PATRICK HUNG HING YU v. HO YIN MAN AND OTHERS

HCA 92/2007

[2024] HKCFI 3186

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 92 OF 2007

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BETWEEN

AND BETWEEN

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REASONS FOR DECISION

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1.  This is the appeal of Madam Huang Kai Chiun Dorothy (“Madam Huang”), the executrix of the estate of the plaintiff (“P”), against a Master’s decision made on 14 June 2024 ordering P’s claim against the 4^th defendant (“D4”) in these proceedings be struck out and dismissed for want of prosecution. At the conclusion of the hearing, I allowed P’s appeal, dismissed D4’s strike out application, and indicated that my reasons would be handed down in due course. Here are the reasons for my decision.

A. THE RELEVANT BACKGROUND

2.  According to the agreed chronology:

(1) Fook Tai Investment Co Ltd (“D3”) was the developer of a project to redevelop 4 plots of land at Leung Fai Terrace near Caine Road (“the Redevelopment”).

(2) In 1991, D3 (a) appointed Stereo Ltd, the 2^nd defendant (“D2”), as consultant to (i) negotiate with the landowners to procure their consent to redevelop, and (ii) procure the necessary approval of the Building Authority for the Redevelopment and (b) agreed to pay D2 5,000 sq ft of the buildable floor area of the new building known as Scenic Rise as consultancy fee.

(3) In 1994, it was confirmed by D3 to D2 that the consultancy fee would comprise as follows: (a) HK$12,543,440 representing 3,583.84 sq ft of the 5,000 sq ft of the buildable floor area of the new building (which was paid by D3 to D2 on 11 May 1994), and (b) upon completion of the Redevelopment, D3 would assign Flats 36A and 36B (subsequently changed to 36D) with gross floor area of 1,416.16 sq ft to D2 provided that D2 would bear the agreed construction costs.

(4) The Redevelopment commenced in December 1992 and was completed in early 1999.

3.  It is common ground that D2 was under the control and majority ownership of Ho Ying Man, the 1^st defendant (“D1”), at all material times.

4.  According to P’s pleaded case:

(1) In 1986, P initiated the idea of the Redevelopment and procured the assistance of D1 to provide finance and manpower for the project. D4 was assigned by D1 to assist P.

(2) In 1991, P and D1 reached an agreement, with the knowledge of D4, to share the consultancy fee to be paid by D3, and D2 was designated by P and D1 as the vehicle for the purpose of receiving the consultancy fee.

(3) In 1994, D1 and D4 approached Mr Lai Hou (“Mr Lai”) for the purpose of selling the right to the consultancy fee.

(4) In 1995, D4 entered into an oral agreement to transfer Flat 36D to Mr Lai. Wealthy Channel Ltd, the 5^th defendant (“D5”), is a company representing the interest of Mr Lai.

(5) In March 1999, D4 commenced proceedings in HCA 3890/1999 against, inter alia, D2 and D3 alleging that D2 was a mere agent of D4 and that D2 held that the benefit of the consultancy fee (including Flats 36A and 36D) on trust for D4. P was not a party to that action but was assured by D1, D2 and D4 that once the action was resolved, P would receive his share of the consultancy fee.

(6) In late 2006, P came to know that in March 2006, the parties settled the action in HCA 3890/1999 by a Tomlin Order (“the 2006 Tomlin Order”), whereby Flats 36A and 36D were to be sold and the sale proceeds were to be divided between D2 and D4.

5.  On 16 January 2007, P commenced these proceedings against D1 to D4. In his Statement of Claim filed on 10 April 2007, P sought against D4 a declaration that D4 has no interest in Flats 36A and 36D.

6.  Later in 2007, D2 and D4 applied to strike out P’s claim. In particular, D4 sought to strike out on the ground that P’s claim disclosed no reasonable cause of action against him. On 13 August 2007, Suffiad J handed down a decision dismissing both applications to strike out on the part of D2 and D4.

7.  In 2012, P passed away. On 14 December 2012, Madam Huang obtained the order to carry on these proceedings for P’s estate.

8.  In 2014, there were amendments to the pleadings of P and D4.

9.  In March 2015, timetabling questionnaires were filed by, inter alia, P and D4. Lists of documents were filed by the parties in April, October and November 2015, and in December 2016.

10.  Madam Huang filed her witness statement on behalf of P in November 2015. D4 filed his witness statements in May 2016 and January 2018.

11.  On 29 October 2015, P obtained a default judgment against D1.

12.  On 20 January 2017, Mr Registrar Lung allowed an application taken out by P pursuant to RHC Order 38 rule 2 for various affirmations to be read out at trial which concerned D4 and D5, and adduced as hearsay evidence. The learned Registrar’s reasons can be seen from his decision dated 20 January 2017.

13.  On 12 July 2017, D1 took out a summons to set aside the default judgment obtained against him.

14.  On 3 November 2017, the 5^th Case Management Conference (“CMC”) took place before Mr Registrar Lung. The learned Registrar, inter alia, ordered that P should fix the return date for the 6^th CMC within 14 days after the disposal of D1’s application for setting aside the default judgment.

15.  On 18 January 2018, D1’s summons was adjourned by DHCJ Sakhrani to a date to be fixed. That application came before DHCJ R Ismail SC on 24 and 25 April 2018, and was dismissed by a decision handed down on 11 May 2018.

16.  In 2022, Madam Huang made an application for legal aid but subsequently withdrew it.

17.  On 16 May 2023, Madam Huang made another application for legal aid. On 21 August 2023, Madam Huang’s current solicitors were assigned to act for her in these proceedings.

18.  In the meantime, the Director of Legal Aid issued a Notice of Assignment of counsel for D4 on 15 September 2023 and issued a Notice of Amendment of Legal Aid Certificate to cover D4’s application to strike out P’s claim herein.

19.  On 7 February 2024, D4 took out a summons to strike out P’s Re-Amended Statement of Claim for want of prosecution and/or on the ground that it may prejudice, embarrass or delay the fair trial of the action and/or it is otherwise an abuse of process of the court.

20.  D4’s striking out application was heard before a Master on 14 June 2024, who, ordered that (1) P’s claim against D4 in these proceedings be struck out and dismissed for want of prosecution and on the grounds that it may prejudice, embarrass or delay the fair trial of the action and/or it is otherwise an abuse of process of the court and (2) costs of this action and D4’s application be paid by P to D4 to be taxed if not agreed with a certificate for counsel.

21.  By a notice of appeal dated 26 June 2024, P sought to appeal against the Master’s order.

B. THE RELEVANT LEGAL PRINCIPLES

22.  In exercising my discretion in the present case to determine whether or not P’s claim should be struck out for want of prosecution, I paid full regard to the principles set out in Ma CJ’s judgment in Wing Fai Construction Co Ltd v Yip Kwong Robert (2011) 14 HKCFAR 935 at §§64-80, and in particular, the following principles:

(1) Striking out should only be used in plain and obvious cases and as a last resort: it must be plain and obvious that by reason of his delay, a plaintiff should be deprived of the opportunity to go to trial for the resolution of his dispute with the defendant (§§65, 73 & 75(1)).

(2) The foundation for the jurisdiction to strike out for inordinate and inexcusable delay must be predicated on an abuse of the process of the court by the plaintiff; mere delay is not sufficient to justify an order to strike out (§§66, 68, 75(2) & 75(5)).

(3) Prejudice to the defendant is a factor relevant to the overall justice of the case (§75(7)).

(4) Where all parties to the proceedings have the obligation to prosecute proceedings and assist the court in furthering the underlying objectives, it is relevant to consider the parties’ conduct and any failure on their part for the purpose of considering the question of abuse and the overall justice of the case (§75(8)).

23.  As far as the question of prejudice is concerned (in the context of a strike out application for want of prosecution), I had also borne in mind the following principles which I gratefully adopted from G Lam J’s decision in Tsang Foo Keung v Chu Ji Mi Jimmy (unreported, HCA 7140/1995, 12 July 2013) at §80:

“(1) The burden lies on the defendant to show prejudice or impossibility of a fair trial.

(2) The discharge of that burden will normally require evidence specifying the particular disadvantage suffered or anticipated by the defendant, though in appropriate cases inferences may be drawn by the judge …

(3) The court has to look at all the circumstances when considering whether there is prejudice or whether it will not be possible to have a fair trial …

(4) The prejudicial effect of delay on a defendant and the effect of delay on the possibility of a fair trial depend in large measure on the nature of the issues in the case, in particular whether the evidence is predominantly in documentary form or whether the crucial evidence may be largely oral ….

(5) Where the prejudice relied on is the dimming of witnesses’ memories due to the lapse of time, a generalised assertion that memories must have grown fainter will generally not be sufficient ... However, it is not essential in every case that there should be evidence of particular respects in which potential witnesses’ memories have faded. So long as there are primary facts from which inferences can properly be drawn, there is nothing wrong with doing so ...

(6) The defendant must also show that there is prejudice or inability to have a fair trial, as the case may be, caused by the delay in the action. The defendant cannot therefore merely rely on prejudice caused by the delay of the plaintiff in issuing the writ ...

(7) The court may take into account what the defendant could reasonably be expected to have done which could have avoided or mitigated the prejudice he suffers or anticipates. If, for example, the defendant relies on the dimming of witnesses’ memories through the passing of time, the court will usually want to know what steps the defendant has taken in locating and proofing the potential witnesses…”

C. PLAINTIFF’S DELAY

24.  In my view, the relevant period of inaction on the part of P was from 2018 to 2023. I considered P’s inactivity during this period to be inordinate and inexcusable.

(1) D4 submitted that there were 2 periods of delay on the part of P: (a) between 2007 and July 2011 and (b) between 2018 and 2023.

(2) As to the period between 2007 and July 2011, I noted that there were in fact activities in these proceedings in 2007 (see paragraphs 5 and 6 above). In any event, after P’s death and after Madam Huang obtained the order to carry on in 2012, the parties picked up their momentum in these proceedings from 2014 to 2018. I therefore considered that much less weight should be placed on the period of inactivity between 2007 and 2011.

(3) Madam Huang has admitted in her affirmation that there has been no substantive action on her part in these proceedings between 2018 and 2023. There was, however, a mediation session arranged between P and D4 in November 2018.

(4) Madam Huang further explained in her affirmation as follows.

(1) She is now 78 years old and has been a housewife without any income.

(2) In 2018, her former solicitors asked her to make a deposit as costs on account. However, she was unable to make payment due to her financial difficulties. She produced a copy of the relevant pages of her bank passbook showing the level of her cash deposits from 2018. As her former solicitors did not make any further request, she was left with the impression that the amount of money that she had paid so far (which was more than HK$500,000) was still sufficient.

(3) Since then until 2020, Madam Huang made regular attempts to follow up the progress of the case but her former solicitor handling the case was not contactable.

(4) In March 2020, Madam Huang travelled to Kuala Lumpur to visit her relatives and was only able to return to Hong Kong in December 2020 due to the COVID-19 pandemic and the subsequent quarantine and travel restriction in Malaysia and Hong Kong. She was unable to contact her former solicitor over long-distance calls who was handling the case. Further, she was never informed by her former solicitors of her obligations under Mr Registrar Lung’s order to fix the return date for the 6^th CMC within 14 days after the disposal of D1’s application for setting aside the default judgment. According to her, she was only so informed in August 2023.

(5) After her return to Hong Kong in December 2020, Madam Huang had to attend hospitals and clinics on a regular basis from October 2021 to January 2022. She exhibited copies of her medical records, consultation summaries and appointment/discharge slips to her affirmation.

(6) It was only in early 2022 when Madam Huang managed to get in touch with another employee of her former solicitors and was told to apply for legal aid if she could not afford the legal fees. Although she did apply for legal aid, she was unable to withstand the stress and subsequently withdrew the application upon medical advice.

(7) In May 2023, Madam Huang’s health slightly improved and she applied for legal aid again. On 21 August 2023, she was granted the Legal Aid Certificate. A meeting was held with her current solicitors in October 2023 after all the relevant documents were received. In early December 2023, she was assigned counsel by the Director of Legal Aid.

(5) It seemed to me that the relevant period of inactivity was from November 2018 (when the mediation took place) to May 2023 (when Madam Huang reapplied legal aid). I considered the period to be inordinate and inexcusable (despite the explanations given by Madam Huang in her affirmation).

25.  Nonetheless, I did not think Madam Huang’s conduct during the period from November 2018 to May 2023 could properly be described as an abuse of the process of the court. I was prepared to give Madam Huang the benefit of the doubt when she said on oath that she was never made aware at any material time of her obligations under Mr Registrar Lung’s order to fix the return date for the 6^th CMC within 14 days after the disposal of D1’s application for setting aside the default judgment. I was unable to accept D4’s submission that P’s non-compliance of the learned Registrar’s order amounted to a “flagrant disregard for court orders, sufficient to warrant a finding of abuse of process”.

D. PREJUDICE TO 4^TH DEFENDANT

26.  D4 relied on the following matters as constituting significant prejudice to him to such an extent that a fair trial might not be possible.

(1) Much of the disputed factual events took place in the 1980s and 1990s.

(2) Key witnesses are of an advanced age: D4 is 84 years old and another witness, one Mr Leung, is in his mid-80s.

(3) P has passed away and can no longer be cross-examined.

(4) D4 has been experiencing anxiety since proceedings started in this action 17 years ago.

(5) D4 has been prevented from enforcing the 2006 Tomlin Order.

27.  In my view, it is important to focus on the prejudice to a defendant which has been caused by the plaintiff’s inordinate and inexcusable delay. In the context of the present case, it is necessary to examine the extent of any prejudice which D4 claimed to have suffered as a result of Madam Huang’s inactivity in these proceedings from 2018 to 2023.

(1) Whilst D4 was correct to point out that some of the disputed events took place many years ago, I considered it material that D4 had already prepared and filed his witness statements in these proceedings in May 2016 and January 2018. This happened before the period of inordinate and inexcusable delay on the part of P. One would have expected D4 to have included the entirety of his relevant evidence in his two witness statements which were filed before the inactivity period.

(2) As to D4’s advanced age, an affirmation has been filed on his behalf by his solicitor to say that D4 is in decent health condition and maintains a normal lifestyle for his age. As to anxiety experienced by D4, this was described by D4’s solicitor in an affirmation as having started when these proceedings commenced 17 years ago. Therefore, such anxiety does not appear to have been caused by Madam Huang’s inactivity in these proceedings from 2018 to 2023. In this connection, solicitors are once again reminded that it is only in exceptional circumstances where solicitors should give factual evidence in an affidavit on behalf of his/her client: Hong Kong Civil Procedure 2024 Note 41/5/4.

(3) As to the suggestion that D4’s potential witness, Mr Leung, is unlikely to clearly remember or be able to articulate the details of events that took place in the 1980s, I noted that D4 has not adduced any cogent evidence before the court to support such a suggestion. Further, I noted that D4 did not seek to file a witness statement from Mr Leung in 2016 or 2018 in this action as an attempt to preserve his evidence. In these circumstances, I was unable to attach any weight to D4’s concerns in relation to Mr Leung.

(4) D4 was correct to submit that P’s demise in 2012 meant that P can no longer be cross-examined at the trial on the veracity of the statements previously made by P. However, this is simply a fact of life. I did not think that D4’s inability to cross-examine P was caused by Madam Huang’s inactivity in these proceedings from 2018 to 2023.

(5) Finally, I did not believe that D4’s inability to enforce the 2006 Tomlin Order was caused by Madam Huang’s inactivity in these proceedings from 2018 to 2023. As pointed out by Mr Yuen (P’s counsel), even if P’s claim against D4 were struck out, P would still have other claims subsisting against the other defendants who were parties to the 2006 Tomlin Order. This would still have resulted in D4 not being able to enforce the 2006 Tomlin Order.

28.  In assessing the overall justice of the case, I had also taken into account the D4’s conduct in the proceedings, and in particular, his apparent failure to prosecute the proceedings from 2018 to 2023.

E. TIME BAR

29.  As an alternative ground, D4 relied on time bar to seek to strike out the entirety of P’s claim herein. In particular, D4 argued that (1) P’s cause of action in dishonest assistance against D4 began to accrue in December 1996 when D1 and D2 agreed to transfer Flat 36D to Mr Lai and the action was therefore time-barred in December 2002, and alternatively (2) by the time the occupation permit was issued on 24 March 1999, P would be entitled to the consultancy fee, and P’s cause of action in dishonest assistance against D4 would be complete on 24 March 1999 and became time-barred on 24 March 2005. Mr Yung (D4’s counsel) accepted his arguments were premised on P having only one pleaded cause of action against D4, namely dishonest assistance.

30.  Apart from dishonest assistance, Mr Yuen submitted that P has pleaded another cause of action based on estoppel against D4. He relied on the facts pleaded in the Re-Amended Statement concerning (1) D4’s assurance that P would receive his share of the consultancy fee once the dispute in HCA 3890/1999 had been resolved, (2) P’s reliance on D4’s assurance and (3) P’s resulting detriment. I was just about able to see these matters pleaded in paragraphs 18, 19 and 20 of the Re-Amended Statement of Claim. I also noted that back in August 2007, Suffiad J dismissed D4’s application to strike out for want of reasonable cause of action despite the fact that P had not yet pleaded dishonest assistance in his Statement of Claim against D4 (see paragraph 6 above). At paragraph 52 of his Ruling, his Lordship said that “In the case of the 4th defendant his interest in Flats A and D arises from his claim to the consultancy fee or that part of it as represented by Flats A and D under the Tomlin Order in HCA 3890 of 1999”.

31.  For these reasons, even assuming the two arguments of D4 to be correct, it appeared to me to be just about arguable that P has pleaded another cause of action against D4 based on estoppel. I did not think that it was plain and obvious that all of P’s claims against D4 are now time barred so that they should be struck out.

32.  In any event, as pointed out by Mr Yuen, D4 has only pleaded in his Amended Defence the time bar defence by relying on the date of the occupation permit. In other words, D4 has only pleaded the limitation defence in paragraph 29(2) above, but not that in paragraph 29(1). It seemed to me that the court should not entertain an unpleaded limitation defence in a strike-out application.

(1) In Hong Kong Civil Procedure 2024, it is stated in Note 18/8/26 that “the Court will not entertain an application to strike out on the basis of expiry of the limitation period until limitation has been pleaded”, citing Ronex Properties Ltd v John Laing Construction Ltd [1983] QB 398 as authority for the proposition.

(2) Mr Yung accepted the correctness of the proposition. However, he submitted that the limitation defence mentioned in paragraph 29(1) above should be treated as part of D4’s general limitation defence and should thus be regarded as having been pleaded. I was unable to agree with this submission. D4’s limitation defence is pleaded at paragraph 36 of D4’s Amended Defence. On the face of that paragraph, I considered it quite clear that the only limitation defence pleaded by D4 was the one mentioned in paragraph 29(2) above: D4 has not pleaded that P’s claim first accrued in December 1996.

33.  Accordingly, I refused to strike out P’s claim against D4 on the ground of time bar.

F. DISPOSITION

34.  For the above reasons, I believed that the overall justice of the case would be for the case to proceed to trial. In the exercise of my discretion, I therefore allowed P’s appeal and dismissed D4’s application to strike out. I also set aside the Master’s orders made on 14 June 2024.

35.  As to costs, I indicated to the parties that in view of the inordinate and inexcusable delay on P’s part, as well as both parties’ conduct from 2018 to 2023, I was minded to make no order as to costs even though D4’s strike out application was dismissed and P succeeded in his appeal against the Master’s decision. A similar costs order was made by G Lam J in Tsang Foo Keung v Chu Ji Mi Jimmy (unreported, HCA 7140/1995, 12 July 2013) at §122. Having received no submissions to the contrary from the parties, I ordered that there be no order as to costs in P’s appeal and in D4’s strike out application. I also ordered that the own costs of P and D4 are to be taxed in accordance with the Legal Aid Regulations.

36.  Finally, counsel for P and D4 both agreed that the matter should proceed to trial as expeditiously as possible. In that connection, Mr Yuen gave an undertaking to the court to make an appointment with all the defendants to fix a date for the 6^th CMC within 14 days.

Mr Ross M Y Yuen, instructed by Messrs W K To & Co, for the plaintiff

Mr Isaac Yung, instructed by Messrs Tsang, Chan & Woo, for the 4^th defendant

HCA 92/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 92 OF 2007

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D E C I S I O N

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THE APPLICATION

1.  This is an application taken out by the Plaintiff (“P”), an executrix of the deceased, pursuant to O.38 RHC for the affirmations in the schedule attached to the summons to be read out at trial and adduced as hearsay evidence.  This application only concerns the following defendants (“Ds”): D4 and D5 respectively.  Each of them has submitted written submissions for opposition and the parties are legally represented.[1] However, D1 is present in person today.  He has submitted no written submissions to this Court for this hearing.  He would like to set aside the default judgment against him.  Since he is unable to deal with his application, he simply remains in court to watch.

Margin notes

2.  The margin of the summons has not set out the rules under which this application is taken out.  P should have set out clearly the relevant statutory provisions under which the application is taken out at the margin of the summons, so that the application is clear for all parties concerned, including this Court.  See White Book 2017 para 32/6/7.  It is time that the legal profession should pay attention to this practice.  Failing to do so will cause confusion and argument at the hearing as will be seen below.  Costs will be considered for such deficiency.

Order 38, rule 2

3.  Obviously, this application is made under O.38, r.2, RHC:

(1)  The Court may, at or before the trial of an action begun by writ, order that the affidavit of any witness may be read at the trial if in the circumstances of the case it thinks it reasonable so to order.

(2)  An order under paragraph (1) may be made on such terms as to the filing and giving of copies of the affidavits and as to the production of the deponents for cross-examination as the Court thinks fit but, subject to any such terms and to any subsequent order of the Court, the deponents shall not be subject to cross-examination and need not attend the trial for the purpose.

(3)  ......

The schedule to the summons

4.  The affirmations that P applies for leave to read out as set out in the schedule of the summons are:

Affirmation/letter of Patrick Hung

(a)  Affirmation dated 10 January 2007;

(b)  Letter to Leung (undated and unsigned);

(c)  Letter to Cosimo Borrelli dated 19 January 2007;

(d)  Letter to Chan (undated and unsigned);

(e)  Letter to Robert Siu & Co. (undated and unsigned);

(f)  Declaration dated 15 December 2006;

(g)  Affirmation dated 25 January 2008

Affirmation of other witnesses

(h)  Affirmation of 郭繼先dated 7 November 2007;

(i)  Affirmations of 賀賢敏 dated 8 June 2007 and 28 May 2007.

For clarification of the application

5.  Before this hearing, I have instructed my clerk to enquire with P’s solicitors as to the authority for reading out the letters and the Declaration in court under O.38, r.2 RHC.

6.  P’s counsel replied admitting that O.38, r.2 does not refer to the letters and the Declaration.  However, she referred to O.38, r.21 and section 48 of the Evidence Ordinance, Cap.8, which permits the court to make directions on hearsay evidence.  I suppose she referred to section 47 of the Evidence Ordinance.  She invited this Court to deal with the letters and the Declaration in this hearing.

7.  D4’s counsel replied that he would argue that the Court has no jurisdiction to deal with the letters and the Declaration under O.38, r.2.  But he said that he understood that P was relying upon Part III of O.38, which deals with hearsay evidence.  But he wanted P to demonstrate that this will be the case in court.

8.  D5’s counsel replied that he agreed that the Declaration could be treated as an affirmation which is defined as:

“An affidavit is a written document containing material and relevant facts or statements relating to the matters in question or issue and sworn or affirmed and signed by the deponent before a person or officer duly authorized to administer any oath or affirmation or take any affidavit.” [2]

He further submits that the letter can be dealt with under section 47 of the Evidence Ordinance, Cap.8 and that P can apply for the letters to be read out in court. [3]

9.  I accept that this Court has jurisdiction to deal with the hearsay evidence despite there being no marginal note on the relevant applicable Order and Rule in the summons.  See Premier Fashion Wears Ltd v Li Hing Chung [1994]1 HKC 213.  However, to admit the hearsay evidence under O.38, r.21 is quite different from the treatment of the evidence under O.38, r.2.  This can be seen at once where under O.38, r.2(2) the witness’s affidavit having been read out in court, the witness “shall not be subject to cross-examination and need not attend the trial for the purpose.”  There is no similar provision under O.38, r.21.

10.  P applies for leave to read out the affirmations and the letters and the Declaration in court at trial.  No reading out is necessary for O.38, r.21.  It will be inappropriate for this Court to make an order in terms as suggested by P in the summons for the letters.  For this purpose, I accept that the Declaration, as its context stands, is within the definition of affirmation as admitted by D5.

11.  For the present summons, as the defendants have no objection for it to be heard and that they are not taken by surprise, I shall deal with the hearsay evidence in relation to the letters here under O.38, r.21 RHC and s.47 of the Evidence Ordinance, Cap.8.

12.  Now, one can see the confusion caused by P in the application without clear marginal notes as which statutory provisions should be invoked under O.38 RHC and/or the Evidence Ordinance, Cap.8.

THE FACTUAL BACKGROUND

13.  The brief factual background, so far as this application is concerned and distilled from the written submissions of P and other defendants, is as follows:

(a)  The main dispute is between P and D4, both claiming to be entitled to the consultancy fee for the development of 4 plots of land, on which a building was built. The consultancy fee was for getting the owners of the lots to agree to the re development and to arrange the approval of the building re development plan by the Building Authority for the construction of the building.

(b)  The consultancy fee, as it stands now, is the two units of the building, namely, unit 36A and unit 36D (“the units”) currently held by D3, the project manager of the development.

(c)  At one stage, D4 entered into an agreement with D5 for the sale of unit 36D. However, the transaction has not been put through. This property and unit 36A are the subject matters of another High Court Action initiated by D4 against D2 and D3. A Tomlin Order was made for those properties to be sold and the proceeds to be shared among the parties. This Tomlin Order has not yet been carried out.

(d)  In this action, P claims full entitlement to the units. D4 also claims full entitlement to the units as well.

(e)  It is a matter of fact to be found by the court as to who is entitled to the units after trial.

(f)  As far as the other defendants are concerned, D1, a shareholder of D2, shows no interest in the argument as he has given no written submissions and default judgment had been entered against him; D2, an agent set up to receive the consultancy fee, was struck off the Register and dissolved on 23 March 2012; D3, the project manager of the building, is holding the units; D4 claims to be entitled to the units as his consultancy fee pursuant to an agreement with D3 and D5 is the purchaser of unit 36D.

DISCUSSION

The affirmations and Declaration

14.  I shall deal with the affirmations and the Declaration first as they can be read out under O.38, r.2, RHC.  Those affirmations and the Declaration are:

(a)  Affirmation dated 10 January 2007 of Patrick Hung

(b)  Affirmation dated 25 January 2008 of Patrick Hung

(c)  Affirmation dated 7 November 2007 of 郭繼先 and

(d)  Affirmations dated 8 June 2007 and 29 May 2007 of賀賢敏

(e)  Declaration dated 15 December 2006

15.  It is obvious that Patrick Hung’s affirmations and Declaration are crucial for P’s case and the other three affirmations are also relevant to P’s case.  None of the defendants says otherwise.

16.  D4 admits that Hung Hing Yu, the original P had passed away and it is impossible to call him to be cross-examined.  D4 asks this Court “to consider the following reasons in deciding the issue of admissibility of the deceased plaintiff’s affirmations and declaration and the weight to be placed on such evidence.”

The relevant legal principles

17.  O.38, r.2 RHC.  See paragraph 3.

18.  The parties rely upon the following authorities for this application:

(a)  High Fashion Garments Co Ltd v Ng Siu Tong &Ors [2004] 1 HKLRD 928;

(b)  Cheung Wei Man Vivien &Anor. v Centaline Property Agency Ltd &Ors [2004] 1 HKC 692.

19.  In High Fashion, the court held:

(a)  Under O.38, r.2, the court, in making an order for the affirmation to be read out in court, must take into account the legitimate interest of the defendant in cross-examining the witness [931F]

(b)  Such right of cross-examination will not be by-passed by section 47 of the Evidence Ordinance as O.38, r.21(2) RHC provides power to the court to direct attendance of the witness for cross-examination [932I &933F];

(c)  Each case must depend on its own facts and circumstances. The court was not suggesting that in each case the attendance of the witness must be secured. It depends on the circumstances of the case. [933B]

20.  In Cheung Wei Man Vivien, the court held:

(a)  For an affirmation to be relied on at trial, the proper course is to take out an application under O.38, r.2 RHC for directions before the case is set down for trial [6].

(b)  It is not practicable to make such an order where the evidence will be strongly contested and its credibility depends on the court’s view of the witness.[6] However, the court did not say that it is not permissible to do so. The court will take all circumstances into consideration, in particular, s.47 of the Evidence Ordinance, Cap.8.

(c)  Under s.47(1) of the Evidence Ordinance, the court must exclude hearsay evidence if it is satisfied, having regard to the circumstances of the case, that the exclusion of the evidence is not prejudicial to the interests of justice. The factors under s.49 of the Evidence Ordinance are relevant.[12]

21.  I bear in mind that the above cases were decided by the CFI judge, supposedly the trial judge of the matters.  In High Fashion, DHCJ Lam (as he then was) stated that he was the trial judge of the matter.  See 564F.

22.  There is no dispute that it is within my discretion under O.38, r.2 and O.38, r.21 RHC to deal with this application.  Ultimately, it is the judge who tries the matter will have the final decision as to the weight to be given to the evidence even if it is admissible.  In my view, when a Master has, at the pre-trial stage, to determine whether the affirmation may be read out in court or admissible in evidence at trial, he or she will exercise the discretion in the manner analogous to expert evidence, relying upon the authority Wong Hoi Fung v American International Assurance Company (Bermuda) Limited & Shrila Chan [2002] 3 HKLRD 507 at §11:

“... ...Where the proposed expert evidence is plainly inadmissible or irrelevant, the court ought to exercise its discretion to refuse the admission of such evidence. But where the court cannot form a clear view on the relevance of the proposed expert evidence or where it considers that the proposed evidence is clearly relevant, then it should grant leave for the evidence to be adduced at the trial : Ko Chi Keung v. Lee Ping Yan Andrew (supra), at p.67 and Annabell Kin Yee Lee & Others v. Lee Wing Kim (May Lee) & Anor (supra), at p.15.”

23.  The Court will, of course, take into consideration section 47 of the Evidence Ordinance, Cap.8.

24.  Counsel for the defendants agree that the above approach should be adopted.

25.  Those reasons set out in the written submissions by D4 on the admissibility and weight of the evidence should be considered by the trial judge in the assessment of the evidence.  I shall now deal with the affirmations.

Mr. Hung’s affirmations and Declaration

26.  As to the late Mr. Hung’s affirmations, they are clearly relevant.  The defendants have raised no objection on relevancy.  In fact, D5 has no objection to these affirmations to be read out in court.  As Mr. Hung has passed away, it is simply not possible to cross-examine him on his affirmations.  To exclude his evidence is obviously in contravention with s.47 of the Evidence Ordinance, Cap. 8.  I shall give leave for his affirmations and Declaration to be read out in court at trial.

27.  D4 intends to rely on the safeguards under Section 48 of the Evidence Ordinance to call additional evidence including but not limited to the ICAC statements to test the reliability of the Plaintiff’s hearsay evidence.  I see no objection for leave to be granted to D4 as requested.  I so order.

Mr. Ho’s affirmations

28.  As to the two affirmations dated 8 June 2007 and 29 May 2007 of賀賢敏 (“Mr. Ho”), D4 strongly opposes reading out these two affirmations and declaration as they contain serious allegations against him unless the affirmant attends court for cross-examination.  He further submits that no sufficient effort has been put on locating this witness.  Today, Mr. Ho has appeared before this Court.  He told me that he was not aware of the default judgment and he would apply to set aside it.  He understands that today’s hearing will not deal with his application.  Therefore, he would only sit in court to hear the arguments between the plaintiff and the other defendants.  D5 holds similar grounds for his objection.  He says that this witness should be subject to heavy cross-examination in view of the inconsistencies in his affirmations and the statement he had given to the ICAC.

29.  Both D4 and D5 ask this Court to impose a condition that the witness should attend court for cross-examination if his affirmations are allowed to be read out in court.

30.  Having balanced the prejudice to P if this witness’s two affirmations were not allowed to be read out at trial and the prejudice that may be caused to D4 and D5 if his affirmations were read out without attending court for cross-examination, I consider that this witness’s evidence is corroborative of Patrick Hung’s evidence.  Their purpose is to strengthen P’s case.  I order that these affirmations can only be allowed to be read out upon the condition that this witness attends court for cross-examination.

Mr. Kwok’s affirmation

31.  As to the affirmation of 郭繼先dated 7 November 2007, similar grounds are levied against his affirmation to be read in court. For the same reasons as for the two affirmations of Mr. Ho, I make the same order of allowing this affirmation to be read out subject to the condition that the witness shall attend court for cross-examination.

The letters

32.  As to the letters, their admissibility is determined under s.47 of the Evidence Ordinance[4] and O.38, r.21 of RHC.

33.  O.38, r.21 of RHC provides as follows:

(1)  Where a party tenders as hearsay evidence a statement made by a person but does not propose to call the person who made the statement to give evidence, the Court may, on application-

(a)  allow another party to call and cross-examine the person who made the statement on its contents;

(b)  allow any party to call-

(i)   additional evidence to attack or support the reliability of the statement;

(ii)  additional evidence to attack or support that first-mentioned additional evidence.

(2)  Where the Court allows another party to call and cross-examine the person who made the statement, it may give such directions as it thinks fit to secure the attendance of that person and as to the procedure to be followed.

34.  The letter to Mr. Leung and the letter to Mr. Chan are undated and unsigned.  There is no evidence that these letters were prepared by the late Mr. Hung.  Nor is there any evidence to show that the letters were sent to Mr. Leung and Mr. Chan.  As such, there is no evidence to establish that these letters are hearsay evidence.  They are inadmissible as evidence.

35.  The letter to Cosimo Borrelli dated 19 January 2007 and the letter to Messrs. Robert Siu were signed by the late Mr. Hung.  In the first letter, there is a date on which the letter was faxed to the recipient.  D4 admits that the evidence would have great impact on the result of the case as he said they “contained very serious allegations against the 4^th Defendant which could have significant impact on the case...”[5]  To exclude them would obviously prejudice P’s case. Pursuant to s.47 of the Evidence Ordinance, they should be admissible, subject to the weight to be given by the trial judge.  The question as to what weight should be accorded to these letters is a matter for the trial judge.  D4 may raise those questions and inconsistencies between the letters and other evidence as set out in the written submissions before the trial judge. P, D4 and D5 are at liberty to call Mr. Cosimo Borrelli and Mr. Robert Siu or the handling solicitor of this case or either of them to give witness statement or to issue subpoenas to secure their attendance in court at trial in relation to those letters.

COSTS AND ORDER

36.  As to the costs of this application, each party asks for costs of this application, with certificate for counsel.  Under O.62, r.3 RHC, the costs should follow the event.  P has not won all the arguments for the application and the affirmations allowed are subject to condition, which P has argued against and lost.  In the circumstances, I consider that it is fair for the costs of this application (with certificate of counsel) to be in the cause, treating this as a summons for directions and so I order.

37.  I shall make an order in terms as follows:

(a)  Mr. Hung’s affirmations and Declaration be read out in court at trial subject to the right of D4 of calling additional evidence including but not limited to the above-mentioned ICAC statements to test the reliability of the P’s hearsay evidence ;

(b)  Mr. Kwok’s affirmation be read out in court at trial provided that Mr. Kwok shall attend court for cross-examination on his affirmation;

(c)  Mr. Ho’s affirmations be read out in court at trial provided that Mr. Ho shall attend court for cross-examination on his affirmations.

(d)  The letters respectively to Mr. Leung and Mr. Chan, both undated and unsigned, are not admissible;

(e)  The letters to Cosimo Borrelli dated 19 January 2007 be admissible as hearsay evidence subject to the conditions as stated in paragraph 35 above;

(f)  The letter to Messrs. Robert Siu be admissible as hearsay evidence subject to the conditions as stated in paragraph 35 above;

(g)  Costs of this application, including the costs for the hearing today be as per paragraph 36 above.

CASE MANAGEMENT

(h)  The costs of Case Management Conference today be in the cause (30 min);

(i)  The matter is adjourned to 11:30 am on 5 July 2017 for 4^th Case Management Conference

(j)  Liberty to apply.

HCA92/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 92 OF 2007

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BETWEEN

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Before : Hon Suffiad J in Chambers

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R U L I N G

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1.     This is an application by the 2^nd and 4^th defendants to strike out the plaintiff’s claim against them respectively.

2.     The grounds relied on by the 2^nd defendant are firstly, that there is no reasonable cause of action against the 2^nd defendant, and, secondly the plaintiff’s claim is frivolous and vexatious.

3.     The 4^th defendant is content to rely only on the ground that there is no reasonable cause of action against him.

Plaintiff’s pleaded case

4.     The pleaded case of the plaintiff can be summarized as follows.

5.     Sometime in 1986, the plaintiff approached the 1^st defendant to explore the possibility of redeveloping Nos. 1, 2 and 3 Leung Fai Terrace together with No. 46 Caine Road in a joint redevelopment.

6.     No. 1 Leung Fai Terrace was, at the time controlled by the Chan family.

7.     No. 2 Leung Fai Terrace was owned by the plaintiff’s family, specifically three uncles of the plaintiff and the estate of the plaintiff’s deceased father.

8.     No. 3 Leung Fai Terrace was owned by the 3^rd defendant, a wholly owned subsidiary of the Chow Tai Fook Enterprises Ltd which was the major shareholder of the New World Development Co. Ltd.

9.     No. 46 Caine Road was controlled by the Leung family.

10.     The 1^st defendant (who was brought in primarily as a financier for the intended redevelopment) agreed to the plaintiff’s proposal, assigned the 4^th defendant to assist the plaintiff in the preliminary work and provided funds and office support.  Such preliminary work continued up to 1990 and 1991.

11.     It was planned for the Chow Tai Fook group to act as developer for the redevelopment and that each of the respective owners or families to have a share of the units in the planned redevelopment.  The redevelopment was considered to be viable only if all four individual plots of land were amalgamated into one building lot to be redeveloped.

12.     In 1991 the plaintiff agreed with the 1^st defendant to obtain and secure the agreement of the respective owners of the four plots of land to a joint redevelopment of same.  It was also agreed between the plaintiff and the 1^st defendant that they would seek a consultancy fee for all the preliminary work done and to be done up to the signing of the joint venture agreement for the redevelopment.  The plaintiff would secure the agreement of the respective owners and the consultancy fee would be split one third to the plaintiff and two thirds to the 1^st defendant.  Such agreement between the plaintiff and the 1^st defendant was known to the 4^th defendant.  (See paragraph 6 of Statement of Claim.)

13.     It was also agreed between the plaintiff and the 1^st defendant (acting on behalf of himself and the 2^nd defendant) that the 1^st defendant would receive the entitlement on behalf of the 2^nd defendant, the 1^st defendant being the director and major shareholder of the 2^nd defendant.  (See paragraph 7 of Statement of Claim.)

14.     Through the efforts of the plaintiff and pursuant to the 1991 agreement between the plaintiff and 1^st defendant, by letter dated 9 July 1991, the 3^rd defendant (as the developer) appointed the 2^nd defendant to act as consultant to negotiate with the other respective owners in the proposed redevelopment and to procure the approval of the Building Authority for the construction of a new building on the Land with not less than 101,000 square feet total floor area.  The 2^nd defendant was to receive 5,000 square feet of the buildable floor area of the new building as consultant fee.  (See paragraph 8 of Statement of Claim.)

15.     Thereafter, the plaintiff obtained the agreement of the respective owners for the redevelopment.  The 1^st and 2^nd defendants obtained the approval of the owners for the proposed building and a Joint Development Agreement was entered into by all the respective owners on 7 December 1992.

16.     It was therefore the common intention between the plaintiff and the 1^st and 2^nd defendants that the 2^nd defendant was to hold one third of the consultancy fee on trust for the plaintiff.

17.     The Joint Development Agreement provided for the 3^rd defendant to act as the developer to demolish the existing building on the Land and to erect a new building with the parties thereto being entitled to certain units in the new building when completed.

18.     Pursuant thereto the existing buildings were demolished and a new building named Scenic Rise was erected on the Land.

19.     In 1994, the 1^st and 2^nd defendants agreed with the 3^rd defendant that the consultancy fee was to be satisfied by:

(a)  the 3^rd defendant paying the 2^nd defendant $12,543,440 partly in cash and partly to discharge a mortgage loan of another property mortgaged to Chow Tai Fook Jewellery Co. Ltd, such sum to represent 3,583.84 square feet of the consultancy fee;

(b)  the 3^rd defendant assigning to the 2^nd defendant Flats A and B on the 36^th floor of Scenic Rise when completed, representing 1,416.16 of the consultancy fee.

20.     Subsequently it was further agreed between the 1^st, 2^nd and 3^rd defendants that Flat D on the 36^th floor be substituted instead for Flat B as being partial satisfaction of the consultancy fee.

21.     It is therefore the plaintiff’s case that since the 1^st and 2^nd defendants having received and applied their share of the consultancy fee (in the form of the $12,543,440 partly in cash and partly to discharge the mortgage loan as pleaded), any and all the interest that the 2^nd defendant had in Flats A and D on the 36^th floor of Scenic Rise (hereinafter referred to as “Flats A and D”) was held on trust for the plaintiff.

22.     Scenic Rise was completed in early 1999 and the occupation permit was issued on 24 March 1999.

23.     It is also the pleaded case of the plaintiff that in March 1999 the present 4^th defendant had issued a Writ in HCA 3890 of 1999 against inter alia the present 1^st and 3^rd defendants alleging that the present 2^nd defendantwas a mere agent of the present 4^th defendant in relation to the consultancy fee and held the benefit of same on trust for the present 4^th defendant.

24.     After the proceedings in HCA 3890 of 1999 were issued, the plaintiff was assured by the present 1^st and 2^nd defendants (acting through the 1^st defendant) as well as the present 4^th defendant that notwithstanding the allegations in that action, once that dispute between them had been resolved, the plaintiff would receive his share of the consultancy fee.

25.     Unknown to the plaintiff until towards the end of 2006, the parties in HCA 3890 of 1999 had settled the action in March 2006 by a Tomlin Order whereby Flats A and D were to be sold and the proceeds divided between them.  That agreement excluded or did not take account of the plaintiff’s interests in the consultancy fee.

26.     In those circumstances, the 1^st and 2^nd defendants were in breach of trust against the plaintiff.  The 4^th defendant is also accountable to the plaintiff as a constructive trustee.

27.     The reliefs claimed by the plaintiff is for :

(a)   a declaration that the 1^st and 2^nd defendants hold all their interests in Flats A and D on trust for the plaintiff;

(b)   a declaration that the 4^th defendant has no interests in Flats A and D;

(c)   an order that the 1^st and 2^nd defendants procure an assignment of Flats A and D to the plaintiff or his order.

Present status of Flats A and D

28.     It is common ground between the parties that at all times the 3^rd defendant was and still is still the registered owner of Flats A and D. 

29.     While the stance of the 3^rd defendant is that it is prepared to assign Flats A and D to whoever may be entitled to them, the 3^rd defendant claims to have a lien upon Flats A and D in respect of construction costs relating to both units and that such construction costs will have to be paid over to the 3^rd defendant before the 3^rd defendant is prepared to assign over Flats A and D to whoever may be entitled to them upon the resolution of the dispute as to consultancy fee between the plaintiff, the 1^st , 2^nd and 4^th defendants.

Striking out contention — no reasonable cause of action

30.     A number of points have been taken by the 2^nd and 4^th defendants in their submissions that the plaintiff has no reasonable cause of action against them.

31.     Firstly, that the type of trust has not been specified by the plaintiff in his pleadings.

32.     Secondly, that the only possible basis for the plaintiff’s claim is the 1991 agreement between the plaintiff and the 1^st defendant contained in paragraph 6 of the Statement of Claim.

33.     That 1991 agreement as pleaded was for consultancy fee at a future date.  That agreement contemplated only a money payment as the consultancy fee, at a time when Flats A and D did not even exist.  Such consultancy fee agreed between the plaintiff and the 1^st defendant was therefore a mere expectancy on their part and incapable of forming the subject of a trust, a fortiori, a trust of Flats A and D.

34.     Thirdly, it was submitted that not only was the plaintiff not a party to the agreement arrived at in July 1991 between the 2^nd and 3^rd defendants whereby the 2^nd defendant was appointed a consultant, and the 3^rd defendant, as the developer, would pay a consultancy fee to the 2^nd defendant.  Furthermore, that agreement (as per the letter dated 9 July 1991) contemplated that the consultancy fee would be ‘equivalent’ to 5,000 square feet of the buildable floor area of the new building.  Even then, the manner in which the consultancy fee was to be paid was to be in money terms, and not by way of property.

35.     Moreover, when the actual agreement was reached between the 2^nd and 3^rd defendants in 1994 as to how the consultancy fee was to be satisfied, partly in cash and partly by Flats A and B (later changed to Flat D instead of B) on the 36^th floor of the new building, once again, the plaintiff was not a party to such agreement.

36.     In the circumstances, it was submitted that the consultancy fee contemplated in the agreement between the 2^nd and 3^rd defendants was different from that originally contemplated between the plaintiff and the 1^st defendant and different scope of work was to be covered.

37.     It was also submitted that the arithmetic approach used by the plaintiff in reaching his one-third share of the consultancy fee is flawed in that Flats A and D represent less than the one-third of the consultancy fee which the plaintiff now claims to be entitled to.

38.     Fourthly, it was submitted that no declaration of trust over Flats A and D have been pleaded.  Flats A and D have at all times been registered in the name of the 3^rd defendant.  In those circumstances, the plaintiff cannot have a claim against either the 2^nd or 4^th defendants on the basis that they hold Flats A and D on trust for the plaintiff.  In this respect, it was also submitted that even if the 2^nd and 4^th defendants have a beneficial interest over Flats A and D, that beneficial interest cannot be the subject of a trust in favour of the plaintiff.  Therefore the plaintiff’s claim is bad.

39.     Lastly, it was submitted that at best the plaintiff, on his pleadings, will only be entitled to claim for a monetary debt in contract, being his one third share of the consultancy fee agreed between the plaintiff and the 1^st defendant but that such a claim cannot succeed because the limitation period of 6 years in respect of contract have run out when this writ was issued by the plaintiff.  It was because of this difficulty suffered by the plaintiff that he has brought this claim on the basis of a trust to overcome the difficulty with the limitation period.

Frivolous and Vexatious

40.     It was further contended by the 2^nd defendant alone that the plaintiff’s claim lacks bona fides, and that the ulterior motive of the plaintiff in bringing this claim is to prevent the sale of Flats A and D.

41. In that respect it is said that the claim was frivolous and vexatious.

Decision

42.     In a striking out application, particularly where it is alleged that there is no reasonable cause of action, the courts look at the pleaded case of the plaintiff, and where there are disputed facts, such disputed facts are taken in favour of the party sought to be struck out.

43.     It cannot be disputed that on the pleaded case of the plaintiff, the plaintiff’s claim was based on the 1991 agreement between the plaintiff and the 1^st defendant whereby they agreed to share the consultancy fee between them one third to the plaintiff and two thirds to the 1^st defendant.

44.     However, it is also the pleaded case of the plaintiff that the 2^nd defendant was brought into this re-development project as the nominee or agent of the 1^st defendant.  Likewise the 4^th defendant was assigned by the 1^st defendant to carry out the preliminary and or preparatory work.

45.     In those circumstances, when after the 3^rd defendant, as the developer, agreed with the 2^nd defendant to pay to the 2^nd defendant the consultancy fee, it would follow that on the pleaded case of the plaintiff, the 2^nd defendant was receiving the consultancy fee on behalf of the plaintiff and the 1^st defendant as nominee.  To that extent, the case of the plaintiff is that the 2^nd defendant holds the consultancy fee, or at least the plaintiff’s share of it, on trust for the plaintiff.

46.     Therefore, although the plaintiff was not a party to the agreement between the 2^nd and 3^rd defendant as to the manner in which the consultancy fee was to be paid, that matters not the least in so far as the plaintiff’s claim is concerned.  It remains the plaintiff’s case that whatever consultancy fee was paid over to or was received by the 2^nd defendant, that would be held by the 2^nd defendant as a nominee on trust for the plaintiff and the 1^st defendant.

47.     It would appear therefore that the plaintiff is relying on a constructive trust albeit such has not been expressly pleaded by the plaintiff in his pleadings.  The failure to plead a constructive trust is not fatal to the plaintiff’s claim as long as all the relevant facts giving rise to same has been pleaded and relied upon by the plaintiff.

48.     As for the submission on the point of law that a mere beneficial entitlement cannot be held on trust for another, that is not a good point of law and is clearly refuted by footnote 8 to paragraph 19-02 in Snell’s Principles of Equity which states:

“It is not always the case that the trustee has the legal interest in the property.  The interest of the trustee may be (and often is) equitable only, as where a beneficiary under a settlement makes a settlement of his interest while the legal ownership is still in the hands of the trustees of the former settlement, or for some other reason the legal estate is outstanding.  See e.g.  Gilbert v Overton (1864) 2 H&M 110”.

49.     The fact that the registered owner of Flats A and D has at all times been the 3^rd defendant can have no adverse impact on the plaintiff’s claim.  Indeed it must be for this reason that the 3^rd defendant is a party to the action since no actual or substantive relief is claimed against the 3^rd defendant by the plaintiff.  The 3^rd defendant is a necessary and proper party to the plaintiff’s claim since the legal estate of Flats A and D is vested in the 3^rd defendant.

50.     As for the fact that the 2^nd and 4^th defendants do not and never did have the legal title to Flats A and D, that does not prevent the plaintiff from claiming against them in the way that the plaintiff has.  What the plaintiff is claiming against the 2^nd and 4^th defendants is their interest or their claimed interests in Flats A and D.  It is therefore quite wrong for the 2^nd and 4^th defendants to base their submission upon the plaintiff’s claim being founded on the 2^nd and/or the 4^th defendants holding Flats A and D on trust for the plaintiff.

51.     In the case of the 2^nd defendant its interest in Flats A and D arises from the agreement between the 2^nd and 3^rd defendant for the consultancy fee to be paid over to the 2^nd defendant in the way such consultancy fee has been calculated. 

52.     In the case of the 4^th defendant his interest in Flats A and D arises from his claim to the consultancy fee or that part of it as represented by Flats A and D under the Tomlin Order in HCA 3890 of 1999.

53.     In so far as the submission that the arithmetic approach adopted by the plaintiff being flawed in that Flats A and D together represent less than one third of the total consultancy fee, that is really a matter of assessment and apportionment at the end of the day.  It does not affect the plaintiff having a reasonable cause of action.

54.     Likewise, the fact that the 3^rd defendant has claimed a lien on Flats A and D in respect of construction costs relating to those units, that is a matter for the 3^rd defendant to raise either by way of defence or by way of a counterclaim.  It cannot affect the plaintiff having a reasonable cause of action.

55.     The submission that the consultancy fee agreed between the plaintiff and the 1^st defendant is different from the consultancy fee agreed between the 2^nd and 3^rd defendants, that is not the case of the plaintiff and that point can only be taken to be disputed fact in so far as the plaintiff’s case goes.  As such it has to be taken in favour of the plaintiff in a striking out application.

56.     It is only in clear cases that an action will be struck out as having no reasonable cause of action.  This is far from such a clear case.

57.     For the reasons given above, I have come to the conclusion that the striking out application on the first ground must be refused.  The plaintiff has shown that he has a reasonable cause of action against both the 2^nd and 4^th defendants.

58.     Having ruled that the plaintiff has a reasonable cause of action in the matter, the second limb taken in the application by the 2^nd defendant that the claim is frivolous or vexatious cannot stand on its own.

59.     I shall now hear the parties on costs.

Mr Robert Y.H. Pang , instructed by Messrs Tang, Leung, Li & Tsang, for the Plaintiff

Mr Brian C.W. Wong, instructed by Messrs Lovells, for the 2^nd defendant

Mr Kevin Hon, instructed by Messrs Robert Siu & Co., for the 4^th defendant