CARRLAN HOLDINGS LIMITED (IN LIQUIDATION) v. CRESTFLAME ESTATES LIMITED AND OTHERS

1990, No.A8291

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

___________

1. This action, in which I have today to consider an application to amend the Statement of Claim, concerns two desirable residences in London: 7 Chester Square and 8 Lees Place ("the properties"). The question in the action is this : To whom do the properties belong? I refer, not to the legal title (about which there is no dispute), but to the beneficial ownership.

2. The plaintiff is a company called Carrian Holdings Limited. It is in liquidation. At all material times before the plaintiff went into liquidation, its affairs are said to have been controlled by one George Tan. The case for the plaintiff is that the beneficial ownership in the properties belongs to the plaintiff.

3. The defendants include two companies: the 1st defendant, Crestflame Estates Limited and the 2nd defendant, Lowriver Estates Limited. The 1st defendant is the registered proprietor of the property at Chester Square and the 2nd defendant is the registered proprietor of the property at Lees Place. The remaining defendants are Kao Wei Tseng, the 4th defendant; his wife Leong Lai Pang, the 3rd defendant; and Kao Keng Hua, David, the 5th defendant, who is their son. It is said on behalf of the defendants that the beneficial ownership in the properties belongs to the 4th defendant.

4. The properties were paid for in accordance with the ordinary practice which prevails in the United Kingdom, by the payment of a deposit of a conventional 10% of the purchase money to the vendors, with payment of the balance of the purchase money to the vendors on completion. The plaintiff alleges a "dishonest and fraudulent design" on the part of George Tan (and also his wife Helen Tan, the daughter of the 3rd and 4th defendant, at any rate in so far as she is fixed with George Tan's knowledge). The expression "dishonest and fraudulent design" is to be found in the classic judgment of Lord Selborne, the Lord Chancellor, in Barnes v Addy [1874] 9 Ch.App. 244, at p.252.

5. The "dishonest and fraudulent design" pleaded is concerned with the way in which the completion moneys were found. It is said by the plaintiff that pursuant to that "dishonest and fraudulent design", these moneys were found from moneys of the plaintiff, and that in consequence the plaintiff is the beneficial owner of the properties. But in relation to the provision made for the payment of the deposit moneys, the pleadings are far less clear. The deposit moneys were provided, not out of the plaintiff's funds (at any rate in the first instance), but out of an overdraft facility granted to Mrs Tan at the London branch of Westdeutsche Landesbank. The circumstances in which that overdraft facility came to be used for the purpose of paying the deposit moneys would be material in so far as the "dishonest and fraudulent design" is alleged to have been carried into effect at the initial stage when the moneys from that overdraft were used for the purpose of payment of the deposits. But on the Statement of Claim as it stands, it seems to me that the pleading fails precisely and distinctly to allege, as part of the "dishonest and fraudulent design", the circumstances in which the deposit moneys came to be paid out of this overdraft facility.

6. Alive to that state of affairs, the plaintiff now seeks to bring forward the inception of the scheme by which the "dishonest and fraudulent design" was to be carried into effect to the payment of the deposit moneys.

7. The plaintiff says (in my judgment, correctly) that it does not need to allege any new facts not mentioned in the pleadings in order to set out what the circumstances were. It says that it merely seeks to raise a contention which it has not previously expressed. But the defendants say (in my judgment equally correctly) that the stress now sought to be placed on the circumstances surrounding the initial payment of the deposit moneys in relation to the "dishonest and fraudulent design" is not something on which they have needed, in any way, to concentrate in the preparation of their case. Accordingly, they say I ought not at this stage of the case to give leave to the plaintiff to make this amendment.

8. The view I take is this. This amendment would be quite unexceptionable, although it seeks to extend the charge of fraud, if it had been one made before the trial and in sufficient time to enable the defendant without an adjournment of the trial fully to examine the circumstances in which the overdraft facility came to be used in the way I have described. But in fact this application is made at the trial. (Mr Gavin Lightman, Q.C., for the defendants said that it was made on the 5th day of the trial; which is what this is, but in fairness I must say that notice of this application has been with the defendants for some time before today.)

9. Nevertheless, I think that on balance I ought to refuse leave to amend primarily for this reason. It may be, I do not say that it is, but it may be, that the defendants would be prejudiced in having to seek, at this stage of the case, to make the enquiries they need to make in order to deal with the allegation now sought to be made. I think this application is made too late. I think it does show a change of direction of the plaintiff's case, in that it seeks to bring forward, as I have said, a material matter (the payment of the deposit moneys) as part of the alleged "dishonest and fraudulent design", and I do not think that where the allegation is one of this nature that is something which the court ought, at this stage of the action, to encourage. I, therefore, propose to refuse leave to amend the Statement of Claim as asked.