DIRK WILLIEM JAN OOSTERVELD v. THE KA WAH BANK LTD AND ANOTHER

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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JUDGMENT

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1. In this case, the plaintiff Mr. Oosterveld has issued a writ against two Defendants, the Ka Wah Bank, the 1st Defendant and Messrs. Woo, Kwan, Lee & Lo, a firm of Solicitors the 2nd Defendant. The basis of Mr. Oosterveld's claim is that members of each of the Defendants conspired together fraudulently to represent that a mortgage or charge was executed on a date when to their knowledge and Mr. Oosterveld's knowledge it was not so executed. He claims that he had suffered damage therefrom.

2. For their part the Defendants have issued separate summonses. In the first instance, to strike out Mr. Oosterveld's Statement of Claim. In a manner which I will not go into, Mr. Oosterveld entered judgment in default against both Defendants while the applications to strike out were still pending. As a result, each Defendant issued a further summons seeking to have the judgment set aside.

3. Mr. Oosterveld has made a number of preliminary points, which he conceded to be technical, but which nonetheless he maintains, and I accept this he is entitled to rely on. If there is any validity in the points which he raised he must have the benefit of them.

4. Mr. Oosterveld made a very comprehensive statement on these points and I think five principal ones emerged. First, he said that the summonses which have been issued, particularly those issued by the 2nd Defendant, were not supported by affidavits, when filed, shoring the grounds upon which striking out was sought, why the judgments were allowed to be entered by default and the arguable grounds upon which the Defendants would like to be heard by way of defence. And even though the affidavits have now been filed, they are any way insufficient. Well, as  to this, I say it is the position as it exists at this hearing which I have to look at not the position as it existed, either when the summonses were issued or when the first hearings occurred before the Master. It is, I think, too late to take this point, If Mr. Oosterveld wished to do so he should have taken it before the Master in the first instance and applied to have some or all of the summonses dismissed at that stage because they were not properly supported.

5. The next point is that Mr. Oosterveld has suffered a delay of 2½ months between the issue of the summonses and the hearing which is now taking place. But I indicated yesterday in the course of his address that this was a fault not in any way attributable to the Defendants. I maintain that now. It is one of the unavoidable facts of litigation that one is governed by the Court diary very often rather than by Defendants, or indeed any other parties, simply dragging their feet. So I think there is nothing in that point.

6. Thirdly, Mr. Oosterveld complained about the affidavit of Mr. Waldron, an affidavit which is, together with its supporting exhibits, several inches thick and which was only filed and served four days before the hearing. Mr. Oosterveld conceded yesterday that although the exhibits are voluminous, consisting as they do of copies of the documents filed in the various actions which have taken place between the parties before this, he was not taken by surprise by the documents themselves. It is simply the order in which they are assembled and the interpretation put on them by Mr. Waldron which cause him some concern. However after Mr. Oosterveld had finished his address on the preliminary points yesterday, we were able to adjourn overnight. I am satisfied that any harm which may have been caused by the somewhat late filing of this affidavit has been cured by the overnight adjournment particularly, as I say, in view of the fact that Mr. Oosterveld was familiar with the many documentary exhibits.

7. The next point that Mr. Oosterveld, I think, sought to make was that applications to strike out and set aside are either mutually exclusive or contradictory. As I pointed out yesterday, it is not unusual to find an alternative pleading so that the party who is pleading if he is unable to succeed on one point always has the other point to fall back on. Certainly it   is not unusual to find in court an application to strike out and, in some circumstances where Defendants have had the misfortune to have judgment entered against them, also an application for that judgment to be set aside at the same time. So, I think there is nothing in that point.

8. Finally, Mr. Oosterveld complained that the original summonses which are those to strike out, contained an application for stay of proceedings. The Master who dealt with those two applications simply adjourned them to a judge in chambers without further order. In other words he was not willing to grant a stay of execution. Subsequently, such stays were granted by another Master pursuant to the summonses to set aside the judgments. Mr. Oosterveld complains it is improper and wrong for parties to go behind the back of one Master and appear before another.

9. I think there are two matters which are against him here. First of all, even if the order for stay had been made on the original summonses to strike out, that would have been perfectly permissible had the parties been able to persuade the Master that circumstances had changed since the applications were originally made. There is, I apprehend, nothing wrong in doing that. And the circumstances had materially changed in that judgment had been entered. But separate summonses had been issued to set aside those judgments. It was pursuant to those summonses that the Master ordered the stay and I see nothing among in that. I do not think it is a point to the advantage of Mr. Oosterveld.

10. Those then were the preliminary points, preliminary technical points, Mr. Oosterveld also raised a point of law, he tried to persuade me that the Defendants are in some way estopped from pursuing the relief which they are now seeking. This is based upon alleged contact which Mr. Oosterveld had with the first Defendant (the Bank),  both before and after the judgment, in which he was led to believe, as I understand it, that the Defendants did not intend to enter a defence or to defend the proceedings. It was as a result of that, said Mr. Oosterveld, that he elected to enter judgment in default instead of proceeding to trial in normal way and this election has now turned out to his detriment. I must confess. I find that a novel proposition which I am unable to accept. But in any event the Defendants' position in the proceedings was made quite plain by the issue of summonses applying to strike out the claim. The summonses were issued before the judgments were formally entered. It may be true that Mr. Oosterveld had lodged draft judgments with the Court Registry before those applications to strike out were issued. But I think that is irrelevant. The important dates are the date of the issue of the summonses to strike out and the date upon which the judgments by default were entered. So I am not persuaded that estoppel can in any way be brought to the assistance of Mr. Oosterveld.

11. I come then to the substance of the applications themselves and I will deal first of all with the applications to strike out the Statement of Claim.

12. There are, I think, three principle grounds put forward as to why the Statement of Claim should be struck out. Mr. Faulkner, who appears for the Bank, relies upon estoppel per rem judicatam and, as a fall back position, he says that the proceedings are nonetheless an abuse of the process of the Court. He also adopts the plea put forward by Mr. Ribeiro, for the 2nd Defendant, that the Statement of Claim is defective and discloses no cause of action. By the same token, Mr. Ribeiro supports and adopts the arguments put forward by Mr. Faulkner.

13. Mr. Oosterveld, it is said, has already had two bites at this particular cherry. In the first instance, in Miscellaneous proceedings 2032, the Bank took proceedings for possession of the premises which are at the root of the dispute between the two parties. Mr. Oosterveld was not, of course, a party to those proceedings . No action vas taken by the company which was the Defendant to those proceedings, a company in which Mr. Oosterveld was the shareholder and sole director. The Bank was granted an order for possession by the Master. Subsequently, Mr. Oosterveld applied to be joined as a party. His application was refused by the Master and finally he appeared before the Court of Appeal, and the Court of Appeal in its judgment, to which I had been referred, confirmed the order for possession which had been granted to the 1st Defendant against the company. And it is upon this principally, I think, that Mr. Faulkner relies for his plea of res judicata.

14. Well, I am not persuaded even now that the plea of res judicata can be based upon the decision of the Court of Appeal. As Mr. Oosterveld pointed out this morning, he was not strictly a party to those proceedings. He was seeking to be joined as a party and its application was refused and it was in the course of refusing that application that a possession order was confirmed.

15. Secondly, the issues which Mr. Oosterveld seeks to raise in the present proceedings, namely fraudulent misrepresentation or at least a conspiracy of fraudulent misrepresentation by representatives of the Bank and Solicitors, were not decided upon by the Court of Appeal. The Court of Appeal, as I discussed with Mr. Faulkner earlier this morning, side-stepped that issue and confirmed the order of the Master giving possession to the Bank on other grounds. So it does seem to me quite plain that that issue was not decided between the parties. Therefore, two of the criteria, which are mentioned in Midland Bank and Green⁽¹⁾ relied upon by Mr. Faulkner have not been met.

16. The fact remains, however, that even if Mr. Oosterveld can succeed in proving a conspiracy between the two Defendants in this case, it will be impossible for him to prove that he had suffered damage or loss because of that conspiracy because the Court of Appeal in MP 2032 made two things quite plain. First, the first mortgage or charge which is the subject to Mr. Oosterveld's complaint was subsumed in a subsequent mortgage or charge the validity of which is not challenged and that alone was sufficient for the Bank to obtain the relief which it sought. Secondly, the interpretation which Mr. Oosterveld sought to place upon Section 80 of the Companies Ordinance as to registration of the charge is the wrong interpretation.

17. Mr. Oosterveld complains that, in fact, these were two matters upon which he was not permitted fully to argue before the Court of Appeal. It seems to me, from reading the judgment to the Court of Appeal that these two issues were fully ventilated and a final decision upon them was reached by the Court of Appeal.

18. There was another set of proceedings, namely, contempt proceedings, by which Mr. Oosterveld sought leave to commit for contempt an officer of the Bank and a member of the firm of Solicitors. Again Mr. Faulkner relies upon this for his argument on res judicata and, with less assurance, so does Mr. Ribeiro who conceded that the contempt proceedings did proceed on a somewhat uncertain basis.

19. Mr. Oosterveld made an ex parte application for leave that was refused by the Judge. There was an appeal which I suppose strictly should have been an ex parte appeal, but nonetheless all parties concerned were there and there was argument. But I think that although all parties were present and although the question of misrepresentation as to the date or execution of the mortgage was ventilated, it was not so fully ventilated as to give rise to the plea which Mr. Faulkner seeks. And, of course, as I also pointed out this morning, there is considerable difference between an application to commit for contempt and an ordinary High Court action not least as to the burden of proof. Nonetheless, there was considerable documentary evidence before the Court of Appeal in the contempt proceedings and the Court of Appeal made it plain that, on the basis of the evidence, Mr. Oosterveld had no chance to success.

20. I find then the argument based on res judicata has failed but, having said that, I am quite satisfied that the fall-back argument, namely that even if it is not strictly a question of estoppel, nonetheless the present proceedings are an abuse of the process of the Court must succeed. There is a wealth authority, such as Stephenson v. Garnett ⁽²⁾ which was cited yesterday, to support this. As I have already indicated, even if Mr. Oosterveld is successful, and that seems very doubtful in view of the remarks of the Court of Appeal in the contempt proceedings, even if Mr. Oosterveld is successful in establish-ing that there was fraudulent misrepresentation and that there was conspiracy between the parties, he will be unable to prove damage or loss because the Court of Appeal has already clearly and in my view, finally, decided beyond a peradventure, that the Bank was entitled to possession of the premises. So on that basis, namely, that these proceedings are an abuse of process of Court, I would strike out the Statement of Claim.

21. There was a third ground, namely that the Statement of Claim is defective in that it discloses no cause of action. Mr. Ribeiro took me very carefully through his argument and I am grateful to him for the manner in which he set it out in writing beforehand, which I think was helpful to all concerned. There is a defect in his argument and it is a defect which Mr. Oosterveld touched in passing but did not develop. It is this. An application to strike out on the basis that a Statement of Claim is defective must rely upon the Statement of Claim itself. Extrinsic evidence, by way of affidavit or otherwise, cannot be prayed an aid and of course, in the course of his argument, Mr. Ribeiro had to take me outside of the Statement of Claim and point to other matters which had occurred in other proceedings. The latter, I think, is not permissible, but nonetheless I think his argument is successful.

22. Mr. Ribeiro contends, rightly in my view, that the basis of Mr. Oosterveld's Statement of Claim is that it is the tort of conspiracy. The recent case of Lonrho v. Shell⁽³⁾ which was cited yesterday makes it plain that the tort of conspiracy must be aimed by the conspirators at the Plaintiff's commercial interests. There is nothing in this Statement of Claim, said Mr. Ribeiro, and I accept this, to suggest that the acts of the conspirators, whoever they may have been, were aimed at Mr. Oosterveld, I suppose, or perhaps, to the company. The company, of course, is not a party to these proceedings and is not complaining. There is no sufficient particularity about this in the Statement of claim and para. 16 of the Statement of Claim, which I confess I am not wholly able to understand, is not in my view sufficient to show that there was a conspiracy aimed at, the Plaintiff as opposed to anyone else. That, in my view, is sufficient for me to be able to say that this Statement of Claim is defective and should be struck out. Therefore, there are two grounds upon which the Statement of Claim should be struck out and it follows, of course, that the judgments must be set aside.

23. Even if I was not prepared to strike out the Statement of Claim as I am, I would, nonetheless, set aside the judgments without any hesitation. Whatever may or may not have occurred between Mr. Oosterveld and the officer of the Bank, the fact remains that when the judgments were formally entered there were outstanding applications to strike out the Statement of Claim. In my view, it would be wholly improper to allow a party to benefit from a Defendant's failure to file a defence in those circumstances. That,of course, is the first hurdle which has to be overcome. The defendants must show way they allowed judgment to be entered by default and that there was some reason for it. That is more than sufficient reason.

24. Then, of course, it is quite plain from the papers that there are abundant grounds upon which the Defendants would be able to defend these proceedings.

25. For these reasons, therefore, the two judgments entered against the 1st and 2nd defendants separately will be set aside , the Statement of Claim will be struck out and the action dismissed.

(1)  Midland Bank Trust Co. Ltd & Anr. v. Green & Anr. (1978) 3 W.L.R. 149

(2)  (1898) 1 Q.B. 677.

(3)  Lonrho Ltd. & Anr v. Shell Petroleum Co. Ltd. & Anr. (1982) A.C. 173.