LI SHIU TO v. CHEUNG PIK NG AND OTHERS

HCA 416/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 416 OF 2003

____________

BETWEEN
	LI SHIU TO	Plaintiff
	and
	CHEUNG PIK NG (張碧梧) and LI SUI CHEE (李瑞智) (in their capacities as the executors of the estate of LI SHIU TSANG, deceased)	1st Defendant
	LI SHIU KWAN	2nd Defendant (Discontinued)
	LI PO CHUN ESTATES LIMITED	3rd Defendant (Discontinued)
	and
	LI SHIU KWAN	Third Party

____________

Before: Hon Au-Yeung J in Chambers

Date of Hearing: 29 June 2015

Date of Decision: 29 June 2015

_____________

D E C I S I O N

_____________

1.  On 18 March 2015, a writ of subpoena was served upon the third party, LSK, by D1. Seven weeks later, LSK applies to have it set aside. The only question is whether or not D1 has abused the privilege of issuing the subpoena, or whether the subpoena was oppressive and vexatious (see Hong Kong Civil Procedure 2015, volume 1, paragraph 38/19/12 and Computer Personnel Limited v Digital Equipment (HK) Limited, unreported, Civ App No 29/1987, 19 March 1987). The ground on which LSK bases his application is that he had been certified medically as not competent or fit to give evidence in court.

2.  D1 has no witness to call at the trial.  He himself has passed away. LSK appears to be the only witness who may be able to give evidence on his behalf.  It cannot be disputed that LSK can give relevant evidence on the issues in dispute in the present case.  In my view, it was not an abuse of the privilege of issuing the subpoena within the meaning of paragraph 38/19/12. 

3.  On the medical evidence, LSK has produced four medical reports all dated December 2014, from different specialists.  The sum total of the medical evidence is that LSK is not totally mentally incapacitated, it is just that he is not in a condition to undergo the stress of giving evidence in court because of his poor medical condition.  There is no counter medical evidence from D1. 

4.  I do not think it is necessary to have LSK declared mentally incapacitated before the court would entertain this application.  Much depends on the overall circumstances, including the evidence from the medical reports.

5.  I agree with counsel for D1 that the first three reports from the specialists in rheumatology, respiratory disease and cardiology show that LSK is suffering from physical incapacities such as spine deformity, hypertension and coronary heart disease.  None of them were of a cognitive nature.  I take note, of course, of Dr Chow’s comment that the hypertension and ischaemic heart disease that LSK suffers from is such that he has been advised to refrain from physical and mental exertion which could aggravate his mental condition.  The court takes note of the fact that giving evidence in court can be a stressful exercise and can be a kind of mental exertion on a 77-year-old person. Nonetheless, with appropriate breaks, for example, during the evidence-taking, the court can accommodate such a witness.

6.  As regards medical evidence from Dr Chu, specialist in geriatric medicine, LSK is said to have mild to moderate impairment in time orientation, short-term memory, subtraction calculation and the ability to follow through three related steps.  Again, this may not be surprising for a 77-year-old person.  Dr Chu was of the opinion that LSK is mentally incompetent to attend any legal proceedings in court.  Because of his mild to moderate dementia, he would not understand information which may involve more than two related steps.  He could not understand complex legal and financial matters and he should not be required to provide any evidence in court.

7.  I have considered the fact that LSK has filed a defence and witness statement as the former 2^nd defendant.  He also acted for D3, the company, up to August 2014 when the plaintiff discontinued the claim against the company.  He can refresh his memory from the documents filed.  It is true that his defence and witness statement contained matters before the plaintiff amended his statement of claim to its current form to include new claims.  LSK will be D1’s witness and certainly D1 will have to take the risk of LSK being unable to give evidence on matters beyond the defendant’s defence and previous witness statement filed, for example, due to loss of memory or his current medical situation.  That will be a matter affecting LSK’s credibility and the weight which the court should place on his evidence, but I do not consider that sufficient to exempt him from being a witness. 

8.  Till now, it appears that LSK has been able to give instructions to his solicitors and to file affirmations.  Furthermore, he continues to act as director of 10 companies, some as sole director.  Mr Hunsworth invites the court to consider there is a distinction between signing mundane corporate documents such as annual returns, annual reports, and the very real strain in giving evidence in court. 

9.  I accept there may be a difference.  However, in the present case, so far as LSK is concerned, he has been signing “mundane” corporate documents such as annual returns, financial statements and directors’ reports, or even tax returns, but I do not regard, for example, signing a cheque for a substantial amount of more than $6 million as a mundane, regular matter to which very limited mental exercise is required from LSK.

10.  In addition, the medical report of Dr Chu was given in 2014, wherein it was recommended that LSK should undertake blood tests and MRI brain imaging, but LSK did not opt to have them at that time.  If his mental condition were as serious as he tried to describe to the court, I would be very surprised that he did not do further medical tests before he embarked on substantial financial matters as, for example, signing a cheque of over $6 million.

11.  Balancing all the factors individually and collectively and in the interest of D1 having LSK as a witness, I am not satisfied that it was oppressive or vexatious for D1 to issue the subpoena. 

12.  Just to complete the picture, D1 takes the point that LSK had delayed by seven weeks before taking out the present application.  I do not think that delay in itself is sufficient to bar LSK from relief.  Given the time from now to the trial, no prejudice would have been caused to anybody by virtue of that so-called delay.  But in any case, I do not think this delay will have any impact on my decision.

13.  In the circumstances, I dismiss LSK’s summons.

(Submissions on costs)

14.  Costs reserved.

 

 

	(Queeny Au-Yeung)
	Judge of the Court of First Instance
	High Court

Mr Victor Joffe and Ms Eva Sit, instructed by Iu, Lai & Li, for the 1^st defendant

Mr Nicholas Hunsworth, of Mayer Brown JSM, for the third party

HCA 416/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 416 OF 2003

____________

BETWEEN
	LI SHIU TO	Plaintiff
and
	LI SHIU TSANG	1st Defendant
	LI PO CHUN ESTATES LIMITED	3rd Defendant

____________

Before: Hon Au-Yeung J in Chambers

Date of Hearing: 17 July 2014

Date of Decision: 17 July 2014

_____________

D E C I S I O N

_____________

 

1. This is the 1^st defendant’s application for leave to appeal from my order made on 11 June 2014 whereby the 1^st defendant’s second striking out application brought on the ground of inordinate and inexcusable delay resulting in prejudice and/or abuse of process was dismissed.

2. The legal principles applicable to an application for leave to appeal are not in dispute.  The 1^st defendant seeks leave under both limbs of section 14AA of the High Court Ordinance (Cap 4).

3. Leave to appeal will be granted if the applicant can show that there is reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard.

4. Reasonable prospect of success involves the notion that prospects of succeeding must be reasonable and, therefore, more than fanciful without having to be probable: SMSE v KL [2009] 4 HKLRD 125, Le Pichon JA, at paragraph 17.

5. The Court of Appeal will not interfere with a decision made by a judge in the exercise of his discretion unless the judge has misunderstood the law or the evidence or the exercise of his discretion was plainly wrong, such that it was outside the generous ambit with which a reasonable disagreement is possible: Cheung Kam Wah v Cheung Hon Wah [2005] 1 HKC 136; Carlos Manuel Kwong v Lo Kam Wing, CACV128/2005, Yuen JA, 3 November 2005, at paragraph 28.

6. When the decision made is one of case management, it would be subject to appeal only in rare circumstances.  The appellant faces the very high hurdle and must show that the judge as gone clearly wrong and made orders which will clearly involve an injustice or inability for the trial court to carry out his task, or if the judge erred in principle or the order was irrational having regard to the issues that had to be resolved: Lee Tak Yee v Chen Park Kuen[2001] 1 HKLRD 401, Rogers VP; Kan Miu Wah v Aeroflot, CACV 142/2006, Le Pichon JA, 6 September 2006; Chan Wing Cheung v Ho Shu Yee, CACV393/2004, Ma CJHC (as he then was), 10 January 2005.

7. The 1^st defendant relies on, essentially, three grounds of appeal.  First, it is said that the correct approach should be to allow the second striking out application to be substantively argued, and any concern as to timetabling and proportionality could have been adequately provided for by the appropriate use of case management powers. 

8. Mr Chu for the 1st defendant relies on Order 1A rule 2(2) which refers to the primary aim in exercise of the court’s power which is to secure the just resolution of disputes in accordance with the substantive rights of the parties.

9. I absolutely agree with this principle.  In my view, just resolution of disputes and proper case management require the court not only to manage the course of a case leading to trial, but also the interlocutory applications that arise in the interval.

10. The fact that a case has not been set down for trial is not a reason for permitting unmeritorious interlocutory applications to go forward.  It is, in my view, a misconception to think that a court must adjourn a summons that is disputed, or where parties have consented to an adjournment to a substantive hearing that may run into hours or, in the present case, a day. 

11. Having said that, I have given the opportunity to the 1^st defendant to show cause at the call-over to see why the application should be allowed to proceed, and the 1^st defendant had in fact put in written submission.  The summons was dealt with after hearing the arguments before I declined to make an order in terms of the consent summons.

12. I fail to see how it can be said that this court has failed in principle in not adjourning the second striking out application to be substantively argued. 

13. The substantial injustice occasioned to the 1^st defendant in the light of the plaintiff’s delay had been dealt with by Master Ho on a previous similar application for strike out.  The matter concerning the contribution claim against LSK had also been dealt with by this court, and will be dealt with by the Court of Appealin October.  The demise of LST, the only witness to the 1st defendantwith personal knowledge, has also been considered by me in the June decision. 

14. Accordingly, I see no merits as regards the first ground.

15. Ground 2 and ground 3 are really criticisms of this court in the way it exercised the discretion.  It has not been pointed out to me on what legal principle I have erred, nor has it been pointed out what relevant facts I have failed to put into the basket of factors that I have considered. The only comment probably is my lack of considering the factors and say that “collectively” I see no merits in the striking out application.  I do not see on what ground the appeal will have any reasonable prospects of success. 

16. Re the second limb relied on by the 1st defendant, it has been pointed out by Mr Chu that the executor defendants are facing a dilemma when they need to go to trial without witnesses.  Be that as it may, I do not see this as a ground to permit leave to appeal where there is simply no merit in the substantive summons itself. 

17. As pointed out by Miss Wong SC, before his death, LST had had the opportunity to state on record his recollection of events under the present amended case of the plaintiff.  Despite the opportunity, LST has said nothing.

18. Considering all the grounds, I am of the view that leave should not be given, there being no reasonable prospect of success and there being nothing to show that in the interests of justice the 1^st defendant should be heard on appeal from my decision.

19. Application is dismissed.  Costs to follow the event and be to the plaintiff to be summarily assessed on Monday.  This will be with certificate for counsel.

	(Queeny Au-Yeung)
	Judge of the Court of First Instance
	High Court

Ms Lisa K Y Wong SC, instructed by ONC Lawyers, for the plaintiff

Mr Gordon Chu, of Iu, Lai & Li, for the 1^st defendant

HCA 416/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 416 OF 2003

____________

BETWEEN
	LI SHIU TO	Plaintiff
and
	LI SHIU TSANG	1st Defendant
	LI PO CHUN ESTATES LIMITED	3rd Defendant
____________

Before: Hon Au-Yeung J in Chambers

Date of Hearing: 11 June 2014

Date of Decision: 11 June 2014

_____________

D E C I S I O N

_____________

1.  Today is the restored case management conference (“CMC”). I am faced with two consent summonses in which the parties have come to terms. One of them is to adjourn the 1^st defendant’s second strikeout summons, the other to seek leave for the 1^st defendant to amend its re-re-re-amended defence.

2.  I have declined to grant an order in terms of the consent summonses.  My preliminary view upon reading them was that there had been too many interlocutory applications in this case, which was commenced in 2003, when it ought to have been set down for trial.  I therefore invited the parties to come and make representation as to whether or not I should entertain that second application for strikeout.  I am informed by the parties that there will not be much dispute on the amendment summons.  I have taken the opportunity today to hear the parties’ submission on whether or not I should allow the second strikeout summons to proceed.

3.  Mr Chu for the 1st defendant invites me to go on.  Originally, I was concerned as to why this second strikeout summons was not taken out earlier when the third party proceedings were dealt with.  However, for present purposes, I accept that the grounds now relied on by the 1^st defendant might not have existed at the time the third party proceedings were taken out.

4.  In principle, the court does have power to entertain a second interlocutory application of the same kind if there is a significant change of circumstances (see the principles in the cases of Chanel Ltd v Woolworths & Co [1981] 1 WLR 485; Beacon College Limited v Yiu Man Hau & Ors HCA 4273/2001, 17 December 2012, Chu J (as she then was).

5.  In the present application, the 1^st defendant relies largely on three reasons:  firstly, the plaintiff’s change of stance; secondly, the death of the 1^st defendant, LST, on 27 December 2012 pending the hearing of the third party proceedings; and thirdly, the issuance of the third party notice which was subsequently dismissed by me in April 2014.

6.  I have sought clarification with Mr Chu today on which limb of Order 18 rule 19 he relies on for the striking-out.  Obviously, he cannot rely on the limb of lack of reasonable cause of action or the frivolous and vexatious ground.  If those grounds were available, they ought to have been relied on in the application before Master Ho.  It has now been clarified that the 1^st defendant seeks to strike out on the abuse of process or delay ground, of course, due to the significant or material change of circumstances.

First ground

7.  The plaintiff’s change of stance can be described as “misrepresentation” to Master Ho who dealt with the first application for striking-out but did not give an order for strikeout.  It was submitted that the plaintiff told Master Ho that the case was ready for trial when it was not really so.  It was evidenced by the fact that the plaintiff sought to amend the statement of claim subsequent to the strikeout hearing.  Leave was granted by Deputy Judge Lok but there was no appeal therefrom against the leave to amend.

Second ground

8.  Next came the 1^st defendant’s application to join LSK as a third party.  Pending a disposal of that application, the 1^st defendant died.  Accordingly, the most important witness for the 1^st defendant cannot give evidence.  This formed the second ground of the present application.

9.  Mr Chu also relies on the various paragraphs in my decision on 4 March 2014, namely paragraphs 29, 30, 32 and 34, which I shall not repeat in the interests of time.

10.  With respect to Mr Chu, when one talks about strikeout, one has to see what the fault or default of the plaintiff was.  What happened after the striking-out, at most, was the application to amend the statement of claim which was granted without any appeal.  The application to join the third party was the 1^st defendant’s own application, not the plaintiff’s. Any delay was not of the plaintiff’s making.  I can hardly see how the 1^st defendant can make out a case of delay on the part of the plaintiff under Order 18 rule 19 as to amount to an abuse of process.

11.  The death of a party in itself cannot be a good ground for striking out. 

12.  Therefore, even if I were to accept all the facts set out in the 1^st defendant’s supporting affirmation for this second striking-out application, I fail to see any prospect of success on any of the grounds advanced by the 1^st defendant.

13.  Furthermore, I have taken into account the fact that, as set out in the consent summons, the parties ask for the second striking-out summons to be adjourned to a date to be heard with one day reserved.  That, in my view, was of course an overestimation.  Be that as it may, one has to compare that with the situation if this case were to be set down for trial.  On the materials before me, there is only going to be one witness, ie the plaintiff.  The rest of the 1^st defendant’s witnesses will not be called:  one has passed away; another has been admitted into an elderly home; the 1^st defendant himself has also passed away.  Looking at the witness statements of the plaintiff before me, I can hardly see cross-examination of him which will take more than one day.  So if the case were to be set down for trial today, I cannot see anything beyond two days for trial.

14.  In view of this situation, to set down the present summons for another day’s argument is wholly disproportionate to the way in which this case has been managed up to today.  Considering all circumstances, the lack of merits and the overall picture in terms of case management of this case, I will not allow the striking-out summons to proceed and I therefore dismiss it.

15.  Insofar as the case management is concerned, I adjourn it for a paper disposal which will be on a date 14 days after the handing down of the Court of Appeal’s judgment in relation to the appeal against the refusal to join a third party.  The 1^st defendant is to submit a certificate of counsel as to trial estimates before that adjourned CMC hearing.  Unless I order otherwise, it will not be necessary for the parties to appear before me on the next occasion for the CMC.

Order

16.  (1) Leave to amend and serve the re-re-re-amended defence within 7 days.  Costs of and occasioned by the amendment be to the plaintiff and the 3^rd defendant.

(2) Leave to amend the reply within 21 days of the service of the last version of the defence.

(3) All consequential matters, including discovery, further witness statements if so advised, and other interlocutory matters are to be dealt with before the hearing of the appeal in October.  When I say ‘dealt with’, I mean filed and served.

(4) Costs of the striking-out summons be to the plaintiff and the 3^rd defendant.

(5) Ten minutes of today’s hearing is apportioned to the costs of the CMC, which shall be in the cause.

(6) Plaintiff’s own costs be taxed in accordance with Legal Aid Regulations.

	(Queeny Au-Yeung) Judge of the Court of First Instance
	High Court

Ms Leung Wai-po, of ONC Lawyers, for the plaintiff

Mr Gordon Chu, of Iu Lai & Li, for the 1^st defendant

Mr Hunsworth, of Mayer Brown JSM, for the 3^rd defendant

Please refer to HCMP1864/2014 for the relevant appeal(s) to the Court of Appeal.

HCA 416/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 416 OF 2003

____________

BETWEEN
	LI SHIU TO	Plaintiff
and
	CHEUNG PIK NG(張碧梧) and	1st Defendant
	LI SUI CHEE (李瑞智) (in their capacities as the executors of the estate of LI SHIU TSANG, deceased)
	LI SHIU KWAN	2nd Defendant (Discontinued)
	LI PO CHUN ESTATES LIMITED	3rd Defendant
and
	LI SHIU KWAN	Third Party

____________

Before: Hon Au-Yeung J in Chambers

Date of Hearing: 27 February 2014

Date of Decision: 4 March 2014

_____________

D E C I S I O N

_____________

 

1.  This is an application by the third party (“LSK”) to strike out the third party notice.

Background

2.  The plaintiff, D1 and the third party (“LSK”) were beneficiaries to the estate of their father, Mr Li Po Chun, who died intestate in 1963.  D1 was the sole surviving administrator of the father’s estate.  Since 1970, D1 and LSK had been the only directors of D3 (“the Company”) which was set up by their father.

3.  The plaintiff’s case is that 801 ordinary shares in the Company (“the Shares”) were registered in the names of 3 fictitious persons.  The Shares belonged to the father’s estate.  D1 breached his duty as administrator in failing to claim them for the estate.  D1 and LSK, as directors of the Company, and with knowledge that the Shares would revert to the father’s estate, procured the Company to pass certain purported resolutions in 1989 and made some purported allotments that had the effect of stripping the Company of assets and depleting the value of its shares. 

4.  The plaintiff had sold out his interests in the Company to D1 and LSK pursuant to a 1971 Agreement and entered into a deed with D1 and LSK regarding distribution of the remaining assets of the estate in 1984.  Despite these settlements, the plaintiff claims that he is entitled to further distribution from the estate, being 228 of the 801 shares.

5.  The action was commenced in 2003.  LSK was initially named as D2 but by consent, the plaintiff discontinued his claim against LSK on 1 June 2005.

6.  Thereafter the action remained dormant until 2011.  The plaintiff narrowly escaped an order of striking out for want of prosecution.

7.  On 21 June 2012, the statement of claim was re-re-amended alleging that D1 was liable on the ground of wilful default.  It also relied on purported dispositions of the Company’s assets to 2 entities allegedly related to LSK and D1.

8.  On 27 December 2012, D1 passed away.

9.  On 9 July 2013, with leave of this court, D1 commenced third party proceedings for contribution under section 3(1) of the Civil Liability (Contribution) Ordinance, Cap 377 (“CLCO”).  D1 asserts that LSK is liable to the plaintiff on the basis of dishonest assistance as a director in procuring the Company to carry out the impugned acts.

10.  The decision in granting leave to commence third party proceedings contained comments on the case but that did not bind LSK who was not a party then.

The application to strike out

11.  LSK now seeks to have the third party notice struck out on the ground that it is frivolous, vexatious or an abuse of the process of the court.  He relies on 2 matters:

A. That D1 cannot claim against him based on section 3(1) of CLCO since the plaintiff’s claim against LSK would have been time-barred under the equitable doctrine of laches; and

B. LSK would suffer prejudice if the third party proceedings were to proceed.

12.  D1 submits that ground A is wrong as a matter of law and ground B is not made out on the evidence.

The legal principles

13.  Section 3 of CLCO provides as follows:

“(1) Subject to the following provisions of this section, any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise).

(2) A person shall be entitled to recover contribution by virtue of subsection (1) notwithstanding that he has ceased to be liable in respect of the damage in question since the time when the damage occurred, provided that he was so liable immediately before he made or was ordered or agreed to make the payment in respect of which the contribution is sought.

(3) A person shall be liable to make contribution by virtue of subsection (1) notwithstanding that he has ceased to be liable in respect of the damage in question since the time when the damage occurred, unless he ceased to be liable by virtue of the expiryof a period of limitation or prescription which extinguished the right (and did not merely bar a remedy) on which the claim against him in respect of the damage was based.
…

(7) In this section-

(a) references to a person's liability in respect of any damage are references to any such liability which has been or could be established in an action brought by or on behalf of the person who suffered the damage; …”

(emphasis added)

14.  For the purpose of liability under section 3(1) of CLCO, it is not necessary for the plaintiff to have actually sued the third party.  It is sufficient if he is entitled to sue the third party and will be able to claim compensation “in respect of the same damage” as the plaintiff seeks against D1.  “Damage” does not mean damages: Annotated Ordinance of HK: Civil Liability (Contribution) Ordinance (Cap 377), para 3.06.

15.  The time at which it is to be determined that the third party is liable to the plaintiff in respect of the same damage is the time when contribution is being sought: Co-operative Retail Services Ltd v Taylor Young Partnership Ltd and others [2002] 1 WLR 1419, at para 58.

16.  Sub-section 3(1) is subject to sub-section 3(3).  The fact that the plaintiff’s claim against the third party is barred by limitation is irrelevant unless the expiry of the limitation period has extinguished the underlying rightof the plaintiff to claim against the third party: Nottingham Health Authority v Nottingham City Council [1988] 1 WLR 903, 906 D-H, per Balcombe LJ.  The effect of section 3(3) has been explained in Mitchell, The Law of Contribution and Reimbursement (2003 ed) para 12.32.

“Thus a defendant cannot escape liability for contribution on the ground that the creditor’s remedy against him has become barred by the expiry of a limitation period by the time of the contribution claim. However, he can escape liability for contribution if the expiry of a limitation period has extinguished the underlying right upon which the creditor’s claim against him is based.”

17.  Examples of where the right to sue is barred can be found in section 17 of the Limitation Ordinance Cap 347 which extinguishes the title to land so as to bar an action to recover land; or section 32(2) which bars the right to make a claim in negligence not involving personal injuries 15 years after the date of the negligent act.

Application of the legal principles

18.  The limitation period for a claim in dishonest assistance is 6 years: sections 4(7) or 20(2) of the Limitation Ordinance; Peconic Industrial Development Ltd v Lau Kwok Fai & ors [2009] 5 HKC 135, paras 19-24; Hotung Investment (China) Ltd v Ernst & Young (a firm) [2012] 5 HKLRD 421, para 15, Kwan JA.

19.  Sections 4(7) and 20(2) of the Limitation Ordinance merely bar the remedy but not the right: McGee, Limitation Period (6^th ed) para 2.019. The claim which the plaintiff could have made against LSK was barred by limitation but did not extinguish the right.  Mr Hunsworth does not argue against it.

20.  Nor does Mr Hunsworth dispute the fact that D1 and LSK (if sued) by the plaintiff would have been liable in respect of the same damage.

21.  In principle, LSK remains liable as a contributor under section 3(1) of CLCO.

22.  However, Mr Hunsworth prays in aid Section 36 of the Limitation Ordinance, which provides that “nothing in this Ordinance shall affect any equitable jurisdiction to refuse relief on the ground of acquiescence or otherwise”.  Acquiescence is assent after the violation has been completed and the claimant has become aware of it.  It is unjust to give the claimant a remedy where, by his conduct, he has done that which might fairly be regarded as equivalent to a waiver of it: Halsbury’s Laws of England, Vol 16(2), at para 911.

23.  Section 36 includes within its scope the equitable defence of laches: Re Loftus [2006] 4 All ER 1110, at para 41.  Laches may bar a claim to equitable relief: Snell’s Equity, para 5-019:

“Laches essentially consists of a substantial lapse of time coupled with the existence of circumstances which make it inequitable to enforce the claim in equity. The first of these circumstances is a reasonable, and detrimental, reliance by the defendant upon the claimant’s delay. Lord Neuberger has recently held that ‘some sort of detrimental reliance is usually an essential ingredient of laches’. Alternatively, it is necessary for there to be some clear act of the claimant which amounts to an acquiescence or waiver of his rights.

Delay will accordingly be fatal to a claim for equitable relief if it is evidence of an agreement by the claimant to abandon or release his right, or if it has resulted in the destruction or loss of evidence by which the claim might have been rebutted, or if the claim is to a business (for the claimant should not be allowed to wait and see if it prospers), or if the claimant has so acted as to induce the defendant to alter his position on the reasonable faith that the claim has been released or abandoned.  But apart from such circumstances delay will be immaterial.  There can be no abandonment of a right without full knowledge, legal capacity and free will, …”

24.  Mr Hunsworth points out that the plaintiff has suspected that the 3 shareholders were fictitious as early as December 1963.  Nevertheless, he took no steps to seek the transfer of the Shares into the estate until August 1987 for personal reasons.  (See paras 32-33 of his witness statement.)  The plaintiff was aware of the purported resolutions and purported allotments by May 2001 at the latest.  In any event, by exercising due diligence, he could or should have become aware of them in about 1989/1990 by a company search. Despite such knowledge, the Plaintiff did not commence the present action until 30 January 2003.

25.  For present purposes, I accept that the plaintiff acquiesced in LSK’s alleged wrongdoing and that LSK would have an unassailable defence in laches if the plaintiff were to bring an action in dishonest assistance against him in 2013.

26.  However section 3(3) CLCO only provides for one exception to liability in contribution and a defence in laches to the plaintiff’s claim does not fall within it.  Mr Hunsworth relies on the case of The Estate of Yang Sen-hui (deceased) and others v Pao Yuen Tung Hsing Yieh Co Ltd [1983] HKLR 124, wherein the Court of Appeal struck out a claim for equitable relief for breach of fiduciary duty on the ground of delay.  However, it does not help LSK, as it only deals with the situation between a plaintiff and a defendant, and not between a plaintiff and a third party under CLCO.

27.  The plaintiff’s withdrawal of the action against LSK does not change the position on liability under CLCO.

28.  The first ground relied on by LSK is not substantiated as a matter of law.  LSK has met the requirements of section  3(1) CLCO.

Prejudice

29.  D1 has passed away.  LSK is deprived of an opportunity to cross-examine the very person who is alleged to have been dishonestly assisted by LSK in breach of his duty as administrator of the estate. 

30.  Even D1 himself asserted that the plaintiff has “wholly and unreasonably delayed in progressing his claims” and that “due to the long passage of time, aging of the remaining witnesses … and fading memory, … [D1] verily believed that it is no longer possible or feasible for there to be a fair trial of the issues in these proceedings”.  (See paras 46-48 of D1’s affirmation filed on 24 August 2011 in support of his application for striking out of the plaintiff’s claim.)  The third party proceedings will involve the same factual matrix and LSK agrees with D1 that it is no longer possible for there to be a fair trial.

31.  On the other hand, Mr Chow SC submits that dishonest assistance is established where there is (i) a breach of trust or fiduciary duty by someone other than the third party; (ii) in which the third party assisted; (iii) dishonesty; (iv) resulting in loss: Snell’s Equity, 32^nd ed, paras 30-076 to 081.  He says these matters were based on objective, documentary evidence, or the oral testimony of LSK himself (on knowledge). None of that depended on the oral testimony of D1.

32.  I accept Mr Chow SC’s propositions on law.  However, as D1 himself denies the plaintiff’s claim, at least in relation to propositions (i) and (ii), D1 can provide evidence to support or attack LSK.  D1 might tell whether he himself knew or at least suspected that the 3 shareholders were fictitious. D1’s absence as a key witness will cause real prejudice to LSK.

33.  Mr Chow SC submits that the prejudice stated in para 30 was no more than a bald assertion and is in any event refuted by the fact that LSK (being formerly D2) already filed a defence, a list of documents and a detailed 15-page witness statement on 17 November 2003.  He would be able to refresh his memory against his witness statement and the documents disclosed.  I will add that LSK has been conducting the case on behalf of the Company and might have continued knowledge about progress of this case.

34.  However, LSK’s witness statement was made 10 years ago.  Since then, the statement of claim has been re-re-amended.  The material amendments included the purported dispositions to related companies of LSK of D1, which the plaintiff impugns, but the plaintiff has not alleged dishonesty against LSK. D1 has to prove dishonesty against LSK.  It is not even clear if D1 has filed a supplemental witness statement to prove those re-re-amendments before he died. These reinforce my view that the absence of D1 will be prejudicial to LSK.

Striking out

35.  Striking out is only employed in clear and obvious cases. Notwithstanding that LSK was joined properly as a matter of law, the fact that D1 himself considered it impossible to have a fair trial of the plaintiff’s stale claim against him, and the fact that D1 (a key witness) has died, make it an abuse of process for the third party proceedings to continue.  I therefore strike out the third party notice and dismiss the claim for contribution.

36.  I make an order nisi that the third party is to have his costs of the third party proceedings, including the summons to strike out, assessed at $160,000, to be paid by D1.

37.  I thank Mr Chow SC and Mr Hunsworth for their assistance.

(Queeny Au-Yeung) Judge of the Court of First Instance High Court

Mr Anderson Chow SC, instructed by Iu, Lai & Li, for the 1^st defendant

Mr Nicholas Hunsworth of Mayer Brown JSM, for the third party

Please refer to CACV66/2014 for the relevant appeal(s) to the Court of Appeal.

HCA 416/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 416 OF 2003

____________

BETWEEN
	LI SHIU TO	Plaintiff
and
	CHEUNG PIK NG(張碧梧) and	1st Defendant
	LI SUI CHEE (李瑞智) (in their capacities
	as the executors of the estate of
	LI SHIU TSANG, deceased)
	LI SHIU KWAN	2nd Defendant
	LI PO CHUN ESTATES LIMITED	3rd Defendant
____________

Before: Hon Au-Yeung J in Chambers

Date of Hearing: 9 July 2013

Date of Decision: 9 July 2013

Date of Reasons for Decision: 10 July 2013

_____________

D E C I S I O N

_____________

1. D1 seeks leave to issue a third party notice against the former D2 (“LSK”). The purpose is to seek contribution against LSK in the event the plaintiff establishes liability against D1. There is no dispute that D1’s contribution claim against LSK satisfies the requirements for bringing in a third party. The only question is whether D1 should be barred from doing so because of the prejudicial lateness of this application.

Background

2. These proceedings originated in the form of claims in the administration of the estate of Mr Li Po Chun (“the father”), who died intestate in 1963.  The protagonists are the plaintiff, D1 and LSK who were his sons.  D1 was the sole surviving administrator of the father’s estate.  Since 1970, D1 and LSK had been the only directors of D3 (“the Company”), a company incorporated by the father.

3. The subject matter of this action concerns 801 ordinary shares in the Company (“the Shares”) registered in the names of Li Wai To, Li Sing Chi and Li Hoi Yeung (“the 3 Shareholders”). 

4. The plaintiff’s case is that the 3 Shareholders were fictitious persons.  The Shares belonged to the father’s estate.  D1 allegedly breached his duty as administrator in failing to claim them for the estate and the plaintiff demanded for recovery in 1987.  Further, D1and LSK, as directors of the Company and with knowledge that the Shares should revert to the father’s estate, procured the Company to pass resolutions:

(i) To amend the Company’s articles and allot preference shares to companies associated with D1 and LSK;

(ii) To dispose of landed properties to other companies associated with D1 and LSK.

5. These impugned acts, carried out in 1989, resulted in stripping of the Company’s assets and depletion in the value of the ordinary shares of the Company, including the Shares.

6. However, the plaintiff had already sold out his interests in the Company to D1 and LSK pursuant to what was known as a 1971 Agreement, and entered into a deed with D1 and LSK regarding the distribution of the remaining assets of the estate in 1984.  Despite these, the plaintiff claims that he is entitled to further distribution from the estate, his share being 228 of the 801 Shares. He claims for loss and damage.

7. In 2005, the plaintiff discontinued the action against LSK.

8. Thereafter, the action went to sleep until 2011.  On 19 January 2012, the plaintiff narrowly escaped an order of striking out for want of prosecution on the basis that his claim was basically ready for trial. 

9. In 19 June 2012, with leave of Deputy Judge Lok, the plaintiff re-re-amended its statement of claim (“the purple version”), alleging that D1 was liable on the ground of wilful default and claimed the entirety of his alleged entitlement to the Shares.

10. Consequent upon the purple version, D1 took out this application in November 2011 for leave to join LSK as a party pursuant to section 3(1) of the Civil Liability (Contribution) Ordinance, Cap 377.

11. On 27 December 2012, D1 passed away.

12. I am told during the course of submission that D2 is still traceable and is in fact conducting the case for the Company.

The issue

13. There is no dispute that the requirements under Order 16, rule 1(1)(a) and (c) have been met in that D1 has a claim against LSK for contribution; and D1 requires a question or issue relating to or connected with the original subject matter of the action to be determined not only as between the plaintiff and himself but also as between either or both of them and LSK.  LSK is liable in respect of the same damage (whether jointly with D1 or otherwise) as the person claiming contribution (ie D1).

14. The plaintiff, however, alleges that D1 was guilty of delay that will cause prejudice to the plaintiff.

Delay

15. The plaintiff contends that D1 should have sought contribution from LSK back in 2004, after the amended version of the statement of claim (“the green version”) or in 2005, when the plaintiff discontinued his action against LSK. There was thus over 8 years’ delay on the part of D1.  The purple version merely added one allegation but did not substantially change the plaintiff’s case (in the view of Deputy Judge Lok).

16. If one were to analyze the amendments to the statement of claim, it can be seen that before filing of the purple version, there was no basis for D1 to seek contribution from LSK.

17. In the green version, the prayers for relief were:

(i) Against D1 only: orders for account as an administrator; and for his removal as an administrator.  This relief is no longer relevant since the plaintiff has abandoned the claim for general account of the administration of the estate.

(ii) Against D1, LSK and the Company: declarations that the resolutions were invalid.  These were directed at the corporate acts and the acts of D1 and LSK as shareholders and directors.

(iii) Against D1 and LSK (in reliefs 7-9): an order that they “shall purchase from the plaintiff the 228 shares referred to in Paragraph (5) above in accordance with Clause 5(i) of the 1971 Agreement”; and damages

18. Items (i) and (ii) simply did not concern LSK.  As regards items (iii), Clause 5(i) of the 1971 Agreement provided that “the Plaintiff agreed to sell to [D1 and LSK] in equal shares and [D1 and LSK] agreed to buy any further shares which the Plaintiff may from time to time acquire or be or become beneficially entitled to in the Company ...” (emphasis added).  This meant that D1 was only asked to bear 50% of the value of the 228 Shares that he allegedly was entitled to.

19. Further, there was no allegation of breach of duty against LSK in the green version.  Therefore, the claim for damages against LSK could only be damages in lieu of specific performance of the 1971 Agreement.

20. In the purple version, item (iii) was replaced by an order for account on the footing of wilful default as an administrator, and payment of a sum representing a 41/1444^th share of the values ascertained (ie 100% of the value of the 228 Shares, alternatively damages in lieu). In other words, the original claim against D1 for 50% liability under the 1971 Agreement is not pursued.  Instead, a 100% liability is imposed on D1 as an administrator.  Since the resolutions were the joint effort of D1 and LSK, D1 has satisfied me that, as a result of the purple version, there was a need to join LSK as a party.

21. If I am wrong and the same relief had been claimed against D1 and LSK in the green version, there would have been 8 years’ delay on the part of D1 in taking out this application.  I have considered the principles in The Liquidator of Wing Fai Construction Company Limited (in compulsory liquidation) v Yip Kwong Robert (2011) 14 HKCFAR 935, para 44-47, 75(8), per Chief Justice Ma.  The Court of Final Appeal reinforces the principle that the defendant also has an obligation to prosecute the proceedings.  Whilst this court does not condone breach of the principles in the Wing Fai case, in the circumstances of this case where the cause of action arose 16 years before then, and the action had gone to sleep for 4 years by the time CJR was implemented in 2009, one can understand why D1 did not institute third party proceedings.

22. The fact is that this action has not yet been set down.  D1 acted promptly to seek the addition of a third party.  Although D1 appeared to have taken out a summons for this purpose only 5 months after the filing of the purple version, one cannot ignore the fact that the reasons for Deputy Judge Lok’s grant of leave to put in the purple action were given only 2 months later in August 2012.  D1 took legal advice and took out an application for joinder of LSK on an ex parte basis on 18 October 2012, only to be directed to issue the present summons.  Any “delay” on the part of D1 has been explained.  It also lies ill in the mouth of the plaintiff to allege delay and prejudice when his own inaction has caused this action to have become dormant for about 6 years.

23. I do not think the fact that D1 has passed away and that LSK was the best person to explain the resolutions and related transactions have any impact on my decision.  Whether or not LSK was joined as a party, he can always be summoned as a witness at the trial of this action.

Prejudice

24. At the last CMC before a master, the action was ready for setting down for trial but for the need of the plaintiff to further amend the statement of claim.  The third party proceedings to be instituted will cause prejudice to the plaintiff in that it will delay the setting down.  The plaintiff is of advanced age and any delay many mean that he will not live to see this action bear fruit. The plaintiff further contends that refusal of leave would not prejudice D1’s position as D1 can always institute separate proceedings against LSK.

25. I accept all of these concerns of the plaintiff.  However, as Deputy Judge Lok commented in his decision dated 14 August 2012, the proposed joinder of LSK was unlikely to take up much time, given that pleadings, list of documents and a witness statement have already been filed by LSK formerly when he was a party.

26. The convenience and justice of having all the issues tried at the same time between the plaintiff and the estates of D1 and LSK, and the need to avoid possible inconsistent findings in 2 sets of proceedings, far outweighs the limited delay caused by joining LSK.

27. Any delay that may be caused may be prevented by setting down the milestone date for trial whilst LSK updates his pleadings, file supplemental witness statement and list of documents in the meantime.

Conclusion

28. I grant leave to D1 to issue a third party notice against LSK. 

29. I have directed that:

(i) The plaintiff should serve the third party notice on LSK within 14 days, ie by 23 July 2013.

(ii) Within 14 days of LSK’s acknowledgement of service, ie by 6 August 2013, the plaintiff shall take out a summons for directions returnable before me on 27 August 2013 at 9:30 am with 30 minutes reserved.

(iii) Parties shall endeavour to agree directions and submit a joint memorandum for me to approve or decide on the papers.  This should be done with a view to vacating the CMC on 19 September 2013.

30. Costs of this application should follow the event and be to D1, with certificate for 2 counsel.  There be summary assessment of costs on 18 July 2013 at 4 pm on the papers without an attendance.  D1 shall file and serve his statement of costs by 10 July 2013.  The plaintiff shall file and serve his grounds in opposition by 17 July 2013.

31. At the hearing, I have expressed my dismay at solicitors who have not prepared a costs statement for summary assessment, in breach of PD 5.4. Such has often (I regret to say in the great majority of interlocutory applications before me as a judge) caused summary assessment to be deferred to some weeks after a hearing and wasted the court’s time in having to review the papers again.  Solicitors who fail to lodge costs statements at the time of the hearing will expect the court to reflect such default in terms of quantum of costs.

32. I thank counsel for their assistance.

	(Queeny Au-Yeung)
	Judge of the Court of First Instance
	High Court

Ms Lisa Wong SC, instructed by ONC Lawyers, assigned by the Legal Aid Department, for the plaintiff

Mr Anderson Chow SC and Ms Eva Sit, instructed by Iu, Lai & Li, for the 1st defendant

The 3rd defendant, represented by Mayer Brown JSM, did not appear

HCA 416/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 416 OF 2003

_____________

BETWEEN
	LI SHIU TO	Plaintiff
and
	LI SHIU TSANG	1st Defendant
	LI SHIU KWAN	2nd Defendant
	LI PO CHUN ESTATES LIMITED	3rd Defendant

__________________________

Before: Deputy High Court Judge Lok in Chambers

Date of Decision on Costs: 13 December 2012

__________________________

DECISION ON COSTS

__________________________

 

1. This is an application by the plaintiff to vary the costs order nisi made by me on 14 August 2012. Both parties agree that any application to vary the costs order nisi should be conducted on paper without a hearing.

2. In the hearing on 19 June 2012, I granted leave to the plaintiff to amend the Re-Amended Statement of Claim.  On 14 August 2012, I handed down the reasons for the said decision and made an order nisi that the costs of and occasioned by the amendments and the costs of the plaintiff’s amendment summons be paid by the plaintiff to the 1^st and the 3^rd defendants and the plaintiff’s own costs to be taxed in accordance with Legal Aid Regulations.

3. The plaintiff now seeks to vary the costs order nisi to the extent that the costs of the hearings of the amendment summons before Master Ho on 22 May 2012 and myself on 19 June 2012 should be paid by the 1^st and the 3^rd defendants with certificate for counsel. Relying on Lessy SARL v Pacific Star Development Ltd [1996] 2 HKLR 1, Ms Wong SC, counsel for the plaintiff, submits that the court should treat the costs of the substantive hearings separately from the costs of the amendment summons.  Since the 1^st and the 3^rd defendants have failed in its opposition to the plaintiff’s amendment summons, the 1^st and the 3^rd defendants should pay for the costs of the substantive hearings.

4. According to the dicta of Yam J in Lessy SARL:

“The rationale behind differentiating these two sets of costs is not to encourage the other side who has decided to resist an application to amend to have a try-on. Otherwise the resisting party would be under an impression that, win or lose, they will get their costs any way. The resisting party should be deterred to adopt such an attitude. In deciding to resist the amendment, they should know that in the event they have lost the argument, they would be ordered to pay the cost of the argument and that is the costs of the hearing whilst the first set of costs, (i.e. the costs of and occasioned by the amendment), would be to them in any event.” (at p 2E-F)

5. Despite such dicta, Yam J acknowledged that the set of costs relating to the substantive hearing is a matter within the discretion of the court having regard to all the relevant considerations (see: pp2J-3B).

6. The rationale for the separate treatment of costs as stated by Yam J in Lessy SARL is certainly a factor in favour of ordering the 1^st and the 3^rd defendants to pay for the costs of the substantive hearings.  However, one cannot ignore the following factors in the present case:

(i)  there was substantial delay in the making of the amendment application and the plaintiff only offered the reasons for the delay after the 1^st and the 3^rd defendants filed their submissions on 18 May 2012 criticising the inadequacies in the plaintiff’s application;

(ii)  the plaintiff made certain concessions about the value of the properties and the role of the 2^nd defendant only after the skeleton arguments of the 1^st and the 3^rd defendants were lodged;

(iii)  the plaintiff had made a quite incorrect representation to Master Ho in the striking out application that the case was by then ready for trial; and

(iv)  the delay of the amendment application is causing some inconvenience to the 1^st and the 3^rd defendants in the preparation of their respective defence case.

7. I must also emphasize that after the implementation of the CRJ, there is a heightened concern to guard against late applications.  The plaintiff’s application is certainly one of those late applications which should not be encouraged by the courts.

8. Further, I agree with Ms Sit, counsel for the 1^st and the 3^rd defendants, that the court should not take into account events subsequent to the court’s decision in determining the issue of costs.

9. Balancing all these factors, I am of the view that the fairest order is that there should be no order as to costs of the substantive hearings.  The same should also apply to the costs of the application to vary the costs order nisi dated 14 August 2012.  I therefore vary the costs order nisi as follows:

(i)  save that there be no order as to the costs of the hearings on 22 May 2012 and 19 June 2012 and the costs of the application to vary the costs order nisi dated 14 August 2012, the costs of and occasioned by the amendments and the costs of the plaintiff’s amendment summons dated 3 May 2012 be paid by the plaintiff to the 1^st and the 3^rd defendants; and

(ii)  the plaintiff’s own costs to be taxed in accordance with Legal Aid Regulations.

	(David Lok)
	Deputy High Court Judge

Ms Lisa K Y Wong, SC, instructed by ONC Lawyers, for the plaintiff

Ms Eva Sit, instructed by Iu, Lai & Li, for the 1^st and 3^rd defendants

HCA 416/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 416 OF 2003

_____________

BETWEEN
	LI SHIU TO	Plaintiff
and
	LI SHIU TSANG	1st Defendant
	LI SHIU KWAN	2nd Defendant
	LI PO CHUN ESTATES LIMITED	3rd Defendant
____________

Before: Deputy High Court Judge Lok in Chambers

Date of Hearing: 19 June 2012

Date of Decision: 19 June 2012

Date of Reasons for Decision: 14 August 2012

__________________________

REASONS FOR DECISION

__________________________

 

1.  This is an application by the plaintiff to amend the Re-Amended Statement of Claim. In the hearing on 19 June 2012, I allowed the plaintiff’s application and I now give my reasons.

Background

2.  These proceedings concern the administration of the estate of Li Po Chun (“the Estate”) who died intestate in 1963.  The protagonists are the 3 sons of the deceased and the only remaining beneficiaries of the Estate, all of whom are now well into their seventies.

3.  The plaintiff’s claim concerns primarily the existence of 3 registered shareholders of the 3^rd defendant (Li Po Chun Estates Limited): Li Wai To, Li Sing Chi and Li Hoi Yeung (“the 3 Shareholders”) who collectively hold 801 shares in the 3^rd defendant (“the 801 Shares”).  The plaintiff’s claim is that the 3 Shareholders are fictitious persons and the 801 Shares belong to the Estate, and the 1^st defendant, as the administrator of the Estate, has failed in his duty to collect in and distribute such assets.

4.  The 3 Shareholders were allotted the 801 Shares on 25 March 1949.  The plaintiff claims to have harboured suspicion that the 3 Shareholders were fictitious since December 1963.

5.  Pursuant to an agreement made between them (“the 1971 Agreement”), the plaintiff sold his interests in the 3^rd defendant to the 1^st and 2^nd defendants and resigned as director of the 3^rd defendant in 1971.  He also entered into an agreement with the 1^st and 2^nd defendants to distribute all the cash in the Estate in 1984.

6.  In 1987, the plaintiff wrote to the 1^st defendant and alleged that the 3 Shareholders were fictitious and the 801 Shares belonged to the Estate, but no action had been taken by the plaintiff until he commenced the present proceedings against the defendants on 30 January 2003, in which the plaintiff was claiming for, inter alia, a declaration that he was entitled to the portion of 41/114^th of the 801 Shares, ie 228 shares (“the 228 Shares”), and the loss or loss of value of the 228 Shares.

7.  It is the plaintiff’s claim that various resolutions were passed by the 3^rd defendant in 1989 (“the Purported Resolutions”) which would have a depletive effect on the value of the 3^rd defendant’s shares and he was only aware of the Purported Resolutions in May 2001.

8.  The plaintiff discontinued the action against the 2^nd defendant, Mr Li Shiu Kwan (“S K Li”), on 1 June 2005, and thereafter the action went to sleep.  It was not until 13 July 2011 that the plaintiff issued a summons for leave to set down for trial out of time.

9.  In response to the plaintiff’s application to set down, the 1^st defendant issued a summons to strike out the plaintiff’s claim for want of prosecution and abuse of process, which was dismissed by Master Ho on 19 January 2012.

10.  The plaintiff issued the present amendment summons on 3 May 2012.

11.  As I see it, there is no serious objection to the following proposed amendments in the following paragraphs of the draft:

(i)  §§6A to 6C: these facts have been mentioned in the witness statements, which only serve to complete the explanation as to why, by June 1981, only the plaintiff, the 1^st and the 2^nd defendants remained interested in the estate;

(ii)  §13(aa): which only involves an allegation of law;

(iii)  §§17A and 18A: which are facts based on the public records of the 3^rd defendant and pleaded to complete the narrative of the changes in the 3^rd defendant’s shareholding;

(iv)  §19B: which only sets out the detailed contents of the statutory declaration already pleaded in §19A;

(v)  §§19C, 21, 32AA, 32AB, 32AC and 38B: facts which have already been mentioned in previous witness statements.

12.  The main objection is related to the averments about the purported allotments of the shares of the 3^rd defendant (“the Purported Allotments”) and the purported dispositions of the 3^rd defendant’s properties (“the Purported Dispositions”) mentioned in §§32A, 40, 40A, 40B, 41, 42, 42A and the new relief claimed in the prayer for relief.

13.  Ms Sit, counsel for the defendant, opposes the application on the following grounds:

(i)  there was substantial and unexplained delay on the part of the plaintiff in the making of the amendment application;

(ii)  the court should not allow the amendments as the plaintiff had indicated to Master Ho in the striking out application that the case was by then ready for trial; and

(iii)  the plaintiff is seeking to introduce new claims in the proposed amendments causing prejudice to the defendant.

Legal principles governing grant or refusal of leave to amend pleadings

14.  The principles under which the court exercises its discretion to allow or refuse amendments to pleadings can be summarised into 4 prepositions (see: Ketteman v Hansel Properties Ltd [1987] 1 AC189, per Lord Brandon at p 212F-H):

(i)  first, all such amendments should be made as are necessary to enable the real questions between the parties to be decided;

(ii)  second, amendments should not be refused solely because they have been made by the honest fault or mistake of the party applying for leave to make them: it is not the function of the court to punish parties for mistakes which they have made in the conduct of their cases by deciding otherwise than in accordance with their rights;

(iii)  third, however blameworthy (short of bad faith) may have been a party’s failure to plead the subject-matter of a proposed amendment earlier, and however late the application for leave to make such amendment may have been, the application should, in general, be allowed, provided that allowing it will not prejudice the other party; and

(iv)  fourth, there is no injustice to the other party if he can be compensated by appropriate orders as to costs.

15.  Ms Wong, SC, counsel for the plaintiff, submits that the principles laid down in Ketteman remain good law after the CJR.  She refers me to two cases.  In Re Sun Hung International Ltd [2009] 2 HKLRD 418, Kwan J, as she then was, applied the Ketteman principles in an application for the amendment of a section 168A petition on the eve of the coming into force of the CJR.  In the post-CJR decision of 厦門新景地集團有限公司 v Eton Properties Limited, unreported, HCMP 13, 15, 18, 21/2012 (decision of the Court of Appeal on 3 February 2012), the Court of Appeal affirmed the decision of the lower court in allowing an application for amendment of the Statement of Claim on the ground that the same was necessary to enable the real questions and controversy between the parties to be decided, despite the fact that the application was made just a couple of months before the scheduled trial date.

16.  I agree that the Ketteman principles remain good law after the CRJ, but I must put a caveat here.  First, the new O 1A of the RHC makes it clear that the court shall give effect to the underlying objectives when it exercises its power or interprets the RHC, including increasing cost-effectiveness of litigation, ensuring that a case is dealt with as expeditiously as is reasonably practicable, promoting a sense of reasonable proportion and procedural economy in the conduct of proceedings, facilitating the settlement of disputes and ensuring that the resources of the court are distributed fairly.  If the amendment application is made in circumstances offending these underlying objectives, the court may have to balance all the factors in the case in determining whether to grant the application.

17.  Second, there is a heightened concern to guard against late applications after the implementation of the CJR.  For case management purposes, there are now certain milestone dates in the course of litigation, and one of which would be the trial date.  If a party makes a late application to amend the pleading with the effect that the trial date may have to be adjourned, the court would be very reluctant in allowing the application unless there are exceptional circumstances.  Indeed, adjournment of the trial is now considered as a serious prejudice to the parties involved in litigations.  Hence, one should not assume that, once the Ketteman principles are satisfied, the court would automatically grant an application for amendment of pleading in particular at a very late stage of the proceedings.

Merits of the application

18.  After considering all the circumstances of the present case, I exercised the discretion in favour of the plaintiff and allowed the amendment application.  My reasons are three-fold.

19.  First, the trial date has yet been fixed and so there is no question about the variation of a milestone date.

20.  Second, the plaintiff’s proposed amendments are, in my judgment, necessary to enable the real questions and controversy between the parties to be decided, and such proposed amendments have not substantially changed the nature of the plaintiff’s claim.

21.  In the existing pleading, the plaintiff has already pleaded that:

(i)  the 1^st defendant has been the sole surviving administrator since 14 September 1973 and has a duty to collect and distribute all the assets of the Estate and to act in the best interest of the Estate and the beneficiaries;

(ii)  the 1^st defendant has been a shareholder and a director of the 3^rd defendant since 18 July 1963 and 21 December 1963 respectively;

(iii)  the 801 Shares form part of the Estate because the names in which they have been registered are fictitious names created by the deceased to hold the shares for him;

(iv)  the 1^st defendant, as the administrator, was and is obliged to get in, and distribute to the beneficiaries, the 801 Shares;

(v)  the 1^st defendant has failed to do so despite repeated requests by the plaintiff;

(vi)  instead, the 1^st defendant, as shareholder and director and together with S K Li, caused the 3^rd defendant to pass the Purported Resolutions and make the Purported Allotments, which resulted in the issue to Gregson Limited and Dredson Limited of shares in the 3^rd defendant which are preferred over the existing ordinary shares including the 801 Shares with regard to both dividends and return of share capital;

(vii)  as a result of the Purported Resolutions and Allotments, the value of the ordinary shares of the 3^rd defendant, including the 801 Shares, had been largely depleted;

(viii)  by causing the Purported Resolutions and Allotments, the 1^st defendant had acted in a manner detrimental to the interests of the Estate and the beneficiaries including the plaintiff; and

(ix)  the plaintiff has suffered loss and damage.

22.  Arising from such pleaded facts, in addition to the declarations that the plaintiff is entitled to have the 228 Shares transferred to him and the nullification of the Purported Resolutions, the following relief has been claimed in the existing prayer for relief:

(i)  a full account of all dealings involving the 1^st and the 3^rd defendants since 1971;

(ii)  the 1^st defendant be removed as the administrator of the Estate;

(iii)  an order for the purchase of the plaintiff’s 228 Shares in accordance with Clause 5(i) of the 1971 Agreement, which requires the 1^st defendant and S K Li to purchase any further shares in the 3^rd defendant that the plaintiff may become entitled to at a price to be agreed, failing which to be fixed by arbitration;

(iv)  damages; and

(v)  such further or other consequential relief to give effect to the declarations and orders sought.

23.  According to the existing pleading, it is clear that the plaintiff is asking for an order that he is entitled to the 228 Shares and claiming for all the loss and damages caused by the 1^st defendant in depleting the value of the 228 Shares, including the making of the Purported Resolutions and Allotments.  As I see it, the new amendments only add one more allegation about the 1^st defendant’s conduct in depleting the value of the 801 Shares, that was the causing of the Purported Dispositions of the 5 properties to Arracourt Limited and Aucilla Limited, and that the plaintiff is claiming for loss and damages resulting from such alleged wrongful conduct.

24.  I agree that, if the court is to allow the amendments, the 1^st defendant has to deal with one more allegation at the trial.  However, since it has all along been the plaintiff’s case that the 1^st defendant had depleted the value of the 801 Shares by the Purported Resolutions and Allotments, the new allegation is closely connected with the substance of the existing claim.  Further, the remedies already claimed in the existing pleading, if granted after trial, would necessarily require the 1^st defendant to go into his ownership and management of the 3^rd defendant over the past 40 years since 1971.  In particular, the court has to inquire the adverse effects that the Purported Resolutions and Allotments have had on the value of the 801 Shares.  If the 3^rd defendant had wrongfully caused the Purported Dispositions in 1989, it would be quite unrealistic for the court to ignore such important fact in assessing the fair value of the plaintiff’s 228 Shares.  Hence, in order to ensure that the real questions and controversy between the parties are to be decided at the trial, the court should allow the amendments.

25.  Third, I do not find that there is significant prejudice caused to the 1^st and the 3^rd defendants by the proposed amendments.  As I have mentioned above, the existing remedies claimed by the plaintiff, if granted by the court, would necessarily require an investigation about the 1^st defendant’s ownership and management of the 3^rd defendant over the past 40 years, and so the 1^st defendant should have expected to deal with the allegation about the Purported Dispositions of the 5 properties in any event.

26.  Furthermore, the new allegation should not prolong the preparation work for the trial.  As conceded by the plaintiff himself, he has no personal knowledge (other than what he can glean from the relevant documents) of, as he did not participate in, the Purported Resolutions, Allotments and Dispositions.  His case on these transactions is essentially a documentary one to be proved by the production of the material documents all of which have already been disclosed.  Hence, it is not expected that the plaintiff will adduce much new evidence in support of his claim.

27.  As for the contribution by the Purported Dispositions to the depletion in value of the 801 Shares, the plaintiff is prepared to accept the considerations stated in the agreements for sale and purchase by which the Purported Dispositions were made as proper values of the relevant properties as at the date of those transactions.  This is a formal concession by the plaintiff which would obviate the need for valuation evidence.

28.  Having made the aforesaid observations, I am not suggesting that the inclusion of the new allegations in the proposed amendments would require no additional preparation work on the part of the 1^st and the 3^rd defendants.  However, given the fact that they would have to deal with the plaintiff’s existing allegations about the Purported Resolutions and Allotments, any additional preparation work should not be too excessive.  In particular, it has all along been the 1^st defendant’s case that the plaintiff has no right to question the Purported Resolutions and Allotments since he had ceased to be a shareholder of the 3^rd defendant.  Given that this is the defence to the existing claim, I wonder what additional preparation work is required to meet the new allegation.  In any event, even if the parties apply to set down the case now, the trial date will still be some time away.  In such circumstances, the additional preparation work should not delay the trial date, and so the complaint about the further anxiety caused by the delay in the resolution of the dispute may have been exaggerated.

29.  In opposing the amendment application, Ms Sit submits that the court should take into account: (i) the history of this case including the delay on the part of the plaintiff in prosecuting the claim; (ii) the absence of explanation as to why the amendment application was taken out at such a late stage of the proceedings; and (iii) the representation made by the plaintiff to Master Ho in the striking out application that the case was by then ready for trial.

30.  There is some force in such criticism.  Whilst the court should not condone such delay on the part of the plaintiff, there are some materials in the affirmations of the plaintiff which can provide some explanation about the delay.  According to the plaintiff, he suffered from a lack of means to further proceed with the action after mid 2005 until he secured legal aid on 14 September 2009.  The present solicitors for the plaintiff were not assigned until 6 July 2010, and senior counsel was first instructed in September 2010.  In December 2010, the plaintiff invited the 1^st and the 3^rd defendants to mediate, but the said defendants declined.  In August 2011, the said defendants applied to strike out the claim for want of prosecution which was finally heard by Master Ho in January 2012.  During such time, the plaintiff and those representing him focused their efforts upon resisting the striking out application.

31.  I agree with Ms Sit that the explanation may not be perfectly satisfactory, in particular no explanation has been given as to why the amendment application had not been taken out shortly after the instruction of senior counsel.  Despite that, this should only be one of many factors that the court should take into account in considering whether to grant the amendment application.

32.  In the Eton Properties case, the Court of Appeal, whilst acknowledging that there was delay in the making of the amendment application and lack of explanation for such delay, nevertheless allowed the application on the ground that the “primary aim” in exercising the case management (or other) powers of the court is to secure the “just resolution of disputes in accordance with the substantive rights of the parties”: O 1A, r 2(2) of the RHC.  I echo the same observation here.

33.  Mr Sit also complains that there may be delay to the proceedings as the 1^st defendant may have to join S K Li as a third party to the proceedings.  Again I see no merit in such argument.  First, the plaintiff is prepared to drop the allegations in the proposed draft about the joint acts of the 1^st defendant and S K Li in respect of the Purported Resolutions, Allotments and Dispositions.  Second, it is not clear why the 1^st defendant did not see the need to join S K Li earlier. The involvement of S K Li in the Purported Resolution, Allotments and Dispositions is obvious even from the existing pleadings.  Third, it is also unclear on what factual or legal basis the 1^st defendant can rely on in seeking an indemnity or contribution against S K Li towards his liability to the plaintiff.  Unlike the 1^st defendant who is the administrator, S K Li did not owe the Estate or the beneficiaries any duty not to prefer or act in his self-interest.  In any event, the joinder of S K Li may not take much time given that he has already filed a Defence, a list of documents and witness statements before the plaintiff discontinued the claim against him in 2005.

34.  It is true that the plaintiff had earlier abandoned the claim for “usual account” (as opposed to account on the ground of wilful default) against the 1^st defendant.  However, it has all along been the plaintiff’s case that he is pursuing an account on the footing of wilful default in requiring the 1^st defendant to account for, not only what he has actually received, but also what he has not but should have received. In this regard, the new allegations add nothing new to the existing claims.

35.  Based on the aforesaid reasons, I exercised the discretion in favour of the plaintiff and allowed the amendment application. However, taking into account the history of this case and the advance age of the parties involved, the court should impose a strict timetable for the conduct of the case to avoid further delay, and the plaintiff cannot expect the court to be generous in granting further indulgence to him in complying with the timetable.

36.  Since the plaintiff is seeking the indulgence of the court in granting leave to amend the pleading at a late stage of the proceedings, I make an order nisi that the costs of and occasioned by the amendments and the costs of the plaintiff’s amendment summons dated 3 May 2012 be paid by the plaintiff to the 1^st and the 3^rd defendants and the plaintiff’s own costs to be taxed in accordance with Legal Aid Regulations, which shall be made absolute 14 days after the date of the handing down of the Reasons for Decision.

(David Lok) Deputy High Court Judge

Ms Lisa K Y Wong, SC, instructed by ONC Lawyers, for the plaintiff

Ms Eva Sit, instructed by Iu, Lai & Li, for the 1^st and 3^rd defendants