XCHRX WAI SAU MING MARILYN v. WONG CHOW TSAI TSE VIVIAN

1995, No. A9650

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. This is an appeal from Master O'Donnell's Order of 25 March 1996 on the application of the plaintiff ("Mrs To") for summary judgment which granted the defendant ("Mrs Wong") unconditional leave to defend.

2. Mrs To's claim is on three dishonoured cheques ("the cheques") for respectively $700,000, $175,000 and $46,500, totaling $921,550, issued by Mrs Wong.

3. Mrs Wong's case is that the cheques were issued by her to Mrs To as security for the repayment of a loan made by Mrs To or her husband William To ("Mr To") partly to her and partly to Ms Angela Luk ("Angela"). The loan amount was $1,000,000, $600,000 of which was lent to Angela and $400,000 to Mrs Wong. After deducting certain repayments made by her, Mrs Wong's share of the debt was $321,550 (the sum total of $275,000 principal and $46,550, being interest paid by Mrs To to a pawnbroker for which Mrs Wong was responsible). The defence raised is that the cheques and the debts due from Mrs Wong and Angela had been discharged by subsequent agreement ("the alleged agreement").

4. Mrs Wong's husband Wong Ho Yi ("Mr Wong") was a playwright, actor and director. He was a shareholder of a company called Tochi Investments Ltd. ("Tochi") which operated Spotlight Productions ("Spotlight"). He and Mrs Wong were the directors of Tochi. Spotlight was planning to produce a cinematographic film entitled "Thunderstorm". In or about January 1995, Mr and Mrs To knew of the plan. The alleged agreement is described in Mrs Wong's affirmation as follows:

"Eventually, the Plaintiff and I agreed that in consideration of the opportunity and right to take part in the production of the film, (a) all my personal debts owed to her shall be waived and (b) any profit generated by the film and payable to me and my husband shall be used incrementally to extinguish the balance of the loan outstanding from Angela, that is if Angela continued to fail to pay."

Mr and Mrs To did participate in the production of the film through a company owned and operated by them, namely, Koonkai Investments Ltd. ("Koonkai"), and the film was produced.

5. The point at first sight seems to be simply that if the defence is credible, unconditional leave to defend the claim should be granted.

6. There was, however, another dispute between the couples relating to their respective rights in the film. That was the subject matter of High Court Action No. 10306 of 1995, whereby Spotlight sought injunctive relief against Koonkai to preserve Spotlight's alleged right to artistic editing of the film. That action (but not the counterclaim for contribution towards the production cost) was disposed of by a judgment of Mrs Justice Le Pichon, handed down on 9 February 1996 after trial. In the course of her judgment, the learned judge dealt with the evidence upon both of the key issues in the present action ("the two issues"), namely, whether the loan was made to Mrs Wong alone or to her and Angela, and whether there was the alleged agreement discharging the debt. The learned judge preferred the evidence of Mrs To and Angela (who was called as a witness for Koonkai) to that of Mrs Wong. Although the learned judge gave detailed reasons for rejecting Mrs Wong's evidence, she did not, as it was not necessary, expressly make any finding of fact relating to the two issues.

7. Mr Yuen, for the plaintiff, relied on issue estoppel. For issue estoppel to apply, three conditions must be satisfied:

(a) the same question was decided in both proceedings;

(b) the judicial decision said to create the estoppel was final; and

(c) the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.

(See Halsbury's Laws of England, 14th Ed., Vol. 16, para. 977 and Cross & Tapper on Evidence, 8th Ed., p. 86.)

8. In her judgment, Mrs Justice Le Pichon dealt with the two issues as germane to the main issue regarding the right to artistic editing of the film that had to be decided by her and as matters to assist her in determining the credibility of the witnesses and the veracity of their evidence. She must have known that the present action was pending, and she did not make any express finding of fact on the two issues. The matter was also clearly in the mind of counsel for Spotlight. In his written closing submissions in those proceedings, it was stated that the loan was the subject matter of this action. He included the loan and the alleged agreement as part of the "numerous collateral issues" and posed the question to be resolved as "how and to what extent these collateral issues shed light on the general character of" Mrs Wong or Mrs To "as being an honest person". He emphasized later that "this part of the evidence is solely related to the general character of" Mrs Wong. He also submitted that whether the alleged agreement led to or amounted to a legally enforceable loan settlement agreement needed not be decided in those proceedings. Mr Yuen submitted that although Mrs Justice Le Pichon did not make any express findings on the two issues in this case, she had in fact rejected the defendant's evidence in respect of the same. So, it was submitted, the two issues had in effect been decided. I find Mr Yuen's submissions attractive. The two issues had been raised by Mrs Wong in the former proceedings in her affirmation evidence in support of her application for interlocutory injunction. At the trial, the two issues were dealt with by her as witness for Spotlight and Mr Wong also gave evidence on whatever knowledge he had on them. Mrs To and Angela also testified on the two issues and they were cross-examined on them. Although there was no express finding on the two issues, the learned judge rejected Mrs Wong's evidence and accepted that given by Mrs To and Angela. I am therefore of the view that the two issues which Mrs Wong wishes to raise in this action had been concretely put forward and decided in the former action.

9. The judgment was handed down on 9 February 1996 after trial. It was perfected on 23 February 1996, and the time to appeal against it, being six weeks after the date of perfection, under Order 59, rule 4 of the R.S.C., has expired. Moreover, Mrs Wong told me that Spotlight could not afford and did not intend to launch an appeal. In the circumstances, there can be no argument that the judgment and therefore the decision on the two issues were final.

10. The third requirement for issue estoppel to operate is that the parties to the former action or their privies were the same persons as the parties to the present action or their privies. In her judgment, the learned judge stated:

"The Plaintiff (i.e., Tochi) is a company wholly owned by Wong Ho-Yi ("Mr Wong") and his wife Wong Chow Tsai Tse Vivian ("Mrs Wong"). Mr Wong wrote the script of the film and is the director as well as the leading male actor in the production. The Defendant (i.e., Koonkai) is a company wholly owned by William To ("Mr To") and his wife Wai Sau Ming Marilyn ("Mrs To"). It financed the production of the film."

Obviously, Mrs Wong was not a party in that action, for Spotlight operated by Tochi, and not her, was the plaintiff. By the same token, Mrs To was not a party in that action either: it was Koonkai which was the defendant. The question to be decided is whether Spotlight/Tochi or its privy was the same as Mrs Wong or Mrs Wong's privy and whether Koonkai or its privy was the same as Mrs To or Mrs To's privy.

11. Para. 990 of Halsbury's, ibid., has this to say:

"Privies are of three classes:

(1) privies in blood, ...

(2) privies in law, ...

(3) privies in estate or interest, ...

...

It is not easy to detect from the authorities what amounts to a sufficient interest. The question seems to be determined by an examination of the factual identity of interests of the parties and the fairness of binding them by a decision in which they were not represented."

12. I do not see in the present case that there is any privity in blood, in law or in estate. The only question is whether there is a privity in interest, which is a "difficulty territory" as described by Megarry V-C in Gleeson v. J Wippell & Co. Ltd. [1977] 3 All ER 54, 59h. At p. 60b-h, the learned Vice-Chancellor stated:

"... it seems to me that the substratum of the doctrine is that a man ought not to be allowed to litigate a second time what has already been decided between himself and the other party to the litigation. This is the interest both of the successful party and of the public. But I cannot see that this provides any basis for a successful defendant to say that the successful defence is a bar to the plaintiff suing some third party, or for that third party to say that the successful defence prevents the plaintiff from suing him, unless there is a sufficient degree of identity between the successful defendant and the third party. I do not say that one must be the alter ego of the other: but it does seem to me that, having due regard to the subject-matter of the dispute, there must be a sufficient degree of identification between the two to make it just to hold that the decision to which one was party should be binding in proceedings to which the other is party. It is in this sense that I would regard the phrase 'privity of interest'. ...

... Any contention which leads to the conclusion that a person is liable to be condemned unheard is plainly open to the gravest of suspicions. A defendant ought to be able to put his own defence in his own way and to call his own evidence. He ought not to be concluded by the failure of the defence and evidence adduced by another defendant in other proceedings unless his standing in those other proceedings justifies the conclusion that a decision against the defendant in them ought fairly and truly to be said to be in substance a decision against him."

13. Tochi which operated Spotlight (the plaintiff in the former proceedings) was, as stated in Mrs Justice Le Pichon's judgment, wholly owned by Mr and Mrs Wong. Mrs Wong also admitted before me that she was a director of Tochi at the material time. It is indisputable that allowing Mr and Mrs To to participate in Spotlight's planned film production would have significant effect on Mrs Wong's own interest. If the alleged agreement existed, there was a waiver of her debt, not Spotlight's, due to Mr or Mrs To and, quoting Mrs Wong's own words, "any profit generated by the film and payable to me and my husband shall be used incrementally to extinguish the balance of the loan outstanding from Angela", which is contrary to Mrs Wong's assertion that Spotlight was not her alter ego. In the former proceedings, it was clear to all concerned that the two issues were germane to the issues to be determined there, for the two issues were raised in the affirmation evidence in the interlocutory stage as well as at the trial. The interest of Spotlight in the artistic editing of the film as well as the other terms of the production agreement (including the interest of Mrs Wong in the alleged waiver) were clearly in issue. Although counsel for Spotlight was, strictly speaking, looking after Spotlight's interest, the instructions to him must have been provided by Mr and/or Mrs Wong. Mr and Mrs Wong both gave evidence at that trial on the two issues and Spotlight's counsel cross-examined Mrs To and Angela on the two issues. The point now relied on by Mrs Wong that the document evidencing a partnership between her and Angela relating to a property at Robinson Heights is a forgery was also mentioned by her to the counsel at the time. All in all, I am convinced that there was a sufficient degree of identification between Spotlight and Mrs Wong, and that her standing in the former action justifies the conclusion that the decision of Mrs Justice Le Pichon ought fairly and truly to be said to be in substance a decision against Mrs Wong. The interest of Mrs Wong, as an admitted director of Tochi, a witness and a person who would be benefited by the production agreement the terms of which were sought to be proved in the former action, was looked after by the counsel, incidental to his discharging his duties towards Spotlight. The two issues had been thoroughly ventilated in the former action, and I hold that Mrs Wong and Spotlight had a privity of interest in the former action.

14. By the same token, Mrs To and Koonkai had a privity of interest in the former action. She was trying to prove the terms of the production agreement between Koonkai and Spotlight. She and her husband wholly owned Koonkai. She and Angela To gave evidence on the two issues and were cross-examined on them. She could not turn round to say, if the judgment was against Koonkai on the two issues, that the decision on them is not in substance a decision against her.

15. It follows that all the three requirements for issue estoppel to operate are present, and Mrs Wong is barred from again raising the two issues in these proceedings.

16. There is another aspect. Consideration for a contract must flow from the promisee (see Halsbury's Laws of England, 4th Ed., Vol. 9, para. 315). It is Mrs Wong's case that the consideration for the alleged agreement was to allow Mr and Mrs To to participate in the production of the film. The consideration appears to me to flow from Spotlight, for it was Spotlight who allowed the Tos to participate in its film production project, whatever services Mrs Wong would provide to the venture. In all her affirmations, however, Mrs Wong did not describe whether the alleged agreement was made with Mrs To by her in her own personal capacity or in the capacity representing Spotlight or in both of those capacities. If she made the alleged agreement in a representative capacity, Spotlight must be joined as a party in these proceedings to enforce the alleged agreement. If she made the alleged agreement in her own personal capacity, not representing Spotlight at all, no consideration flowed from her to the Tos, and Spotlight must be joined as a party to enforce the alleged agreement. Spotlight has so far not been joined as a party in this action, and it follows that the alleged agreement is not enforceable by Mrs Wong, and her defence will fail. If Spotlight were joined in the present action, then issue estoppel would apply against it, for it was a party in the adjudicated action and would be a party in this action.

17. My conclusion is that Mrs Wong is barred by issue estoppel from relying on the defence which is based on the two issues that had been decided by Mrs Justice Le Pichon.

18. I have also considered the question of abuse of process, which is untrammeled by the technicalities of estoppel (see House of Spring Gardens Ltd. v. Waite [1991] 1 QB 241, at 254E to 255D). For the reasons given by Mrs Justice Le Pichon for rejection of Mrs Wong's evidence, it appears to me that the defence in this action is hardly credible and the pursuit of it would be futile. The learned judge had heard all the evidence relative to the two issues and she had observed the demeanour of all the witnesses who gave testimony on them. She preferred the evidence that contradicted Mrs Wong's testimony. She also analyzed the inherent probabilities of the versions of the opposite sides and came to the same conclusion. I can scarcely imagine a situation where Mrs Wong could by adducing evidence again before another judge (and she is bound by her former evidence before Mrs Justice Le Pichon) persuade him to give a decision in her favour. The defence is in the circumstances frivolous, vexatious and an abuse of process.

19. Before I conclude, I think I ought to express briefly my views on Mrs Wong's submissions. Her main points are as follows:

(1) Neither she nor counsel for Spotlight was aware of or foresaw the question of issue estoppel, and in fact the counsel specifically told the court in the former action that the two issues would be determined in the present action.

(2) Spotlight was not her alter ego. She was merely a director of Tochi which operated Spotlight and was acting in such a capacity and as a witness in the former action different from her personal capacity in the present action.

(3) She was not represented in the former action. Counsel for Spotlight did not represent or protect her interest and that was how he understood it by telling the court that the two issues would be determined in the present action.

(4) The two issues were raised but not comprehensively dealt with. She did not have the chance to call all the evidence that she had on the two issues, and Mr To, who took part in the discussion about the terms of the production agreement, including the waiver of the loan, did not give any evidence before Mrs Justice Le Pichon.

I have already dealt with Points (2) and (3).

20. Point (1) appears to me to be reliance on a mistake of law. Not being aware of a point of law that may be detrimental to a person's interest cannot give him immunity from facing its consequences.

21. I do not accept Point (4), for the two issues were squarely raised by Spotlight and Koonkai each adducing evidence at the trial before Mrs Justice Le Pichon. The learned judge said that they were germane to the determination of the issues in the action before her. In her judgment, she dealt with and analyzed the evidence and arguments on the two issues in great detail.

22. Moreover, Mrs Wong admitted before me that her allegation that the partnership agreement on Robinson Heights was a forgery was not a hindsight. She had mentioned it to counsel for Spotlight at the trial, but he was acting too gentlemanly in not putting the allegation to Angela when cross-examining her. Mrs Wong also complained that Mr To, whom she described as a key witness that had intimate knowledge of the alleged agreement, was not called at the trial. It is not for her or the court to conjecture why he was not called. It was up to the legal advisers representing the opposing parties to call him or otherwise. This matter does not help Mrs Wong. Mrs Wong also told me that neither she nor counsel for Spotlight concentrated on the proving of the two issues in the former action, and if she was not allowed to defend in this action, she would be deprived of the chance of calling all the evidence that she had on them. I have examined all the affirmation evidence before me, and apart from the so-called key witness (being Mr To) and the partnership agreement being a forgery, she did not provide particulars of any evidence further than that before Mrs Justice Le Pichon that may have a significant bearing on the two issues, let alone that can conclusively show that the learned judge's views on them are wrong. Anyhow, any such evidence that Mrs Wong may have, which I doubt, was available or would with reasonable diligence on her part have been available to her at the former trial, and it would be improper for the court to allow her to reopen the two issues.

23. For all the above reasons, I am of the view that Mrs Wong is bound to fail in her defence. There is no point for this matter to linger further. Summary judgment is given in favour of Mrs To for the sum claimed, i.e., $921,550, with interest at the relevant court rate from the date of the writ until payment. I also make an order nisi for costs here and below.

(K. H. Woo)

Judge of the High Court