KONG YINGJIA v. HONEST FAITH INDUSTRIAL (CHINA) LTD AND ANOTHER

HCA 1401/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1401 OF 2016

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DECISION

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BACKGROUND

1.  By a summons dated 4 January 2017, the Plaintiff applied for judgment under Order 14A of the Rules of the High Court.  On 28 February 2017, the Plaintiff took out another summons applying to strike out of the whole of the Defence or alternatively certain paragraphs thereof.

2.  The 1^st Defendant is a company incorporated in Hong Kong on 5 November 2007.  At all material times, the 1^st Defendant was merely an asset holding company with no real business.  The only asset of the 1^st Defendant was a Guangdong border-crossing vehicle number plate “粵ZX650港” (“ZX650”).  With this number plate attached to a designated Hong Kong vehicle, this would allow the vehicle to drive from Hong Kong into Mainland China. 

3.  On 16 November 2011, the Plaintiff purchased all the issued shares in the 1^st Defendant totalling 10,000 shares from the then sole shareholder of the 1^st Defendant through Thomas Tsui (“Tsui”).  The Plaintiff and his company Proword International (HK) Ltd (“Proword”) were appointed as directors of the 1^st Defendant.   

4.  Since then, the Plaintiff had been driving to and from mainland China using ZX650 which was attached to his Hong Kong vehicle.  In about February 2015, the Plaintiff delivered ZX650 to Tsui for the alleged purpose of the annual licence renewal with the Guangdong Province Traffic Management Bureau.  For that purpose, the Plaintiff also entrusted the company documents of the 1^st Defendant to Tsui or his company City Best Limited (“City Best”).  The Plaintiff said he paid Tsui a fee in the sum of about HK$25,000 every year for the service in the licence renewal.

5.  Tsui failed to return the ZX650 despite repeated demands by the Plaintiff.  Around November 2015, the Plaintiff discovered from the Company Registry that his shares in the 1^st Defendant had been transferred to the 2^nd Defendant.  The Plaintiff alleged that the transfer was without his consent or knowledge.  It was also discovered that the 2^nd Defendant had replaced the Plaintiff and Proword as the sole director of the 1^st Defendant. 

6.  The Plaintiff alleges that his signatures on the instrument of transfer and the bought and sold notes that purportedly transferred the shares to the 2^nd Defendant were forged.  He made a report to the police on or about 1 December 2015.

7.  The following is a summary of how the 2^nd Defendant came to purchase the shares in the 1^st Defendant.  On 18 October 2010, the 2^nd Defendant (through his business partner) acquired through Tsui a Guangdong border-crossing number plate “粵ZW080港” (深圳灣) for the sum of RMB535,000.  The purchase was done through the acquisition of the entire shareholding of a company called Topfly Information Consultant Limited which was holding the number plate.  Under that agreement, the 2^nd Defendant paid a total sum of RMB300,000 to Tsui in late 2010.

8.  Tsui was not able to deliver the number plate to the 2^nd Defendant and therefore another cross-border plate was given to the 2^nd Defendant on a temporary basis.  What happened afterwards was that a number of licence plates were given to the 2^nd Defendant due to problems with the previous ones.  

9.  In about November or December 2014, Tsui’s staff took the 2^nd Defendant’s vehicle with the plate No. “粵ZN817港” as Tsui said there was some problems with the use of the licence.  In about end of February to early March 2015, Tsui informed the 2^nd Defendant that another licence would be provided to him. 

10.  On or about 4 March 2015, Tsui emailed the 2^nd Defendant the details of the 1^st Defendant and an approval notice for ZX650.  Tsui said the 1^st Defendant and ZX650 would be transferred to him.  At the request of Tsui, the 2^nd Defendant attended the office of the company secretary of the 1^st Defendant on 27 March 2015 and he signed, inter alia, the instrument of transfer and the bought and sold notes for the transfer of all the shares in the 1^st Defendant to him.  At that time, the Plaintiff had not signed on those documents.  It was in early April 2015 that the instrument of transfer and the bought and sold notes duly stamped and signed by the Plaintiff were given to the 2^nd Defendant.  Since then, the 2^nd Defendant’s name was entered into the register of members of the 1^st Defendant and the company documents were given to the 2^nd Defendant. 

11.  Once again, Tsui failed to attach ZX650 to the 2^nd Defendant’s vehicle and he said that another cross-border plate “粵ZQ609港” would be provided.  An agreement dated 23 July 2015 was signed between Tsui, City Best and the 2^nd Defendant for the transfer of that plate on or before 13 November 2015 and the provision of a personal guarantee by Tsui.

12.  On 21 April 2016, the Plaintiff, through his solicitors, demanded the 2^nd Defendant for the return of the shares in the 1^st Defendant.  This was refused by the 2^nd Defendant who provided the Plaintiff with, inter alia, copies of the instrument of transfer and bought and sold notes signed by the Plaintiff.  The parties were unable to resolve the disputes and as a result, the Plaintiff commenced this action.

13.  In summary, the Plaintiff’s case is that the transfer of the 1^st Defendant’s shares was made without his knowledge or consent.  The Plaintiff alleges that the signatures purportedly signed by him on the transfer documents were forged. 

14.  The gist of 2^nd Defendant’s case is that the Plaintiff has sold and transferred the shares in the 1^st Defendant to him and he denies that the Plaintiff’s signatures were forged.  Though the 2^nd Defendant had never dealt with the Plaintiff directly in the transfer, he alleges that the Plaintiff had either sold the 1^st Defendant’s shares to Tsui (or City Best) or had entrusted Tsui (or City Best) as agent or representative to sell or to transfer or dispose or otherwise to deal with ZX650 and all the shares in the 1^st Defendant.

15.  In this application, the Plaintiff asked the court to determine four questions under Order 14A:

 (1) Whether beneficial interest of the Plaintiff in the issued shares of the 1^st Defendant would be passed to the 2^nd Defendant on the alleged executed transfer documents set out in paragraph 3 of the Defence relied on by the 2^nd Defendant;

 (2) Whether Tsui or City Best was the agent of the Plaintiff with any authority to sell and/or transfer the issued shares of the 1^st Defendant in the name of the Plaintiff;

 (3) Further and/or in the alternative to sub‑paragraph (2) above, whether the agreement (if any) to sell and/or transfer the issued Shares of the 1^st Defendant in the name of the Plaintiff entered into between Tsui or City Best (purportedly on behalf of the Plaintiff) on the one side and the 2^nd Defendant on the other side is enforceable against the Plaintiff; and

 (4) Further and/or in the alternative to sub-paragraph (3) above, whether there was total failure of consideration upon no consideration paid by the 2^nd Defendant to the Plaintiff for sale and/or transfer of the issued shares of the 1^st Defendant in the name of the Plaintiff.

THE APPLICABLE LEGAL PRINCIPLES

16.  Order 14A, rule 1 provides that:

“ (1) The Court may upon the application of a party or of its own motion determine any question of law or construction of any document arising in any cause or matter at any stage of the proceedings where it appears to the Court that—

(a) such question is suitable for determination without a full trial of the action; and

(b) such determination will finally determine (subject only to any possible appeal) the entire cause or matter or any claim or issue therein.

(2) Upon such determination the Court may dismiss the cause or matter or make such order or judgment as it thinks just.”

17.  In Rockwin Enterprises Ltd v Shui Yee Ltd [2003] 3 HKC 174, Recorder Geoffrey Ma SC (as he then was) laid down the three-step approach in dealing with an application under Order 14A.  He saidat para 18:

“ Once seized of an application under O 14A, the court’s approach is essentially a three-step approach:

(1) Is the relevant question one of law or of the construction of a document?

(2) If so, is that question one that should be determined under the O 14A procedure?

(3) If the answer to (2) is ‘yes’, what is the determination of that question and what orders should the court make as a consequence of determining that question?”

18.  In relation to the second step, the Recorder said this at para 20:

“ 20. Step (2) requires the court to be satisfied of the following:

(a) That the question of law or construction is one that is suitable for determination without a trial. In other words, the court has all the necessary facts and matters before it in order to determine the question of law or construction.

(b) That if so suitable and should it be determined by the court, that it will finally determine (subject to a possible appeal) the entire cause or matter or any issue or claim therein.

(c) Even if the above two conditions are fulfilled, that the court in its discretion is satisfied that the question is one that ought to be determined under O 14A.”

19.  In relation to the last point at paragraph 20(c), the Recorder said this at para 21:

“ 21. It is clear that the court has a residual discretion whether or not to embark on a determination of a question under O 14A even where the first two requirements (set out in paras 20(a) and (b) above) are fulfilled. This is clear from the word ‘may’ in O 14A r 1(1) and from the authorities.”

20.  In other words, the court has to first decide if it is a matter that satisfy the first two requirements mentioned above.  If it is not, the court should dismiss the application.  If the two requirements are satisfied and the court does not exercise its discretion to refuse a determination of the questions, the court should, under the third requirement, make a determination of the question and decide the appropriate order to be made.

21.  I should add that even during the determination of the question, the judge may decide, during the course of the hearing of the summons, to refuse making a determination (see Shell Hong Kong Ltd v Yeung Wai Man Kiu Yip Co Ltd & Another (2003) 6 HKCFAR 222, Chan PJ at para 38).

DISCUSSION AND DECISION

First requirement

22.  The four questions do not relate to the construction of any document.  In my view, it is more appropriate to describe them as mixed questions of law and facts.  I consider that a mixed question of law and facts would satisfy the first requirement.  As I shall elaborate below, the court in that situation would have to consider whether the question of law can be determined based on established or agreed facts rather than on hotly disputed facts which can only be determined at trial. 

23.  I find that the Plaintiff has satisfied the first requirement.

Second requirement

24.  In relation to the first limb of the second requirement, namely, whether the question of law is one that is suitable for determination without trial, Chan PJ in Shell Hong Kong Ltd v Yeung Wai Man Kiu Yip Co Ltd & Another (2003) 6 HKCFAR 222, stated at para 24 that:

“ 24. It must also be noted that it is inappropriate to use this procedure if the issues of facts are interwoven with the legal issues to be determined. For obvious reasons, the question of law or construction of document cannot be dealt with on assumed or hypothetical facts. And if it is necessary for the court to hear evidence to resolve a factual dispute in order to come to a determination on the question of law or construction of document, it would not normally be suitable to invoke O.14A.”

25.  Similar sentiments were expressed by Rogers VP in Netwell Properties Ltd v JCG Finance Co Ltd [2004] 2 HKLRD 138, at para 6:

“ 6. The first observation which should be made is that the O 14A procedure is one to determine a question of law or construction of a document which arises in an action where the question is suitable for determination without a full trial of the action and the determination would finally determine the entire cause or matter of the claim. If there is a dispute as to the facts, it is difficult to see how judgment can be entered in favour of a claimant. Where a claimant seeks judgment under O 14A the facts would have to be based on either established facts or agreed facts. As set out in the Hong Kong Civil Procedure 2002 at para 14A/2/4, there should be no hypothetical facts and where the issues of fact are interwoven with the legal issues raised, it will be undesirable for the court to split the legal and factual determination, for to do so would in effect be to give legal rulings in vacuo or on a hypothetical ruling, which the court will not do.”

26.  And In Weltime Hong Kong Ltd v Cosmic Insurance Corp Ltd [2004] 2 HKC 155, Deputy Judge Poon (as he then was) at para 24:

“ 24. The second observation, which is related to the first is this. If the point of law or construction sought to be determined is sensitive to the facts, as in the case where facts are in dispute and can only be determined after trial or where fuller facts are required, it is not a suitable case for O 14A. Likewise, where the issues of fact are interwoven with the legal issues raised, it will be undesirable for the court to spilt the legal and factual determination, for to do so would in effect be to give legal rulings in vacuo or on a hypothetical ruling, which the court will not do: see Hong Kong Civil Procedure 2002 Vol 1 para 14A/2/4 at pp 178 – 179. In cases where a proper construction of a document is ‘facts-sensitive’, it is not suitable to bring an application under O 14A.”

27.  Also, in the Rockwin Enterprises Ltd case, theRecorder said this at para 27:

“ 27. Of course, the residual discretion becomes exercisable really only where the two requirements (referred to in paras 20(a) and (b) above) have been fulfilled. Here, it is important to emphasise that the question of law or construction is one that is suitable for determination without a trial. In other words, the court must have all the necessary facts and matters before it in order to determine the question of law or construction. Where the court is not seized of all relevant facts, it would be an extremely rare case (if ever) in which the procedure under O 14A would be adopted. In Cable & Wireless HKT International Ltd v New World Telephone Ltd (HCCL 229/1999, 5 April 2000, Stone J, unreported), the main concern of the court was that the factual basis for the determination of the question he was invited to determine, was uncertain. On appeal, the judge’s views were upheld by the Court of Appeal. I note that this approach is entirely consistent with those passages contained in Hong Kong Civil Procedure 2001 at para 14A/2/4.”

28.  In summary, Order 14A, rule 1(1)(a) is not satisfied if the issues of fact are interwoven with the legal issues.  I consider that interwoven means the question of law and facts are blended closely together.  The determination of the law is sensitive to and would depend on the determination of the facts at trial.  You cannot deal with one without dealing with the other.  Accordingly, unless the facts are established or agreed, a determination of the law would not be possible, since the court will not give a hypothetical ruling or a ruling in vacuo.

Question (1)

29.  In the statement of claim, the Plaintiff alleges that the transfer of the 1^st Defendant’s shares to the 2^nd Defendant was made without his consent or knowledge.  Specifically, the Plaintiff alleges that the transfer was made by forging the Plaintiff’s signature on the relevant forms.  Acting on the forged transfer, the 1^st Defendant removed the Plaintiff as shareholder and director. 

30.  On the other hand, the Defendants do not accept that the Plaintiffs’ signatures are forgery.  They rely on a number of circumstantial evidence in support.  According to the Plaintiff, not only are the signatures on the transfer documents forged, the Plaintiff also alleged that his signatures and the chop of his company, Proword, on the documents of the 1^st Defendant that were filed with the Companies Registry were all forged.  One of these documents was a notification of change of secretary and director form purportedly signed by the Plaintiff on 16 November 2011 which was well before the alleged sale of shares to the 2^nd Defendant in 2015. 

31.  Mr Fong submitted that the allegation of forgery is irrelevant to the determination of the case.  Mr Fong said the Plaintiff and the 2^nd Defendant had never dealt with each other directly.  There was no representation by Tsui that he was the Plaintiff’s agent in transferring the shares to the 2^nd Defendant.  Mr Fong also relied on a passage in Liang Jun Xian v Tsui Hin Chi (unreported, 26 September 2008, CACV 88/2008) in support of his argument that the Plaintiff’s signature on the bought and sold notes and instrument of transfer would not necessarily pass the beneficiary interest to the 2^nd Defendant.  In that case, Tang VP (as he then was) said at para 22: 

“ 22. Mr Ng referred to the bought and sold notes and the instruments of transfer in support of his submission that the shares were sold to the defendant. With respect, the bought and sold notes and the instruments of transfer only give superficial support to the defendant’s case …. It is trite law that beneficial interest would not necessarily pass on the executions of these documents.”

32.  Whilst I can understand why Mr Fong would like to down play the significance of the forgery allegation, far from being irrelevant, that is the crux of the Plaintiff’s claims.  It was the Plaintiff who raised and relied on forgery in his statement of claim.  Where the main issue of the case involves an allegation of fraud, the matter can only be determined at trial.  If the signatures were not forgery, it would go to support the transfer of beneficial interest and the authority given to Tsui by the Plaintiff.  The Plaintiff might also be estopped from disputing the validity of the transfer of the shares. 

33.  In the Liang Jun Xian case, Tang VP only stated that beneficial interest would not necessarily pass on the execution of the bought and sold notes and instruments of transfer.  He did not say that beneficial interest would never pass on the execution of the transfer documents. Sometimes share transfer documents are signed but the transferee is holding the shares on trust for the transferor.  In that case, it is obvious that the signing of the transfer documents does not pass the beneficial interest. 

34.  The facts and context of the Liang Jun Xian case were very different from the present case.  For instance, there were documents signed by the defendant in that case after the execution of the transfer documents which apparently showed that the relevant shares continued to belong to the plaintiff.  In the present case, not only were the transfer documents signed, the 2^nd Defendant’s name had been registered in the register of members and directors.  I do not think the Court of Appeal is laying down a legal principle as suggested by Mr Fong.  Whether or not it amounts to a transfer of beneficial interest would depend on the facts of the case.  This actually reinforces my finding that this question is not one that is suitable for determination without a trial. 

Question (2)

35.  The 2^nd question relates to whether Tsui or City Best was the Plaintiff’s agent.  Mr Fong argued that the Plaintiff had never dealt with the 2^nd Defendant directly and Tsui could not have been the Plaintiff’s agent in transferring the shares.  He also raised a number of reasons why the allegation of agency was without substance.  Mr Lee relied, inter alia, on the apparent authority that the Plaintiff had clothed Tsui with by, for example, leaving Tsui with the licence document of ZX 650 and the company documents of the 1^st Defendant.  Mr Lee submitted that this question can only be determined after the relevant facts have been canvassed at trial. 

36.  Some of the matters raised by the Plaintiff are contested by the Defendants.  Insofar as those matters relied on by the Plaintiff that are unlikely to be challenged (for example the allegation that the Plaintiff and the 2^nd Defendant never met each other before), they are only some of the factors to be taken into account in considering whether Tsui was the agent with authority to conclude the deal.  Other factors would have to be considered and they can only be tested at trial before the court can make a decision on the question. 

37.  Whether or not the Plaintiff’s signature was forged is an important matter to take into account.  If the transfer documents were in fact signed by the Plaintiff and given to Tsui and if it resulted in transferring the beneficial interest, the question of authority might not arise. Furthermore, if the signatures were genuine, question would arise as to why the Plaintiff would have given Tsui such documents and whether this amounted to clothing Tsui with apparent authority to sell the shares or to communicate the Plaintiff’s agreement to sell. 

38.  Mr Lee relied on the fact that Tsui was in the business of selling Guangdong cross-border vehicle number plate by selling the shares of the company holding the number plate.  Even the Plaintiff admitted that he had removed the number plate from his vehicle and passed the license document of the number plate to Tsui, albeit for the alleged purpose of annual licence renewal.  Whilst the only asset of the 1^st Defendant was the number plate, it was the Plaintiff’s case that he allowed Tsui to take care of the company matters of the 1^st Defendant for him.  It also appeared that Tsui was given possession of the share certificates, registers of members and directors, the certificate of incorporation and the business registration certificate of the 1^st Defendant. 

39.  Fuller facts are definitely required and the evidence would have to be tested at trial before the court can decide on the factual basis upon which it would make a determination on this question.  The question of law and facts are interwoven.  How the court is going to decide on the fact would affect the answer to the question.

40.  Mr Fong also sought to challenge the Defendants’ case that either the Plaintiff had sold the shares to Tsui (or City Best) or he had entrusted Tsui (or City Best) as agent or representative to sell or transfer or to dispose of or otherwise to deal with CX650 and/or the shares in the 1^st Defendant.  The Plaintiff alleged that the Defendants did not even know the real role of Tsui and that it showed that they had no factual basis to support such allegation. 

41.  I think the Defendants are entitled to raise this alternative case on the basis that the Plaintiff’s signatures are genuine. The evidence showed that it was the 2^nd Defendant who first signed on the transfer documents.  The completed documents were later returned to the 2^nd Defendant after the Plaintiff had executed the same.  If the Plaintiff’s signatures were genuine, it would go a long way to support the Defendants’ case. 

42.  In addition, according to the Plaintiff’s own case, he had given Tsui (who was in the business of selling cross-border vehicle number plate) possession of the physical plate ZX650 as well as the licence document.  The Plaintiff said he parted with those documents and the plate to enable Tsui in about February 2015 to help him to arrange for annual licence renewal.  However, the relevant licence had only been renewed on 23 December 2014 and it would not expire until 18 January 2016.  If the title documents were delivered by the Plaintiff to Tsui in February 2015 not for licence renewal, it could be because the Plaintiff had sold ZX 650 to Tsui or Tsui was selling the number plate on behalf of the Plaintiff. 

43.  Like the forgery issue, the agency issue is highly sensitive to the facts.  I am not satisfied that the court has all the necessary facts and matters to determine this question. 

Question (3)

44.  The Plaintiff raised the question on whether there was an agreement between the Plaintiff and the 2^nd Defendant to sell the shares in the 1st Defendant since it was never the Defendant’s case that he had dealt with the Plaintiff directly.  This was put as an alternative to Question (2) and the Plaintiff relied on the same reasons as in Question (2).

45.  Mr Fong complained that the Defendants had not pleaded any agreement between the Plaintiff and the 2^nd Defendant for the sale of the shares.  With respect, I do not consider any substance in this challenge.  In the statement of claim, the Plaintiff did not raise the absence of an agreement.  His case is that the transfer of shares was done without his consent or knowledge by someone who forged his signature.  In his defence, the 2^nd Defendant denied the said allegations and he relied on the various transfer documents and the authority of Tsui (or City Best) in agreeing to sell or transfer the shares to him. 

46.  Whether there is an agreement and if so whether it is enforceable against the Plaintiff would depend on the determination on the issues as to whether there was forgery and whether Tsui and/or City Best were the Plaintiff’s agent and with authority to bind him.  From the discussions so far, it is clear that the factual basis for determination of this question was far from certain.  I am not satisfied that this question is suitable for determination without a trial.

Question (4)

47.  The Plaintiff alleges that there was a total failure of consideration as he has never received any consideration for the sale of the shares. 

48.  Mr Lee submitted that this issue is intertwined closely with the issues of forgery and agency (or the authority of Tsui).  He relied on the bought and sold notes showing that a HK$10,000 consideration was acknowledged to have been received by the Plaintiff.  He also relied on the 2^nd Defendant’s case that he had paid not less than HK$500,000 to Tsui for the purchase of the shares. 

49.  I agree with Mr Lee that the question of consideration was closely related to the forgery and agency/authority questions. They are facts sensitive and are not suitable to be dealt with by the procedure under Order 14A. 

50.  Having considered all the materials before me and the submissions made, I am not satisfied that the four questions posed by the Plaintiff are one that is suitable for determination without a trial.  They are mixed questions of law and facts and the factual basis are in serious disputes. 

51.  In the premises, the Plaintiff has failed to satisfy all the requirements under Order 14A, rule 1.  Even if I am wrong, and in view of the concerns I have expressed, I would exercise my residual discretion in not making a determination of the four questions. 

STRIKING OUT

52.  Although Mr Fong conceded that should I rule against the Plaintiff on the Order 14A application, his application to strike out the whole of the Defence should also be dismissed.  In view of the different legal tests between an application to strike out and one under Order 14A, I should deal briefly with the striking out application below. 

53.  I rely on the judgment of Au-Yeung J in Sealegend Holdings Ltd v China Taiping Insurance (HK) Co Ltd HCAJ 95/2012, 24 October 2014, at paras 24 – 32, which helpfully summarises the relevant principles in the determination of a striking out application:

“ 24. The court may, either of its own motion or on application, at any stage of the proceedings order to be struck out any claim on the basis, amongst others, that it is scandalous, frivolous or vexatious or is otherwise an abuse of the process of the court: Order 18, rule 19(1)(b) and (d).

25. A proceeding is frivolous when it is incapable of reasoned argument, without foundation or cannot possibly succeed. A proceeding is vexatious when it is oppressive or lacks bona fides. The expression ‘frivolous or vexatious’ includes proceedings which are an abuse of the process: Hong Kong Civil Procedure 2014, §18/19/8.

26. An ‘abuse of the process of the court’ connotes that the process of the court must be used bona fide and properly and must not be abused. The court will prevent the improper use of its machinery, and will, in a proper case (eg where an action is absolutely groundless or time-barred) summarily prevent its machinery from being used as a means of vexation and oppression in the process of litigation: Hong Kong Civil Procedure 2014, §18/19/10.

27. The court has inherent jurisdiction to stay all proceedings before it which are obviously frivolous or vexatious or ‘hopeless’ in the sense of being bound to fail: Hong Kong Civil Procedure 2014, §18/19/12, 16 and 21.

28. There should be no trial on affidavit. Disputed facts are to be taken in favour of the party whose pleading is under attack. See Hong Kong Civil Procedure 2014, at §18/19/4, paragraph (1).

29. The power to strike out should only be exercised in plain and obvious cases where the claim is obviously unsustainable. A claim must be so obviously unsustainable, the pleading unarguably bad, and it must be impossible, not just improbable, for the claim to succeed before the Court would strike it out. That a case may be weak and unlikely to succeed is no ground for striking it out. See Hong Kong Civil Procedure 2014, at §18/19/4, paragraph (1).

30. Strike out is not justified merely because the story told is highly improbable, and one which it is difficult to believe would be proved. A party’s claim or defence would be struck out only if it is a sham so that to rely on it must be an abuse of the process of the court. Even if one side has a ‘formidable case’, it does not mean that the other has no case. See Hutchvision Asia Ltd v Asia Television Ltd, HCA 6757/1992, 8 September 1993, per Godfrey J (as he then was), p6.

‘ But any lawyer with any experience of private practice will be able to remember, only too well, those cases which appeared to be certainties but which, to his surprise, nevertheless failed and, by the same token, those cases which seemed bound to fail but which, to his surprise, nevertheless succeeded. It is for just this reason that the court will not embark, at this stage of an action, on a consideration whether the case of one side or the other is true or false. It will consider only whether the nature of the defence is such that it has to be characterised as an abuse of the process of the court, which is something else altogether.’

31. Where a party seeks to strike out another’s case as unsustainable, he will have to show the other party’s case to be ‘wholly imaginary, a myth or not bona fide’: Overseas Trust Bank Ltd v Coopers & Lybrand & Ors, CACV 109/1989, Fuad VP, 15 December 1989, p15.

32. It is not sufficient to adduce evidence that is relevant for consideration.  The lack of proper explanation from the party whose pleading is sought to be struck out is not enough.  See Viva Steamship Co Ltd v Chow Lim Choy & Ors [2003] 1 HKLRD 663 (CA), at §11.”

54.  Applying the legal principles, the court will have to consider the 2^nd Defendant’s Defence on the basis that the Plaintiff’s signatures on the transfer documents are genuine.  As I have explained above, that was the crux of the case to be determined at trial.  I do not consider the Defence to be frivolous, vexatious or obviously unsustainable.  It is also not an abuse of process for the Defendants to raise these matters in defence. 

55.  In relation to the application to strike out certain paragraphs in the Defence, Mr Fong submitted that the main complaint is that those allegations lack factual basis. However, he has given no or few particulars as to why there is an absence of factual support for the Defendants’ allegations.  Insofar as the Plaintiff’s reliance on the reasons advanced in the Order 14A application, I have already addressed them in this Decision. The main issues in this action are whether the alleged forgery could be established by the Plaintiff and whether Tsui (or City Best) was the agent of the Plaintiff and had the authority to sell or transfer the shares in the 1^st Defendant to the 2^nd Defendant.  They have to be decided at trial.

56.  Notwithstanding the Plaintiff’s challenge of the allegation of facts in the Defence, in considering the question of striking out, those facts have to be taken in favour of the Defendants.  Moreover, I do not consider those paragraphs in the Defence to be “wholly imaginary, a myth or not bona fide”.  I am not convinced that this is a plain and obvious case to strike out those paragraphs. 

57.  In the premises, I dismiss the Plaintiff’s application to strike out the whole of the Defence or the specific paragraphs referred to in the Plaintiff’s summons. 

COSTS

58.  The parties agree that costs should follow the event.  Since I have dismissed the Plaintiff’s applications, I order that the Plaintiff should pay the 1^st and 2^nd Defendants’ costs of the two summonses dated 4 January 2017 and 28 February 2017 with certificate for counsel, such costs to be taxed if not agreed. 

59.  It remains for me to thank Counsel for the assistance that they have provided.