LEUNG TAT KIN, ANTHONY AND ANOTHER v. WONG TING WAI AND OTHERS

DCCJ 4234/2015

[2019] HKDC 1486

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4234 OF 2015

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DECISION

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Introduction

1.  By summons dated 24 July 2019 purportedly taken out pursuant to O. 19 r.9, Rules of the District Court (“the Summons”), Mr Chan, the 6^th defendant herein, applies to set aside the judgment of this court entered against all the remaining defendants herein including Mr Chan (“the Judgment”) at the conclusion of the trial on 20 May 2019. None of the defendants took part in the trial except the 8^th and 10^th defendants who reached a settlement with the plaintiffs just before its commencement.

2.  This is the first step that Mr Chan has ever taken in these proceedings since the institution of the same in 2015. He did not even file a notice of intention to defend let alone his defence. He does not take issue with all the service of the court documents previously effected on him at his residential address in the New Territories.

3.  Very briefly stated, the plaintiffs’ claim is for the return of the entire issued shares (“the Shares”) in a local company known as Jianteng Enterprise Limited (“the Company”) held by Mankins Properties Limited (“MPL”) as the nominee of Mr Leung. Mr Leung acquired the Shares from Mr Wong (the 1^st Defendant) on or about 10 August 2011.  The Company holds the entire shares of a PRC company which is the registered owner of a cross-border vehicle licence.  Mr Leung’s complaint is that from July 2012 to December 2014, the Shares were without his knowledge or consent transferred from Mr Wong to Mr Yeung (the 2^nd Defendant), then from Mr Yeung to Mr Guo (the 3^rd Defendant) and then from Mr Guo to Mr Zheng (the 4^th Defendant) by a series of forged documents filed with the Companies Registry.  On or about 10 November 2014, despite the protest of Mr Leung and MPL, Mr Zheng purportedly transferred the Shares to Mr Chan. 

4.  The claim of Mr Leung against Mr Chan is based on the tort of unlawful means conspiracy. Mr Chan is alleged to conspire with other defendants to deploy an unlawful means, viz, the filing of some forged documents with the Companies Registry thereby injuring the interest of Mr Leung and MPL in respect of the Shares.

5.  After hearing the evidence of Mr Leung and examining the documentary evidence, in the absence of any challenge thereto and contrary evidence, with the assistance of Ms Xu, counsel for Mr Leung and MPL, this court came to the conclusion that the pleaded case of Mr Leung and MPL was borne out by the evidence and their claim against, among other defendants, Mr Chan was proved. This court hence entered judgment against, among other defendants, Mr Chan.

This application

6.  As pointed out by Ms Xu, this application should be made under O.35 r.2 rather than O.19 r.9..  Mr Perry Chan, for Mr Chan, accepts this though he insists that O.19 r.9 should still be relevant. I cannot agree with him.   

7.  In Shocked v Goldschmidt [1998] 1 All ER 372 at p.381e to j, Leggatt LJ set out the eight propositions relating to an application under O.35, r.2.  These eight propositions were adopted by Cheung JA in Lau Kam Chuen v Lee Ching [2003] 2 HKLRD 1018 at §11 and they are as follows:

(1) Where a party with notice of proceedings has disregarded the opportunity of appearing at and participating in the trial, he will normally be bound by the decision.

(2) Where judgment has been given after a trial it is the explanation for the absence of the absent party that is most important; unless the absence was not deliberate but was due to accident or mistake, the court will be unlikely to allow a rehearing.

(3) Where the setting aside of the judgment would entail a complete retrial on matters of facts which have already been investigated by the court the application will not be granted unless there are very strong reasons for doing so.

(4) The court will not consider setting aside judgment regularly obtained unless the party applying enjoys real prospects of success.

(5) Delay in applying to set aside is relevant, particularly if during the period of delay the successful party has acted on the judgment, or third parties have acquired rights by reference to it.

(6) In considering justice between parties, the conduct of the person applying to set side the judgment has to be considered: where he has failed to comply with the orders of the court, the court will be less ready to exercise its discretion in his favour.

(7) A material consideration is whether the successful party would be prejudiced by the judgment being set aside, especially if he cannot be protected against the financial consequences.

(8) There is a public interest in there being an end to litigation and in not having the time of the court occupied by two trials, particularly if neither is short.

Mr Chan’s explanation for his absence at trial

8.  Mr Chan has filed his affirmation and an affirmation of Jiang Xihen to support his application. Each affirmation consists of 3 pages only. In his affirmation, Mr Chan disclosed for the first time that he was merely a trustee or nominee of Mr Jiang holding the Shares on trust for him. Mr Jiang is a PRC resident and has been his friend for years. Mr Jiang asked him to be his trustee or nominee in respect of the Shares out of convenience only.  Mr Chan is a permanent resident of Hong Kong Special Administrative Region. Mr Chan asserted that Mr Jiang was a bona fide purchaser of the Shares.

9.  Mr Chan accepted that in or about 2015 or 2016, he started receiving the court documents and legal correspondence served on him by the plaintiffs. He said that he was surprised and did not understand their contents. He simply forwarded such documents to Mr Jiang by way of an instant communication application known as Weixin. He asked Mr Jiang what they were about and how to deal with them. Mr Jiang told him that he did not know. Then Mr Chan asserted that he had already discharged his duties as the trustees of the Shares by sending the information to Mr Jiang and he did not follow up with the progress of this action himself.

10.  On or about 25 February 2019, Mr Chan transferred the Shares to Mr Jiang so as to avoid administration work arising from the ownership of the Shares.

11.  Mr Chan did receive the Judgment and had a discussion with Mr Jiang about the same. Due to their lack of litigation experience, they sought assistance from their friends. Their friends were, however, not forthcoming and helpful. Delay was thereby caused. Eventually, after further discussion, they decided to seek legal advice and hence took out the Summons to make the present application.

12.  In his affirmation, Mr Jiang explained that in late 2014, he and his father wanted to acquire a cross-border vehicle licence for business purposes. They instructed an agent called Mr Huang who advised them that it would cost RMB100,000 less if they hold the licence through a company. Mr Huang recommended to them the Company and its shares would cost RMB780,000 (“the Price”). Upon his advice, they paid the Price to another agent called Mr Fan to purchase the Shares.

13.  Mr Jiang maintained that the acquisition of the Price was completed by Mr Huang and Mr Fan on his behalf and he is a bona fide purchaser.

14.  Since 2015 or 2016, Mr Jiang received the court documents and legal correspondence relating to these proceedings from Mr Chan. He forwarded such documents to Mr Huang and asked for his advice. Mr Huang told him that he would follow up the matter. Mr Jiang placed his complete trust in Mr Huang. Up till the trial on 20 May 2019, Mr Huang had not reported to him any problem about these proceedings and so he believed there was nothing to follow up.  

15.  As regards the Judgment, Mr Jiang gave a similar, if not identical, account of what had transpired between Mr Chan and him.

16.  Finally, two days before this hearing, Mr Jiang filed another affirmation without leave. The contents of this affirmation are almost the same with those of his previous affirmation save that thereto he exhibited four payment certificates evidencing the payment of the Price to Mr Fan by Mr Jiang Jiu Hua, his father and the bought and sold note evidencing the transfer of the Shares by Mr Chan to him on 25 February 2019.

Analysis

17.  Mr Chan does not dispute the fact that the Notice of Trial had been served on him thrice before the trial on 16 January 2019, 29 April 2019 and 6 May 2019.  Nor does he challenge the fact that the Judgment was properly served on him.

18.  Mr Chan’s explanation for his total non-participation in these proceedings, and not just the trial, is wholly unacceptable.  Regardless of his alleged position as the trustee or nominee of Mr Jiang in respect of the Shares, Mr Chan must realize that in the present action he has to deal with a personal claim against him and he has to bear the legal consequences himself. Mr Jiang is not a party at all. Even if he relied on Mr Jiang to handle this action for him, it is unbelievable that he would allow himself to be completely ignorant of the progress of the action for the whole period from its commencement in 2015 to its conclusion in 2019 whilst he was happy to deal with the administration work concomitant with the ownership of the Shares for Mr Jiang. I cannot believe that Mr Chan could be carefree about his possible liability.

19.  It is also incredible that Mr Chan could believe that he personally did not have to do anything to support the allegation of Mr Jiang and defend the action throughout the years. He should at the very least be expected to make a statement to assert that he was the trustee or nominee of Mr Jiang only. His alleged trust in Mr Jiang and his misunderstanding that he would handle all the matters in this action for him are unreasonable.

20.  If Mr Chan chose to adopt such an irresponsible and indifferent approach to these proceedings and did not take a single step by himself, he must accept, and I cannot see how he could be allowed to escape from, the inevitable consequences. 

21.  It should be clear that I should not be taken to accept the allegation that Mr Chan was the trustee or nominee of Mr Jiang. There is no written declaration of trust. If Mr Jiang was indeed the beneficial owner of the Shares throughout, he must be a necessary to this action. Up till now there is no joinder application at all and it speaks volume for the lack of conviction of Mr Chan in his allegation. 

22.  Mr Chan’s solicitors filed a notice to act on 31 May 2019. The 7-day deadline under O.35 r.2(2) to set aside the Judgment had expired by then. Nonetheless, Mr Chan found no urgency in this matter and waited until 24 July 2019 to take out the Summons. This delay is both inordinate and inexcusable.

23.  In my judgment, Mr Chan, for reasons best known to himself, made a decision to take no part in the proceedings including the trial. Even after the Judgment was entered against him personally, he took all the time to issue the Summons. He could not expect that he could take such parts in these proceedings in accordance with his own schedule in cynical disregard for all the rules and procedures.

24.  The same criticisms are applicable to Mr Jiang.

25.  The lack of a good explanation for Mr Chan’s absence is the most important factor in this application. I accept Ms Xu’s submission that on this ground alone, the Summons should be dismissed: Karla Otto Limited v Bulent Eren Bayram and Anor., unreported, HCA821/2011, 18.5.2017 per Au-Yeung J at §19.

26.  There are other grounds that the application of Mr Chan should be dismissed in light of the eight propositions set out above. I would continue to state such grounds.

27.  If I were to set aside the Judgment, it does not merely mean that there would be a complete retrial on matters of fact which has been investigated by this court at trial. The whole matter has to be started afresh at the pleading stage after all these years. Mr Chan has to be allowed to file his defence and Mr Jiang has to be joined as a party. Mr Leung and MPL would no doubt suffer prejudice as a result. They also have to pay more legal costs in this litigation, which they may not be able to recover from Mr Chan and Mr Jiang at the end of the day.

28.  It is a public interest that there should be a finality to litigation and it is against the spirits of CJR and the public interest that the court would allow the same claim be reprocessed from scratch and be tried twice.

29.  In the circumstances, this court really sees no ground to exercise my discretion to set aside the Judgment. For completeness, I have considered the merit of the purported defence and I believe I need only deal with it briefly against the background.  

30.  In the first place, I am not satisfied that Mr Jiang paid for the Shares and was the purchaser of the Shares at all. There is no explanation why the payment of the Price by the father of Mr Jiang had to be in 4 installments. Nor is there any reason why the father of Mr Jiang and Mr Fan could not give evidence themselves to explain the nature of the 4 payments and lend credence to the allegation of Mr Jiang.

31.  More importantly, there is no reason why the documentary evidence of such payments only came to light two days before this hearing.

32.  The Company does not have a register of members. Evidence can be adduced to prove that a person is a member and MPL produced all the documentary evidence to prove its acquisition of the legal title of the Shares. I accept Ms Xu’s submission that MPL holds the legal title of the Shares on the best evidence and Mr Jiang could not be a bona fide purchaser of the legal title of the Shares.

33.  She further submits that without the legal title to the Shares, any equitable interest claimed by Mr Jiang in the Shares would be subject to the beneficial interest acquired by Mr Leung. She relies on the well-known maxim: “where the equities are equal, the first in time prevails.”

34.  I agree with her submissions. Mr Perry Chan can only make a submission in refutation that Mr Leung and MPL did not acquire the Shares from Mr Wong at all. He took me through the purported signatures of Mr Wong appended on the documents relating to the acquisition and some other different signatures of Mr Wong appearing in the Memorandum of Association and Form NC1 filed with the Companies Registry. The former were in English whereas the latters were in Chinese. He then submits that Mr Leung and MPL might be victimized by fraud and have never acquired the Shares.

35.  I cannot accept this submission. An allegation of forgery should not be lightly made and cannot be substantiated on flimsy grounds. Mr Chan should have carried out a serious investigation into the authenticity of the signatures of Mr Wong and a visual comparison between an English signature and a Chinese signature of his cannot advance his case any further.

36.  In the circumstances, I am not impressed with the purported defence of Mr Chan at all and it does not appear to me to have any real prospects of success.

Conclusion and order

37.  The application of Mr Chan is unmeritorious. The delay in raising his purported defence is alarming and inexplicable. His purported defence seems to be suspicious and in any event bad in law. The Summons must be dismissed.

38.  Costs should follow the event. Ms Xu asks for indemnity costs and summary assessment in her written submissions. I am inclined to make a costs order nisi that Mr Chan should pay the plaintiffs costs of and incidental to this application with certificate for counsel, to be summarily assessed on paper if not agreed. In the event that there is no application to vary the order nisi within 14 days, Mr Chan should lodge with this court his submission on the statement of costs of Mr Leung and MPL and state his objections, if any, within 14 days thereafter. Then this court should proceed with summary assessment on paper.

39.  Lastly, I thank both Ms Xu and Mr Perry Chan for their assistance.