CHAN WAI MING AND ANOTHER v. CHAN WAI LUN AND OTHERS

CACV 92/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 92 OF 1999

(ON APPEAL FROM HCMP 775/95)

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J U D G M E N T

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Rogers, J.A. :

1. On 27th August 1972, Mr. Chan Yam died. He was an undertaker. He had two businesses. One was called Kwong Shau and the other was called Kwong Fook. He left behind him a widow and 9 children. Since then, his widow has died and his elder daughter has died. He was intestate. The 1st Plaintiff and the 1st Defendant were the administrators of the estate.

2. It was not until March 1995 that an originating summons was issued at the behest of the 1st Plaintiff and one of the other brothers against the 1st Defendant, naming also the other children who had not joined as Plaintiffs in the action. That action claimed an account of the assets of Mr. Chan Yam which were in the hands of the 1st Defendant.

3. The primary asset is said to be the undertaking business which was carried on in those days in Shaukeiwan Road under the name Kwong Shau.

4. Within a month of the father's death, the 1st Defendant took out a new business registration in his own name using the same trading name as has been used previously. Previously, the business had been operated as a partnership of which by the time of his death, the deceased had three quarters and the 1st Defendant had one quarter.

5. The main burden of the action is the claim by the 1st Plaintiff that the 1st Defendant must account for what he has received as a result of the father's death and in particular, the business assets. The 1st Defendant seeks to strike out the proceedings in total.

6. The 1st Defendant says that the action is bound to fail for the reason of laches. He points to a number of factors. He points, first of all, to the fact that for estate duty purposes, a value was put on the two businesses, Kwong Shau and Kwong Fook, and that he says he has accounted for. It is difficult at this stage, if not impossible, for the Court, he says, to go behind that.

7. Then he says that it is impossible at this late stage to show what the testamentary expenses and funeral expenses were in respect of the deceased.

8. A vital witness as to the basis upon which the 1st Defendant took over the premises, he says, was the mother but she has died.

9. One of the major complaints is that a property in Morrison Hill Road, to which the business was moved, was subsequently acquired. The 1st Defendant says it was acquired with his money. The contest in the case is whether that is correct or whether it was purchased with the money of the business which the 1st Plaintiff says was being conducted on the family's behalf.

10. The 1st Defendant also says that because no complaint was made over the period of time, he spent his own time and effort on the business which he could have devoted in other directions.

11. He points to the case of Clegg v. Edmonson (1857) 8 DE G M & G 787. He says that in respect of businesses, one cannot wait to see whether the business will make a profit in which case one can make a claim, and if it makes a loss, wash one's hands of it. It is now after this length of time, too late for the Plaintiff in any event to make claims for an account and other relief which is sought.

12. Finally, the 1st Defendant says that it is impossible now to render the usual accounts even if they had to be forthcoming because they have been destroyed. There is no obligation on anyone to keep accounts going back some 26 years and, apparently, the only accounts which are available are those which go back to 1986.

13. In short, it seems to me that the 1st Defendant does have a very strong case and is likely to have a very strong case that there has been laches. But there has been evidence filed on behalf of the Plaintiffs, not only by the 1st Plaintiff. The 1st Plaintiff says, amongst other things :-

"We have from time to time asked him to produce business accounts but these were not forth coming. We had tolerated him all these years (before this action was taken out) and tried to support him and the business when he came to plead for our financial assistance in times of difficulty, with the understanding that our business would one day pay us back all such loans and benefits. But we have not waived any of our rights or entitlement of the estate."

14. He is supported in some of these assertions by one of the sisters, who also filed evidence to show that she had indeed made a loan at one stage on the basis that the business was being run as the family business.

15. It seems to me that these are all matters which need to be decided at a trial when the Judge can see and hear the witnesses. However strong the Plaintiffs' case might seem, it does not seem to me at this stage that it has that strength that one can safely say that no Judge acting reasonably could come to a conclusion other than that defence of laches must succeed.

16. In my view, therefore, the Judge below was correct in the matter of directions. She ordered that the action be tried as if it were a writ action and that it should proceed accordingly. She refused to strike the claim out on the basis of laches. I would therefore dismiss this appeal and say simply that the sooner these proceedings are brought to a trial, the better.

Godfrey, J.A. :

17. This is an appeal from an order of Mrs. Justice Bokhary made on 12 March 1999 whereby she dismissed an application by the 1st defendant to strike out the plaintiffs' proceedings.

18. The ground of the 1st defendant's application to strike out was, in effect, that the plaintiffs' proceedings had no real prospect of success, because the plaintiffs had been guilty of laches in prosecuting their claim. The case is so clear, he says, that no judge acting judicially could reasonably have come to the conclusion that the plaintiffs' claim ought to be allowed to proceed to a trial.

19. The question whether or not proceedings brought by a plaintiff ought to be struck out as an abuse of the process of the court on the ground that those proceedings have no real prospect of success is a question which a judge must answer as an exercise of discretion. If the judge has come to a decision which was plainly wrong, or has, in some other way, misapprehended the nature of the case, then this court can, and indeed must, interfere.

20. The question before this court now is whether that is what has happened here.

21. The judge, in dismissing the 1st defendant's application to strike out the plaintiffs' proceedings, said this :-

"The facts are hotly in dispute, range over a long period and need to be sifted with care."

22. Was the judge wrong? If not, clearly the proceedings could not properly be struck out.

23. The claim of the 1st defendant that the plaintiffs here have been guilty of laches requires us to consider the nature of such a claim. The following explanation will suffice :-

"Laches essentially consists of a substantial lapse of time coupled with the existence of circumstances which make it inequitable to enforce the claim. Delay will accordingly be fatal to a claim for equitable relief if it is evidence of an agreement by the plaintiff to abandon or release his right, or if it has resulted in the destruction or loss of evidence by which the claim might have been rebutted, or if the claim is to a business (for the plaintiff should not be allowed to wait and see if it prospers), or if the plaintiff has so acted as to induce the defendant to alter his position on the reasonable faith that the claim has been released or abandoned. But apart from such circumstances delay will be immaterial."

See Snell's Equity, 29th Edition (1990) at p.35.

24. There are many evidentiary considerations that may affect the question whether the plaintiff has or has not been guilty of unreasonable delay. What is reasonable depends on all the material circumstances, as pointed out in Spry, The Principles of Equitable Remedies, 5th Edition (1997) at p.432.

25. Turning to the instant case, the 1st defendant has advanced a powerful argument for contending that the plaintiffs have indeed been guilty of laches here. The plaintiffs' delay, in bringing this claim, has been very great. The 1st defendant's assertion that that delay has resulted in the destruction or loss of evidence by which the claim might have been rebutted is a powerful one. The mother, who was the principal beneficiary in the estate of which the 1st defendant was co-administrator and the person to whom he accounted for his dealings with the business over a very long time, has died. It is now practically impossible for the 1st defendant to reconstitute all the accounts of the business and accordingly the relief, if any, granted at any trial of the action here would have to be tailored so as to avoid the making of an order with which it would be impossible for the 1st defendant to comply. The prejudice which has been suffered by the 1st defendant as a result of the long delay, and the loss of documentary evidence which might have tended to rebut the plaintiffs' claim, are clearly very serious matters. The 1st defendant's case that to grant now the relief sought in this action would, in all the circumstances, be unfair to the 1st defendant is one which he must have a strong chance of establishing at any trial.

26. The question, however, is whether that case can be said at this stage to be so clear that the grant to the plaintiffs of any relief in this action would be impossible. If so, to allow these proceedings to remain on the file would indeed be an abuse of the process of the court.

27. Strong as the case for the 1st defendant is, I find myself unable to come to that conclusion. In the end, I am satisfied that the judge was right in concluding that this matter is one which simply has to go to a trial. To drive a plaintiff from the judgment seat is something which the court will never do unless quite satisfied that to allow the plaintiff to proceed with his action would be to abuse its own procedure. Strong as this case is, as I say, it is not as strong as that.

28. For these reasons, I, too, would dismiss this appeal.