CHAN YUET YING v. WONG CHOI HUNG AND OTHERS

HCA 3800/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 3800 OF 2003

HCA 2893/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 2893 OF 2004

________________________

________________________

REASONS FOR DECISION

________________________

I.  INTRODUCTION

1.  Wong Chow Fuk alias Wong Chow Fook (“Deceased”) was a businessman engaged in property development/investment.  He passed away on 7 July 2002 in Puning City, Guangdong, Mainland China.  Prior to his death, the Deceased had 3 unions, ie with Madam Wong Chin Mui (“Madam Wong”) (“1^st Union”), the plaintiff herein (“P”) (“2^nd Union”) and Madam Chan Shui Ling (“Madam Chan”) (“3^rd Union”). 

2.  P claimed to be the lawful wife of the Deceased pursuant to a Chinese customary marriage which took place in Macau on 18 March 1953, and neither Madam Wong nor Madam Chan was the lawful wife or concubine of the Deceased.  But D2 claimed Madam Wong was the kit fat wife of the Deceased by customary marriage in Puning City on 3 July 1938.

3.  There was no dispute the Deceased had 10 children, ie 4 from the 1^st Union (2 sons and 2 daughters including the 1^st and 2^nd defendants herein (“D1” and “D2”)), 5 from the 2^nd Union (1 son Wong Hui Ching Jeffrey (“Jeffrey”) and 4 daughters (including Wong Yin Fei)) and 1 from the 3^rd Union (a son the 2^nd defendant (“D3”)) (collectively, the “Issues”).  P claimed Jeffrey is her biological son, but D2 and D3 contended he was adopted.

4.  P claimed the Deceased died wholly intestate, so P and the Issues were the only beneficiaries to the Deceased’s estate (“Estate”).  As explained below, some issue had arisen as to whether the Deceased died testate leaving his will in Chinese dated 22 December 1998 (“Will”) that (a) dealt with and disposed of his entire Estate, (b) appointed D1 as sole executor and trustee, and (c) named D1, D2 and D3 as the only beneficiaries of the Deceased’s residuary estate under the Will (ie Chan and her children would not be entitled to any share/interest in the Estate).  To date, no grant of probate or letters of administration had been issued, and no personal representative had been appointed in respect of the Estate.

5.  The 4^th defendant (“Lung Tang”) was incorporated on 18 May 1973 in the name of “Lung Tang Restaurant Limited”.  Its name was changed to “Lung Tang Enterprises Limited” by special resolution dated 17 December 1975.  Lung Tang had an authorised share capital of $2,000,000 divided into 20,000 shares of $100 each, all of which had been issued as fully paid up.  P and the Deceased were each registered as the holder of 10,000 shares at $100/share (“P’s Share” and “Deceased’s Share”), and they were the only registered shareholders of Lung Tang.  At all material times prior to 15 July 1998 P and the Deceased were the only directors.  D2 and D3 claimed that on/about 15 July 1998 D1 and D3 were appointed directors and P ceased to be a director, but P claimed D2 and D3 were not properly appointed directors. [1]  Interestingly, P wavered in her stance as to whether she ceased to be a director of Lung Tang[2] or whether she remained as a director[3] after 15 July 1998. None of the defendants (collectively, “Ds”) ever held any shares of Lung Tang, and D2 was never a director of Lung Tang.

6.  Lung Tang was the registered owner and developer of premises known as Lung Tang Court, Tsing Lung Tau Lot No 61, Castle Peak Road, New Territories (“Lung Tang Court”) which was made up of 2 blocks of flats of 12 units each.  In/about February 1999, all individual units of Lung Tang Court were disposed of except (a) Unit 1B, Block B and Unit 1C, Block A, Lung Tang Court, and (b) 7 car parking spaces (ie nos 86, 88, 88A, 89, 89A, 90 and 91), Lung Tang Court (collectively, “Premises”).

7.  D1 and D2 incorporated the 5^th Defendant (“Techon”) on 9 July 1992.  They were the registered shareholders and directors of Techon.  On 29 June 1998, the Deceased became a director of Techon.  On 30 June 1998 D3 became a director and shareholder of Techon, so D1, D2 and D3 each held 3,000 shares. 

II.  HCA3800/2003

8.  On 13 October 2003, P commenced HCA3800/2003 (“1^st Action”) against D1, D2, D3 and Lung Tang.  On 2 April 2004, Master Hui granted leave for P to join Techon as the 5^th defendant.  On 15 May 2004, P filed her Amended Writ of Summons against Ds with Amended Statement of Claim endorsed thereon.  On 22 March 2012, P filed her Re-Amended Statement of Claim against the Ds.  For the Ds:

(a) On 17 February 2005, D1 by his solicitors filed acknowledgment of service giving notice of intention to defend.  Thereafter D1 did not file any Defence or take part in the proceedings.  On 17 February 2012, Master Lai granted leave for D1’s solicitors to cease to act in the 1^st Action.  It was common ground that D1 could not be located. 

(b) On 4 November 2015, D2 filed his Amended Defence and Counterclaim.  On 30 May 2012, P filed her Reply and Defence to Counterclaim by D2. 

(c) On 18 April 2012, D3 filed his Re-Amended Defence.  On 12 June 2012, D3 served his Answer to P’s Request for Further and Better Particulars of the Re-Amended Defence by D3.

(d) Lung Tang and Techon did not take part in the proceedings in the 1^st Action.

III.  HCA2893/2004

9.  On 20 December 2004, P commenced HCA2893/2004 (“2^nd Action”) against D1, D2, D3 and Techon.

10.  On 29 March 2012, P filed her Amended Statement of Claim.  For the Ds:

(a) On 6 April 2005, D1 filed his Defence.  On 15 November 2005, P filed her Reply to Defence by D1.  From then onwards D1 did not take part in the proceedings, and on 17 February 2012 Master Lai granted leave for D1’s solicitors to cease to act in the 2^nd Action. 

(b) On 2 November 2015, D2 filed his Re-Amended Defence.  On 13 June 2012, P filed her Amended Reply to Amended Defence by D2.

(c) On 5 November 2015, D3 filed his Re-Amended Defence.  On 15 November 2005, P filed her Reply to Defence by D3.

11.  On 6 October 2006, P entered default judgment against Techon for the sum of HK$110,000,000 with interest thereon at judgment rate from 20 December 2004 until payment with fixed costs of $1,550.

IV.  CONSOLIDATION OF THE 1^ST AND 2^ND ACTIONS

12.  On 17 October 2012, the following orders together with case management directions for discovery and witness statements were made (“Master Order”):

(a) the 1^st and 2^nd Actions be consolidated and carried on as one action (“Consolidated Action”) “and that the leading action be [the 1^st Action]; all the parties shall retain the same descriptions in the consolidated action, save and except the 4^th Defendant in the 2^nd Action, ie [Techon], be described as the 5^th Defendant in the consolidated action”;

(b) “to the extent that [P, D1, D2 and D3] have filed pleadings in both actions, filing of consolidated pleadings are dispensed”, and “[the] pleadings that have been filed shall stand as pleadings in their respective action”.

13.  As a result of the Master Order, we now have the rather strange situation in which (a) the 1^st and 2^nd Actions were consolidated into one action but within it there were “respective actions” with a “leading” action, and (b) the consolidated action had “pleadings in their respective action” but consolidated lists of documents, witness statements and court orders.  In my view, it is a conceptual error for “lead” and “follow” actions to subsist within a single consolidated action, and the intermix of consolidated and de-consolidated steps within a consolidated action is, at best, an unhealthy and confusing procedural trap for the unwary.  The absence of consolidated pleadings also creates procedural havoc when there are future amendments (as is often the case).

14.  Parties should do well to remember Chung J’s admonitions in Wong Yuen Shun Kwong Wah Hong Limited v Siu Siu Kam[4] as follows:

“34. The master made an order on 27 February 2002 ‘consolidating’ the two actions.

35. When they came on for trial, the trial bundles contained, among other things, pleadings for each of the two actions. This is because, despite the ‘consolidation’ order, there was no court direction to give effect to the consolidation. The actions were thus effectively only ‘consolidated’ in name; the ‘consolidation’ order actually required discovery of documents to be proceeded with as if the two actions were still separate and independent actions. There was no direction as to, for instance, who was to be the plaintiff and who the defendant in the consolidated action, which set of pleadings in the two actions should be used (or whether new pleadings should be filed) or how the relief originally sought in the two actions is to be treated in the consolidated action.

36. This totally defeated the purpose of the consolidation, which is to save costs and time: Hong Kong Civil Procedure 2006, para. 4/9/2. The usual order for consolidating actions can be found, for example, in Chitty & Jacob’s Queens Bench Forms (1986) 21^st Ed., pp. 140-141 (Forms 156 and 157). Queen’s Bench Forms also contains a sample summons:-

‘… for an order … that the above-mentioned actions be consolidated [and that here add application for any necessary directions, e.g., the order for directions dated the _______ day of _______ , _______ , already made in the action [specify the action] , do apply to the consolidated action, or that the plaintiffs serve a statement of claim in the consolidated action in _______ days, etc., or as the case may require], and that the costs …’ (p. 139 (Form 155)).

37. A consolidation order is of course different from, for instance, an order for the trial of action together or one to follow the other (p. 141 (Form 161)), an order to stay one action until the trial of another (p. 142 (Form 162)), an order to stay actions pending the trial of one as a test action (p. 142 (Form 163)) or an order for the trial of one of several actions as a test action (p. 142 (Form 164)). Which of these orders should be sought will depend on the different circumstances of each case. But almost without exception, consequential directions will have to be given to ensure these orders serve their purpose in the litigation.

38. Unfortunately, all concerned with the consolidation application in these two actions somehow omitted to include these, or other useful, directions.”

In my view, consequential case management directions accompanying an order for consolidation of actions should normally include directions for filing/serving consolidated pleadings, and any exception will be quite rare.

15.  Consequently, whilst the Master Order was an improvement on the situation facing Chung J in Wong Yuen Shun Kwong Wah Hong Limited, it still left much to be desired.  It was in this unfortunate state that the Consolidated Action was set down for trial 2 years later, and came before this court for pre-trial review (“PTR”) on 22 September 2015 (“1^st PTR”).  As noted in Parts II and III above, even after the consolidation of the 1^st and 2^nd Actions, the deconsolidated pleadings were separately amended on different dates, which only served to add to the confusion.  To make some sense in the discussions below, all references herein to the 1^st and 2^nd Actions prior to the Master Order are references to the former separate legal actions prior to consolidation, but all such references after the Master Order are references to the constituent parts of the Consolidated Action that pertained to the previous 1^st Action and the previous 2^nd Action respectively (despite the deconsolidated amended pleadings).

V.  SUPPLEMENTAL STATEMENT SUMMONS

16.  Shortly before the 1^st PTR on 16 September 2015, D2 filed a summons for leave to file and rely on at trial his supplemental witness statement dated 24 August 2015 as per the copy attached thereto (“D2 Statement”) on 16 September 2015 (“D2 Statement Summons”).  On 18 September 2015, D2 filed his 1^st affirmation in support of such summons.

VI.  1^ST PTR

17.  At the time when D3 filed/served his Defence in the 1^st Action more than 11 years ago on 21 June 2004, he already averred that such Defence was without prejudice to his right (a) to dispute P’s locus standi, standing and/or interest in the 1^st Action whether in her own right or to bring derivative action or otherwise at any time and/or at trial, and (b) to strike out P’s claim for being scandalous, frivolous, vexatious, or might prejudice, embarrass or delay the trial, or was otherwise an abuse of the court’s process.

18.  As a result of revelations as to the corporate status of Lung Tang at the 1^st PTR, Ms Ng (then counsel for D2) and Mr Chan (then counsel for D3) indicated that D2 and D3 would take out applications to strike out P’s claims in the 1^st Action, so I (a) directed D2 and D3 to respectively take out such application (if so advised) within 14 days, and P to take out application (if so advised) within 14 days for leave to amend the Re-Amended Statement of Claim in the 1^st Action, and (b) granted leave for P (if so advised) to file/serve affidavit in opposition to the D2 Statement Summons within 14 days and for D2 (if so advised) to file/serve affidavit in reply within 14 days thereafter.  P eventually did not file any affidavit to oppose the D2 Statement Summons.

19.  At the 1^st PTR, the court noted the pleadings revealed some related legal actions that involved the parties to the Consolidated Action.[5] In the course of submissions by Mr Lau (then counsel for P), Ms Ng and Mr Chan, it appeared there were even more related legal actions than what had been revealed in the pleadings in the Consolidated Action.  So at the 1^st PTR, I directed the parties to agree on a summary of related legal actions setting out each action’s history, key developments, respective stance of the relevant parties and current status (“Summary of Related Actions”).

20.  On 25 September 2015, I gave written directions for the parties to agree on a bundle of core documents in respect of a related legal action HCMP2674/2004[6] (“Related Action Bundle”), and for P to lodge such bundle with the court no later than 7 days before the adjourned PTR scheduled to be heard on 30 October 2015 (“2^nd PTR”).

21.  On 29 October 2015, P filed the Summary of Related Actions signed by Mr Lau, Ms Ng and Mr Chan. Shortly before the 2^nd PTR, P lodged the Related Action Bundle.

VII.  STRIKING OUT SUMMONSES

22.  On 6 October 2015, D2 filed a summons to strike out P’s Re-Amended Statement of Claim in the 1^st Action on the basis that it disclosed no reasonable cause of action, was frivolous or vexatious and/or was otherwise an abuse of the court’s process (“D2 Striking Out Summons”).  On the same day, D2 filed his 2^nd affirmation in support of such summons (“D2 2^nd Aff”).

23.  On 6 October 2015, D3 filed a summons to dismiss the 1^st Action against D3 and to strike out the Amended Writ of Summons and Re-Amended Statement of Claim against D3 on the grounds that they disclosed no reasonable cause of action and/or no cause of action known to the law, P’s claims were hopeless and bound to fail, they were scandalous, frivolous or vexatious and/or they were otherwise an abuse of the court’s process (“D3 Striking Out Summons”).  On the same day, D3 filed his affirmation in support of such summons (“D3 Aff”).

VIII.  2^ND PTR

24.  At the 2^nd PTR, Mr Lau indicated P had no objection to the D2 Statement if leave was granted for P to file/serve witness statement(s) in reply/response.  Ms Ng had no objection to such proviso, but as Mr Lau did not produce any draft witness statement(s) in reply/response to the D2 Statement, Mr Chan was unable to take proper instructions.  So at the 2^nd PTR I granted the following directions:

(a) P shall (if so advised) send to D2 and D3 signed copies of supplemental witness statements of P, Jeffrey and/or Wong Yin Fei limited to reply/response to the D2 Statement (“P Reply Statements”);

(b) within 7 days thereafter, D3 shall serve on P and D2 notice in writing as to (i) whether D3 had any objection for P to formally serve the P Reply Statements and rely on them at trial, and (ii) whether D3 wished to serve supplemental witness statements in reply/response thereto (“D3 Reply Statements”) within 21 days thereafter;

(c) if D3 elected not to object under (b)(i) above subject to leave being granted for D3 to file/serve the D3 Reply Statements, D3 shall (if so advised) send P and D2 signed copies of the D3 Reply Statements within 21 days thereafter;

(d) the D2 Statement Summons be adjourned to be heard on the 1^st day of trial (6 January 2016) at 10:00am with costs reserved.

25.  Since (a) P and D2 through their then counsel indicated they had no objection to the D2 Statement and P Reply Statements (if any) and (b) D3 through his then counsel indicated he had no objection to the D2 Statement, the purpose of case management directions in the above paragraph was to give D3 an opportunity to address any possible forensic prejudice that might arise from the then as-yet-unknown contents of the P Reply Statements.  But it was clear from the 2^nd PTR that neither P nor D3 had any objection to the D2 Statement.

26.  As regards the D2 and D3 Striking Out Summonses, Mr Lau confirmed P would rely on legal submissions and would not file any affidavit in opposition.  So at the 2^nd PTR I adjourned such summonses to be heard on the 1^st day of trial (6 January 2016) at 10:00am with costs reserved.  I also directed that no further affidavit shall be filed/served by any party without leave of the court, and any application for such leave shall be made no later than 21 days before the adjourned hearing with reasons on affidavit.  The striking out applications was adjourned so that every opportunity until the last possible moment was afforded to P to address the attack by D2 and D3.

IX.  1^ST DAY OF TRIAL

27.  On 19 November 2015, P filed Notice to Act in Person in the 1^st and 2^nd Actions.  P, who was 80 years old, was absent at the trial.  By an affidavit of service filed on the 1^st day of trial, the hearing bundle as well as the written opening submissions and list of authorities of Ms Ng (counsel for D2 and D3 at trial) were served on P’s address for service on 22 December 2015 and 5 January 2016.  These documents amounted to recent reminders to P of the trial dates.  I proceeded to hear the D2 Statement Summons, D2 Striking Out Summons and D3 Striking Out Summons on the 1^st day of trial.

28.  In respect of the D2 Statement Summons, I was informed by Ms Ng that P did not send any P Reply Statement(s) to D2 and D3 within the prescribed time or at all.  Since Mr Lau and Mr Chan confirmed at the 2^nd PTR that P and D3 respectively had no objection to the D2 Statement, and P and D3 eventually chose not to file/serve any supplemental witness statement in reply/response, so on the first day of trial I granted leave for D2 to file the D2 Statement and dispensed with service of the same.  I also ordered D2 to pay to P and D3 their costs of and occasioned by the D2 Statement Summons (including all costs reserved if any) to be taxed if not agreed.

29.  In respect of the D2 and D3 Striking Out Summonses, despite the orders made at the 1^st and 2^nd PTRs, P did not (i) seek leave to file any affidavit in opposition (and none had been filed) and/or (ii) file any application for leave to amend the Re-Amended Statement of Claim in the 1^st Action.  So on the 1^st day of trial, I granted the following orders:

(a) the Amended Writ of Summons and Re-Amended Statement of Claim in the 1^st Action be struck out, and P’s claims against the Ds in the 1^st Action be dismissed;

(b) subject to the costs order in (2) below, P do pay D2’s costs of the 1^st Action before and after the Master Order (including costs of the D2 Striking Out Summons and all costs reserved, if any) to be taxed if not agreed;

(c) subject to the costs order in (2) below, P do pay D3’s costs of the 1^st Action before and after the Master Order (including costs of the D3 Striking Out Summons and all costs reserved, if any) to be taxed if not agreed.

This meant the only remaining proceedings in the 1^st Action for the purpose of the trial were D2’s counterclaim against P whilst D3 dropped out of the picture altogether.  Ms Ng sought leave to withdraw D2’s counterclaim with no order as to costs.  So on the 1^st day of trial, I also (1) granted leave for D2 to withdraw his counterclaim in the 1^st Action, and (2) made an order that there be no order as to costs of and occasioned by D2 in respect of his counterclaim in the 1^st Action including all costs reserved if any.  I have reserved my Reasons for Decision in respect of the D2 and D3 Striking Out Summonses, which I now give.

X.  LEGAL PRINCIPLES: STRIKING OUT

30.  The principles governing a striking out application are well established.  Hong Kong Civil Procedure 2016provides inter alia as follows:[7]

“…... It is only in plain and obvious cases that the court should exercise its summary powers to strike out …… any pleading under this rule. …… Disputed facts were to be taken in favour of the party sought to be struck out. Nor should the court decide difficult points of law in striking out proceedings. The claim must be obviously unsustainable, the pleadings unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out. …… Plain is not the same as simple and obvious is not the same as short… if on a careful reading of the Statement of Claim however complicated, it can be seen that there is no cause of action, a court can, and probably will, order it to be struck out …… The mere fact that the case is weak and not likely to succeed is no ground for striking it out ……

It is for the party seeking to strike out …… pleading to demonstrate that the case is a plain and obvious one in which the other party’s claim is bound to fail. ……

…… This rule also empowers the court to amend …… any pleading. However, unless there is reason to believe that the case can be improved by amendment, leave will not be given. Or where the amendments would be far‑reaching and so radical as to amount to a totally new pleading which would probably provoke a fresh application to strike out, the correct course is to strike out. ……”

31.  The fact that in a particular case the question of law appears difficult or obscure does not preclude the court from striking out pleadings if it is satisfied it has all the necessary information to decide the question, and has come to the conclusion after full argument in the face of all relevant information that the case is plainly and obviously one for striking out.  In such circumstances, the court “should not decline to do so on the ground that the issues are difficult or complicated”.[8] 

32.  It must also be borne in mind that the object of the jurisdiction under Order 18 rule 19 of the Rules of the High Court (“RHC”) “is to ensure that defendants shall not be troubled by claims against them which are bound to fail, having regard to the contested facts.  …… In those circumstances it is pointless for the case to go on …… and even more useless and time consuming from the point of view of the proper administration of justice is that there should then have to be …… an order for an issue to be tried, and for that issue to be tried before the inevitable result is attained …… the object is “to prevent parties being harassed and put to expense by frivolous, vexatious or hopeless litigation.” ……”[9]

33.  In Sealegend Holdings Ltd v China Taiping Insurance (HK) Co Ltd, it was said that:[10]

“25. A proceeding is frivolous when it is incapable of reasoned argument, without foundation or cannot possibly succeed. A proceeding is vexatious when it is oppressive or lacks bona fides. The expression ‘frivolous or vexatious’ includes proceedings which are an abuse of the process: Hong Kong Civil Procedure 2014, §18/19/8.

26. An “abuse of the process of the court” 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 (eg where an action is absolutely groundless or time-barred) summarily prevent its machinery from being used as a means of vexation and oppression in the process of litigation: Hong Kong Civil Procedure 2014, §18/19/10.

27. The court has inherent jurisdiction to stay all proceedings before it which are obviously frivolous or vexatious or ‘hopeless’ in the sense of being bound to fail: Hong Kong Civil Procedure 2014, §18/19/12, 16 and 21.”

34.  As regards the timing of the application, Hong Kong Civil Procedure 2016 states as follows:[11]

“Although the rule expressly states that an application to strike out the indorsement on a writ or a pleading may be made at any stage of the proceedings, the application should always be made promptly and as a rule before the pleadings are closed. …… As to whether such an application should be heard at the commencement of the trial, the rule under Halliday v. Shoesmith [1993] 1 W.L.R. 1 – which generally restricted a strike-out application being made after the costs of preparation for the trial has been incurred – has been rejected in Hong Kong in Tang Wang Shiu v. Tang Kin Yeung [2002] 3 H.K.L.R.D. 627. Bearing in mind that O.18, r.19 permits an application to be made ‘at any stage of the proceedings’, Recorder Kenneth Kwok S.C. held that ‘the duty must lie … on a party not to put in, and persist on the basis of, a pleading which offends against O.18, r. 19. (Consequently), the recipient of an offending pleading cannot be under a greater duty to enforce the rule before the commencement of trial’. In coming to his decision, Recorder Kenneth Kwok S.C. preferred the Goymer v. Lombard North Central Wheelease Ltd, The Times, April 1, 1993 line of cases in which Leggatt L.J. stated that ‘the court will not nowadays feel precluded from exercising its power on the ground that the trial is imminent’. An important factor in exercising the Court’s discretion was the emphasis upon saving precious court time, no matter the stage of the application (Johnson v. Gore Wood & Co. [1999] B.C.C. 474, C.A.). Notwithstanding the above observations, the Court of Appeal has confirmed that late applications for strike out (i.e. at the commencement of the trial) should only be acceded to in the clearest circumstances, e.g. where the particulars are totally lacking and the allegations clearly unsustainable. See Poon Lai Bing v. Gold Dragon Ltd t/a Club Paris (unrep., CACV136/2007, [2008] H.K.E.C. 16).”

35.  In Tang Wai Cho v Tang Wai Leung, Cheung JA said as follows:[12]

“8. The focus of the parties in the Court below, and indeed before us, was on the striking-out of the plaintiff’s claim. While there are authorities which support the view that striking-out can be entertained even at trial or shortly before it, this Court (Cheung JA and Stone J) in Poon Lai Bing v Gold Dragon Ltd (unrep., CACV 136/2007, [2008] HKEC 16) was of the view that the application in such a late stage should only be entertained in the clearest circumstances. To lodge a striking-out application on the third day of a trial is wholly exceptional. I expressed my surprise that the plaintiff’s legal advisers allowed such a course to be taken without objection. In Johnson v Gore Wood & Co. [2002] 1 AC 1, the defendant applied to strike out an action four years after its commencement on the ground that it was an abuse of process. The House of Lords reversed the Court of Appeal’s decision to strike out the plaintiff’s claim on that ground.

9. Lord Bingham held that (p.34D):

…… [the defendant’s] failure to take action to strike out over a long period of time is potent evidence not only that the action was not seen as abusive at the time but also that, on the facts, it was not abusive.

10 Lord Millett also said that (p.61F):

I do not consider that a defendant should be permitted to raise such an objection as late as this. A defendant ought to know whether the proceedings against him are oppressive. It is not a question which calls for nice judgment. If he defends on the merits, this should be taken as acquiescence.

11.  In my view the same comment applies with equal force to a striking-out based on the other well established grounds as well.  In my view one should retain a proper perspective to determine whether the dispute can, in effect, be put to an end by a striking-out application in the middle of the trial.  General observations by Courts that striking-out can be dealt with at or close to trial do not provide a ready-made answer that such can or should be done in any particular case.  If grounds for striking-out exist then they should be apparent, in the normal course of events, at the close of pleadings, and at the latest after exchange of witness statements.  There is nothing whatever exceptional about the present case, and regrettably this case demonstrates that the striking out application is evidently a complete waste of time and costs.”

36.  In Ko Hon Yue v Chiu Pik Yuk, Ma CJ made the following obiter observations on the invitation to the trial judge to deal with a striking out application made at trial based on Henderson v Henderson abuse in relitigation:[13]

“84. …… It is true that an application to strike out can be made at any time: see RSC O.18 r.19(1).  However, where an application is made to strike out proceedings or any part thereof on the basis that they should not be permitted to go to trial, it is obvious that such an application should be made at the earliest possible opportunity, before the parties and the court’s resources are potentially wasted. Obviously, where a claim or defence is unsustainable as a matter of law, the timing of the application to strike out is less critical, but where a discretion (or something akin to it) exists as to whether or not a set of proceedings or any part thereof should be permitted to continue, time is important. In this latter situation, where proceedings may constitute an abuse on the basis that it would be vexatious for a court to try the case, the sooner this is dealt with the better; otherwise, the very evils sought to be avoided (the wastage of time and resources causing vexation or harassment of the other party) would continue to accumulate.  The present case provides a glaring example of this.

……

86. The Trial Judge’s decision to dismiss the plaintiff’s claim on this basis was reversed by the Court of Appeal.  A number of reasons were articulated in support of this conclusion, but I need only refer to one: the delay on the defendants’ part to raise the point of abuse.  It was not until the trial itself that the point was raised by the defendants that the action ought to be dismissed on the basis of abuse.  ……

87. By the time Chu J was invited to deal with the issue, the parties were already fully prepared for trial on each of the issues raised in the action.  In other words, there was an irony here that presented itself before the court: Chu J was asked to strike out the proceedings on the basis that the plaintiff ought not to be permitted to go to trial when at that stage, both parties (not to mention the Judge) had fully prepared themselves for a trial. …… In my view, the Judge ought to have refused to deal with the abuse arguments and simply have dealt with the substantive issues in the action only.  It was at that stage far too late to mount a strike out application on the basis of the abuse alleged. …… This is not a situation where a late strike out application is made on the basis that no reasonable cause of action or defence existed.  In that situation, a court may well find it appropriate to deal with the application: see, for example, Tang Woung Shiu v Tang Kun Yeung [2002] 3 HKLRD 627.” (my emphasis)

XI.  LEGAL PRINCIPLES: DISSOLVED COMPANY

37.  A pertinent matter for the D2 and D3 Striking Out Summonses is the status of a dissolved company.  In Ng Pit Hak & ors v Ho Chiu,[14] a company had claims against the defendant arising from loss of benefits from a hydropower station project in Mainland China that ought to have accrued to it, and from losses it suffered on account of use of its funds by the defendant to carry out unauthorised stock trading activities, so the plaintiffs being ex-shareholders of the company commenced a derivative action against the defendant.  But on 12 May 2009 Master S Kwang struck out such claim on the ground that the exceptions to the rule in Foss v Harbottle[15] only applied when a company still existed and not where the company had been dissolved.

38.  In that case, the company was struck off from the Companies Register pursuant to section 291(6) of the previous Companies Ordinance Cap 32 (“CO”),[16] and as a result the company was dissolved.  Section 292 of the CO provides that:

“(1) When a company is dissolved, all property and rights whatsoever vested in or held on trust for the company immediately before its dissolution, (including leasehold property but not including property held by the company on trust for any other person) shall be deemed to be bona vacantia and shall accordingly belong to the Government, and shall vest and may be dealt with in the same manner as other bona vacantia accruing to the Government.

(2) Subsection (1) is subject and without prejudice to the following –

(a) any order that may at any time be made by the court under section 290 or 291;

(b) a reinstatement that may be made under section 291AB.”

Master S Kwang held that any pre-existing right that accrued to the company to sue the defendant for misappropriation of the company’s funds would no longer, as a result of the dissolution, vest in the company (unless and until the company was restored), but would vest in the government under the bona vacantia principle, so there was no viable cause of action for the plaintiffs as ex-shareholders of the company to maintain the claim in that action against the defendant for money which at one time allegedly belonged to the company.  The learned master held that the plaintiffs’ claim was plainly and clearly bad, and he exercised his discretion to strike out the statement of claim.

39.  The 1^st plaintiff in Ng Pit Hak & ors took the matter on appeal, but To J refused his application for leave to appeal out of time and dismissed his appeal.[17] The learned judge held as follows:

“8. The basic principle is that if a wrong is done to a company, the company is the only proper plaintiff to take action against the wrongdoer: Foss v Harbottle (1843) 2 Hare 461. There are exceptions under that rule. However, Master Kwang held that such exceptions were inapplicable to a dissolved company. That must be right. If a company is dissolved, all property and rights whatsoever vested in or held on trust for the company immediately before its dissolution, shall be deemed to be bona vacantia and shall belong to the Government, by virtue of section 292(1) of Companies Ordinance. The exception under the rule in Foss v Harbottle could not have the effect of overriding a statutory provision. Thus, all along, the right to sue the Defendant for misappropriation of the Company’s funds was in the Company, which as a result of its dissolution was vested in the Government. The learned Master’s conclusion was based on well established principles and could not have been faulted. ……”

40.  In Re Integrated Marketing Communications Limited,[18] G Lam J in dealing with an application for the restoration of a company to the Companies Register pursuant to section 765 of the Companies Ordinance Cap 622[19] said as follows:

“7. With respect, I think that must be right. As a matter of general principle, a company that is dissolved has ceased to exist as a legal entity. In the absence of express statutory provision such as found in s.291(7) of the previous Companies Ordinance before its repeal, a dissolved company is not normally in a position either to sue or be sued or indeed to do any other legal act.”

XII.  LEGAL PRINCIPLES: COMMON LAW DERIVATIVE ACTION

41.  In Waddington Ltd v Chan Chun Hoo,[20] Ribeiro PJ held that as matter of principle and authority, the common law required the plaintiff to show the requisite prima facie case when his locus to sue derivatively on behalf of the company is challenged:

“12.It follows that where a wrong is alleged to have been done to a company and a minority shareholder purports to bring a derivative action on the company’s behalf, it is incumbent on the shareholder to show that the general ‘proper plaintiff’ rule is displaced and that the case falls within the relevant exception [eg ‘fraud on the minority’ exception to the rule in Foss v Harbottle].

13.The derivative action is a procedural device invented by the courts to afford protection to the minority. Procedurally, there is no requirement at common law for a person seeking to sue derivatively first to obtain the leave of the court. But it does not follow from this that there is no threshold requirement to be met by the plaintiff. Substantively, such an action is only permitted where it can prima facie be shown that there exists a viable cause of action or equitable claim vested in the company which, if made good, would establish a fraud on the minority; as well as control of the company by the alleged wrongdoers such as to enable them to stifle any proposed action against themselves.

14.The time-honoured practice at common law is for the plaintiff to issue proceedings ‘on behalf of himself and the other shareholders other than the defendants’, naming the company on whose behalf the proceedings are brought as one of the defendants. A challenge to the plaintiff’s locus generally takes the form of an application by the relevant defendants to strike out the claim or to have the court determine as a preliminary issue that the plaintiff has no locus to sue on the company’s behalf. The issue of standing can also arise in other procedural contexts, such as an application to add a party or to amend a pleading so as to introduce a derivative action. It is in such a context that the court has to consider whether the self-appointed derivative plaintiff should be permitted to proceed with the action by way of exception to the proper plaintiff rule.

……

20. The common law rule is therefore that a plaintiff whose standing to bring a derivative action is challenged must establish a prima facie case that the company is entitled to the relief claimed and that the action falls within an applicable exception to the rule in Foss v Harbottle (usually the fraud on the minority exception). Where, as often occurs, the plaintiff seeks an order to be indemnified as to costs by the company which may benefit from the derivative action, the court’s approach is to consider whether and to what extent an honest, independent and prudent board might decide to authorise prosecution of the action, given the available evidence.

21. One may also note in passing that the burden and threshold requirements are different where a defendant seeks to strike out a plaintiff’s action on the ground that the loss claimed is merely reflective loss.  In such cases, the plaintiff is asserting his own cause of action and the burden lies on the defendant to show that it is plain and obvious that the losses are indeed merely reflective and the action is unsustainable.  Thus, in Johnson v Gore Wood, Lord Bingham of Cornhill noted: ‘At the strike-out stage any reasonable doubt must be resolved in favour of the claimant.’”

42.  As regards the burden/standard of proof for the prima facie test, To J in Melvin Waxman v Li Fei Yu & ors[21] held that the burden of proving a prima facie case that the company is entitled to the relief claimed and that the action falls within an applicable exception to the rule in Foss v Harbottle rests on the plaintiff whose locus to bring the derivative action is challenged.  To J followed the guidance in Waddington Ltd on the standard of proof for the prima facie test,[22] and held as follows:

“25. …… the prima facie case test …… means something less than proof beyond reasonable doubt or proof on a balance of probability. This is because once those standards are reached, it would be actual proof on a criminal or civil standard. The term prima facie case or prima facie evidence just means sufficient evidence to pass the judge so as to make the issue fit for determination by the tribunal of fact. To achieve that standard, the party which bears the burden of proof has to adduce sufficient evidence to satisfy the court, sitting as the tribunal of law, that there are reasonable grounds for believing that his case or the issue in question is well founded so that the issue becomes one which is fit for the tribunal of fact to adjudicate on. It should never be equated with proof beyond reasonable doubt or proof on a balance of probability.

26. …… In my opinion, how this burden is discharged depends on the circumstances of the case.  If the issues in question are adequately pleaded and not contradicted by evidence filed by the parties, then the pleading alone would be sufficient proof of the prima facie case.  But even if contrary evidence has been filed by the defendant, the courts are not required to conduct a trial by affidavit nor in all cases necessarily required to call the makers of the affidavit for cross-examination.  The courts are capable of and well experienced in making provisional finding of facts on affidavit evidence in such interlocutory proceedings by testing the plaintiff’s case against documentary evidence, incontrovertible evidence, or evidence which is not in dispute.  The court can determine against the backdrop of such contrary evidence whether the plaintiff’s evidence has passed the judge so as to make the issue or the case fit for determination by the tribunal of fact.  In an appropriate case, the court may be satisfied on the basis of the pleaded case that the prima facie test is met, irrespective whether contrary evidence has been filed by the defendant. ……”

43.  I now turn to the parties’ pleadings in the 1^st Action.  However, since D2 and D3 took narrow points under the D2 and D3 Striking Out Summonses, I only set out those parts of the pleadings that would be relevant for the present purpose.

XIII.  P’s CLAIM IN THE 1^ST ACTION

44.  P claimed that from the early 1990s onwards the Deceased started to suffer from dementia of the Alzheimer type as a result of which he gradually lost his mental capacity, that his mental condition progressed to the late onset stage of Alzheimer’s disease by February 1999 if not earlier, and that his mental incapacity was known to D1, D2 and D3. 

45.  P averred the purported appointment of D1 and D3 as directors of Lung Tang on/about 15 July 1998 was void and of no legal effect because (a) no meeting of directors/members was called/held for such purported appointment whether on 15 July 1998 or at any time, and (b) D1/D3 did not hold any qualification shares whether before or within 2 months of such purported appointment as required under articles 11-12 of Lung Tang’s Articles of Association, and D1/D3 knew or ought to have known of such matters.

46.  P claimed Lung Tang beneficially owned the Premises, the open market value of which was not less than $16,000,000 as at 9 February 1999.  P claimed that by an assignment dated 19 February 1999 D1, D2 and D3 caused/procured Lung Tang to purportedly assign the Premises to themselves at a stated consideration value of $8,000,000 (“Assignment”):

(a) D1, D2 and D3 procured the Deceased to execute the assignment dated 19 February 1999 in his capacity as a director of Lung Tang when he was mentally incapacitated;

(b) D1 purported to act as director of Lung Tang to execute the assignment dated 19 February 1999 when his appointment was void and/or invalid;

(c) on/about 9 February 1999, D1, D2 and D3 caused/procured (i) Techon to pay Lung Tang $8,000,000 by cheque purportedly as consideration for the Assignment, (ii) the Deceased to sign Lung Tang’s cheque drawn on its bank account for $8,000,000 payable to Techon being repayment of the $8,000,000 it had paid for the Premises, and (iii) the deposit of Lung Tang’s cheque into Techon’s bank account for Techon to receive Lung Tang’s repayment of $8,000,000.

P claimed the knowledge of D1, D2 and D3 was imputed to Techon as they were/are Techon’s only shareholders and directors.  Consequently, D1, D2 and D3 did not pay any consideration or there was total failure/absence of consideration, so the Assignment was ineffective and did not bind Lung Tang.  Lung Tang was therefore entitled to the retransfer of the legal title of/in the Premises or alternatively D1, D2 and D3 held/hold their legal title of/in the Premises upon resulting/constructive trust for Lung Tang. 

47.  P also claimed that the Assignment was the result of a fraud practised by them upon Lung Tang and it should be set aside.  P relied on the above matters and added that (a) the Assignment was the result of a fraudulent scheme D1, D2, D3 and Techon practised upon Lung Tang for any/all of them to obtain transfer of legal title of the Premises without payment, (b) D1, D2 and D3 had no intention of paying the purchase price to Lung Tang, (c) D1, D2, D3 and Techon intended to deprive Lung Tang of its legal title to the Premises being its substantive asset.

48.  P further claimed the Assignment was an unconscionable bargain that should or ought to be set aside as being the fruit of an equitable fraud.  P relied on the above matters and added that:

(a) at the time of the Assignment the Deceased was suffering from Alzheimer’s disease and his facilities were impaired thereby rendering him unable to discharge his duty as a director of Lung Tang;

(b) in discharge of their purported authority as directors of Lung Tang, D1 and D3 caused/permitted/allowed their duty as directors of Lung Tang to conflict with their personal interest as assignees of the Premises, and D2 as the other assignee had actual knowledge of such as he was privy to the Assignment;

(c) neither the Memorandum nor Articles of Association of Lung Tang permitted/authorised transfer of its assets to its directors without consideration;

(d) no consideration was given by D1, D2 and D3 or anyone else for the Assignment, or alternatively Techon’s payment of $8,000,000 was a sham as it was returned on the same day of payment;

(e) but if there had been payment of $8,000,000 for transfer of the legal title of the Premises, such transfer was at a substantial undervalue;

(f) so Lung Tang did not obtain any benefit, financial or otherwise, from the Assignment.

49.  P therefore claimed Lung Tang lost its only valuable asset, and P suffered loss and damages to the extent of P’s Share in Lung Tang, but Lung Tang was rendered unable to institute legal proceedings against D1, D2, D3 and Techon for the aforesaid wrongs in that:

(a) Lung Tang had no validly appointed director or acting director since the death of the Deceased;

(b) P ceased to be a director since 15 July 1998 by rotation of directors under article 13 of Lung Tang’s Articles of Association;

(c) neither D1 nor D3 had been validly appointed as director, but had they been validly appointed, neither D1 (who was a fugitive at large from Hong Kong since about the end of 2006) nor D3 was/is willing to give instructions to institute legal proceedings against themselves for their own wrongs (or alternatively there would be a conflict of interest and duty for them to continue to act as directors for such purpose);

(d) to date there was still no grant of representation in respect of the Estate, so the Deceased’s Share was still vested in the name of the Deceased;

(e) although P was/is Lung Tang’s only other shareholder holding P’s Share, no meeting of members could be called/convened and no resolution could be passed since the quorum for such meeting required at least 2 members;

(f) P was/is precluded from transferring any of her shares in Lung Tang to a third party in that such transfer required consent of the board of directors;

(g) since the death of the Deceased Lung Tang’s company papers were in the possession of D1 and D3, and P had not been able to obtain the same despite commencing HCMP1972/2003 against D1, D3, Lung Tang and Lung Tang’s auditors Chui, Fok and Company (“CFC”) who had possession, custody and control of Lung Tang’s documents upon the instructions of D1 and D3.

50.  P therefore brought the 1^st Action against the Ds as a derivative action for Lung Tang, and she sought the following reliefs (for and on behalf of Lung Tang): (a) a declaration that the Assignment was null/void and had no legal effect, (b) an order that the Assignment be set aside, (c) an order that D1, D2 and D3 do forthwith transfer/assign the legal title of/in the Premises to Lung Tang, (d) alternatively to (a)-(b) above, damages in the sum of $16,000,000 being the monetary value of Lung Tang’s loss as a result of the wrongs of D1, D2, D3 and Techon, and (e) interest, costs and further/other relief.

XIV.  D2’s DEFENCE AND COUNTERCLAIM IN THE 1^ST ACTION

51.  By his Amended Defence and Counterclaim, D2 denied P’s claims, and counterclaimed for a declaration that the Deceased beneficially owned P’s Share with costs and further/other relief. 

52.  D2 denied at the material times and in particular prior to February 1999 the Deceased suffered dementia of the Alzheimer type, and averred the Deceased was mentally capable of (a) understanding the general nature of what he was doing, (b) executing legal documents and drawing cheques in the normal manner, and (c) dealing with his company/personal affairs.  D2 did not notice and other family members (including Jeffrey) did not notify D2 that the Deceased suffered mental incapacity. 

53.  D2 claimed the Deceased operated his property development/ investment business by several companies of which Lung Tang was one, and he injected capital into (and had ultimate powers of control, management and decision-making in respect of) his businesses through such companies, so P was just a nominee director/shareholder with no participation/ involvement in the Deceased’s businesses including Lung Tang. Further, the Deceased solely paid up Lung Tang’s issued shares including P’s Share, and he was the beneficial owner thereof.  D2 had no knowledge of Lung Tang’s internal management except that at all material times P did not participate or was not involved in the operation of the Deceased’s businesses.  In fact, P left the Deceased in 1992 and since then (particularly in the period prior to February 1999) she had no contact with the Deceased, so the management of Lung Tang remained with the Deceased who was free to dispose of his assets held under Lung Tang by virtue of his legal/beneficial interest in the shares of Lung Tang.

54.  D2 claimed the Assignment was properly executed by the actual/apparent/ostensible authority of Lung Tang’s directors with consideration pursuant to the Deceased’s wish to dispose of Lung Tang’s assets in favour of his sons D1, D2 and D3, so D2 was a purchaser in good faith under the Assignment.  Since the Deceased was the beneficial owner of P’s Share and P was just a nominee shareholder/director without involvement/participation in the management of Lung Tang, P did not suffer any loss and damages and was not entitled to bring any derivative action on behalf of Lung Tang.

XV.  D3’s DEFENCE IN THE 1^ST ACTION

55.  D3 also denied P’s claim.  D3 averred the Deceased was of sound contracting mind and mentally well capable of understanding what he was doing up to and including at the very least February 1999, and before her Amended Statement of Claim in May 2004 P never complained about the Deceased’s mental capacity/fitness/ability to contract.  In any event, D3 had no knowledge/notice of any alleged mental incapacity on the part of the Deceased rendering him in any way incapable of understanding what he was doing.

56.  D3 claimed (a) the Deceased was the owner/developer of the land/premises known as Lung Tang Court, (b) the Deceased used Lung Tang as a vehicle/nominee to develop/sell Lung Tang Court, (c) the Lung Tang Court project was beneficially owned and funded by the Deceased who was therefore the sole beneficial owner of all proceeds of sale arising from the sale of units and car parking spaces of Lung Tang Court, and (d) the Deceased extracted such proceeds away from Lung Tang for himself as he was solely entitled to. 

57.  When Lung Tang was incorporated, P and the Deceased were appointed directors and they were equal shareholders.  P had no interest in (and did not concern herself with) the business, operations or affairs of Lung Tang, and she never sought, demanded or participated in any management/control of the affairs of Lung Tang.  Indeed, she knew and consented to the Deceased running the entire operations under Lung Tang to her exclusion and using Lung Tang as his vehicle/nominee to run his businesses, and/or P had waived or acquiesced the same.  Hence, the Deceased was entitled to deal with and dispose of the units and car parking spaces of Lung Tang Court as he pleased with no intention to benefit Lung Tang which he only used as vehicle/nominee, and the open market value of the Premises was therefore irrelevant. 

58.  D3 claimed P ceased to be a director and D1/D3 were properly appointed as directors on 15 July 1998 with Forms D2 signed by the Deceased and filed with the Companies Registry.  D3 averred P knew and consented to D1/D3 acting as directors and/or de facto directors of Lung Tang and/or holding themselves out and/or conducting themselves as directors of Lung Tang, and/or P allowed, waived and/or acquiesced to the same, so P and Lung Tang were bound by the acts and conduct of D1 and D3 acting as such.  Since D1/D3 never received any offer from the existing shareholders (including P) for transfer of shares in Lung Tang to them, and since all authorised share capital had been issued as paid up, it was impossible to make any new allotments unless the authorised share capital was first increased[23] followed by further allotment of new shares with offer to D1/D3 for their acquisition.  Such matters were outside the power/control of D1 and/or D3, but dependent upon and within the power/control of inter alia P, but P never consented and/or indicated consent to increase Lung Tang’s authorised share capital and no special resolution by shareholders in general meeting was ever passed to such effect.  So P knew it was not possible for D1/D3 to acquire shares in Lung Tang, and had waived and acquiesced to the appointment of D1/D3 as directors, including irregularities and/or breach of the Memorandum or Articles of Association (if any).

59.  D3 claimed that at all material times and since 15 July 1998 he did not participate in the management/control of Lung Tang.  He also denied D1, D2 and D3 procured/caused D1 and the Deceased as directors of Lung Tang to execute the assignment dated 9 February 1999 to assign the Premises to D1, D2 and D3 as tenants-in-common for the stated consideration value of $8,000,000.  Instead, it was the true/proper wish/intention of the Deceased, who was wholly/beneficially entitled to the Premises to deal with them as he wished.  D3 averred Lung Tang’s Articles of Association permitted the sale of properties held by the company to directors.[24] In any event, at the time of and after the Assignment, the Deceased, D1, D2 and D3 were aware of the nature/contents/effect of the Assignment, and were in full agreement with and fully consented to the same.  But if D1 and D3 were not Lung Tang’s directors on 9 February 1999, D1, D2 and D3 would be third party strangers and the Assignment would not constitute self-dealing.  D3 claimed D1, D2 and D3 were bona fide purchasers without notice/knowledge of any irregularities, breaches or wrongdoings, and they dealt with Lung Tang in good faith.  D3 was not aware Lung Tang’s, P’s or anybody else’s interest was or would be adversely affected or they would be concerned over the Assignment in any way whatsoever.[25] Further or alternatively, P knew and consented to and/or had waived and/or acquiesced in the acts/conduct of Deceased, D1, D2 and D3, including any alleged irregularities, breaches and/or wrongdoings (which were denied).[26]

60.  D3 claimed P and/or Lung Tang did not suffer any loss since the Deceased beneficially owned and was entitled to and did direct/command Lung Tang (as mere vehicle/nominee of the Deceased) to transfer/sell the Premises as and when he should so choose, to whomsoever and at whatever price he should desire.  The Deceased’s intention was to gift the Premises to D1, D2 and D3 as follows: (a) the Deceased procured Lung Tang to transfer the Premises to D1, D2 and D3 by way of an assignment dated 9 February 1999 with a stated consideration value of $8,000,000, and (b) the Deceased procured $8,000,000 (which was his money) to be paid by Techon (which was subject to his sole control and wishes in this regard) to Lung Tang, and Lung Tang to issue a cheque on the same day for the same amount to be repaid to Techon.  All along Techon held the sum of $8,000,000 for and on behalf of the Deceased only, and D1, D2, D3 and Techon only acted in accordance with the Deceased’s wishes/commands in their acts/conduct in relation to such monies, so the consideration came from Techon even though the Deceased voluntarily decided to transfer $8,000,000 from Lung Tang to Techon, and no consideration/value came from any of D1, D2 and D3 personally/directly as regards the Assignment.  D3 claimed the Assignment was effective and did bind Lung Tang, and neither Lung Tang nor P suffered any loss.

61.  D3 claimed the Deceased had a foreign currency account with New Zealand dollars in the name of P and the Deceased (“NZ Account”), and all monies therein belonged to the Deceased.  In/about 1991, P secretly withdrew/misappropriated all monies in the NZ Account (about NZ2,570,132) without the knowledge/consent/authority of the Deceased, who was greatly angered upon discovery of P’s act and informed P he would treat the money she took/misappropriated as her share of the Estate.  Further or alternatively, P’s claim in the 1^st Action could be and/or had already been set-off and/or reduced against the monies she misappropriated from the NZ Account, and P’s claim herein (which was denied) had been extinguished.

62.  D3 claimed P did not have any locus standi to bring the 1^st Action in respect of the claims therein, and he denied P was entitled to bring a derivative action using Lung Tang’s name.  D3 averred the alleged wrongdoers were not in control of Lung Tang and/or could not be regarded as being in control of Lung Tang:

(a) none of D1, D2 and D3 were registered as shareholders of Lung Tang;

(b) if P was correct in contending D1 and D3 were not properly directors of Lung Tang, D1, D2 and D3 did not control Lung Tang’s board of directors and had no control over Lung Tang;

(c) D3 (albeit a director of Lung Tang) was not involved in the management/control of Lung Tang and did not in fact manage/ control Lung Tang;

(d) the Deceased was dead and no longer a director of Lung Tang, and the Deceased’s Share was vested in the Estate.

P and the Estate held all the shares of Lung Tang and had full/total control of Lung Tang.  D3 claimed that if P was displeased with the constitution/ conduct of the board of directors of Lung Tang, she (if so disposed) was well able to alter the same.  Further, she had taken no action with regard to any alleged conflict of interest, eg there was no request by P or otherwise for D3 to resign as director of Lung Tang.

63.  D3 averred that so far as he was aware, (a) P had not requested/ procured/taken any steps for Lung Tang and/or its board of directors to institute legal proceedings for the claims in the 1^st Action in the name of Lung Tang as the proper plaintiff, (b) P made no attempts nor took any steps to change/alter the constitution of Lung Tang’s board of directors, (c) insofar as P was correct in contending D1 and D3 were not properly directors of Lung Tang (which was denied) she made no attempts nor took any steps to create/constitute a functional and/or acceptable board of directors, and (d) P made no attempts nor took any steps to invoke the provisions in Lung Tang’s Articles of Association to represent the voting rights and powers of the Deceased/Estate as shareholder of the Deceased’s Share in members’ general meeting.  D3 claimed that had Lung Tang been so disposed of , it would have been well able to bring legal proceedings as it pleased, and if Lung Tang had no functioning or validly appointed board of directors and/or a board of directors that was acceptable to P, this was due to P’s own actions, inactions and voluntary choices.

XVI.  DISCUSSION: DISSOLVED COMPANY

64.  The primary submission by Ms Ng was that Lung Tang (on whose behalf P brought the 1^st Action as a common law derivative action) had long since been dissolved and ceased to exist.  It was clear from the company search records exhibited to the D2 2^nd Aff and D3 Aff that Techon and Lung Tang had been struck off the Companies Register and dissolved on 31 October 2008 and 16 November 2007 respectively.  In respect of Lung Tang, it was recorded in the company search records that:

“Pursuant to section 291(6) of the Companies Ordinance, notice has been published on 31 October 2008 under Gazette Notice No 7306 and the name of this company [ie Lung Tang] has been struck off the register. This company is accordingly dissolved as from the date of the publication of the notice.”

65.  As a matter of logic and common sense, and as confirmed by the authorities in Part XI above, Lung Tang as a dissolved company ceased to exist as a legal entity and could not itself sue or do any other legal act unless and until it was restored to the Company Register.  Since Lung Tang itself could no longer sue the alleged wrongdoers, it must follow that a derivative action could not be brought on its behalf.  Section 292(1) of the CO was in force and applicable at the time of Lung Tang’s dissolution, and when Lung Tang was dissolved, all property and rights whatsoever that were vested or on trust for Lung Tang immediately before its dissolution were deemed bona vacantia and shall accordingly belong to the Hong Kong government.

66.  There was no evidence before me that any application had been made and/or any order had been granted to restore Lung Tang to the Companies Register.  In the circumstances, P had no viable derivative cause of action against the Ds in the 1^st Action, and further pursuit of such claim would be an abuse of the court’s process. 

67.  In coming to this view, I have borne in mind the principles in relation to late striking out applications (especially those made at the commencement of trial), ie that such applications should be acceded to in the clearest circumstances.  But I also note Ma CJ’s observations in Ko Hon Yue that the timing of the application to strike out “is less critical” where a claim is unsustainable, and that in a situation where a late strike out application was made on the basis that no reasonable cause of action existed, “a court may well find it appropriate to deal with the application”.  Here, the underlying fact (ie Lung Tang was dissolved) was introvertible, and on such premise the D2 and D3 Striking Out Summonses turned on a crisp point of law that was quite plain and obvious.  As explained above, P’s claim in the 1^st Action was clearly unsustainable and unarguably bad, and I have no hesitation in striking out the Amended Writ of Summons and the Re-Amended Statement of Claim in the 1^st Action, and dismissing P’s claims in the 1^st Action against the Ds. 

68.  This is sufficient to dispose of the matter, and there is no need to turn to the other ground that Ms Ng relied on, ie P did not have locus standi to bring a common law derivative action.  However, in deference to her arguments, I shall deal with this point briefly.  But before I do so I have to turn to the evidence/materials on the related legal actions drawn from the Summary of Related Actions, Related Action Bundle, pleadings in the Consolidated Action, and D2 2^nd Aff.

XVII.  RELATED LEGAL ACTIONS

(a) HCMP1972/2003

69.  On 9 May 2003, P as shareholder of Lung Tang commenced HCMP1972/2003.  In the Re-Re-Amended Originating Summons filed on 30 July 2003, P claimed against Lung Tang, its auditors CFC and D1 for an order that Lung Tang do send P copies of its balance sheet and profit/loss account for the last 6 accounting years within 7 days, failing which CFC do send to P the aforesaid documents within 7 days.  D2 (not being a party to HCMP1972/2003) did not know whether P obtained the requested documents.  But in P’s 2674/04 1^st Aff referred to in paragraph 72 below, it was said that by the end of 2003 P was advised by her solicitors to stay HCMP1972/2003 and to commence another action with more effective cause of action.  As a result, P commenced the 1^st Action.

(b) 1^st Action

70.  On 13 October 2003, P commenced a common law derivative action against D1, D2, D3 and Lung Tang.  Subsequently, Techon was added as the 5^th defendant.  Particulars of the 1^st Action and its current status have been set out above.

(c) HCMP2674/2004

71.  On 15 October 2004, P commenced HCMP2674/2004 against D1, D2 and D3 for the following reliefs (which D2 did not oppose):

(a) P be at liberty to call an extraordinary general meeting (“EGM”) of Lung Tang by giving not less than 21 days’ notice in writing thereof to the Official Administrator (“OA”) (in his/her capacity as the representative in whom was vested the Deceased’s Share);

(b) the notice of such meeting shall specify the place, date and time of the meeting to be held in Hong Kong and the meeting would be for passing a resolution that P alone be re-appointed as director and Jeffrey be appointed a director with immediate effect;

(c) P be at liberty to hold and conduct such an EGM, and the sole presence of P at such meeting shall be deemed to constitute a quorum for that meeting.

72.  On the same day, P filed her affirmation in support of the originating summons (“P’s 2674/04 1^st Aff”).  In such affirmation, P set out her case, and referred to HCMP1972/2003 and the 1^st Action.  P went on to say that upon enquiries made in June 2004, the OA declined to become registered as shareholder of the Deceased’s Share and/or to convene an EGM to appoint P and one other person as directors to enable Lung Tang to function.  So at the end of June 2004, P was legally advised that she was the sole surviving shareholder and sole surviving director,[27] but (a) a general meeting could only be held with the joint attendance by P and the Deceased, and (b) a board meeting could only be held with the appointment of another director by the Deceased and P in general meeting, so P had to apply to the court for a necessary order under section 114B(1) of the CO[28] that P alone shall be deemed sufficient quorum to constitute a general meeting which would enable P to appoint Jeffrey as the other director thus forming a “functional and acceptable board of directors”, and upon the formation of such functional and acceptable board of directors Lung Tang should be able to resolve to join the 1^st Action as a 2^nd plaintiff to claim inter alia against D1, D2 and D3 as purported purchasers of the Premises for total failure of consideration for the Assignment, and to instruct solicitors to implement such resolution.  P was further advised it was desirable for Lung Tang to be made a co-plaintiff with P or an alternative plaintiff to P in the 1^st Action, but if Lung Tang were so added without the aforesaid necessary order, such was liable to be struck out for being embarrassing or showing no cause of action.

73.  D3 filed his affirmation in opposition made on 16 November 2004.  D3 claimed P and Jeffrey were not suitable persons to act as directors of Lung Tang due to their conflict of interest, and they should not be allowed to have sole voting powers at Lung Tang’s board meetings.  D3 counter-proposed for an independent person to be appointed to represent the Estate and the Deceased’s Share, and in fact D had commenced probate action HCAP14/2004 to appoint a solicitor Mr Wong Wo Ching David as administrator of the Estate to manage the Deceased’s Share, to attend/vote at the proposed EGM of Lung Tang, and to take up directorship at Lung Tang to safeguard the interest of the Estate.  So D3 sought an adjournment pending the appointment of such administrator for the Estate.

74.  P filed her affirmation in reply made on 28 December 2004.  She updated the court on progress in respect of HCAP14/2004, and doubted the impartiality of Mr Wong Wo Ching David whom she saw as likely to protect D1, D2 and D3 by opposing legal actions against them.  P denied she was in a position of conflict with the Estate, but to address any possible concern she proposed alternative reliefs which included (a) ordering the OA to attend the proposed EGM to vote in favour of the intended resolution that the OA and P be appointed as Lung Tang’s directors with immediate effect, and to attend all subsequent general/board meetings of Lung Tang and to act in a manner that would be in Lung Tang’s best interest, (b) appointing an independent and impartial solicitor other than Mr Wong Wo Ching David (or any alternative unilateral appointee of D3) as administrator in substitution provided such appointment would be by simple majority of votes of all 11 beneficiaries of the Estate with P (as lawful wife of the Deceased) having 50 votes and the Issues each having 5 votes, and (c) granting letters of administration of the Estate to P or to P with Jeffrey, the OA and/or an independent solicitor.

75.  On 21 February 2005, D1 filed his affirmation in opposition.  D2 claimed the Deceased died testate leaving the Will that dealt with and disposed of the entire Estate and appointed D1 as sole executor and trustee.  Under the Will, D1, D2 and D3 were the only beneficiaries of the Deceased’s residuary estate (including the Deceased’s Share), and P and her children would not be entitled to any share/interest in the Estate.  D1 claimed the Deceased was of sound mind when he made the Will, and he knew/approved of the same.  D1 further claimed the Deceased remained of sound mind until some time in 2000 when he suffered from dementia of Alzheimer’s type with late onset and delusions.  D1 said he was therefore entitled to a grant of probate of the Will, and was competent, able and ready to act as sole executor of the Estate.  

76.  D1 explained he intended to prove the Will in solemn form, and to apply for a limited grant of probate over the Deceased’s Share to expedite proper representation of the Estate in Lung Tang pending the full grant of probate.  And once he successfully obtained such limited grant of probate, D1 intended to produce the same to Lung Tang pursuant to section 72 of the CO, and to attend Lung Tang’s general meeting as the Deceased’s legal personal representative.  On such basis D1 urged the court not to grant the “necessary order” and/or the reliefs P sought. 

77.  But for reasons unknown to D2, P filed/served on him Notice of Discontinuance on 8 February 2005 to wholly discontinue HCMP2674/2004 against him.  On 14 March 2005, P filed her 3^rd affirmation in reply to D1’s affirmation.  She insisted the Deceased was of unsound mind since 1996, and urged the court to issue writs of subpoena to the relevant medical doctors for the hearing of the originating summons.

78.  On 28 April 2005, Barma J (as then he was) made no order as to the proceedings in HCMP2674/2004 subject to the undertaking by D1’s solicitors (a) to issue a probate action within 7 days, and (b) to take out summons for limited grant of probate for the Deceased’s Share within 7 days, and to proceed with the action and application with reasonable despatch (“Barma Order”).

(d) HCAP14/2004

79.  As explained above, D3 commenced probate action HCAP14/2004 on 30 November 2014 against Madam Wong and her children as well as P and her children as defendants.  D3 claimed (a) the Deceased died intestate, (b) P’s application in HCMP2674/2004 for re-appointment as Lung Tang’s director should be rejected since her interests ran counter to those of the Deceased, (c) Lung Tang Court was beneficially owned by the Deceased who intended to gift the Premises to D3’s family and not to P’s family, and (d) Mr Wong Wo Ching David should be appointed as administrator of the Estate.  On 13 December 2004, D3 applied by summons to seek limited appointment of Mr Wong Wo Ching David as the administrator of the Estate.

80.  P in her Defence filed on behalf of herself and her children claimed Madam Wong and Madam Chan were not the lawful wife or concubine of the Deceased.  In her Counterclaim, P claimed she was the lawful wife of the Deceased, had borne him 5 children, and as his only surviving spouse had highest priority in obtaining grant of administration of the Estate.  Since the Estate was held half on trust for her as surviving spouse and half on trust for the Issues of which P’s 5 children formed the majority, P and her children had 75% interest in the Estate.

81.  On the other hand, D1 claimed Madam Wong was the lawful kit fat wife of the Deceased who married her on 3 July 1938 in Puning City.  D1 relied on the Will, and claimed he as the sole executor under the Will (and not anyone named by D3) should represent the Estate.

82.  Since P filed her affirmation on 14 March 2005, there was no further progress.  On 17 January 2005, Barma J (as then he was) ordered that the matters in HCAP14/2004 were to be resolved by the same judge at the next call-over hearing in HCMP2674/2004.  On 28 April 2005, Barma J made the Barma Order.

(e) 2^nd Action

83.  On 20 December 2004, P commenced the 2^nd Action against D1, D2, D3 and Techon which concerned another company Fook Yiu Enterprises Limited with shares held in the names of P and the Deceased.  In Part III above I have given a brief summary of the procedural history of the 2^nd Action. 

(f) HCAP5/2005

84.  Pursuant to the Barma Order, on 5 May 2005 D1 commenced probate action HCAP5/2005 against Madam Wong and her children, P and her children, and Madam Chan and her children.  D1 maintained Madam Wong was the kit fat wife of the Deceased whom he married on 3 July 1938 in Mainland China.  D1 reiterated the Deceased executed the Will appointing him as the sole executor of the Estate, that the only beneficiaries of the Estate were D1, D2 and D3 and not P or any person from the 2^nd Union, and that the Deceased was of sound mind up until at least 2000 and had full understanding of the Will.  D1 asked the court to pronounce for the force and validity of the Will in solemn form of law. 

85.  On 18 June 2005, P filed her affirmation in opposition.  On 19 December 2011, P and her children filed their Defence and Counterclaim.  They claimed (a) P was the lawful wife of the Deceased pursuant to a Chinese customary marriage that took place in Macau on 18 March 1953, (b) neither Madam Wong nor Madam Chan was the lawful wife or concubine of the Deceased, (c) there were 10 Issues, 4 out of 1^st Union, 5 out of 2^nd Union and 1 out of 3^rd Union, and (d) the Deceased died wholly intestate so P/Issues were the only beneficiaries of the Estate.  No grant of representation had been made and there was no personal representative for the Estate. 

86.  P said that from the early 1990s the Deceased started to suffer from dementia of the Alzheimer type as a result of which he gradually lost his mental capacity, and his mental condition progressed to the late onset stage of the Alzheimer’s disease by February 1999 if not earlier, so D1 was put to strict proof of the Will, which the Deceased never mentioned to P and/or her children and which probably was never mentioned to Madam Chan and/or D3 too (because D3 in HCAP14/2004 pleaded that the Deceased died intestate leaving no will).  There were also errors in various parts of the Will that would not have been made or left uncorrected had the Deceased been of sound mind, memory and understanding when he executed the Will or had he known/approved of its contents.  So P and her children disputed the validity of the Will as a testamentary instrument of the Estate where the Deceased did not have the relevant testamentary capacity to execute it by reason of his mental incapacity caused by the Alzheimer’s disease, and where he did not know/approve of the contents of the Will.  They also denied D1 was entitled to have the Will pronounced in solemn form of law.

87.  In their Counterclaim, P and her children averred that P as surviving spouse had priority to the grant of administration of the Estate.  The residuary estate was held as to half in trust for P absolutely and as for the other half on statutory trust for the 10 Issues in equal shares.  P claimed she and her children collectively had the greatest interest in the Estate, and P had preference for administration of the Estate whilst Jeffrey was more accustomed to business.  P claimed that since the end of 2006 D1/D2 were fugitives at large from Hong Kong, so they were not suitable for administering the Estate.  Instead, P and her children counterclaimed for inter alia (a) an order that the validity of Will be propounded against, (b) a declaration  that the Deceased died intestate, and (c) grant of letters of administration of the Estate to P or alternatively to P with Jeffrey.

88.  D2 did not appear in HCAP5/2005.  D3 informed the court at the hearing on 25 May 2005 he would take a neutral stance.  But since P and her children filed their Defence and Counterclaim on 19 December 2011, there was no further progress of the action.

(g)  HCCW349/2007

89.  After obtaining judgment against Techon in the 2^nd Action on 6 October 2006, P filed a petition in HCCW349/2007 on 25 May 2007 seeking to wind up Techon in order to recover damages under such judgment.  But due to inactivity on the part of P, the Amended Petition was dismissed for want of prosecution by Master Hui on 23 April 2008.

XVIII.  DISCUSSION: LOCUS STANDI

90.  As seen from the authorities in Part XII above, when a plaintiff whose standing to bring a common law derivative action is challenged, he must establish a prima facie case that the company is entitled to the relief claimed and also that the action falls within an applicable exception to the rule in Foss v Harbottle (usually the fraud on minority exception).  D3 raised challenge to P’s standing in bringing a derivative action in his Re-Amended Defence in the 1^st Action and his witness statement dated 5 February 2013, and both D2 and D3 filed the D2 and D3 Striking Out Summonses to strike out P’s derivative claims in the 1^st Action on the ground of locus standi.  Thus, the burden fell on P to establish a prima facie case.

91.  To fall within the fraud on minority exception to the rule in Foss v Harbottle and to establish a prima facie case that P had locus to bring the derivative action against the Ds in the 1^st Action, it was necessary for P to establish (a) there was a viable cause of action vested upon Lung Tang, (b) a case of fraud on Lung Tang by the Ds, and (c) Lung Tang was controlled by the alleged wrongdoers such as to enable them to stifle any proposed action against themselves.  D2 and D3 said this was not the situation here.

92.  In respect of (a), D2 and D3 reiterated that Lung Tang upon its dissolution had lost its right to sue, and hence there was no longer any viable cause of action against the alleged wrongdoers vested upon Lung Tang, and consequently P also lost the right to sue for and on behalf of Lung Tang in a derivative action.  I agree with Ms Ng that P failed to establish a prima facie case in this respect.

93.  In respect of (b), D2 denied P’s allegation that D1 and D3 (as directors) committed a fraud on Lung Tang, particularly when D1 and D3 (with knowledge that the Deceased was of unsound mind) caused/procured the Deceased being the sole director of Lung Tang at that time (i) to appoint D1 and D3 as directors of Lung Tang and (ii) to execute the assignment dated 9 February 1999 to assign the legal/beneficial ownership of the Premises to D1, D2 and D3 for the stated consideration of $8,000,000, and D2 claimed the witness statements of P and her witnesses did not contain evidence to support P’s allegations of fraud on Lung Tang by the Ds as alleged wrongdoers.

94.  But I am mindful of the fact that D2’s and D3’s striking out applications were made very late in the day.  I also bear in mind the admonitions by the Court of Appeal in Poon Lai Bing v Gold Dragon Limited trading as Club Paris & anor[29] and Tang Wai Cho and also the guidance by Ma CJ in Ko Hon Yue that lodging a late application for striking out at trial is exceptional and can only be acceded to in the clearest circumstances.  In my view, the ground for striking out put forward in the above paragraph was one based on evaluation of the evidential basis for P to contend that D1, D2 and D3 committed fraud on Lung Tang, as Ms Ng put it, “by procuring the unsound mind Deceased (being a director and shareholder of Lung Tang) to instruct the execution of the Assignment”.  In my view, this is where, as Ma CJ put it, “a discretion (something akin to it) exists as to whether or not a set of proceedings or any part thereof should be permitted to continue”, and as such “time is important”.  In the circumstances, had this been the only ground to support the striking out applications (but it was not so in the case here), I would have refused to deal with such argument and would proceed to deal with the substantive issues at trial.

95.  In respect of (c), D2 and D3 claimed they and D1 did not have control of Lung Tang to prevent Lung Tang from bringing action against them.  They argued that from incorporation until dissolution Lung Tang only had 2 registered shareholders, ie P and the Deceased (and after his death the Estate) with each of them holding 50% of the issued share capital, and they were the ones in control of Lung Tang. D1, D2 and D3 were never registered shareholders of Lung Tang (and D2 was not even a director), so it could not be said they were in control of Lung Tang such as to be able to stifle any proposed legal action against themselves, and unless a prima facie case of such control was established, P would not fall within the fraud on minority exception and would have no standing to bring a derivative action on behalf of Lung Tang.

96.  I note the Re-Amended Statement of Claim in the 1^st Action alleged no board meeting and no general meeting of Lung Tang could be convened.  But even according to the Re-Amended Statement of Claim in the 1^st Action, it could only be said Lung Tang was temporarily unable to appoint a functioning board of directors because (a) the Deceased passed away in July 2002, (b) the Deceased’s Share became vested in the Estate upon his death, (c) D1 and D3 were not properly appointed directors, and (d) there was insufficient quorum to hold a general meeting or EGM to appoint another director to establish a functioning board of directors until a personal representative was appointed to represent the Estate.  But no representative could be appointed to act for and on behalf of the Estate and to convene board/general meetings as yet because there was an unresolved dispute over the Estate and the Will. 

97.  It was open to P to apply to court under section 114B of the CO for a necessary order to convene an EGM to appoint directors for establishing a functioning board of directors.  Indeed, P was so legally advised and she made such application in HCMP2674/2004.  It was unknown why P discontinued her claim in HCMP2674/2004 against D2, but I am not surprised since D2 was neither a shareholder nor director of Lung Tang.  More importantly, by the Barma Order granted in HCMP2674/2004, it was obvious that the court considered the best way forward for resolving who should have control over the Deceased’s Share for the purpose of convening any EGM to appoint directors for Lung Tang was for D1 to bring about (with reasonable expedition) a probate action to propound the Will and to apply for a limited grant of probate over the Deceased’s Share, and for other interested parties to air their respective stance in such probate action. 

98.  D1 did exactly that by commencing HCAP5/2005, and P and her children filed their Defence and Counterclaim thereto.  By such counterclaim, P asked for (a) an order that the validity of Will be propounded against, (b) a declaration that the Deceased died intestate, and (c) grant of letters of administration of the Estate to P or alternatively to P with Jeffrey.  Irrespective whether or not D1 did progress his claim in HCAP5/2005, there was nothing to prevent P from taking the initiative to progress her counterclaim.  Had P proceeded with her counterclaim with reasonable expedition and obtained the reliefs she sought, there would have been no difficulty for P as administratrix of the Estate to deal with the Deceased’s Share for convening an EGM to appoint directors in order to establish a functioning board of directors, and in due course for such board (if it saw fit) to resolve to join or take over the claim in the 1^st Action (and the plaintiff had been advised of such mechanism by her legal advisers in HCMP2674/2004). 

99.  But even though (a) D2 did not appear in HCAP5/2005, (b) D3 informed the court at the hearing on 25 May 2005 he would take a neutral stance, and (c) D1 could not be located by the end of 2006 (which rendered it unlikely for him to come forth to pursue his claim or resist P’s counterclaim), P had not progressed her counterclaim ever since the Defence and Counterclaim was filed on 19 December 2011.  This was especially significant when P claimed D1 and D3 were not validly appointed as directors of Lung Tang as they were not appointed in members’ general meeting and they had no qualification shares.  On such premise, there should be even greater incentive for P to proceed with her counterclaim in HCAP5/2005.

100.  As regards P’s complaint that she had not been able to get Lung Tang’s company papers from Lung Tang and/or CFC despite commencing HCMP1972/2003, it is interesting to note she admitted in P’s 2674/04 1^st Aff that by the end of 2003 she was legally advised to stay HCMP1972/2003 and to commence another action with more effective cause of action (ie the 1^st Action). I cannot see how P could complain in the 1^st Action when she herself had chosen not to pursue her claim in HCMP1972/2003.

101.  In the circumstances, I see the force of Ms Ng’s submissions that any failure to convene board/general meetings was not caused by the alleged wrongdoer defendants’ control over Lung Tang.  The aforesaid matters in relation to HCMP2674/2004 and HCAP5/2005 were not controverted.  On such undisputed background, even taking into account the stringent considerations for late striking out applications at trial, I am persuaded that had it been necessary I would have struck out the Amended Writ of Summons and Re-Amended Statement of Claim in the 1^st Action and dismissed P’s claims in the 1^st Action against the Ds on this ground as well.

XIX.  2^ND ACTION

102.  As explained above, P was absent at the trial.  Order 35 rule 1(2) of the RHC provides that “[if], when the trial of an action is called on, one party does not appear, the judge may proceed with the trial of the action or any counterclaim in the absence of that party”.  Hong Kong Civil Procedure 2016 states as follows:[30]

“…… if the plaintiff does not appear, but the defendant does appear at the trial, the defendant is entitled to judgment dismissing the claim, …… The effect of this judgment is the same as if it were a judgment dismissing the action on the merits, ie the court will give the whole costs of the action and counterclaim to the defendant (Armour v Bate [1891] 2 Q.B. 233).”

103.  So on the 1^st day of trial, noting that the plaintiff had failed to appear at the trial, and D2 and D3 having thereupon become entitled under Order 35 rule 1(2) of the RHC to judgment dismissing the action, I ordered that the 2^nd Action do stand dismissed out of this court with costs.  I further ordered P to pay D2 and D3 their costs of their defence to the 2^nd Action before and after the Master Order including all costs reserved (if any) to be taxed if not agreed.