SZETO YUK LIN v. TSANG CHIU MO SAMUEL AND OTHERS

HCA 2392/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2392 OF 2008

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D E C I S I O N

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1.  There are 3 applications before me:

A. An application for further and better particulars of the reply;

B. An application for further and better particulars of the answers to the request for further and better particulars of the reply;

C. An application to strike out a paragraph in the reply.

BACKGROUND

2.  The plaintiff by original action is the mother of the defendants (“Samuel”, “Simon” and “Sylvia” respectively). She seeks specific performance of an alleged agreement made on 28 July 2006 (“the Agreement”) in which the defendants agreed to transfer 4 categories of assets to her:

Category 1: Shares in China Sky Finance Ltd (CSFL);

Category 2: 43.36% shares in Century Legend (Holdings) Ltd (“the Listco”) held by companies called Barsmark and ST(79);

Category 3: 3 properties in Macau (“the Macau Properties”);

Category 4: Kwan Fat Shopping Arcade in Macau which is owned by SEL Properties (Macau) Ltd (“SEL”).

3.  The Agreement was said to have been evidenced by a set of Minutes signed by the plaintiff and the defendants.  The plaintiff says that by the Minutes, the defendants have admitted that they were holding the 4 categories of assets either through themselves or companies controlled by them, on trust for the benefit of the plaintiff. 

4.  The defendants deny there was such an agreement, or that there was consideration for the agreement or that there was intention between the parties to enter into legal relations (“the 3 defences”).  They also deny the correctness of the Minutes or their binding effect.

5.  In respect of Category 1 asset, the defendants’ case is that the plaintiff made a gift of $50 million to Samuel, who used it to commence the business of CSFL; and that the plaintiff was not the beneficial ownership of the shares in CSFL.  The gift was denied by the plaintiff in her reply.  The plaintiff further claims that all capital injections into CSFL, whether through Samuel or otherwise, belonged to her beneficially.

6.  In respect of Category 2 asset, the defendants’ case is that the transfer of shares from Barsmark to ST(79) was a private matter among the defendants.  In her reply, the plaintiff pleaded that Century Legend Ltd (“CLL”) held a substantial amount of shares in Listco.  Those shares were held on trust for her: as to 45% by 2 of her employees, and as to 5% by each of Samuel and Simon. Allegedly at Samuel’s request, the plaintiff agreed to let the defendants hold her interests in Listco for her.  She transferred HK$9 million to each defendant to enable them to “rearrange” the shareholding structure in Listco on her behalf. 

7.  In paragraph 11(6) to (9) of the Reply, the plaintiff pleaded the “rearrangement” wherebyCLL sold the entire equity interest (42.05%) in Listco to Barsmark.  In October 2003, Barsmark further acquired all the issued shares in the Listco through a cash offer. The total consideration required by Barsmark in the “rearrangement” of shareholding in Listco was HK$13.72 million. After the re-arrangement, the defendants refunded a total of HK$12.98 million to the plaintiff.

8.  The defendants deny the rearrangement but admit paying the plaintiff HK$12.98 million.

9.  In respect of Category 3 assets, the defendants’ case is that they had paid for the assets.  The plaintiff’s reply was that these assets were transferred to the defendants to hold on trust for the plaintiff and they agreed to re-transfer to the plaintiff after the expiry of 7 years from their applications for immigration to Macau.

10.  In respect of Category 4 asset, the defence was that the defendants had paid for it.

11.  As for the Agreement, the defendants pleaded, amongst others, that they had caused SEL to borrow from Onshine Credits, supported by Samuel’s guarantee, to help the plaintiff pay off her heavy gambling debts.  When the defendants refused to give further assistance,  the plaintiff was upset and began to make unfounded claims that all properties belonged to her.  In January 2008, Samuel caused SEL to borrow another HK$10 million from Onshine Credits (which the plaintiff admitted) and lent it to the plaintiff.  In 2002, Szeto Estates Ltd and CSIL entered into an Option Agreement.  It is the defendants’ case that they agreed to consider the plaintiff’s request for transfer of all the shares in SEL and the Macau Properties to her by way of gifts subject to certain conditions, in particular, the discharge of Samuel’s guarantee to Onshine Credits.

12.  In reply, the plaintiff pleaded that she asked the defendants to arrange payment for her gambling debts from the properties beneficially owned by her. She admitted that Samuel arranged for SEL to borrow a total of HK$300 million from Onshine Credits, supported by her and Samuel’s guarantee.  She denied that the whole sum was used to pay off her gambling debts.  She said that Samuel suggested an asset protection scheme to her and she was asked to sign the Option Agreement.

THE LEGAL PRINCIPLES

13.  Under Order 18, rule 8(1) of the Rules of the High Court:

“A party must in any pleading subsequent to a statement of claim plead specifically any matter, for example, performance, release, any relevant statute of limitation, fraud or any fact showing illegality-

(a) which he alleges makes any claim or defence of the opposite party not maintainable; or

(b) which, if not specifically pleaded, might take the opposite party by surprise; or

(c) which raises issues of fact not arising out of the preceding pleading.”

14.  Under Order 18, rule 12(1) of the Rules of the High Court:

“Subject to paragraph (2) [irrelevant for present purposes], every pleading must contain the necessary particulars of any claim, defence or other matter pleaded …”

15.  Under Order 18, rule 12(3):

“The Court may order a party to serve on any other party particulars of any claim, defence or other matter stated in his pleading, … or a statement of the nature of the case on which he relies, and the order may be made on such terms as the Court thinks just.” (emphasis added)

16.  Under Order 18, rule 12(3B),

“No order shall be made under paragraph (3) unless the Court is of the opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs.”

SOME PRELIMINARY OBSERVATIONS ON THE PLAINTIFF’S PLEADINGS

17.  The plaintiff’s amended statement of claim (“ASOC”) and reply are, without disrespect, convoluted pleadings, although I hasten to add that Mr Chong and Ms Wong are not responsible for them.  Paragraphs 8, 12, 16 and 20 of the ASOC are quite embarrassing in that they are based on what the plaintiff describes as her “contentions” that she was beneficial owner of assets, and not that she was the beneficial owner of them. 

18.  In purported reply to the defendants’ case that there was no Agreement as she alleges and that she has no beneficial interest in any of the 4 categories of assets, she pleads in paragraph 3(2) of her reply that she was the “beneficial owner” of the CSFL shares.

19.  In my view, those were half hearted pleas of trust.

20.  Master Ho and Chung J (on appeal) have rejected the application to amend the statement of claim to introduce pleas of resulting trust for lack of particulars.  Master Ho has aptly pointed out that this case involved numerous fund and share flows in relation to the companies and properties in question. Some of the money involved were alleged to be gifts, loans, repayment of debts on behalf of the plaintiff.  It would be an understatement on the part of the plaintiff to simply state that those companies or properties belonged to her and were acquired with her own funds and were held by the defendants on resulting trust for her.  In Master Ho’s views, all the material facts in support of her claim for resulting trust should be pleaded so that the defendants would know the case to meet and what evidence to prepare for the trial.

GENERAL GROUNDS IN OBJECTION TO THE APPLICATIONS

21.  Mr Chong submits that particulars to be ordered under Order 18, rule 12 must mean particulars of material facts to support the claim or defence.  He submits that all facts other than those in support of the Agreement and the 3 defences are peripheral and not material to the determination of the sole cause of action, namely, the Agreement.  He also submits that the defendants’ requests are for evidence and not particulars.

22.  Mr Chong relies on the principle that the relevance of an issue is not dictated by a party unilaterally simply by placing it in his pleadings, but by its substance in the context of the case.  The other party is not barred from taking the point that the allegation made in the pleadings are irrelevant to the subject matter of the action and ought to be disregarded for the purpose of discovery.  See Allington Investments Corp & ors v First Pacific Bancshares Holdings Ltd & anor [1995] 2 HKC 139, at 144 H-I; Re Cosmo-Technology Ltd [2009] 2 HKLRD 151, at §19.

23.  With respect, Mr Chong’s interpretation of Order 18, rule 12(3) is contrary to the express power given to the court to order particulars on “other matter stated in his pleading”. 

24.  Allington and Re Cosmo-Technology are distinguishable on the facts.  In both cases, it was the applicant for discovery who had raised the irrelevant issues and relied on them to seek discovery.  In the present case, the particulars sought are on the plaintiff’s own pleas, which the plaintiff cannot be heard to say are irrelevant.

25.  Mr Chong submits that it was the defendants who raised all sorts of peripheral matters (such as an Option Agreement) in paragraph 20 of their defence to which the plaintiff filed a reply.  No particulars ought to be ordered on them.  Further, no particulars ought to be ordered on matters pertaining to credibility.

26.  Again, with respect to Mr Chong, paragraph 20 of the defence effectively set out the facts in support of the defendants’ denial of the Agreement.  Those pleas are not material to the plaintiff’s cause of action but definitely material to the defence: Order 18, rule 1(a) and (c).  If the defendants only set out those facts in the witness statements without pleading them, it would surely take the plaintiff by surprise: Order 18, rule 1(b).

27.  Further, despite Mr Chong’s confirmation that the plaintiff’s case does not rest on resulting trusts, there are throughout her pleadings various averments that she provided funding or that she has beneficial interest in assets.  Particulars are missing.

28.  Accordingly, I disagree with Mr Chong’s general grounds in opposition. I turn now to the specific applications.

A.  APPLICATION FOR FURTHER AND BETTER PARTICULARS OF THE REPLY

29.  This application concerns items 8, 9(b) and 11(b) of the Request originally served on 31 July 2009.

A1.  Request no. 8 concerning paragraph 11(6) to (9) of the reply

30.  The defendants ask for a statement of the nature of the plaintiff's case in paragraph 11(6) to (9) of the reply (see paragraph 7 above) that the facts pleaded were a rearrangement to place the plaintiff’s alleged interest in the Listco in the names of her children.

31.  Mr Chain points out that similar averments have been made in paragraphs 9A to 9D of the draft ASOC.  I note that paragraphs 9A to 9D of the draft ASOC pleaded that the Listco shares were held on resulting trust for the plaintiff, initially by CLL and after the rearrangement by Barsmark and ST(79).  The plaintiff pleaded that the further shares in the Listco registered in the name of Barsmark were acquired by her with her own funds.  Master Ho disallowed those amendments for lack of particulars. 

32.  Specifically, Master Ho observed that the present case was different from a simple case based on resulting trust, having regard to the matters in paragraph 20 above.  He took the view that the plaintiff should provide material facts in relation to her claim for resulting trust over the subject assets [page 32D to 33 I of the transcript]. 

33.  In my view, the plaintiff should answer the request.  It could not be right that the rejected amendments remain alive in the reply without the need to address the concerns of Master Ho. 

A2.  Request no. 9(b) concerning paragraph 12 of the reply

34.  The defendants pleaded that the plaintiff lost HK$13 million in gambling and Samuel repaid on her behalf.

35.  The plaintiff admitted that plea.  In paragraph 12 of her reply, the plaintiff further avers that Samuel, Simon and Sylvia held numerous properties on trust for her.  This reply is similar to the draft amended paragraph 25A to the statement of claim which has been rejected by Master Ho. 

36.  The defendant requested for particulars of all facts relied on in support of the allegation that they were held on trust for the plaintiff and identify all documents.  This request is justified for the same reasons given in paragraph 33 above.

A3.  Request no. 11(b) concerning paragraph 27(1) of the reply

37.  Under paragraph 27(1) of the reply, the plaintiff pleads that through intermediaries or indirectly, she had demanded the defendants to implement the Agreement. In answer to the first set of request for particulars, the plaintiff has already stated that she could not remember the identity of the intermediaries.  The defendants still insist that she should provide the identity.

38.  In my view, even if the plaintiff will be unable to prove this plea in her reply, there is no reason why she should be pressed to repeat her answer.  The defendant’s request is unreasonable.

39.  In summary, under application (A), I order the plaintiff to provide particulars only in relation to requests no. 8 and 9(b).

B.  APPLICATION FOR FURTHER AND BETTER PARTICULARS OF THE ANSWERS TO THE REQUEST FOR FURTHER AND BETTER PARTICULARS OF THE REPLY

40.  This dapplication concerns 5 answers originally filed by the plaintiff on 17 September 2009 (“the Answers”).

B1.  Paragraph 1(a) to (i) of the Answers

41.  In paragraph 8 of the ASOC, the plaintiff pleads that "at all material times, the plaintiff had contended that she is and was the beneficial owner of all the shares in CSFL” (emphasis added).

42.  In the Answers, the plaintiff pleaded that “at all material times, whenever CSFL required funds … the plaintiff had injected approximately HK$150 million into CSFL in the way described above.”

43.  The defendants ask the plaintiff to provide further and better particulars to the Answers by stating her case on the nature of the alleged injection of HK$150 million into CSFL (whether it was a loan, a gift, a subscription of shares or otherwise). They also ask the plaintiff to state the bases as to how she arrived at the figure HK$150 million and whether it included the gift of HK$50 million.

44.  This request is clearly justified to clarify how the plaintiff could claim to have beneficial interest in the shares of CSFL.  Master Ho’s observations are applicable.

B2.  Paragraph 2(a) to (c) of the Answers

45.  The defendants pleaded that they had paid for the Macau Properties. In her Answer, the plaintiff admits the payments but avers that they were much less than the actual value of the Macau Properties at the time of transfer.

46.  The defendants request for particulars of (a) the exact amount paid by the defendants with the plaintiff; (b) the actual value of the Macau Properties at the time of the transfer; and (c) whether it is the plaintiff's case that when the Macau Properties were transferred back to the plaintiff after the expiration of 7 years from the defendants applications for immigration to Macau, she would keep the sums paid by the defendants. 

47.  The plaintiff objects to this request on the ground that these pleas are irrelevant to determination of the cause or defence.

48.  In my view, the defendants are entitled to these particulars to avoid surprises and to enable them to prepare the evidence for the case.  

B3.  Paragraphs 3 and 4 of the Answers

49.  The plaintiff pleaded in paragraph 10(1) of her reply that she injected a sum of HK$20.4 million and US$12 million into CSIL and another HK$28,320,000 and US$600,000.  The defendants ask her to state the basis and nature of the injection, ie was it a loan (and if so to whom), a gift (and if so to whom) or a subscription to shares (and if so in which company), and if none of the above, what was the nature of the plaintiff’s injection.

50.  The plaintiff gave particulars that pursuant to an agreement among her, Samuel and Simon (the latter 2 acting on behalf of the Listco), the sums were paid to Listco on the basis that if the bid for a new casino license was successful, those sums could be used for the business of Listco, but if the application failed, then those sums would be returned.  Further or alternatively, those sums ought to be returned on the grounds of failure of consideration.

51.  That, in my view, was just raising more assertions instead of answering the request.

52.  The defendants press for further and better particulars of when the agreement was made, whether it was oral or in writing, the consideration in support and the nature of payments allegedly made to Listco in view of her allegation that “those sums could be used for the business of Listco if the bid for a new casino license was successful”.

53.  For the same observations of Master Ho, the plaintiff ought to give further and better particulars as sought.

B4.  Paragraph 6 of the Answers

54.  The defendants seek further and better particulars as to the trust of the CLL shares allegedly held by the 2 employees and the source of funding for the plaintiff’s acquisition of those shares. These requests are justified as they would clarify the plaintiff’s half hearted pleas of trust.

B5.  Paragraph 7 of the Answers

55.  The same particulars are requested for as for paragraph 6 of the Answers save that the trustees are said to be Samuel and Simon.  The request is clearly justified.

56.  I order particulars to be delivered in relation to the Answers.

57.  In general, the particulars sought are needed for the fair disposal of the cause of the defence, to avoid surprises and hence save costs arising out of the need for adjournment.  They ought to be provided.

C.  APPLICATION TO STRIKE OUT A PARAGRAPH IN THE REPLY

58.  The relevant paragraph is 3(2) of the reply in which the plaintiff pleaded that all capital injections (by way of subscription of shares or loans) into CSFL, through Samuel or otherwise, belonged to the plaintiff beneficially, and she is the beneficial owner of all the shares in CSFL.

59.  Mr Chain submits that this plea, if ever needed, should have been in the ASOC.  This must be right in my view, having regard to the plaintiff’s previous attempt to include a similar plea in paragraphs 5B and 9B of the draft ASOC.  Though Mr Chong makes clear that his case does not rest on resulting trust and paragraph 3(2) of the reply was in answer to the defence that the defendants were the beneficial owners of CSFL, there is no reason why the plaintiff should be allowed to introduce through the backdoor a half-hearted plea of trust in total disregard of Master Ho’s observation.

CONCLUSION

60.  I order as follows:

(1) Re application A, within 28 days, the plaintiff do provide further and better particulars of request nos. 8 and 9(b).

(2) Re application B, within 28 days, the plaintiff do provide further and better particulars of the Answers.

(3) Re application C, paragraph 3(2) of the reply is struck out.

61.  I make an order nisi that the defendants are to have the costs of all applications to be summarily assessed on the papers on 21 October 2014 at 4:30 pm.  The defendants’ costs statement is to be filed and served by 8 October 2014.  The plaintiff’s grounds in opposition is to be filed and served by 17 October 2014.

62.  The case management summons is adjourned for disposal on 24 November 2014 at 2:30 pm.  The parties shall exchange updated timetabling questionaires by 10 November 2014.  Three days prior to the hearing, the parties shall submit a joint memorandum of all the directions that they propose to ask the court to give.  The parties must bear in mind what I have said at the hearing, namely, that the court will not be lenient towards applications for amendment to pleadings having regard to the lapse of 6 years since commencement of the action and the various applications related to pleadings.

63.  I thank counsel for their assistance.

(Queeny Au-Yeung) Judge of the Court of First Instance High Court