CHANG KING TO v. WONG SHUEN YUK

HCA 2518/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2518 OF 2015

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JUDGMENT

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1. This action relates to the property known as Unit 1, 16^th Floor, Block 17, Heng Fa Chuen, Hong Kong (“the property”).

2. The property is jointly owned by the plaintiff Chang King To (“P”) and the defendant Wong Shuen Yuk (“D”).

3. D is the mother of P.

4. The property was originally purchased in the names of D and her late husband Chang Kou Shang (“the father”) as joint tenants in October 1985 when the property was still under construction.

5. D and the father had 3 sons including P who is the eldest.

6. The father passed away before the completion of the sale and purchase of the property.  After the death of the father, D became the sole owner of the property.

7. By a nomination executed by D dated 13 March 1987, D nominated P as joint tenant of the property.  The relevant assignment assigning the property to D and P as joint tenants was also executed on 13 March 1987.

8. Since then the property was held by D and P as joint tenants.

9. On 26 July 2011 Cheung & Choy (“the solicitors”) wrote to P stating that they were instructed to act for D.  By the said letter the solicitors gave notice to P that the joint tenancy of the property was severed (“the 1^st Notice of Severance”).

10. It appears from the evidence that the 1^st Notice of Severance was at one time pending registration in the Land Registry but that the registration of the same was later withdrawn as the address of the property was not properly described.

11. On 24 February 2012 the solicitors wrote again to P stating that they were instructed to act for D.  By the said letter the solicitors gave notice to P that the joint tenancy of the property was severed (“the 2^nd Notice of Severance”).

12. In or about October 2013 D suffered a fall and sustained serious head injuries which resulted in her becoming mentally incapacitated     .

13. D is a mentally incapacitated person under the Mental Health Ordinance (Cap 136).  An order was made by the Guardianship Board on 7 August 2014 that D be received into guardianship.

14. By action no HCA 785/2014 (“HCA785”) issued on 7 May 2014 P brought proceedings against the solicitors.  By the prayer for relief in the amended statement of claim in HCA785 P claimed the following relief:

“(1) a declaration that the 2nd Notice of Severance i.e. the Notice of Severance dated 24th February 2012 and registered at the Land Registry by memorial no. 12022802130010 is null and void for all intents and purposes;

(2) an order that the 2nd Notice of Severance be vacated from registration at the Land Registry;

(2A) damages to be assessed;

(3) costs; and

(4)   further/and/or other relief.”

15. The solicitors applied to strike out the amended statement of claim in HCA785 and for the action to be dismissed.  The application came before Deputy High Court Judge Mayo for hearing on 12 November 2014.

16. By his decision dated 21 November 2014 Deputy High Court Judge Mayo (“the judge”) ordered that the amended statement of claim be struck out and that HCA785 be dismissed.

17.   As is clear from the decision of the judge the causes of action that were pleaded in support of the declaration sought in HCA785 were the negligence of the solicitors and the further claim that the solicitors were guilty of slander of title.  The amended statement of claim was struck outand the action dismissed for the reasons given by the judge in his decision.

18. P appealed the decision of the judge which came before the Court of Appeal.  By the judgment dated 30 June 2015 in CACV 257/2014 the Court of Appeal (Yuen, Kwan and Barma JJA) dismissed P’s appeal with costs.

19. By this action P claims against D for the relief as set out in the prayer for relief in the statement of claim as follows:

“(1) a Declaration that the 1^st and 2^nd Notices of Severance are void ab initio;

(2) a Declaration that none of the 1^st and 2^nd Notices of Severance is an instrument that affects the Property or any rights and interests therein;

(3) a Declaration that the Plaintiff and the Defendant were and remain the joint owners of the Property;

(4) alternative to (1) – (3) above, a Declaration that the 1^st and 2^nd Notices of Severances were revoked on or around 24^th July 2011 and on or around 24^th February 2012 respectively;

(5) an Order that the registration of the 2^nd Notice of Severance in the Land Registry against the Property be vacated

(6) costs; and

(7)   further and/or other relief.”

20. By D’s summons dated 21 June 2016 (“D’s summons”) D applies to strike out the statement of claim and for this action to be dismissed.  Alternatively, D applies for leave to file and serve her defence within 28 days from the date of the order to be made.

21. The applicable principles are well established and not in dispute.  These are set out at para 18/19/4 of the Hong Kong Civil Procedure 2017 Vol 1.

22. I bear in mind the following:

(1)   It is only in plain and obvious cases that the court should exercise its summary powers to strike out a pleading;

(2)   There should be no trial on affidavit evidence;

(3)   Disputed facts were to be taken in favour of the party whose pleading is sought to be struck out;

(4)   The claim must be obviously unsustainable, the pleading unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out;

(5)   The mere fact that the case is weak and not likely to succeed is no ground for striking out; and

(6)   One must be careful not to drive a plaintiff from the judgment seat.

23. Mr Chow, for D, made it plain that the ground on which he relies for striking out the statement of claim is that it is scandalous, frivolous and vexatious and an abuse of the process of the court.  Relying on Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1973–1976] HKC 194 it was submitted that it was an abuse of the process of the court if one raises in subsequent proceedings matters which could have and should have been litigated in earlier proceedings.

24.     In Yat Tung it was held on the facts of that case that res judicata in its wider sense applied and it would be an abuse of the process of the court to raise in subsequent proceedings matters which could and should have been litigated in the earlier proceedings.  I would observe that the bank was a party to both the earlier proceedings and the subsequent proceedings brought by Yat Tung.

25. In Ngai Few Fung v Cheung Kwai Heung [2008] 2 HKC 111 it was held that the law on res judicata did not remain static after the Privy Council decision in Yat Tung.  The subsequent Privy Council decision in Brisbane City Council & Anor v Attorney General for Queensland [1979] AC 411 explained that abuse of process was the true basis of the doctrine of res judicata underlying the case of Yat Tung.  It was not permissible to adopt a mechanistic approach by saying that since the cause of action or defence could have been raised in an earlier proceeding, then it should have been so raised, so that when those issues were subsequently raised in the later proceedings, they would necessarily become abusive.

26. In Ko Hon Yue v Chiu Pik Yuk (2012) 15 HKCFAR 72, when considering res judicata in the wider sense, Ma CJ said at paras 82 and 83:

“ 82. The abuse that is known as the Henderson v Henderson abuse (or res judicata in the wider sense — the nomenclature is not important) is derived from the case of that name. It has been developed and explained by the House of Lords in Johnson v Gore Wood & Co [2002] 2 AC 1, by the Judicial Committee of the Privy Council in Yat Tung Investment Co Ltd v Dao Heng Bank Ltd and Brisbane City Council v A-G for Queensland [1979] AC 411, by the English Court of Appeal in Bradford and Bingley Building Society v Seddon [1999] 1 WLR 1482 and by our Court of Appeal in Ngai Few Fung v Cheung Kwai Heung [2008] 2 HKC 111 and Chiang Lily v Secretary for Justice [2009] 6 HKC 234 . The essence of the doctrine is that a party ought generally not to be permitted to raise in subsequent proceedings matters which that party could and should have raised in earlier proceedings.

83.  For reasons that will become evident presently, it is unnecessary in order to resolve this part of the appeal to go into the precise ambit of the principles regarding this form of abuse, although for my part, I would say that the present state of the law is reflected by the decision of the House of Lords in Johnson v Gore Wood & Co and of the Court of Appeal in Chiang Lily v Secretary for Justice.  For present purposes, it is sufficient just to refer to the following facets of the doctrine:

(1)  The starting point is to recognise that the doctrine is founded onan abuse of process.  As Lord Wilberforce said in Brisbane City Council v A-G for Queensland, ‘it ought only to be applied when the facts are such as to amount to an abuse: otherwise, there is a danger of a party being shut out from bringing forward a genuine subject of litigation’: (p.425).

(2)  This concern (that a party ought not lightly to be deprived of the right to have serious matters litigated) was echoed by Lord Millett in Johnson v Gore Wood & Co: (p.59D–G).

(3)  It must therefore be essential when striking out a claim on this basis (and thus preventing a litigation of that claim) thatan abuse is found to exist in seeking to raise in subsequent proceedings claims or issues which could and should have been raised in earlier proceedings.  This 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: Johnson v Gore Wood & Co, 31A–B.

(4)  The abuse can also take the form of the administration of justice being brought into disrepute: see Chiang Lily, 256D–G ([58]) referring to Hunter v Chief Constable of the West Midlands Police [1982] AC 529.  With the procedural reforms introduced by the Civil Justice Reform in 2009, the courts in Hong Kong must now, when exercising their procedural powers, increasingly bear in mind not just the parties before them in any particular litigation but also the position of other litigants in the court process.  RSC O.1A r.1(f) states as one of the underlying objectives of the court's procedural powers under the Rules to be ‘to ensure that the resources of the court are distributed fairly’.

(5)  In examining aspects such as abuse, the court is concerned with balancing interests: not just those of the litigants before it, but also taking into account the other interests involved in the administration of justice.  It is important therefore here to emphasise that when the court is dealing with the Henderson v Henderson type of abuse, it is not looking at an absolute bar to litigation such as issue estoppel or cause of action estoppel.  On the contrary, in considering this type of abuse, the court is required to assess a number of factors and balance competing interests.  See here, Bradford and Bingley Building Society, 1490F–H.  It is also worth making the following observations at this juncture:

(a)  There is conceptually an important distinction betweenabsolute bars such as issue estoppel and the type of abusewith which we are concerned.  In the former situation, the party who seeks to re‑litigate an issue or cause of action has already had his day in court, whereas in the latter situation, that party has not: cf Johnson v Gore Wood, 59D (‘It is one thing to refuse to allow a party to re‑litigate a question which already has been decided; it is quite another to deny him the opportunity of litigatingfor the first time a question which is not previously being adjudicated upon’ (Lord Millett)).

(b)  The assessment of different factors and balancing competing interests can be said to be an exercise of a discretion.  A number of decisions of the English Court of Appeal have cast doubt on whether the court does indeed exercise a discretion as such: see Aldi Stores Ltd v WSP Group Plc [2008] 1 WLR 748, 762C–D ([16]) and Stuart v Goldberg Linde [2008] 1 WLR 823, 845E–846C ([81]).  It is unnecessary for present purposes to decide whether or not a discretion is actually being exercised.  The more important point to bear in mind is that an appellate court is obliged to pay sufficient regard to the decision of the court below and should be reluctant to interfere where the decision is based on the assessment or balancing of a number of factors.  Nothing in the two said cases suggests otherwise; in fact, quite the contrary.”

27. I would also refer to Endozo Maylin Palomar v Lee Chi Ming [2014] 4 HKLRD 470 and what Cheung JA said at paras 3.1 to 3.3:

“ 3.1 Striking out a claim by reason of res judicata in the wider sense pursuant to the principle in Henderson v Henderson 67 ER 313 and Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581 or abuse of process pursuant to Johnson v Gore Wood & Co [2002] 2 AC 1 is based on the principle that a party ought generally not to be permitted to raise in subsequent proceedings matters which that party could and should have raised in earlier proceedings (Ko Hon Yue v Chiu Pik Yuk (2012) 15 HKCFAR 72 at 113 per Ma CJ). The determining factor is whether the subsequent proceedings constitute an abuse of process.

3.2 Lord Bingham of Cornhill observed in Johnson v Gore Wood and Co at p.31:

… I would not accept that it is necessary, before abuse maybe found, to identify any additional element such as a collateralattack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party.  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 should 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 the 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.  (emphasis added)

  3.3   Ma CJ at [83(2)] of Ko Hon Yue stated:

(2)   This concern (that a party ought not lightly to be deprived of the right to have serious matters litigated) was echoed by Lord Millett in Johnson v Gore Wood & Co: (p.59D–G)”

28. Each case, of course, depends on its own facts.

29. Mr Chow submitted that P relied on the same factual matrix in HCA785 and in this action.

30. In HCA785 P pleaded that the 1^st Notice of Severance and the 2^nd Notice of Severance served by the solicitors on him were served without the instructions or authorization of D and were therefore invalid, null and void.  It was also pleaded that in the alternative, if the 1^st Notice of Severance and the 2^nd Notice of Severance were valid, then the 1^st Notice of Severance had been revoked by D by the signed copy of an email dated 29 July 2011 and the 2^nd Notice of Severance had been revoked by D’s letter dated 29 February 2012.

31. In this action, P seeks the declarations sought based on the same facts relied on in HCA785.

32. Mr Chow submitted that the claims in this action could and should have also been brought against D in HCA785.  He also submitted that in view of the findings made by the Court of Appeal in CACV 257/2014 it is an abuse of the process of the court for this action to continue and this action should be dismissed.

33. Mr Lam, for P, accepts that the same factual matters relied onin HCA785 against the solicitors are also relied on in this action against D.  He also accepts that the declaratory relief sought against D in this action is substantially the same as the declaratory relief sought in HCA785.

34. It seems to me that although the same factual matters are relied on and the declaratory relief sought in both actions are substantially the same, that does not necessarily mean that this action is an abuse of the process of the court.

35. I bear in mind that this action is the first time that P is suing D.  There is no question of the same litigant being vexed twice unlike the situationin Yat Tung.

36. It is also important to consider what the Court of Appeal was dealing with in CACV 257/2014.  That was an appeal from the decision of the judge in HCA785.  It is clear that the judge held that the cause of action in negligence against the solicitors was unsustainable because there was no duty of care owed by the solicitors to P.  And he also held that the cause of action for slander of title was also unsustainable.

37.     Mr Chow submitted that the Court of Appeal has made findings of fact.  He submitted that at paras 25, 26 and 26.2 of the judgment of Yuen JA the following relevant facts were found by the Court of Appeal:

(1)   That no application was made by D to set aside the 2^nd Notice of Severance or to vacate the registration of the 2^nd Notice of Severance;

(2)   That D would have done so during the 1½ years between the registration and her incapacity if she had not given instructions to the solicitors to issue the 2^nd Notice of Severance;

(3)   An implied finding that there was no evidence from P that D had in fact not given instructions to the solicitors to issue the 2^nd Notice of Severance.

38. In my view, Mr Chow has read much more into what is actually contained in the paragraphs he cited in Yuen JA’s judgment.  I am unable to accept Mr Chow’s submissions.

39. Both Kwan JA and Barma JA concurred with the judgment of Yuen JA.  As Yuen JA said at para 24, before discussing the cases cited by Mr Lam, for P, where solicitors have been held liable to non‑clients, Yuen JA noted the matters set out at paras 25 to 27 as follows:

“25. First, Mr Lam accepts that a joint tenancy may be severed at any time by one joint tenant (acting by himself or through solicitors) without the consent of the other, and if Madam Wong had given instructions to sever the joint tenancy, the plaintiff cannot claim against the Solicitors. His case is predicated upon the basis that Madam Wong did not give those instructions.

26.1. Second, Madam Wong must have been aware of the 2^nd Notice of Severance, as it was already registered when the plaintiff did his search of the Land Register in March 2012. There is no evidence that the plaintiff had kept this information to himself and there is no reason why he would not have informed Madam Wong of the registration.

26.2.   The point to note is that if the severance was not done on her instructions, she could take steps to reverse it (ie take steps tovacate the registration).  She could have done so in the 1½ yearsbetween the registration and her incapacity, and even now a nextfriend may be appointed to act for her.  I will return to this pointin my discussion of the ‘will’ cases Ross v Caunters [1980] Ch 297and White and another v Jones and another [1995] 2AC 207 below.

27.  It was against the backdrop of the matters set out above thatthe plaintiff commenced legal proceedings against the Solicitors.  His case (as formulated by Mr Lam) is that before the Solicitors accepted the retainer to issue a notice of severance, they were under a duty to him (although he was not their client) to ascertain the identity of the person giving those instructions.  As noted above, this case must be premised on the person giving the instructions not being Madam Wong, because if she had given those instructions, the plaintiff can have no possible claim against the Solicitors.”  [emphasis added]

40. After having dealt with the cases cited by Mr Lam, Yuen JA went on to say at paras 33.1 and 33.2:

“33.1. Thus of the three cases cited by Mr Lam, it will be seen that the latter two concerned situations where the solicitors had acted or purported to act for the persons suffering loss. It is only in the wills cases (Ross v Caunters and White v Jones) that the claimants were not persons for whom the solicitors purported to act. However the duty of care arose in those cases only becauseof the unique nature of a will, where it was reasonably foreseeablethat the clients’ estates could not sue (as they had suffered no loss)and the persons who suffered loss would not otherwise have been able to sue. Absent the finding of a duty of care owed to the intended beneficiaries, there would have been no remedy for the solicitors’ negligence.

33.2.   That is not the situation here at all.  If Madam Wong had not instructed the Solicitors to sever the joint tenancy and if she had suffered loss as a result of the Solicitors’ act, she could and can institute proceedings against them.  She has not done so (whether personally during the 1½ years before her incapacity orthrough a next friend since then).  If the plaintiff is in any doubtas to the nature of the interest he holds in the property, he can seeka declaratory judgment against his co-owner Madam Wong.  These are just some of the remedies open to Madam Wong and the plaintiff respectively.  Mr Lam accepts that to be the case.  His only response was that if his client sued Madam Wong, there may be costs implications. But there are costs implications in all litigation, including the plaintiff’s claim against the Solicitors.”  [emphasis added]

41.     It seems to me that in dealing with the question of whether the solicitors owed any duty of care to P, Yuen JA was making it quite plain at para 33.2 that P is not without remedies, unlike the situation in the cases cited by Mr Lam where a duty of care arose because of the unique nature of a will.  She was clearly saying at para 33.2 that P “can seek a declaratory judgment against his co‑owner [D]”.  By this action, P is doing precisely that by seeking declaratory judgments against D as set out in the statement of claim.

42. I am unable to accept that the Court of Appeal has made definitive findings of fact as submitted by Mr Chow in an appeal on whether the judge below was right to strike out the statement of claim on the groundthat no duty of care was owed by the solicitors to P.  There was no finding by the Court of Appeal that the court did not accept the affidavit evidence filed by P or that they did not believe him.  There was no finding that D did or did not give instructions to the solicitors to issue the 1^st Notice of Severance and the 2^nd Notice of Severance.

43. As set out at para 27 of the judgment of Yuen JA:

“… this case must be premised on the person giving the instructions not being Madam Wong, because if she had given those instructions, the plaintiff can have no possible claim against the Solicitors.”

That was the premise on which the Court of Appeal considered whether the solicitors owed any duty of care to P.  There was no finding of fact as submitted by Mr Chow.

44. D has failed to satisfy me that it is an abuse of the process of the court for P to bring this action against D.  In my judgment, this is not a plain and obvious case for the court to exercise its summary powers to strike out the statement of claim.

45. I dismiss paras 1 and 2 of D’s summons.  I give leave to D to file and serve her defence within 28 days from today.

46. I also make an order nisi that D do pay P his costs of D’s summons, such costs to be taxed if not agreed.

47. P’s own costs are to be taxed in accordance with Legal Aid Regulations.