HO SIN YING v. CHAN YUI LING AND ANOTHER

CACV 221/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 221 OF 2013

(ON APPEAL FROM HCA NO. 1531 OF 2012)

________________________

________________________

______________

JUDGMENT

______________

Hon Lam VP (giving the Judgment of the Court):

1.  This is an appeal against the decision of Chung J made on 30 September 2013 striking out the statement of claim of the Plaintiff and dismissing the action. As set out in his judgment, the learned judge [“the Judge”] struck out the claim on two bases:

(a) abuse of process; and

(b) time bar.

2.  Sadly, there is a long litigation history in the disputes involving the Plaintiff and those interested in the estate of doctor Tsang Kwong Lik [“Dr Tsang”], who passed away at the age of 51 on 12 December 2001.  It is necessary to have regard to such history in considering whether the present claim constitutes an abuse of process.

3.  Dr Tsang was brought up by the Plaintiff who was married to his father after the natural mother of Dr Tsang had divorced the father in 1958.  Broadly speaking, the claim in this action was brought by the Plaintiff to recover properties which were allegedly investments made by Dr Tsang on her behalf.  The doctor died intestate and he had no surviving spouse or issue.  His estate therefore devolved according to the law of intestacy to his mother.  Subject to potential claims under the Inheritance (Provision for Family and Dependants) Ordinance [“IPFDO”] Cap 481, his mother became the sole beneficiary to the estate.  But there was a dispute as to who was his mother for the purpose of our intestacy law.  

4.  The first round of litigation was between the Plaintiff and the natural mother of Dr Tsang, Madam Leung, on the entitlement to the grant of letters of administration in respect of the estate of Dr Tsang under HCAP 8 of 2004.  In November 2006, A Cheung J (as the Chief Judge then was) held in favour of Madam Leung.  The Plaintiff’s appeal against that decision was dismissed by the Court of Appeal in April 2008 in CACV 3 of 2007. The further appeal by the Plaintiff to the Court of Final Appeal was dismissed in July 2009.

5.  By the time the Court of Final Appeal handed down its judgment, Madam Leung had passed away.  After her divorce with the father of Dr Tsang, she had actually remarried another man and they had given birth to 2 daughters and 1 son.   Chan Yui Ling [“Chan”], the 1^st Defendant, was one of those daughters.  By virtue of the chain of representation, with the demise of Madam Leung, Chan became the administratrix of the estate of Dr Tsang on 21 July 2010.

6.  The Plaintiff commenced two High Court actions in 2010.  In the first one, she brought an IPFDO claim against the estate of Dr Tsang in HCA 90 of 2010 [“HCA 90”].  In the second one, she sued Chan as the personal representative of Dr Tsang in HCA 1501 of 2010 [“HCA 1501”] to seek relief in respect of properties which Dr Tsang allegedly held on trust for her. 

7.  In view of the arguments advanced before us, it is necessary to examine the claims of the Plaintiff in HCA 1501 with some detail.  In the statement of claim of 23 November 2010, there were averments to the following effects:

(a) Maryo Development Limited [“Maryo”], the 2^nd Defendant in the present action, was a company in which Dr Tsang held 998 shares with the remaining 2 shares held by his sister Tsang Yau May;

(b) Over the years the Plaintiff paid Dr Tsang various sums of monies (in the total amount of $3.9 million) for investing into a number of properties.  Those properties included what was referred to as the Tak Man Street Property (held in the name of Dr Tsang), Whampoa Garden Property (held in the name of Maryo), Man Tai Street Property (held in the name of Maryo), Ha Heung Road Property (held in the name of Dr Tsang);

(c) Dr Tsang had assured the Plaintiff that these properties were acquired for the Plaintiff and the Tsang family in general as a source of income for members of that family; and

(d) The Plaintiff had beneficial interests in those properties and the proceeds of the same.

8.  The reliefs claimed in HCA 1501 were as follows:

“(1) A Declaration that the Defendant and/or the estate of the deceased holds the 998 fully-paid ordinary shares of HK$1 each in the capital of the Company (“the shares”) on the resulting, implied and/or constructive trust for the Plaintiff absolutely, alternatively for the Plaintiff and the estate of the deceased as beneficial owners in equal shares, alternatively in such shares as the Court shall determine;

(2) An injunction restraining the Defendant and the estate of the deceased from transferring, disposing, charging, mortgaging or otherwise dealing with the shares or any interests therein;

(3) A declaration that the Tak Man Street Property and the Ha Heung Road Property registered in the name of the deceased are held by the estate of the deceased and/or the Defendant on a resulting, implied and/or constructive trust for the Plaintiff or alternatively for the Plaintiff and the estate of the deceased as beneficial tenants in common in shares mentioned in above; alternatively, in such shares as the Court shall determine;

(4) Alternatively an inquiry as to the beneficial interest in the Properties;

(5) And [sic] order for the sale of the Properties together with an order that the proceeds therefrom be distributed according to the said trust;

(6) For such further or other relief as the court may deem fit; and

(7) Costs.”

9.  HCA 1501 and HCA 90 proceeded in parallel for some time.  Directions were given on 28 September 2011, by consent, for them to be tried before the same judge consecutively.  Thereafter, trial dates were fixed and the trials would have started from 11 June 2012.  The trial of HCA 1501 was to take place first before the court (the same judge) hearing the IPFDO claims in HCA 90.  Under the IPFDO, the court must amongst other things, have regard to the financial resources and financial needs which an applicant has or is likely to have in theforeseeable future and the size and nature of the net estate (see Section 5(1) of the IPFDO).  Thus, such directions were clearly made to ensure by the time the court came to decide the IPFDO claims the claims based on investments made by Dr Tsang on behalf of the Plaintiff were resolved so that the court could have a clear picture as to these relevant matters under Section 5(1).

10.  If the Plaintiff was able to recover properties or funds from the estate in HCA 1501, her financial resources would have been increased substantially. Correspondingly, the size of the net estate of Dr Tsang would be reduced. Therefore, these questions must be settled before the court could properly exercise its power under the IPFDO.   

11.  However, at the pre-trial review on 14 March 2012, counsel for the Plaintiff (not those appearing for the Plaintiff in this appeal) informed the court that she would discontinue HCA 1501.  The decision to discontinue was made with the benefit of legal advice from that counsel. This culminated in a consent order of 22 March 2012 for discontinuance with the Plaintiff’s undertaking, amongst other things, that she “would not commence another action based on the same cause of action” [“the Undertaking”].  Under the terms of that consent order, the Plaintiff had to pay the costs of Chan in that action.

12.  The Plaintiff proceeded with HCA 90 and it was tried before Deputy High Court Judge Saunders on 11 to 13 June 2012.

13.  In the course of the trial of HCA 90, Deputy High Court Judge Saunders enquired about the other action (viz HCA 1501).  The then counsel for the Plaintiff informed the court as follows:

“… there were initially two proceedings, one of which being seeking declaration of resulting trust; some of the property held in the name of the deceased and Maryo were held for her benefit because she make contribution. That was done by my predecessor.

My Lord, after I took over the proceedings and as a result of my advice then (sic) trust action was dropped and we pursue on this one.”

14.  Judgment in HCA 90 was handed down on 13 July 2012.  Deputy High Court Judge Saunders dismissed the IPFDO claims on the basis that the Plaintiff failed to establish that immediately prior to the death of Dr Tsang she was being wholly or substantially maintained by him.  This conclusion was reversed on appeal in CACV 173 of 2012 on 16 August 2013.  The Court of Appeal allowed the appeal of the Plaintiff and awarded a lump sum payment of $2,625,000 in her favour.

15.  Since it is a lump sum award without any provision for payment by instalments, there is no power to vary the award once it has been made.  We understand the award had been paid to the Plaintiff.

16.  On 27 August 2012, the Plaintiff issued the writ in the present action.  After the close of pleadings, the 1^st and 2^nd Defendants issued summonses to strike out the statement of claim and to have the action dismissed on 4 and 14 June 2013 respectively.

17.  On 21 August 2013, the Plaintiff issued a summons for re-amending the Statement of Claim.  However, in view of the striking out of the claims and the same analysis was applicable to the proposed re-amended statement of claim, the judge did not grant leave to re-amend.   

Abuse of process

18.  The essence of the Judge’s reason in holding that the present action is an abuse of process is that the action falls within the scope of the Undertaking, see para 25 of the judgment.  Before the Judge, and also before us, the Plaintiff submitted that the Plaintiff is not suing on the same cause of action in the present action as in HCA 1501.

19.  The Judge alluded to the contention of the Plaintiff advanced below at paras 11 to 13 of the judgment.  Before us, Mr Lee SC (appearing for the Plaintiff in the appeal together Mr Hung and Ms Ng) made a similar submission.  Learned counsel placed emphasis on the fact that the consent order of 22 March 2012 only provided for the discontinuance of HCA 1501 instead of its dismissal.  It is well established that mere discontinuance does not bar a plaintiff from starting a fresh action to sue on the same claim.

20.  But the focus is on the Undertaking rather than the terms of the order.  The Judge adopted the approach in the construction of contract set out in the authorities in construing the meaning of the expression “cause of action” in the Undertaking, see paras 14 to 17 of the judgment.  Mr Lee did not dispute that as the correct approach to be adopted.

21.  At paras 18 to 22, the Judge referred to the following matters as the underlying factual matrix which he should have regard in the construction of the expression:

(a) The litigation history between the Plaintiff and Madam Leung;

(b) The claims in HCA 1501;

(c) The history and the result in HCA 90; and

(d) The intimation by counsel on behalf of the Plaintiff in the course of trial of HCA 90 that the trust action was dropped.

22.  The Judge came to the conclusion that the intention of the consent order was the dropping of the trust action and the Undertaking should not be narrowly construed to allow new claims to be advanced on different legal grounds based on the same set of facts (see para 23 of the judgment).

23.  There is no dispute that a cause of action is the material facts which entitled a plaintiff to succeed: see Cooke v Gill (1873) LR 8 CP 107, Letang v Cooper [1965] 1 QB 232 and Paragon Finance plc v D B Thakerar & Co [1999] 1 All ER 400.  Referring to Henderson v Merrett Syndicates [1995] 2 AC 145 p.193-194 and Nelson v Rye [1996] 1 WLR 1378 at p.1389, Mr Lee submitted that the same set of facts may give rise to two or more causes of action.

24.  Whilst we have no reason to disagree with what were said in those cases, how those general propositions would impact on the present appeal must be considered in context.  None of those cases concern construction of an undertaking given in similar circumstances as in our case. 

25.  In the present context, counsel submitted that the material facts to prove the causes of action advanced in the present action (express trust, breach of agency agreement) are different from those material to the establishment of the claim in HCA 1501 (resulting or constructive trust).

26.  He also submitted that if Chan wished to pre-empt the plaintiff from suing on the same set of facts, her counsel should extract an undertaking “not to commence another action on the same or substantially the same subject-matter as the present” or “not to commence another action on the same or substantially the same grounds as the present action”.

27.  As it stands, submitted Mr Lee, the Undertaking only bars the Plaintiff from instituting a fresh action based on the same causes of action, viz resulting trust, constructive trust and proprietary estoppel.

28.  Mr Lee accepted this would not be a desirable outcome from Chan’s point of view.  However, there was no obligation on the part of those acting for the Plaintiff to address the concern of Chan in drafting the Undertaking.  Insofar as Chan and those representing her might have conducted HCA 90 differently and the outcome of HCA 90 might have been different if the court was aware of the possibility of the Plaintiff starting a fresh action based on the investment by Dr Tsang on behalf of the Plaintiff, Mr Lee submitted that was not the fault of the Plaintiff.  Those representing Chan should bear responsibility for their misapprehension as to the effect of the Undertaking.

29.  Mr Lee also contended that the Undertaking was not supported by any consideration and the 2^nd Defendant viz Maryo could not benefit from it as it was not party to HCA 1501.

30.  With respect, we cannot accept Mr Lee’s analysis.  The Undertaking was given so that Chan would accept the discontinuance of HCA 1501 as opposed to its dismissal.  That was good consideration.  Whilst it would be clearer if the Undertaking were formulated in the way as suggested by Mr Lee with reference to “the same or substantially the same subject matters or grounds or facts”, the failure to adopt such formula is not fatal to the defendants’ case on the construction of the Undertaking.  This court must examine the wordings used in the Undertaking against the underlying factual matrix in order to decide what the parties objectively intended to achieve by using those words and hold the parties to their bargain.  In the process, the court must not substitute what it perceives to be fair from one party’s viewpoint for what the written terms (objectively construed) provide for.  As Lord Hoffmann said in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at p.912:

“Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.”

31.  In Fully Profit (Asia) Ltd v The Secretary for Justice (2013) 16 HKCFAR 351 at para 15, Ma CJ reiterated:

“… The surer guide to interpretation is context. …”

32.  In our judgment, the following are the relevant underlying factual matrix which provides the context for the Undertaking:

(a) The litigation history, in particular HCA 1501 and HCA 90, up to 22 March 2012;

(b) The pleadings of the Plaintiff in HCA 1501; and

(c) The potential impact of the investment claims (whether in HCA 1501 or in the present action) on the IPFDO claims in HCA 90.

33.  With respect to the Judge, the subsequent intimation by counsel for the Plaintiff at the trial of HCA 90 was not something available to the parties on 22 March 2012.  Hence, it cannot be part of the context in the construction of the Undertaking.

34.  We have already referred to the litigation history above.  The direction of 28 September 2011 for trial of HCA 90 immediately after the trial of HCA 1501 was made for the simple reason that, as explained above, without the resolution of the investment claims, the proper resolution of the IPFDO claims would not be possible.

35.  Against such background, when counsel for the Plaintiff informed the court at the pre-trial review (for both HCA 1501 and HCA 90) that she did not intend to proceed with HCA 1501, it would only make sense if that was treated as her abandonment of such claims in order to concentrate on the IPFDO claims.  Otherwise, given the potential impact of the investment claims on the IPFDO claims as explained above, the court should not permit HCA 90 to go ahead while those investment claims were still unresolved.

36.  Mr Lee submitted that the wordings of the consent order of 22 March 2012 do not have the effect of an election by the Plaintiff to proceed with HCA 90 only.  That depends on the proper construction of the Undertaking.

37.  There cannot be any dispute that the Undertaking was intended to achieve some kind of finality.  Mr Lee accepted that the Plaintiff cannot revive any claims based on resulting or constructive trusts or proprietary estoppel.  The disagreement between the parties is about the extent of finality.  Mr Lee said the Plaintiff is not prevented by the Undertaking from claiming on express trust, breach of agency agreement and conversion of properties even though they are based on similar factual matrix as those advanced in the claims in HCA 1501.  Mr Pang SC (appearing with Mr Leung for the defendants) submitted that the Undertaking barred the Plaintiff from doing so.

38.  In the authorities cited to us, the expression “cause of action” has never been understood as simply referring to the legal formulation of a claim.  Whilst the same set of underlying facts may generate different legal claims and a particular legal formulation of a claim may have different elements from another legal formulation, it is clear from the authorities that the cause of action is the underlying factual basis for a claim.  In this connection, Mr Pang referred us to para 15/1/2 of the Hong Kong Civil Procedure 2014 which, in our view, correctly summarises the authorities by this proposition,

“The words ‘cause of action’ comprise every fact (though not every piece of evidence) which it would be necessary for the plaintiff to prove, if traversed, to support his right to the judgment of the court.”

39.  Therefore, we reject the submission that because the legal formulation in HCA 1501 was resulting and constructive trust and proprietary estoppel, the Plaintiff is at liberty to commence a new action based on other legal formulations by reference to express trust, breach of agency agreement and conversion. 

40.  In our view, the issue between the parties should be determined by asking whether the Plaintiff relied on the same factual matrix which she needs to prove to establish her right to judgment in HCA 1501.

41.  In this connection, Mr Lee suggested that the Plaintiff should be allowed to advance a cause of action which requires additional factual elements to be established in addition to those already relied upon in HCA 1501.  A declaration of express trust, Mr Lee submitted, is different from a trust arising impliedly from the common understanding of the parties when property passed from the Plaintiff to Dr Tsang.                  

42.  Because Mr Lee relied on express trust to answer the defendants’ challenge based on limitation, he said in his skeleton submission that the Plaintiff’s claims in the present action rest primarily on express trust.  But there is no plea of declaration of trust in the statement of claim.  What is pleaded is an oral express agreement (which does not appear in another version of draft placed before Chung J).  Counsel referred to paras 8 to 10A of the draft re-amended Statement of Claim which read as follows,

“8. Since about 1986, the Deceased started his investments in properties by himself and/or via his vehicle the 2^nd Defendant (as will be detailed in paragraph 9 below) for and on behalf of himself and the Plaintiff with funds contributed jointly by the Plaintiff and the Deceased pursuant to an oral express agreement between the Plaintiff and the Deceased whereby the Plaintiff would transfer to the Deceased sums of money for buying properties, and the Deceased undertook and/or represented to the Plaintiff that he would hold the sums of money contributed by the Plaintiff and/or the equitable interest in the acquired properties on trust for the Plaintiff (“the Express Trust”).  Further, the Deceased undertook and/or represented to the Plaintiff that the properties acquired b y the sums of money contributed by them jointly and/or the profits and/or the income therefrom would be for the benefit of her, inter alia, upon her retirement and/or in times of emergencies.

9. In 1988, the Deceased set up the 2^nd Defendant as his vehicle for investments in properties; the Deceased held 99.8% of the share capital of the 2^nd Defendant and was a director of the 2^nd Defendant before his death.

10. At all material times, the Plaintiff reposed trust and confidence in the Deceased; the Plaintiff had been relying on the Deceased to make investments in properties.

10A. By reason of the matters pleaded in paragraphs 8 to 10 above, the Deceased, either by himself or via the 2^nd Defendant, and/or the 2^nd Defendant, held the properties acquired with, inter alia, the funds of the Plaintiff under the Express Trust as joint tenants as between the Plaintiff and the Deceased and/or the 2^nd Defendant, or alternatively as tenants in common of equal shares.”

43.  As can be seen from the draft, no particular is given in this draft as to the date on which the oral agreement was made and the consideration for the same.

44.  Further, as Mr Pang pointed out, this plea is not that different in substance from what had been alleged at para 48 of the Statement of Claim in HCA 1501:

“48. By reason of the matters aforesaid, in all material times the mutual understanding between the Plaintiff and the deceased has always been that the investment in the Tak Man Street and Ha Heung Road Properties as well as all the properties held by the Company would be and should only be used as a source of income for members of the Tsang family, in particular the education of the Plaintiff’s children and the living expenses for the retirement of the Plaintiff and her husband (hereinafter referred to as “the Understanding”).”

45.  Having compared the pleadings in HCA 1501 with the statement of claim, including the draft re-amended version of it, in the present action, we agree with Mr Pang that the foundational facts for the Plaintiff’s claims in both actions are the same.  No doubt, because of the change in the legal formulation of the claim, there are variations in the details, but the backbone of the Plaintiff’s claims remains her giving of monies to Dr Tsang for investment in properties and Dr Tsang’s use of the funds for such purpose and assurances from Dr Tsang to her.

46.  Having regard to the relevant context for the Undertaking alluded above, we do not accept it should be construed as permitting the Plaintiff to advance new claims based on the same underlying facts even though further details are added to the same.  We are of the view that so long as the Plaintiff needs to refer to the same underlying facts as essential elements in her new claims, they are covered by the Undertaking as “action based on the same cause of action”. 

47.  Mr Lee submitted that it is unfair to the Plaintiff if she could not proceed with her claims as Deputy High Court Judge Saunders found that she had entrusted $3.9 million to Dr Tsang for investment and the finding was not disturbed on appeal.  However, that finding came about after she gave the Undertaking.  As submitted by Mr Pang, counsel for the defendant would conduct HCA 90 in a different manner if such undertaking had not been given.  Upon our conclusion that the proper construction of the Undertaking does have the effect of barring her from advancing claims based on the same foundational facts, we do not see any unfairness.  With the benefit of legal advice, she chose to proceed with HCA 90 only when she could have pursued both her investment claims (in HCA 1501) and her IPFDO claim (in HCA 90).  She gave the Undertaking out of her own freewill with legal advice.  There is nothing unfair in holding her to her own bargain.

48.  On the other hand, it would be unfair to the Defendants to allow her to advance the present claims in breach of the Undertaking.  Mr Lee made no secret of the intention of the Plaintiff to rely on the findings of Deputy High Court Judge Saunders as to the $3.9 million in the present action against the Defendants on the basis of issue estoppel. In view of the defendant’s resistance of HCA 1501 (up to the point where it was discontinued), it is by no means clear whether the evidence would be the same and whether the court would reach the same conclusions in HCA 90 if HCA 1501 were fought at the same time.

49.  Given the relevance of the financial resources of the Plaintiff and the size of the net estate in the IPFDO claim, the award by the court would probably be different if the Plaintiff still had valid investment claims against the estate.

50.  We therefore hold that the pursuit of the present action, whether in the form as advanced before the Judge or in the latest version of the draft re-amended Statement of Claim, is a breach of the Undertaking.

51.  Would that justify the striking out of the claim as an abuse of process? Both Mr Lee and Mr Pang are content to adopt the broad merits-based assessment approach of Lord Bingham in Johnson v Gore Wood [2002] 2 AC 1, applied by our Court of Final Appeal in Ko Hon Yue v Chiu Pik Yuk (2012) 15 HKCFAR 72 in determining whether there is abuse of process in the present context.  We respectfully agree that it is the correct approach.

52.  Premised on our conclusion that the pursuit of the present action is a breach of the Undertaking, we are of the clear view that it is an abuse of process for the Plaintiff to commence and continue with the present action in light of the unfairness that it would occasion to the Defendants as discussed at paras 48 and 49 above.  As we said, the Plaintiff cannot complain about the bar from reviving her discontinued investment claims when she had chosen to abandon it at the eleventh hour and Chan had proceeded with HCA 90 to her detriment (in terms of the finding related to the $3.9 million) in reliance on such abandonment.

53.  Further, the Plaintiff had reaped the benefit of her election in terms of the IPFDO lump sum award and such benefit, for reasons already canvassed, would not be hers but for the abandonment of the investment claims.  In this connection, we have not overlooked the judgment of Yuen JA in CACV 173 of 2012 that the IPFDO claim and the investment claims were distinct. However, that was based on the state of evidence before Deputy High Court Judge Saunders, see paras 26 and 27 of the judgment of 16 August 2013.  As discussed earlier, but for the bar from future revival of the investment claims, the state of evidence and the relevant finding may have been very different.  In any event, the Court of Appeal did not consider the potential impact of the success of the investment claims might have on the quantum of the IPFDO claim.

54.  As mentioned, there is no power for the court to vary that lump sum award.  Mr Lee did not put forward any legal basis why the Plaintiff should be entitled to retain such an award and pursue the investment claims at the same time.

55.  As regard the position of the 2^nd Defendant, plainly it is a privy of the 1^st Defendant, and as such is entitled to the benefit of the barring effect of the Undertaking for present purposes.

56.  In the circumstances, we agree with the Judge that the present action should be struck out on the ground of abuse of process.

Time bar

57.  In light of the above conclusion, it is not necessary for us to deal with the question of time bar.  We would record Mr Pang accepted that if the Plaintiff were allowed to run the case of express trust, the limitation point is gone.

Disposition

58.  The appeal of the Plaintiff is dismissed.  We also order by way of costs order nisi that the Plaintiff shall pay the Defendants’ costs of this appeal, such costs are to be taxed if not agreed, with certificate for 2 counsel.