LAM KIN CHUNG v. SOKA GAKKAI INTERNATIONAL OF HONG KONG LTD AND OTHERS

HCMP 2355/2023

[2025] HKCFI 2244

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2355 OF 2023

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DECISION

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1.  This is the Petitioner’s application by Summons filed on 8 August 2024 to strike out parts of the evidence, including affirmations and exhibits (“Challenged Evidence”), filed on behalf of the 2^nd to 18^th Respondents (“Respondents”), namely :

(1)  Paras 69-75 and 81-83 of the Affirmation of Ngan Sai Fong (“Ngan”) filed on 12 April 2024 (“Ngan (1)”) and pp 303-317 and 370-412 of exhibit NSF-1; and

(2)  The Affirmation of Wo Wai Kuen filed on 12 Apri1 2024 (“Wo (1)”).

Issue

2.  The central issue in this application is whether the Challenged Evidence is relevant to the disputes in these proceedings. 

Background

3.  The material background can be succinct stated as follows.  By a Petition filed on 11 December 2023, the Petitioner brings a case of unfair prejudice against the Respondents in the running of Soka Gakkai International of Hong Kong, the 1^st Respondent (“Company”).  Soka Gakka is a religious institute of Japan which preaches Nichiren Buddhism. 

4.  The Company is limited by guarantee and a charitable organisation which promotes Buddhism.  Its affairs are managed by a Committee, whose members perform the role of directors of the Company.  Members of the Committee serve voluntarily without remuneration. 

5.  The Respondents are Committee Members of the Company.  The 2^nd Respondent had been succeeded by Ngan, the 5^th Respondent, as the Company’s “general director”.

6.  The Petitioner has been a member and donor of the Company since around 1975.

7.  It is alleged by the Petitioner that in 2011 he discovered that the Committee Members had approved the sale of a property owned by the Company in Chai Wan for HK$80m, and the purchase of premises in Sai Wan Ho for HK$23.8m.  The Petitioner believes that the sale of the Chai Wan property was at a substantial undervalue, and the purchase of the Sai Wan Ho property was at substantial overvalue.  Consequently, statutory derivative action was brought by the Petitioner against certain Committee Members in relation to the property transactions in June 2017 (leave to bring the action was granted in May 2017).  

8.  Following the discovery of the property transactions, the Petitioner made a number of complaints about inadequacies in the Company’s corporate governance.  This included the Company’s (a) failure to convene any AGMs from 1975 to 2014; (b) refusal to permit inspection of its register of members (“Register”); and (c) failure to allow members to nominate candidates for election as Committee Members.  These complaints form part of the unfairly prejudicial conduct alleged in the Petition ([72(3)]-[72(4)]).

9.  The Company’s denial of the Petitioner’s request to inspect the Register had resulted in proceedings brought by the Petitioner in October 2016. 

10.  In 2021, the Petitioner also initiated an action to recover HK$1m he had donated to the Company in 1994 to construct a cultural centre in Tai Po. 

11.  It is reasonably clear that with, inter alia, these complaints and legal actions the relationship between the Petitioner and the Respondents has been under strain for some time.

The Petition

12.  The Petition contains a catalogue of allegations of lack of proper corporate governance in the management of the Company, some of which have been referred to in para 8 above.  Mr Pao SC, who appeared with Mr Lung and Mr Ng for the Respondents, had highlighted two allegations of the Petition as relevant to the present application :

(1)  In 2018, the Committee established and has since maintained a register of members who do not wish to receive communications from other members (“Refusal Register”), together with the requirement that Committee election candidates undertake not to communicate with members on the Refusal Register;  

(2)  In 2022, the Committee implemented and has since maintained a policy that the Register would only be made available upon an undertaking not to communicate with or distribute campaign materials to members on the Refusal Register (“Communication Restrictions”).

13.  In summary, the Petitioner’s case is that the unfairly prejudicial conducts set out in the Petition are symptomatic of systemic corporate governance failings by the Company’s management to comply with their duties, the Memorandum and Articles of Association of the Company and statutory as well as common law requirements.

14.  The Petitioner says that the Petition was presented so that the Court may adjudicate on the unfairly prejudicial acts which will have an important impact on the Company’s corporate governance, including the ability of its members to discharge their fiduciary duties to advance the Company’s charitable objects (see Lam Kin Chung v Soka Gakkai International of Hong Kong Ltd [2022] 4 HKC 202, [120], [123]-135] per Yuen JA). These are clearly matters of importance to the Company’s members as a whole as well as its charitable objects, and do not affect the Petitioner’s interests alone.

15.  In fairness, as pointed out by Mr Pao, the Petition contains a serious allegation[1] that the unfairly prejudice conducts were intended to consolidate and maintain the control of the Supreme Entities[2] and/or incumbent Committee Members. 

The Challenged Evidence

16.  Ngan (1), [69]-[75] concern the Petitioner’s borrowing of HK$5m from a member of the Company (“Wong”) which was the subject matter of a Debt Action by the latter in 2011.  Summary judgment was entered against the Petitioner in Wong’s favour on 10 August 2012.  The Petitioner’s appeal was dismissed.

17.  Ngan (1), [73], [81]-[83]  concern a fraud as alleged in the Statement of Claim (“Fraud SOC”) of an action (“Fraud Action”) commenced by certain Singaporean investors against the Petitioner in 2012, which involved his use of the same corporate vehicle as in his dealings with Wong in the Debt Action.  The Fraud Action had been tried and judgment is expected to be handed down at the end of May 2025.

18.  Wo (1) provides evidence of a Singaporean businessman who visited the Company in 2009 and accused the Petitioner of abusing his (self-proclaimed) identity as a senior member of the Company and disciple of the spiritual leader of Soka Gakkai to gain trust and perpetrate fraud.

The Respondents’ case

19.  The Respondents say that the Petitioner’s case is unmeritorious.  Their substantive defence relating to the Refusal Register and the Communication Restrictions (other allegations of unfairly prejudicial conduct are not relevant to this application) is that there is no unfairly prejudicial conduct against the Petitioner or any other member of the Company :

(1)  These were responsive restrictions (“Responsive Restrictions”) implemented by the Committee under legal advice and justified by the Petitioner’s misconduct.  The Committee acted in good faith in the best interests of the Company and its members.  None of the Responsive Restrictions was put in place to entrench the Committee’s control or to exclude any member or the Petitioner as he alleges;

(2)  Even assuming that the Responsive Restrictions constituted conduct prejudicial to the Petitioner, such prejudice was not “unfair” considering his misconduct. The Court would also be entitled to refuse some of the reliefs sought, even if unfair prejudice were established.

20.  In respect of the Debt Action, it is emphasised by the Respondents that the Company demands exemplary moral conduct from its members and followers through the “Three Principles” that strictly prohibit: (1) loans amongst members; (2) business partnerships amongst members; and (3) romantic or other relationships violating societal or ethical norms.  The Three Principles stem from the core tenets of Soka Gakkai.  Members must attest to adherence to the Three Principles upon joining.

21.  Further, the Petitioner owes fiduciary duties to the Company as a member to act in good faith in advancing its charitable objects (“Member’s Duty”).  This was acknowledged in the Petition.

22.  As shown in the Debt Action, the Petitioner received HK$5m from Wong either as a loan or, as he contended, as payment for allotment of shares in his company, eBizAnywhere.  Either way, the 1^st or 2^nd of the Three Principles was infringed.  In light of the importance of the Three Principles to the Company as a charitable and religious organisation, there was necessarily a breach of Member’s Duty on the part of the Petitioner. 

23.  It was for the Company as an institution to implement steps to protect its members as a whole in light of such violations, and the Petition is the forum for the Court to decide whether the Responsive Restrictions were appropriate and proportionate responses to take.

24.  As regards the Fraud Action, it was alleged that the Petitioner had perpetrated an elaborate investment fraud upon certain Singaporean investors through misrepresentations, invoking prominent tycoons and credentials to enhance his credibility along the way.  In particular, the Petitioner was accused of inducing investors to purchase shares or advance substantial loans to eBizAnywhere.

25.  When the allegations are considered alongside the incident detailed in Wo’s Affirmation, the Fraud Action heightened the Committee’s legitimate concerns that the Petitioner had exploited his affiliation with the Company and the spiritual leader of Soka Gakkai for illicit personal gains.  There was no other reason why a victim would be looking for the Petitioner at the Company’s premises.

Applicable principles

26.  Mr Yu, who appeared for the Petitioner, had provided the Court with the following summary[3] of the relevant legal principles.  Pursuant to O 41, r 5(1) of the RHC, an affidavit may contain only such facts as the deponent “is able of his own knowledge to prove”.  Under O 41, r 6, the Court may also strike out of any affidavit any matter which is “scandalous, irrelevant or otherwise oppressive”.

27.  The principles on strike out under O 41, r 6 were summarised by Barma J (as he then was) in Chan Woon Fui v Chan Wing Suen, unrep, HCCW 350/2004, 11 July 2005), [4] :

(1)  Degrading, indecent and offensive charges made in an affidavit will be regarded as scandalous if they are irrelevant or inadmissible in evidence to prove any material allegation in the petition [4(1)];

(2)  Irrelevant matter may be struck out even if not scandalous.  Offensive matters which are material will not generally be struck out [4(2)-(3)];

(3)  It is wrong to include argumentative material in affidavits and such material may be struck out [4(4)];

(4)  The Court may decline to strike out on the basis that it can exclude the offending material from its mind when deciding the issues; it may strike out some or all of the material complained of; or in an extreme case order the entire affidavit to be taken off the court file [4(5)].

28.  Evidence of facts and circumstances to show the disposition of a party is inadmissible: Sun Legend Investments Ltd v Ho Yuk Wah (2011) 14 HKCFAR 541 at [58] per Litton NPJ. 

29.  The Court may also exercise its case management powers to exclude evidence.  The basis of the Court’s discretion to exclude evidence that is relevant and legally admissible is the Court’s case management power inherent in the Court’s control over its process.  The power is consistent with Order 1A: Re Estate of Nina Kung (No 2) [2009] 4 HKLRD 157, [40] per Johnson Lam J (as he then was).

30.  In this regard, under O 1B, r 1(2)(j), the Court may “exclude an issue from consideration”.  Further, r 1(2)(l) empowers the Court to make any order for the purposes of managing the case and furthering the objectives in Order 1A.  O 1A, rule 4(2)(c) provides that the Court’s active case management includes “deciding promptly which issues need full investigation and trial”.  

31.  In Nina Kung, Lam J applied the test set out in O’Brien v Chief Constable of South Wales Police [2005] 2 AC 534. As Lord Bingham held :

(1)  The first stage of the inquiry asks whether the evidence sought to be adduced is relevant.  Relevance must be judged by reference to the issue which the court is called upon to decide.  If relevant, the evidence is legally admissible ([3]-[4]);

(2)  The second stage requires the judge to make a difficult and sometimes finely balanced judgment: whether evidence which ex hypothesi is legally admissible should be admitted [5].  The judge may consider [6]:

(a)  whether the admission of the evidence will distort the trial and distract the attention of the decision-maker by focusing attention on issues that are collateral to the issues to be decided;

(b)  whether the potential probative value of the evidence outweighs the potential for causing unfair prejudice; and

(c)  the prejudice of admission of the evidence on the resisting party, eg, burden in time, cost, the lengthening of the trial, the potential prejudice to witnesses called upon to recall matters long thought to be closed.

32.  Mr Pao had no disagreement with the above principles. He emphasised that the touchstone is relevance of the Challenged Evidence.  To this central issue, I now turn.

Relevance of the Challenged Evidence

33.  The Respondents’ evidence which may shed light on the relevance of the Challenged Evidence is, firstly, scanty.  Such evidence is confined to Ngan (1), [59]-[60], [69]-[75] and [81]-[83] and Ngan (2)[4],  [4]-[6] and [29]-[32]. 

34.  Soundly, the evidence is replete with inadmissible submissions, contrary to para 7 of the directions of this Court made on 22 February 2024. 

35.  Thirdly, although it is contended by the Respondents that the Responsive Restrictions were implemented by reason (or partly by reason) of the Petitioner’s conducts demonstrated by the Debt Action and the Fraud Action, there is not one iota of evidence on, eg, when the Committee became aware of those Actions, whether Committee meeting(s) was called to discuss the matters, what was discussed at the meeting(s) and the resolution(s) passed.     

36.  Fourthly, the evidence in question amount to little more than bad character evidence (submissions may be the more appropriate description).  There is no linkage demonstrated between the evidence and the Responsive Restrictions.

37.  Fifthly, Mr Yu made a powerful submission to contest the relevance of the Challenged Evidence as follows.  The Debt Judgment was dated 10 August 2012 and the Fraud SOC was dated 27 September 2012. The Refusal Register was established in 2018, and the Communication Restrictions were put in place in 2022.  The improbability that the Responsive Restrictions were related to the Debt Action and the Fraud Action is self-evident.  There is no answer to the submission.  For completeness, it may be added that the incident referred to in Wo (1) took place in 2009.

38.  Sixthly, as pointed out by Mr Yu, the Respondents’ evidence on the Refusal Register is that (a) it was “a direct, considered and proportionate response to the privacy concerns revealed by [the Petitioner’s] actions so as to protect the interests of the [Company] members” (Ngan (1), [132]); and (b) although the Petitioner’s actions were the catalyst for the Refusal Register, its effect “is not targeted at [the Petitioner]” (Ngan (1), [135]).  It is apparent from Section (E) of Ngan (1) in which paras 132 and 135 appeared that the “Petitioner’s actions” had nothing to do with the Debt Action or the Fraud Action. 

39.  In respect of the Communication Restrictions, the Respondents’ evidence is that they constituted “a direct response by the Committee to the data protection concerns exposed by the Donation Pamphlet” (Ngan (1), [156]).  The Donation Pamphlet was a document distributed by the Petitioner to other members to solicit donations to a Fund in his name or to UNHCR to assist Syrian families in need of help (Ngan (1), [86]).

40.  In the premises, it is quite plain that the Challenged Evidence is little more than allegations of bad character against the Petitioner and they have nothing to do with the issues which the Court will be required to adjudicate in the Petition.  The scandalous nature of the Challenged Evidence coupled with its lack of relevance constitute sufficient ground to strike out the Challenged Evidence.  I can see no good reason which may militates against exercising the Court’s power to strike out the Challenged Evidence.

41.  I should mention that there are two other issues in this application, namely :

(1)  The Challenged Evidence contravene O 41, r 5(1) since: (a) Ngan did not have personal knowledge of the underlying legal proceedings in the Challenged Evidence; and (b) the Challenged Evidence is inadmissible in light of the rule in Hollington v F Hewthorn & Co Ltd [1943] KB 587 or no weight should otherwise be attached to them;

(2)  The Court should exercise its case management discretion to exclude the Challenged Evidence to avoid disproportionately expanding the scope of inquiry.

42.  Whilst there is force in Mr Yu’s submissions on both issues, especially on (2), in light of the conclusion on the main issue, it is unnecessary to deal with them.

Disposition

43.  For the reasons aforesaid, I make an order in terms of para 1 of the Summons.  The parties take no issue that costs should follow the event.  I order that the costs of and occasioned by this application be paid by the Respondents, to be taxed if not agreed. 

44.  I am grateful to counsel for their assistance.