzhou Office.

13. Whilst Mr Chan readily concedes that the advances made through Kurena and Kamliease Guangzhou Office are not by themselves conclusive as to who is the actual lender, he submits that the demands for repayment coming from Kurena and from Kamliease Guangzhou Office conclusively show that the lenders must be none other than Kurena and Kamliease Guangzhou Office. Upon this basis, he says, therefore, that the proper plaintiff for those claims, if they exist, should be Kurena and Kamliease Guangzhou Office, but not the present Plaintiff.

14. Mr Chan further submits that even with the amendments to the Statement of Claim to plead that Kurena and Kamliease Guangzhou Office were the Plaintiff's agent in issuing the cheques, the various debit notes and the demand letters, this does not detract from the fact that the Amended Statement of Claim is still liable to be struck out on the basis that it is frivolous, vexatious and an abuse of court process by reason of the fact that there is no evidence, apart from the Plaintiff's bare assertion to support those amendments that Kurena and Kamliease were the agent of the Plaintiff in these dealings. Lastly, Mr Chan relies on a letter dated 18th September 1998 from Messrs Andy Lo & Co. to the executors of the estate of the deceased which states :-

" We act for Mr Chan Chi Ngon.

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We have now taken further instructions from our client on the aforesaid claims. As you may have already known, our client is indeed the sole person who owns and controls both Kurena and Guangzhou Kamliease Office. As such we believe that the proper person to make the claims is our client. A copy of the draft statement of claim by our client against you is enclosed herein for your reference."

15. Mr Chan relies on the contents of that letter quoted above to say that not only is what is stated in the letter wrong in law, but it shows also that the entire claim of the Plaintiff is misconceived in that Kurena and Kamliease Guangzhou Office should be the proper plaintiffs in this case.

The Plaintiff's case

16. As already indicated, the Defendant's application to strike out the Plaintiff's claim is opposed. The Plaintiff puts his claim fairly and squarely on the basis as it is pleaded in the Amended Statement of Claim, namely that in all these three claims, Kurena and/or Kamliease Guangzhou Office were only acting as the agent of the Plaintiff either in paying over the money loans or advances and/or in issuing debit notes and/or demands for repayments from either the deceased before his death or from his estate after his death. If there was any ambiguity as to the basis of the Plaintiff's claim originally, these ambiguities have now been removed by the Amended Statement of Claim.

17. Secondly, Mr Tang for the Plaintiff does not dispute that the payments and/or advances came from Kurena and/or Kamliease Guangzhou Office, nor does he dispute the fact that at some stage debit notes and/or demand letters were issued or written in the name of Kurena and/or Kamliease Guangzhou Office, nor that in one of the claims there was a part-repayment made to Kamliease (indeed all these documents are documents coming from the Plaintiff). Mr Tang, however, submits that whether or not Kurena and Kamliease Guangzhou Office were acting as the agents of the Plaintiff, or whether it was the other way round, is a matter to be decided by the court after hearing all the evidence as well as the explanation given by the Plaintiff for the coming into existence of these documents. In other words, it is only after hearing all the explanation given by the Plaintiff that the trial judge could come to a decision as to whether Kurena and/or Kamliease Guangzhou Office were acting as the agent of the Plaintiff in these transactions. In short, a question of fact for the trial judge to decide.

18. The third point made by Mr Tang is that in so far as Kamliease Guangzhou Office is concerned, this has not even been shown by the Defendant to be a separate legal entity. In this context, the Plaintiff has filed affidavit evidence which shows that Kamliease was a company incorporated in Hong Kong and was a wholly owned subsidiary of Kurena. It was originally formed by the Plaintiff, to be used in the Kwong Fat Gardens development project. Thereafter, the Plaintiff set up the Kamliease Guangzhou Office for convenience sake. However, in 1992, Kurena sold off most of the shares of Kamliease to others, but despite doing so, the Plaintiff continued to maintain the Kamliease Guangzhou Office as his operating arm. One particular reason for doing so was that the Kamliease Guangzhou Office had a bank account in Guangzhou at the Guangdong Development Bank and that the monies maintained in that bank account all belonged to the Plaintiff. In those circumstances, the Plaintiff had agreed with the new shareholders of Kamliease that he, the Plaintiff, could continue using the Kamliease Guangzhou Office for his own purposes on the basis that the operation of the Kamliease Guangzhou Office had nothing to do with Kamliease. All this, says the Plaintiff, were known to the deceased who also knew that the Kamliease Guangzhou Office was the Plaintiff's own office. There is no evidence from the Defendant to even suggest that this was not so.

19. Lastly, Mr Tang concedes that what is stated in the solicitor's letter of 18th September 1998, in particular the statement quoted above from that letter, is incorrect as a matter of law. However, says Mr Tang, that mistake is now corrected insofar as the Plaintiff's case is concerned by the amendments in the Amended Statement of Claim.

My decision

20. This is an application to strike out the Plaintiff's claim. The applicable law for that is very clear. Such an application should only be granted in plain and obvious cases. Matters in dispute must never be decided upon a mini trial on affidavit. Where there are disputed facts, those facts in favour of the parties sought to be struck out should be adopted by the Court hearing such an application.

21. It seems to me that the crux of the dispute between the parties in this application is as follows. The Defendant is asking the Court to look at the documents, namely the debit notes, the cheques for payment and the demand letters which all emanated from the Plaintiff and which the Defendant says show the Plaintiff to be the agent of Kurena and Kamliease Guangzhou Office. That, says the Defendant, is contradictory with the Plaintiff's present case wherein the Plaintiff says that Kurena and Kamliease Guangzhou Office were his agents in these transactions. Therefore, the Defendant says the Plaintiff's claim must be frivolous and should be struck out.

22. On the other hand, the Plaintiff acknowledges that there are these cheques for payments, these debit notes and these demand letters. If they or their contents imply that the Plaintiff was the agent of Kurena and/or Kamliease Guangzhou Office, then they are wrong and the Plaintiff will at the trial explain those mistakes. Until he is given such a chance, the Plaintiff should not be driven away from the judgment seat.

23. Who is a principal and who the agent in any transaction is a question of fact. The fact that there are documentary evidence which may indicate or suggest one way is not itself conclusive, much less in the circumstances of this case. Having seen these debit notes and the demand letters for myself, I am not persuaded that the Plaintiff cannot assert otherwise, namely, that he is the principal. It may be that his assertions are made somewhat weaker by the existence of these documents but the fact that a case is weak or weakened is not a good ground for striking it out. The Plaintiff will have to explain them and whether or not he succeeds in the case depends on the view taken by the trial judge after hearing all the evidence and explanation. If I were to accede to the Defendant's application for striking out in this case, it would effectively mean that I have, by a mini trial on affidavit, come to the conclusion that the documents, namely the debit notes and demand letters, must be true and cannot possibly contain any mistakes in so far as they suggest Kurena and/or Kamliease Guangzhou Office to be the principal. This brings to mind the words of Godfrey J. (as he then was) in the case of Hutchvision Asia Ltd v. Asia Television Ltd [1993] 2 HKC 510 where he said at page 514 :

" In fact, the rule has not changed at all since 1889. What unfortunately has happened is that more and more often practitioners have attempted, in proceedings for striking out and/or summary judgment, to persuade the court to embark on a mini-trial by affidavits of the allegations made respectively by the plaintiff against the defendant and vice versa."

24. Accordingly, for the reasons that I have given, the Defendant's application to strike out is dismissed.

Costs

25. In view of the fact that both sides have seen fit to appear by leading Counsel, there will be a costs order nisi that the costs of this application be to the Plaintiff with certificate for two Counsel.