LEE HO YIN v. CHEN KAM NGA

DCCJ 2765/2022

[2023] HKDC 704

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2765 OF 2022

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DECISION

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Introduction

1.  This is the application by the defendant by summons taken out on 5 September 2022 to strike out the plaintiff’s claim and pleadings and to dismiss the present action.

2.  By his Statement of Claim, the plaintiff claims against the defendant for the sum of HK$290,000 being allegedly an outstanding sum of the consideration of the purchase price for the plaintiff’s half share of and interest in the property known as Flat E on 6^th Floor of Tower 7, Tai Hing Gardens Phase II, No 7 Ho Hing Circuit, Tuen Mun, New Territories (“the Property”) under a Memorandum of Agreement dated 3 August 2010. Completion took place on 3 August 2010 whereupon the plaintiff assigned his estate and interest of and in the Property to the defendant.

3.  It is the defendant’s stance that the present claim by the plaintiff amounts to abuse of process as the plaintiff has pleaded a diametrically inconsistent position that is different from that which he took in a previous action and has concealed the truth. As such, the present claim by the plaintiff constitutes an abuse of process of the court and should be struck out.

The plaintiff’s pleaded case

4.  It is the plaintiff’s pleaded case that he and the defendant had an intimate relationship since around 2002. In May 2009, the parties entered into an agreement to purchase the Property as joint tenants at the price of HK$1,510,000. The initial and further deposits totalling HK$302,000 were paid by them in equal shares, and the balance of the purchase price was paid through a mortgage under which they acted as borrowers. After completion of the purchase in July 2009, they moved into the Property and started cohabitation. However, their relationship turned sour, and the plaintiff moved out in about May 2010.

5.  The parties then agreed that the defendant would purchase the half share of the plaintiff’s interest in the Property. The then outstanding mortgage loan stood at about HK$1,200,000, of which the plaintiff should bear half, ie HK$600,000. By a Memorandum of Agreement dated 3 August 2020 (superseding an earlier Provisional Agreement for Sale and Purchase dated 7 June 2010), the parties agreed that the defendant would purchase from the plaintiff his half-share interest in the Property at an agreed consideration of HK$1,000,000. Completion took place on the same day (ie 3 August 2010), and an assignment was executed by the plaintiff assigning his half-share of the interest in the Property to the defendant at the stated consideration of HK$1,000,000. However, it is the plaintiff’s case that no payment had been made by the defendant. After deducting the plaintiff’s half-share of the outstanding mortgage liability (being HK$600,000), the defendant was indebted to him in the sum of HK$400,000 upon completion.

6.  In about March 2012, the plaintiff and the defendant resumed cohabitation. They then proceeded to purchase another property known as Flat C, 1/F, Tower 6, Tai Hing Gardens Phase II, No 6 Ho Hing Circuit, Tuen Mun, New Territories (“Flat 1C”) in that year. It is the plaintiff’s case that part of the outstanding consideration of HK$400,000 for the purchase of the Property, in the sum of HK$290,000, was then repaid by the defendant to him to fund the purchase of Flat 1C, leaving an outstanding balance of HK$110,000 due to him by the defendant.

7.  The parties broke up again and ceased to cohabit in 2014. The defendant subsequently commenced proceedings in the High Court in HCA 553 of 2016 and HCA 356 of 2017 (which were later consolidated) (“the Consolidated Action”) against the plaintiff for various reliefs related to several properties and investment funds, including the Property and Flat 1C. The plaintiff, as defendant in the Consolidated Action, counterclaimed against the defendant for, inter alia, the amount of HK$110,000 based on the circumstances referred to in paragraphs 5 and 6.

The Judgment in the Consolidated Action

8.  The Consolidated Action was tried before Madam Justice Queeny Au-Yeung in February 2021. One of the areas of contention was whether the defendant had paid HK$290,000 towards the purchase of Flat 1C, or whether that sum was intended by the parties as repayment of part of the outstanding consideration of HK$400,000 for the Property in the circumstances alleged by the plaintiff as referred to in paragraphs 5 and 6 above.

9.  Apparently, at the trial of the Consolidated Action, the plaintiff’s case that he had several conversations with the defendant confirming that the payment by the defendant of HK$290,000 was for repayment of part of the debt of HK$400,000 owed to him was rejected by the learned judge. In paragraph 148 of the Judgment handed down on 12 May 2021, the learned judge said as follows:-

“148. On Mr Lee’s side, the 3 separate conversations were not mentioned in his pleading or witness statements. They were not put to Ms Chen in cross-examination except along the lines that, “We admit you had paid HK$290,000 as the purchase price of Flat 1C. But if you owed the Defendant money at that time, then that would be repayment.” In my view, the 3 separate conversations bore the hallmarks of recent invention and I reject the same.”

10.  As a result, the learned judge ruled that the sum of HK$290,000 was contributed by the defendant towards the payment for the purchase of Flat 1C, and thus the outstanding consideration of HK$400,000 for the Property was still due from the defendant towards the plaintiff. Although the case went on appeal, this part of the Judgment was not in issue. The appeal was eventually dismissed on 5 August 2022[1].

11.  However, in relation to the plaintiff’s counterclaim in the Consolidated Action, in paragraphs 190 and 191 of the Judgment, the learned judge said:-

“190. In respect of the counterclaim for HK$110,000, Mr Lee did not transfer his interest in [the Property] to Ms Chen for free. She owed him the HK$400,000 Debt arising out of that transfer.

191. Unfortunately, the counterclaim has only prayed for HK$110,000. There is no related claim for damages, tracing or restitution for unjust enrichment. Mr Timothy Wong invites the court to grant relief under the general prayer for “just and equitable relief”. With respect, the HK$290,000 was a legal debt and not equitable claim. I do not think there is room to grant such specific relief under the general prayer. Accordingly, the Court can only award the sum of HK$110,000 to Mr Lee.”

12.  It is in such circumstances that the plaintiff now seeks to claim in the present action for the remainder of the outstanding sum of HK$400,000 (ie in the amount of HK$290,000) against the defendant.

The defendant’s submissions

13.  The defendant relies generally on the principles governing striking-out applications. The court has power under Order 18 rule 19 of the Rules of the District Court, Cap 336H and its inherent jurisdiction to strike out claims that are an abuse of the process of the court – see Hong Kong Civil Procedure 2023, Vol 1, para 18/19/9.

14.  The defendant submits that after the court has found in the Consolidated Action that the plaintiff was lying, he now turns around and says the defendant has never repaid the HK$290,000 debit. As such, the defendant says that not only did the plaintiff deliberately conceal the truth during the previous action, he now hopes to use an opposite set of “facts” to win a different point in another action. This, according to the defendant, constitutes an abuse of process because a person who knows the truth must tell it from the outset and commit to it. It would be an abuse for him to deliberately conceal the truth in an earlier action, only to tell it in a subsequent action, or to test diametrically inconsistent positions in different actions.

15.  In support of his contentions, Mr Cristian Tsang, counsel for the defendant, referred to Vervaeke (formerly Messina) v Smith [1983] 1 AC 145. In that case, the plaintiff filed a petition seeking to nullify her marriage with an Englishman, claiming that she did not know it was a marriage ceremony that she had gone through with him and consequently had not consented to it. She was initially granted a decree in nullity, but in subsequent proceedings in which the government officer responsible for preventing collusive matrimonial proceedings intervened, she claimed that, notwithstanding that she had presented a false case originally, she was nevertheless entitled to a decree of nullity on the ground of want of consent. The court dismissed her petition, finding that she had lied, and that she knew that it was a wedding ceremony she had with a view to obtaining British citizenship and a passport. Subsequently, the plaintiff sought, and obtained, a declaration in the Belgian courts that the marriage was void ab initio on the ground that it was merely a mock marriage, as the parties had no intention of living together. The plaintiff subsequently filed new petitions in England seeking a declaration that the Belgian decree should be recognised in England. The petitions were dismissed and on appeal to the House of Lords, it was ruled that the proceedings came within the rules governing res judicata in that the original decision of the court was a decision on the very point decided on by the Belgian courts, and thus the Belgian decree of nullity was not entitled to recognition in England. The House of Lords further found (per Lord Hailsham, Lord Simon and Lord Brandon) that, in the circumstances in which the petitioner not only did not rely on the grounds available to her but deliberately sought to conceal the facts, both public policy and res judicata would prevent the attempt by her to claim recognition in the English courts of the Belgian decree. At page 157B-G, Lord Hailsham said:-

“…whatever the limits of Henderson v. Henderson (1843) 3 Hare 100 (which I regard as a sound rule in ordinary civil litigation) may ultimately turn out to be, I believe that it must apply to a case like the present, where the petitioner in the first proceedings not merely does not rely on the grounds then already in theory available to her, but deliberately conceals the real facts (on which she now relies) from the court in order to put forward a bogus case which is radically inconsistent with them…the present proceedings depend upon the recognition of a Belgian decree of nullity which was obtained only after, and because, the original and fraudulent basis of the claim had been disposed of against her, and after the English judge had discovered for himself the true facts inconsistent with her bogus case and stated them in an unmistakable form. I believe that to recognise such a decree so obtained does offend the conscience of the court to such an extent that public policy precludes recognition.

In my view, therefore, the appeal fails and must be dismissed, first on the ground of res judicata, secondly on the ground of public policy, and thirdly, because in the circumstances of the present case the rule in Henderson v. Henderson which is both a rule of public policy and an application of the law of res judicata should apply to the attempt by the appellant to claim recognition in these courts of the Belgian decree…”

16.  Further, the defendant submits that it is abusive for a party to test diametrically inconsistent factual positions in different proceedings despite knowing what the truth is. In Berthier Godown Ltd v E Wah Realty Ltd [1986] HKC 8, Mortimer J[2] said at pages 14H-15A:-

“…if the party seeks to raise new matters in separate proceedings or seeks to reverse a previous assumption that has been the basis of earlier proceedings in new proceedings, that amounts, first of all, to an abuse of the process and second, he is estopped from doing so… He certainly cannot seek to raise factual and legal issues in conflict with his earlier stance and the earlier order of the court. He must pursue all the remedies available to him and raise all the arguments that are available to him in the first proceedings.”

17.  In Chan Chun Chuen v Kao, Lee & Yip, HCA 597 of 2015, 12 October 2017, DHCJ Anson Wong SC, following Mystar Holdings Ltd v 247037 Alberta Ltd, 2009 ABQB 480[3], also said at paragraph 30 that “[i]t may be an abuse of process for a party, with full knowledge of the facts, to advance a claim that is diametrically opposed to its position taken in an earlier set of proceedings”. The same principle has been adopted in other cases like Tang Wai Keung v Wong Shui Fong [20121] HKCFI 3627 and Re Shun Tak Holdings Ltd [2009] 5 HKLRD 743 also referred to by the defendant.

The plaintiff’s contentions

18.  Firstly, the plaintiff submits that reliance by the defendant on the case of Vervaeke is practically misplaced, as the facts of that case clearly demonstrated abuse, whereas the attack on the plaintiff in the present case is not even close in both facts and degree. The plaintiff also submits that on the authority of Vervake, there has to be “deliberate concealment of real facts”, and a “bogus case which is radically inconsistent with such facts”.

19.  According to the plaintiff, he pleaded in the Consolidated Action that the HK$290,000 was repaid by way of the defendant’s direct payments towards the down payment for Flat 1C, based on an agreement between the two of them. Although the learned Judge found that there was no such agreement, the plaintiff says this does not necessarily mean the plaintiff was guilty of deliberate concealment of facts. It might just have been a different understanding based on words spoken between the parties.

20.  In short, the plaintiff submits that the defendant’s allegation that the plaintiff was found to have lied or was dishonest was unfounded and not supported by facts or judicial finding.

21.  Secondly, the plaintiff submits that his assertion that the HK$290,000 had been repaid was based on the direct payments by the defendant towards the down payment for Flat 1C, and this could not be construed as a position that is diametrically opposite to his present claim that the amount had not been repaid. To use the plaintiff’s own description, this does not carry a contrast as between “day and night”.

22.  Thirdly, the plaintiff pointed out that the rule in Henderson v Henderson has long been criticised as too dogmatic. There is always a danger of a party being shut out from bringing forward a genuine subject of litigation. The law has finally been restated in the landmark case of Johnson v Gore Wood & Co [2002] 2 AC 1, where Lord Bingham said in his well-quoted speech at page 31:-

“It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not.”

23.  The plaintiff also referred to the subsequent English Court of Appeal decision in Dexter Limited v Vlieland Boddy [2003] EWCA Civ 14 where the court explained the principles of Johnson in a useful summary[4]. In particular, it is noted that the question in every case is whether, applying a broad merits-based approach, a party’s conduct is in all the circumstances an abuse of process, and the court will rarely find that the later action is an abuse of process unless that later action involves unjust harassment or oppression[5].

24.  The plaintiff then went on to refer to the Court of Final Appeal’s judgment in Ko Hon Yue v Chiu Pik Yuk (2012) 15 HKCFAR 72 where the court stated[6] that “[t]his abuse will usually take the form of the other party being “vexed” (or in some cases, the terms “oppressed”, “unjustly harassed” or “unjustly hounded” are used) by the subsequent set of proceedings”.

25.  Based on the above, the plaintiff submits that the burden is on the defendant to prove that she is vexed for an unnecessary second time or that she was oppressed or unjustly harassed. All the facts and circumstances have to be considered. Here, the plaintiff contends, the defendant could not be said to be vexed twice. The plaintiff pleaded that out of the HK$400,000, HK$290,000 was repaid by way of the defendant making direct payments towards the purchase of Flat 1C, pursuant to an agreement. This was pleaded as a matter of fact or belief, and the plaintiff could not have pleaded an alternative case.

26.  At the same time, the plaintiff also submitted that if this action is struck out, then the defendant will be unjustly enriched. As such, the plaintiff submits that the justice of this case lies in allowing the plaintiff to pursue the claim, thus calling out for a dismissal of the application to strike out.

27.  Lastly, the plaintiff also referred to Yifung Development Ltd v Liu Chi Keung Ricky, HCA 3020 of 2015, 10 September 2019, K Yeung J at paragraph 33 where the learned judge said:-

“ …I remind myself that it is only in plain and obvious cases that the court should exercise its summary power to strike out, that disputed facts should be taken in favour of the party sought to be struck out, that the court should not decide difficult points of law in striking out proceedings, and that 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.”

Analysis

28.  Firstly, regarding the parties’ submissions on the case of Vervaeke, I accept that each case is to be considered on its own facts. In the present case, the payment of HK$290,000 by the defendant out of her own funds was not disputed in the Consolidated Action. However, the plaintiff has alleged that he had three conversations with the defendant confirming that the payment by the defendant of HK$290,000 was for repayment of part of the debt of HK$400,000 owed to him (ie being the outstanding consideration for the purchase by the defendant of the plaintiff’s half share in the Property). As mentioned above, the learned judge noted that such conversations were neither pleaded nor mentioned in the witness statement of the plaintiff in that action, and she held that the alleged conversations bore the hallmarks of recent invention and rejected the same. Obviously, the ruling that the plaintiff had invented such conversations allegedly confirming the repayment of HK$290,000 would render the plaintiff’s submission that there is no judicial finding to support the allegation that he was found to have lied or was dishonest an under-statement at the very least. The upshot of this point is that the plaintiff was indeed found to have invented this part of his evidence to suit his case in the Consolidated Action.

29.  Secondly, I do not accept that it was simply a matter of treatment of the HK$290,000 by the plaintiff, as the case of the defendant was also considered by the court in determining the nature of the payment of three separate amounts of HK$100,000, HK$90,000 and HK$100,000 supported by annotated bank documents, amounting to a total of HK$290,000. As noted by the judge, two of the annotated documents pointed to payment of the initial and further deposits, whilst the third document, though unannotated, showed the last payment of HK$100,000 was made a day before the completion of the purchase[7]. Having considered the evidence, in particular the intention between the parties at the time[8], the learned judge concluded that those payments were not made as repayments of the outstanding HK$290,000 due from the defendant to the plaintiff. This is therefore not just a matter of the unilaterally claimed treatment of the payments by the plaintiff, but a matter of the mutual intention of the parties, and the credibility of their evidence.

30.  Thirdly, I accept the defendant’s contention that the plaintiff is here seeking to put forward a case that is diametrically opposite to what he has alleged in the Consolidated Action. This is straightforward a matter of “day and night”, to use the description adopted by the plaintiff. The court has found that he has lied regarding his allegation that the HK$290,000 was made in repayment of the sum due to him. He now turns around and commenced the present action claiming on the basis that no such repayment had been made. The question of whether he could have raised this as an alternative claim apart, I am satisfied that the plaintiff is here obviously seeking to reverse his previous case that has been the basis of earlier proceedings. This, according to the authorities referred to above, amounts to an abuse of the process of the court, and he is estopped from doing so.

31.  Fourthly, there seems to be little dispute over the Henderson v Henderson principles as restated in Johnson. The defendant has not specifically made submissions concerning res judicata in the wider sense apart from references to lies and dishonesty, and the making of a diametrically opposite new claim. In this respect, however, I do not accept the plaintiff’s argument that the defendant in this case would not be vexed twice should the present claim be allowed to be pursued. This issue had been dealt with and determined in the Consolidated Action. There was no alternative counterclaim pleaded in respect of the repayment of the HK$290,000 that, in the event the court ruled that the three sums were not transferred in repayment of the outstanding consideration of the Property due to the plaintiff, but was transferred for the defendant’s purchase of a share in Flat 1C, then the defendant would still be liable to the plaintiff in debt, or be answerable in unjust enrichment, for the same. There is in my view nothing to prevent the plaintiff from pleading such an alternative case in his counterclaim. He is thus estopped from raising the same issue again by way of the present claim.

32.  One other matter I need to mention is that, as the plaintiff has pointed out, the defendant has in her affirmation dated 5 September 2022 referred to her intended reliance on the receipt clause in the deed of assignment dated 3 August 2010 for a potential argument that the plaintiff is estopped from alleging that he has not received the HK$290,000 being the outstanding consideration due to the plaintiff. In this respect, the defendant has not put forward any submissions, and I do not propose to rule on this potential point of argument, suffice for me to say that I agree with the plaintiff’s submission that a “receipt clause” may not necessarily be a conclusive piece of evidence of payment – see Asgain Co Ltd v Cheng Ka Yan (No 2) [2018] 2 HKLRD 641.

Conclusion

33.  Based on the above analysis, I allow the defendant’s application and order that the plaintiff’s claim be struck out, and the action herein be dismissed. I also make an order nisi that the plaintiff shall pay the defendant the costs of this action, including the costs of and occasioned by this application, with certificate for counsel in respect of this application.

34.  Lastly, it remains for me to thank counsel for their assistance.