VIVA STEAMSHIP CO. LTD. v. CHOW LIM CHOY AND OTHERS

CACV 287/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 287 OF 2002

(ON APPEAL FROM HCA NO. 1722 OF 2001)

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J U D G M E N T

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Hon Rogers VP:

1. This is an appeal from a judgment of Madam Justice Kwan given on 2 May 2002 with reasons handed down five days later. The application before the judge was an appeal from the Master who struck out the defence and counterclaim of the defendants and ordered delivery up of vacant possession of a flat in Seymour Road, Hong Kong. The judge below set aside the order of Master de Souza and ordered costs in favour of the defendants. The plaintiff appealed that order seeking restoration of Master de Souza's order. At the conclusion of the hearing of this appeal judgment was reserved, which we now hand down.

Background

2. The nature of this application is somewhat unusual in that the application is made on the basis that the defences pleaded were wholly unsustainable amounting, in effect, to something that was, in the words used in the judgment in Overseas Trust Bank Ltd. and Coopers & Lybrand (a firm) and Others and Anthony Wentworth Howitt and Others [1990] 1 HKLR 568, "wholly imaginary, a myth or not bona fide." It will be necessary to consider the basis of the application further after reviewing the essential facts.

3. The statement of claim was endorsed on the writ, which was issued on 18 April 2001. Whereas the prayer in the statement of claim is simply for delivery up of vacant possession of the flat with mesne profits from 28 March 2001, the statement of claim includes many more allegations than that the flat was registered in the plaintiff's name and that the plaintiff was entitled to vacant possession. It commences by pleading the formation of the company by one Cho Nan Chin ("Cho"). After referring to the purchase of the flat by Hong Kong Atlantic Shipping Company Limited ("Atlantic"), which was averred to have been an associated company of the plaintiff, the pleading goes on to allege that Atlantic's board of directors granted a licence to Chau Tin Yuen a.k.a. Chow Din Yuen ("Chau") to occupy the flat "until his retirement or death or when being asked to deliver up vacant possession of the same" and that whereas Chau would pay for the utilities in respect of the flat, Atlantic would pay the outgoings namely rates, Crown rent, management fees. This licence to occupy the flat free of charge was pleaded to have been an employee benefit for Chau.

4. Chau was a nephew of a cousin of Cho and also the father of the 1st and 5th defendants. It is pleaded that Chau did not remain an employee of Atlantic but that his employment was transferred to another company "within the plaintiff's group". In 1985 the ownership of the flat was transferred to the plaintiff. It is then pleaded that Chau retired in 1989 and on his retirement he requested Cho to be allowed to occupy the flat on the grounds of ill health and that he had been accustomed to living in the flat and was too ill to move. It is then pleaded in paragraph 10 of the statement of claim that:

"Out of compassion and concern for a nephew, Cho caused the Plaintiff to extend the licence to occupy the Property free of charge until his death on the condition that Chau would pay for the utilities in respect of the Property."

It was then said that Chau had died in 1999 and that, initially, the defendants were permitted to remain in the property but later when they were requested to move out of the flat they refused.

5. The defence and counterclaim was filed in July 2001. That raised three main issues. In the first place, it is said that the purchase monies for the flat were provided by Chau and hence the flat was held on a resulting trust for Chau. After Chau's death, the defendants, being the persons entitled to Chau's estate, were entitled to the flat. Then there is a plea of estoppel. Finally, there is a plea of adverse possession extinguishing the plaintiff's right to the flat. Further and better particulars of the defence have been requested and provided.

6. The application to strike out the defence and counterclaim on the basis that it was frivolous, scandalous, vexatious and an abuse of the process of the court was issued on 10 December 2001. It was supported and opposed by written evidence. Indeed there was an application on the part of the plaintiff, which was eventually not pursued, to include further evidence for the hearing of this appeal. It emerges from the evidence that all is not simple and straightforward.

7. In the first place, although Chau had been a seaman and longshoreman for the first part of his life ending his seafaring days as a bosun, and indeed was illiterate, he had nevertheless acquired considerable capital. The suggestion in the evidence is that he had done so because his travels as a seaman had taken him to the Middle East. In consequence, he had been able to trade in gold between Persian Gulf Countries and Asian Countries. It is said that he left his wages and his savings to be held by Cho. There is no doubt that prior to the purchase of the flat, Chau had been able to accumulate enough money to purchase two other properties in his name. Chau's son, the 1st defendant, was educated in England and on his return in 1973 he worked with his father in Atlantic. The 1st defendant's evidence is that at those times when he was able, he went, on a monthly basis, to collect the interest on behalf of his father, which was paid in respect of the monies held by Cho.

8. In respect of the flat in question, it is the defendants' case, as particularised by the 1st defendant in his written evidence, that he had been told by his father that the flat in question was his father's but that Cho had requested that it be kept in the company name for tax reasons. Although the 1st defendant had tried to persuade his father to have the flat put in his father's name, his father did not agree to that until almost just before he died. By then it was too late to have that done.

9. Mr Tong SC, on behalf of the plaintiff, relies on a number of matters which he says "should have drawn the judge to conclude that the defence was wholly fictitious." In the first place, he relies on the inherent improbability of the defendants' version being true. He points to the fact that there is no document which supports the defendants' case. He argues that the arrangement to have the property in the company name could not have been for any tax benefit either for the company or for Chau. On the contrary, it is said that the contemporaneous written documents of the company showed that the deceased had been one of the four directors of Atlantic at the time when the flat was purchased and that there is no suggestion in the minutes that the flat was purchased with Chau's money. Indeed, this court was taken through the mortgage documents, which showed that a mortgage loan of $400,000 was obtained on a commercial basis to enable the flat to be purchased leaving a further $190,000 to be paid.

10. Then it is said that, although the 1st defendant has alleged that he collected interest and that the deposit monies belonging to Chau were at least $400,000, that goes no way towards showing that the property was purchased with the money which had been deposited with Cho. Indeed, the continued collection of interest indicates otherwise. Then great stress was placed upon the tax returns signed by the deceased. Those indicated that the flat was occupied by him as part of the emoluments from his employer and therefore the benefit was taxable in his hands. Finally, it was said that when letters of administration were applied for by the 1st defendant in respect of Chau's estate no reference was made to the flat as being part of the deceased's estate.

11. Whilst not disputing that these are all points which are relevant for consideration as to the validity of the defendants' claims, I do not consider that they are conclusive in themselves. One can but wonder the extent to which Chau, although a director of Atlantic, was fully aware of the contents of the minutes which were written in English, a medium and a language which he could apparently not understand. The tax returns were also clearly completed for his signature by somebody else. It is true that no proper explanation has been given as to why the flat was not included in the list of Chau's assets but, again, there may well be explanations for that.

12. The judge below considered these matters and, on reading the judgment, I am not satisfied that she failed to take into account any of the matters. Mr Tong SC's submissions in this court included suggestions that the judge had not given "proper weight" either cumulatively or separately to the facts.

13. One observation in relation to the nature of these proceedings which was made during argument and still seems to be valid is that these proceedings were conducted more on the basis of an Order 14 summary judgment application than they were to proceedings to strike out a pleading. Mr Tong relied heavily upon the Overseas Trust Bank case. It has to be noted, however, that there it was the third party notice that was sought to be struck out. The actual decision in that case was that the judge at first instance had been wrong not to consider an affidavit which had been put forward. The judge at first instance had refused to do so because he considered it inappropriate on a striking out application to decide difficult questions of fact. The decision of the Court of Appeal was that the matter should be remitted to the High Court to consider the affidavit. In doing so the court adopted the expression "wholly imaginary, a myth or not bona fide" as a test as to whether the proceedings should be struck out.

14. In approaching this case I have to say that, first of all, the judge below was exercising a discretion. I do not consider that the grounds for disturbing the exercise of the judge's discretion have been shown. It has not been shown that the judge was clearly wrong nor that she applied wrong principles of law nor that she failed to take into account facts which should have been taken into account nor that she took into account facts which she was not entitled to do, nor that she did not appreciate the evidence. The gravamen of Mr Tong's attack, as already stated, is that the judge did not give proper weight to some of the facts.

15. I would go further however. I consider that the facts in this case are by no means clear. There are obviously very unusual circumstances. The explanation provided by Cho shows that Chau was treated extremely well and was accorded far better treatment by Cho than Cho accorded to his own sons. One minor detail, for example, to which attention has been drawn is that Chau was provided at company's expense with a car and driver. Chau was, therefore, on the face of it, far more than a mere longshoreman or retired seaman. It would seem that he was accorded far more benefits than would be accorded to somebody in his position. The explanation provided that he was a nephew of one of Cho's blood cousins hardly provides an explanation for this. There are many facts which, in my view, a court would have to go into and weigh up in deciding whether the 1st defendant's evidence can be believed. It is true, as Mr Tong said, that the 1st defendant's evidence was in very large part hearsay. It was not all hearsay however. Neither do I accept that all the evidence which the defendants can adduce in court is now before this court. In short, I consider that the facts of this case are indeed strange and I consider that there are matters which merit trial.

16. The pleaded defence of estoppel seems to me to be an after thought. However, it is so insignificant in the scheme of things that I do not consider it should be struck out. The claim for adverse possession is an alternative plea and although on the defendants' main case it is difficult to see how it may be sustained, again, I do not consider that its presence causes difficulties such that it should be struck out. In my view, this case should proceed to trial as soon as possible. I would therefore dismiss this appeal and make an order nisi of costs in favour of the defendants.

Hon Le Pichon JA:

17. I agree.