HORN KINGDOM LTD v. China Sun Finance Co Ltd

HCA 3014/2016

[2019] HKCFI 2684

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3014 OF 2016

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DECISION

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1.  On 4 February 2019, Master K W Wong struck out the claim and dismissed the action against the 2^nd defendant on the basis that the action was frivolous and vexatious. The action is a claim by the plaintiff as against the 2^nd defendant for a declaration that the plaintiff is the beneficial owner of property known as the Ground Floor Unit and Garage Space A of No 23 Plantation Road.

2.  In addition to declarations, the statement of claim claims further relief such as an injunction against seeking possession, mortgaging, charging or disposing with the property and an order requiring the 2^nd defendant to account for income and profits.  In the statement of claim, there are 11 items of relief sought against the 2^nd defendant, all related to that underlying concept. 

3.  The 2^nd defendant is the first chargee under a first legal charge dated 27 March 2015.  The first legal charge was to secure a mortgage loan made by the 2^nd defendant to the 1^st defendant of HK$48 million.  There is no dispute that the 2^nd defendant has priority over all other mortgagees and the 1^st defendant has failed to repay the loan.

4.  The 2^nd defendant has commenced a mortgagee possession action under HCMP 2131/2016 for possession of the properties, but that action has been stayed by an order of Master R Lai on 13 March 2017 pending the resolution of these proceedings.

5.  Under this action, the plaintiff asserts to be the beneficial owner of the properties under resulting trusts alleged to arise because the plaintiff contributed to the purchase price and that the 2^nd defendant had notice of the plaintiff’s beneficial interest.  In addition, it is alleged that the 2^nd defendant had knowledge that the plaintiff had paid the monthly instalments owed by the 1^st defendant to the 2^nd defendant under the loan.

6.  The 2^nd defendant applied to have the claim against it struck out and that application was successful before Master K W Wong.  I do not set out or even address in any detail the basis upon which the Master struck out the action, but it is said by the 2^nd defendant that repayment of the monthly instalments cannot assist in the establishment of a resulting trust because the resulting trust needs to have been established at the date of purchase.  The 2^nd defendant therefore says that the payment of the monthly instalments is irrelevant and the only proposition which could have any chance of success is a proposition that the plaintiff contributed to the purchase money.

7.  However, the plaintiff has filed a list of documents which disclose only two items and those two items do not demonstrate any contribution to the purchase price.  There are only six bank transfer slips disclosed and those post-date the acquisition by seven years.  The 2^nd defendant therefore says that given the absence of any documentary evidence and despite multiple rounds of the exchange of witness statements and affirmations, the absence of proof of participation in the purchase is apparent.  The 2^nd defendant therefore suggests that the claim is manifestly misconceived and can have no prospect of success such that it should be deemed as frivolous and an abuse of the process. 

8.  I have not seen any details of the decision of the Master striking out this action because none have been produced.  However, it is a reasonable assumption that those points (which are the points which the 2^nd defendant has made to me on this appeal) are the ones which were made to the Master and upon which he struck out the action.  I set them out simply for completeness and I stress that I have made no assessment of the merits or validity of those arguments. 

9.  On 15 February 2019, the plaintiff issued a notice of appeal against the decision of the Master.  It appears from the evidence which is before me that on 15 March 2019, the plaintiff was struck off the Companies Register and was dissolved.  In June 2019, the plaintiff’s solicitors, Messrs Jim & Co, were the subject of intervention by the Law Society.  It is not apparent to me that the plaintiff or its directors or anybody concerned with the plaintiff has taken any steps in relation to this matter since at least 15 March 2019.

10.  In the circumstances, on 4 September 2019, the solicitors for the 2^nd defendant wrote to the court asking for the appeal to be dismissed in order to avoid this hearing.  The court declined to do so anticipating that steps were possibly being taken behind the scenes by those involved with the plaintiff to restore the company and that by the time of the hearing on 9 October 2019 further progress may have been made.

11.  It appears that no steps have been taken and no progress has been made.  At the commencement of the hearing, the plaintiff was not present at all, but about 10 minutes into Mr Chan, counsel for the 2^nd defendant’s presentation to the court a Ms Cheung appeared in court with what appeared on the face of it to be a letter of authorisation from the plaintiff asking that she should represent the plaintiff.  Ms Cheung has already provided a witness statement in this action dated 2 May 2018 in which she describes herself as a director of the plaintiff.

12.  It is not clear to me how the plaintiff is in a position to authorise Ms Cheung to represent her given that the plaintiff has, in fact, been struck off the register.  Mr Chan suggested that I should not hear anything which Ms Cheung wished to say because the authorisation for her to act was suspect, for the reasons I have just identified and there was, in any event, no leave for a limited company to appear by its directors.  Those points have some merit, however, I decided to hear what Ms Cheung wished to say.  She told me that she was applying for the company to be restored and that she needed time to liaise with the Law Society in order to retrieve the documents held by the company’s previous lawyers.  She stated that she planned to find a lawyer and from the submissions I perceived there to be an application for an adjournment of this appeal.

13.  I am not prepared to grant an adjournment.  The plaintiff was dissolved and struck off in March 2019 and it is now October 2019.  Nothing appears to have been done for the last seven months and the plaintiff’s previous solicitors were the subject of intervention by the Law Society in June 2019, which is four months ago.  There is no explanation of any delay and I am not prepared to accept the statement from Ms Cheung today that she needs more time.

14.  The company and those concerned with it have had more than sufficient time to address the difficulties which the company has faced.  No steps appear to have been taken and I am not satisfied that it is appropriate to adjourn the appeal and therefore to effectively keep the stay on the possession proceedings which the 2^nd defendant has commenced.

15.  No submissions have been made on the merits of the appeal, no evidence has been filed and, in the circumstances, there is no reason for me to allow the appeal.  The propositions which have been made by the 2^nd defendant have a prima facie attraction.  Although, as I stated, I have not addressed them in detail.  Despite this being a rehearing, I see no reason why I should seek to identify what type of case the plaintiff may wish to advance in pursuance of it and, therefore, absence of any submissions by the plaintiff on the substance of the appeal, I dismiss the appeal.

16.  The costs of the appeal are to be paid by the plaintiff to the 2^nd defendant.