SZETO YUK LIN v. TSANG CHIU MO SAMUEL AND OTHERS

HCA 2392/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2392 OF 2008

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(by Original Action)

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(by Counterclaim)

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D E C I S I O N

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1.  Here are my brief reasons. There are two parts to the summons before me today. The first part relates to the defendants’ insistence on the plaintiff answering certain requests as ordered by me on 17 September 2014. The second part is a request for the plaintiff to answer a new request. So it is an application for the plaintiff to answer a new request arising from her previous answers.

2.  The first part of the application concerns paragraphs 3(2), 10(1) and (2) and 11(1)(b) of the reply.

3.  Mr Chain, counsel for the defendants, has produced a very useful summary of the pleas in the reply, the previous requests and the previous answers.  I will adopt this table as the basis for dealing with the first part of the application.

Paragraph 3(2) of the reply

4.  The first part of the answer to a request effectively uses the same plea in the reply to answer the request.  The plaintiff is simply repeating that she is the beneficial owner of all the shares in CSFL without giving particulars and it does not carry her case any further. 

5.  The discussion between the Bench and Mr Chong this afternoon shows the confusion that can arise if particulars are not given.  Beneficial ownership is not just legal jargon but a proper legal term that bears meaning and gives rights to a party.  It is not clear if the plaintiff is saying that she is beneficial owner of the money, ie $150 million, or beneficial owner of the shares in the company.  She should answer the request for particulars.

6.  The second part to the answer is that the plaintiff explains that the money, $150 million, came from the plaintiff’s own or controlled accounts.

7.  Having considered the plaintiff’s answers, I do not think it is appropriate to press the plaintiff further for particulars.  She, on the face of her present answers, has stated her inability to give particulars.  If she chooses to leave such a vague set of answers which does not improve her case much further, I consider that it is, at the end of the day, a matter for the court to draw inferences having considered all the evidence at the trial.

8.  Further, as to whether the $50 million was included in the $150 million, again the plaintiff has stated that she is unable to give particulars.  For the same reason, I shall not press on for her to provide a further answer.

9.  In respect of paragraph 3(2) of the reply, I shall insist on the plaintiff answering the request in paragraph 3(2) which is to state precisely the plaintiff’s case on the nature of the alleged objection of $150 million into CSFL (whether it was a loan, a gift, a subscription to shares or otherwise).

10.  The plaintiff’s plea in the reply has been going round in circles.  I repeat the observations I have made in paragraphs 17 to 20 of my decision on 17 September 2014.  I consider that if the plaintiff does not provide the answer the plea ought to be struck out.

Paragraph 10(1) and (2) of the reply

11.  The answer she now gives is simply inconsistent with the previous answers she has given.  She previously said that there was an agreement between the plaintiff and the 1^st and 2^nd defendants acting on behalf of Lisco.  Now she completely contradicts herself by saying that the agreement was not contractual in nature, but denoted some kind of arrangement between her and the two defendants on the affairs of the Lisco as beneficial owner and trustees.

12.  She even says that she has not made inquiry as to whether or not the 1^st and 2^nd defendants have obtained authority from the board of the Lisco to proceed with the bid.  Given this sort of answer, I do not consider it meaningful to press on further with the plaintiff answering the requests.  In my view, ultimately it is a matter for the court to draw inferences, having considered all the evidence at the trial.

Paragraph 11(1)(b) of the reply

13.  This concerns the purchase of shares in CLL and holding of those shares on trust for the plaintiff.  The previous answer was that the shares were purchased by two employees, Samuel and Simon, using funds provided by the plaintiff.  The plaintiff further says that the funds came from her own or controlled accounts without identifying that.

14.  The plaintiff, in her answer, further stated that she does not have possession of the documents relating to the acquisition of shares in and of CLL and is unable to give particulars as to the dates, amounts, mode of payments and identity of payees.  Given this answer, once again, I do not consider it meaningful to press the plaintiff on with a further answer.

The new request

15.  Judging from the new request, the defendants are entitled to know the plaintiff’s particulars in order to better prepare the case.  What counsel has told me at the Bar table in purported answer to this request, clearly demonstrates that it was justified for the defendants to seek the particulars, and I so order.

16.  Insofar as paragraph 1 of the summons is concerned, I do give an unless order.  I will hear counsel as to the time.  I believe that if the plaintiff does not give the request concerning the basis of the beneficial ownership in paragraph 3(2) of the reply, then the plaintiff’s reply, insofar as this paragraph is concerned, should be struck out.

17.  As to the rest of paragraph 10(1)(2), 11(1)(b), as the plaintiff has tried to answer those particulars, I believe it would be too draconian for the court to strike out those few paragraphs at this stage.

18.  Paragraph 2 of the summons, I will grant an order for the plaintiff to provide the particulars.  I will also hear counsel as to the time.

Order

19.  Unless by 4 pm on 15 December 2014 the plaintiff do provide full particulars to those ordered on 7 December in respect of paragraph 3(2) of the plaintiff’s reply filed on 12 March 2009, paragraph 3(2) of the reply be struck out.  The plaintiff do provide particulars by 4 pm on 15 December 2014.

20.  Costs reserved on the summons.

(Submission on the plaintiff’s request for further and better particulars of the defence under requests 3 and 4)

21.  I will refuse the request:

(1)  the request did not arise out of anything unclear from the defendants’ pleadings.

(2)  I agree with Mr Chain that this is an attempt to ask the defendants to build a case for the plaintiff.  The scope of the request is so wide that any type of payments into CSFL will be covered by the request and this is not the purpose to be served by a request for further and better particulars.  So I exempt the defendants from having to answer requests 3 and 4.

22.  I make an order that the defendants are to provide further and better particulars to the plaintiff’s request dated 4 November 2014 except for requests 3 and 4.  Such further and better particulars are to be provided within 21 days.

HCA 2392/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2392 OF 2008

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D E C I S I O N

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1.  There are 3 applications before me:

A. An application for further and better particulars of the reply;

B. An application for further and better particulars of the answers to the request for further and better particulars of the reply;

C. An application to strike out a paragraph in the reply.

BACKGROUND

2.  The plaintiff by original action is the mother of the defendants (“Samuel”, “Simon” and “Sylvia” respectively). She seeks specific performance of an alleged agreement made on 28 July 2006 (“the Agreement”) in which the defendants agreed to transfer 4 categories of assets to her:

Category 1: Shares in China Sky Finance Ltd (CSFL);

Category 2: 43.36% shares in Century Legend (Holdings) Ltd (“the Listco”) held by companies called Barsmark and ST(79);

Category 3: 3 properties in Macau (“the Macau Properties”);

Category 4: Kwan Fat Shopping Arcade in Macau which is owned by SEL Properties (Macau) Ltd (“SEL”).

3.  The Agreement was said to have been evidenced by a set of Minutes signed by the plaintiff and the defendants.  The plaintiff says that by the Minutes, the defendants have admitted that they were holding the 4 categories of assets either through themselves or companies controlled by them, on trust for the benefit of the plaintiff. 

4.  The defendants deny there was such an agreement, or that there was consideration for the agreement or that there was intention between the parties to enter into legal relations (“the 3 defences”).  They also deny the correctness of the Minutes or their binding effect.

5.  In respect of Category 1 asset, the defendants’ case is that the plaintiff made a gift of $50 million to Samuel, who used it to commence the business of CSFL; and that the plaintiff was not the beneficial ownership of the shares in CSFL.  The gift was denied by the plaintiff in her reply.  The plaintiff further claims that all capital injections into CSFL, whether through Samuel or otherwise, belonged to her beneficially.

6.  In respect of Category 2 asset, the defendants’ case is that the transfer of shares from Barsmark to ST(79) was a private matter among the defendants.  In her reply, the plaintiff pleaded that Century Legend Ltd (“CLL”) held a substantial amount of shares in Listco.  Those shares were held on trust for her: as to 45% by 2 of her employees, and as to 5% by each of Samuel and Simon. Allegedly at Samuel’s request, the plaintiff agreed to let the defendants hold her interests in Listco for her.  She transferred HK$9 million to each defendant to enable them to “rearrange” the shareholding structure in Listco on her behalf. 

7.  In paragraph 11(6) to (9) of the Reply, the plaintiff pleaded the “rearrangement” wherebyCLL sold the entire equity interest (42.05%) in Listco to Barsmark.  In October 2003, Barsmark further acquired all the issued shares in the Listco through a cash offer. The total consideration required by Barsmark in the “rearrangement” of shareholding in Listco was HK$13.72 million. After the re-arrangement, the defendants refunded a total of HK$12.98 million to the plaintiff.

8.  The defendants deny the rearrangement but admit paying the plaintiff HK$12.98 million.

9.  In respect of Category 3 assets, the defendants’ case is that they had paid for the assets.  The plaintiff’s reply was that these assets were transferred to the defendants to hold on trust for the plaintiff and they agreed to re-transfer to the plaintiff after the expiry of 7 years from their applications for immigration to Macau.

10.  In respect of Category 4 asset, the defence was that the defendants had paid for it.

11.  As for the Agreement, the defendants pleaded, amongst others, that they had caused SEL to borrow from Onshine Credits, supported by Samuel’s guarantee, to help the plaintiff pay off her heavy gambling debts.  When the defendants refused to give further assistance,  the plaintiff was upset and began to make unfounded claims that all properties belonged to her.  In January 2008, Samuel caused SEL to borrow another HK$10 million from Onshine Credits (which the plaintiff admitted) and lent it to the plaintiff.  In 2002, Szeto Estates Ltd and CSIL entered into an Option Agreement.  It is the defendants’ case that they agreed to consider the plaintiff’s request for transfer of all the shares in SEL and the Macau Properties to her by way of gifts subject to certain conditions, in particular, the discharge of Samuel’s guarantee to Onshine Credits.

12.  In reply, the plaintiff pleaded that she asked the defendants to arrange payment for her gambling debts from the properties beneficially owned by her. She admitted that Samuel arranged for SEL to borrow a total of HK$300 million from Onshine Credits, supported by her and Samuel’s guarantee.  She denied that the whole sum was used to pay off her gambling debts.  She said that Samuel suggested an asset protection scheme to her and she was asked to sign the Option Agreement.

THE LEGAL PRINCIPLES

13.  Under Order 18, rule 8(1) of the Rules of the High Court:

“A party must in any pleading subsequent to a statement of claim plead specifically any matter, for example, performance, release, any relevant statute of limitation, fraud or any fact showing illegality-

(a) which he alleges makes any claim or defence of the opposite party not maintainable; or

(b) which, if not specifically pleaded, might take the opposite party by surprise; or

(c) which raises issues of fact not arising out of the preceding pleading.”

14.  Under Order 18, rule 12(1) of the Rules of the High Court:

“Subject to paragraph (2) [irrelevant for present purposes], every pleading must contain the necessary particulars of any claim, defence or other matter pleaded …”

15.  Under Order 18, rule 12(3):

“The Court may order a party to serve on any other party particulars of any claim, defence or other matter stated in his pleading, … or a statement of the nature of the case on which he relies, and the order may be made on such terms as the Court thinks just.” (emphasis added)

16.  Under Order 18, rule 12(3B),

“No order shall be made under paragraph (3) unless the Court is of the opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs.”

SOME PRELIMINARY OBSERVATIONS ON THE PLAINTIFF’S PLEADINGS

17.  The plaintiff’s amended statement of claim (“ASOC”) and reply are, without disrespect, convoluted pleadings, although I hasten to add that Mr Chong and Ms Wong are not responsible for them.  Paragraphs 8, 12, 16 and 20 of the ASOC are quite embarrassing in that they are based on what the plaintiff describes as her “contentions” that she was beneficial owner of assets, and not that she was the beneficial owner of them. 

18.  In purported reply to the defendants’ case that there was no Agreement as she alleges and that she has no beneficial interest in any of the 4 categories of assets, she pleads in paragraph 3(2) of her reply that she was the “beneficial owner” of the CSFL shares.

19.  In my view, those were half hearted pleas of trust.

20.  Master Ho and Chung J (on appeal) have rejected the application to amend the statement of claim to introduce pleas of resulting trust for lack of particulars.  Master Ho has aptly pointed out that this case involved numerous fund and share flows in relation to the companies and properties in question. Some of the money involved were alleged to be gifts, loans, repayment of debts on behalf of the plaintiff.  It would be an understatement on the part of the plaintiff to simply state that those companies or properties belonged to her and were acquired with her own funds and were held by the defendants on resulting trust for her.  In Master Ho’s views, all the material facts in support of her claim for resulting trust should be pleaded so that the defendants would know the case to meet and what evidence to prepare for the trial.

GENERAL GROUNDS IN OBJECTION TO THE APPLICATIONS

21.  Mr Chong submits that particulars to be ordered under Order 18, rule 12 must mean particulars of material facts to support the claim or defence.  He submits that all facts other than those in support of the Agreement and the 3 defences are peripheral and not material to the determination of the sole cause of action, namely, the Agreement.  He also submits that the defendants’ requests are for evidence and not particulars.

22.  Mr Chong relies on the principle that the relevance of an issue is not dictated by a party unilaterally simply by placing it in his pleadings, but by its substance in the context of the case.  The other party is not barred from taking the point that the allegation made in the pleadings are irrelevant to the subject matter of the action and ought to be disregarded for the purpose of discovery.  See Allington Investments Corp & ors v First Pacific Bancshares Holdings Ltd & anor [1995] 2 HKC 139, at 144 H-I; Re Cosmo-Technology Ltd [2009] 2 HKLRD 151, at §19.

23.  With respect, Mr Chong’s interpretation of Order 18, rule 12(3) is contrary to the express power given to the court to order particulars on “other matter stated in his pleading”. 

24.  Allington and Re Cosmo-Technology are distinguishable on the facts.  In both cases, it was the applicant for discovery who had raised the irrelevant issues and relied on them to seek discovery.  In the present case, the particulars sought are on the plaintiff’s own pleas, which the plaintiff cannot be heard to say are irrelevant.

25.  Mr Chong submits that it was the defendants who raised all sorts of peripheral matters (such as an Option Agreement) in paragraph 20 of their defence to which the plaintiff filed a reply.  No particulars ought to be ordered on them.  Further, no particulars ought to be ordered on matters pertaining to credibility.

26.  Again, with respect to Mr Chong, paragraph 20 of the defence effectively set out the facts in support of the defendants’ denial of the Agreement.  Those pleas are not material to the plaintiff’s cause of action but definitely material to the defence: Order 18, rule 1(a) and (c).  If the defendants only set out those facts in the witness statements without pleading them, it would surely take the plaintiff by surprise: Order 18, rule 1(b).

27.  Further, despite Mr Chong’s confirmation that the plaintiff’s case does not rest on resulting trusts, there are throughout her pleadings various averments that she provided funding or that she has beneficial interest in assets.  Particulars are missing.

28.  Accordingly, I disagree with Mr Chong’s general grounds in opposition. I turn now to the specific applications.

A.  APPLICATION FOR FURTHER AND BETTER PARTICULARS OF THE REPLY

29.  This application concerns items 8, 9(b) and 11(b) of the Request originally served on 31 July 2009.

A1.  Request no. 8 concerning paragraph 11(6) to (9) of thereply

30.  The defendants ask for a statement of the nature of the plaintiff's case in paragraph 11(6) to (9) of the reply (see paragraph 7 above) that the facts pleaded were a rearrangement to place the plaintiff’s alleged interest in the Listco in the names of her children.

31.  Mr Chain points out that similar averments have been made in paragraphs 9A to 9D of the draft ASOC.  I note that paragraphs 9A to 9D of the draft ASOC pleaded that the Listco shares were held on resulting trust for the plaintiff, initially by CLL and after the rearrangement by Barsmark and ST(79).  The plaintiff pleaded that the further shares in the Listco registered in the name of Barsmark were acquired by her with her own funds.  Master Ho disallowed those amendments for lack of particulars. 

32.  Specifically, Master Ho observed that the present case was different from a simple case based on resulting trust, having regard to the matters in paragraph 20 above.  He took the view that the plaintiff should provide material facts in relation to her claim for resulting trust over the subject assets [page 32D to 33 I of the transcript]. 

33.  In my view, the plaintiff should answer the request.  It could not be right that the rejected amendments remain alive in the reply without the need to address the concerns of Master Ho. 

A2.  Request no. 9(b) concerning paragraph 12 of the reply

34.  The defendants pleaded that the plaintiff lost HK$13 million in gambling and Samuel repaid on her behalf.

35.  The plaintiff admitted that plea.  In paragraph 12 of her reply, the plaintiff further avers that Samuel, Simon and Sylvia held numerous properties on trust for her.  This reply is similar to the draft amended paragraph 25A to the statement of claim which has been rejected by Master Ho. 

36.  The defendant requested for particulars of all facts relied on in support of the allegation that they were held on trust for the plaintiff and identify all documents.  This request is justified for the same reasons given in paragraph 33 above.

A3.  Request no. 11(b) concerning paragraph 27(1) of thereply

37.  Under paragraph 27(1) of the reply, the plaintiff pleads that through intermediaries or indirectly, she had demanded the defendants to implement the Agreement. In answer to the first set of request for particulars, the plaintiff has already stated that she could not remember the identity of the intermediaries.  The defendants still insist that she should provide the identity.

38.  In my view, even if the plaintiff will be unable to prove this plea in her reply, there is no reason why she should be pressed to repeat her answer.  The defendant’s request is unreasonable.

39.  In summary, under application (A), I order the plaintiff to provide particulars only in relation to requests no. 8 and 9(b).

B.  APPLICATION FOR FURTHER AND BETTER PARTICULARS OF THE ANSWERS TO THE REQUEST FOR FURTHER AND BETTER PARTICULARS OF THE REPLY

40.  This dapplication concerns 5 answers originally filed by the plaintiff on 17 September 2009 (“the Answers”).

B1.  Paragraph 1(a) to (i)of the Answers

41.  In paragraph 8 of the ASOC, the plaintiff pleads that "at all material times, the plaintiff had contended that she is and was the beneficial owner of all the shares in CSFL” (emphasis added).

42.  In the Answers, the plaintiff pleaded that “at all material times, whenever CSFL required funds … the plaintiff had injected approximately HK$150 million into CSFL in the way described above.”

43.  The defendants ask the plaintiff to provide further and better particulars to the Answers by stating her case on the nature of the alleged injection of HK$150 million into CSFL (whether it was a loan, a gift, a subscription of shares or otherwise). They also ask the plaintiff to state the bases as to how she arrived at the figure HK$150 million and whether it included the gift of HK$50 million.

44.  This request is clearly justified to clarify how the plaintiff could claim to have beneficial interest in the shares of CSFL.  Master Ho’s observations are applicable.

B2.  Paragraph 2(a) to (c) of the Answers

45.  The defendants pleaded that they had paid for the Macau Properties. In her Answer, the plaintiff admits the payments but avers that they were much less than the actual value of the Macau Properties at the time of transfer.

46.  The defendants request for particulars of (a) the exact amount paid by the defendants with the plaintiff; (b) the actual value of the Macau Properties at the time of the transfer; and (c) whether it is the plaintiff's case that when the Macau Properties were transferred back to the plaintiff after the expiration of 7 years from the defendants applications for immigration to Macau, she would keep the sums paid by the defendants. 

47.  The plaintiff objects to this request on the ground that these pleas are irrelevant to determination of the cause or defence.

48.  In my view, the defendants are entitled to these particulars to avoid surprises and to enable them to prepare the evidence for the case.  

B3.  Paragraphs 3 and 4 of the Answers

49.  The plaintiff pleaded in paragraph 10(1) of her reply that she injected a sum of HK$20.4 million and US$12 million into CSIL and another HK$28,320,000 and US$600,000.  The defendants ask her to state the basis and nature of the injection, ie was it a loan (and if so to whom), a gift (and if so to whom) or a subscription to shares (and if so in which company), and if none of the above, what was the nature of the plaintiff’s injection.

50.  The plaintiff gave particulars that pursuant to an agreement among her, Samuel and Simon (the latter 2 acting on behalf of the Listco), the sums were paid to Listco on the basis that if the bid for a new casino license was successful, those sums could be used for the business of Listco, but if the application failed, then those sums would be returned.  Further or alternatively, those sums ought to be returned on the grounds of failure of consideration.

51.  That, in my view, was just raising more assertions instead of answering the request.

52.  The defendants press for further and better particulars of when the agreement was made, whether it was oral or in writing, the consideration in support and the nature of payments allegedly made to Listco in view of her allegation that “those sums could be used for the business of Listco if the bid for a new casino license was successful”.

53.  For the same observations of Master Ho, the plaintiff ought to give further and better particulars as sought.

B4.  Paragraph 6 of the Answers

54.  The defendants seek further and better particulars as to the trust of the CLL shares allegedly held by the 2 employees and the source of funding for the plaintiff’s acquisition of those shares. These requests are justified as they would clarify the plaintiff’s half hearted pleas of trust.

B5.  Paragraph 7 of the Answers

55.  The same particulars are requested for as for paragraph 6 of the Answers save that the trustees are said to be Samuel and Simon.  The request is clearly justified.

56.  I order particulars to be delivered in relation to the Answers.

57.  In general, the particulars sought are needed for the fair disposal of the cause of the defence, to avoid surprises and hence save costs arising out of the need for adjournment.  They ought to be provided.

C.  APPLICATION TO STRIKE OUT A PARAGRAPH IN THE REPLY

58.  The relevant paragraph is 3(2) of the reply in which the plaintiff pleaded that all capital injections (by way of subscription of shares or loans) into CSFL, through Samuel or otherwise, belonged to the plaintiff beneficially, and she is the beneficial owner of all the shares in CSFL.

59.  Mr Chain submits that this plea, if ever needed, should have been in the ASOC.  This must be right in my view, having regard to the plaintiff’s previous attempt to include a similar plea in paragraphs 5B and 9B of the draft ASOC.  Though Mr Chong makes clear that his case does not rest on resulting trust and paragraph 3(2) of the reply was in answer to the defence that the defendants were the beneficial owners of CSFL, there is no reason why the plaintiff should be allowed to introduce through the backdoor a half-hearted plea of trust in total disregard of Master Ho’s observation.

CONCLUSION

60.  I order as follows:

(1) Re application A, within 28 days, the plaintiff do provide further and better particulars of request nos. 8 and 9(b).

(2) Re application B, within 28 days, the plaintiff do provide further and better particulars of the Answers.

(3) Re application C, paragraph 3(2) of the reply is struck out.

61.  I make an order nisi that the defendants are to have the costs of all applications to be summarily assessed on the papers on 21 October 2014 at 4:30 pm.  The defendants’ costs statement is to be filed and served by 8 October 2014.  The plaintiff’s grounds in opposition is to be filed and served by 17 October 2014.

62.  The case management summons is adjourned for disposal on 24 November 2014 at 2:30 pm.  The parties shall exchange updated timetabling questionaires by 10 November 2014.  Three days prior to the hearing, the parties shall submit a joint memorandum of all the directions that they propose to ask the court to give.  The parties must bear in mind what I have said at the hearing, namely, that the court will not be lenient towards applications for amendment to pleadings having regard to the lapse of 6 years since commencement of the action and the various applications related to pleadings.

63.  I thank counsel for their assistance.

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

 

HCA 2392/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 2392 OF 2008

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R E A S O N S  F O R  D E C I S I O N

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INTRODUCTION

1. This is the plaintiff’s appeal against Registrar Ho’s order of 10 September 2013.  The registrar refused to give leave for the plaintiff to amend her statement of claim in relation to parts of the proposed amendments.  At the end of the appeal hearing, save as to one part of the proposed amendments, the appeal was dismissed with costs.  The reasons for so concluding appear below.

BACKGROUND

2. This is an unfortunate case where a plaintiff mother sues her three children (and the children counterclaim against her). For ease of reference, and where necessary, the plaintiff will be called “Mdm Szeto” and the 1^st to 3^rd defendants respectively “Samuel”, “Simon” and “Sylvia” below.

3. In gist, Mdm Szeto’s case is that the following properties are held on trust for her and she should be the beneficial owner thereof:

(a) shares of a China Sky Finance Ltd (“CS Finance”), which are now held in the names of China Sky Investments Ltd and China Sky Nominee Ltd, companies controlled by the defendants;

(b) shares of a listed company, Century Legend (Holdings) Ltd (“CL Holdings”), which are now held in the names of Barsmark Investments Ltd (“Barsmark”) and ST(79) Investment Ltd (“ST79 Investment”), companies also controlled by the defendants;

(c) real properties in Macau held, in the case of one property in the names of Samuel and Simon, and in the case of two others, in the name of Sylvia (“the Macau properties”);

(d) a shopping arcade in Macau (“the Macau shopping arcade”), which is now held in the name of an SEL Properties (Macau) Ltd (“SEL Macau”).  Those shares are held by a Century Legend Properties Ltd (“CL Properties”), a company controlled by the defendants.

4. Further to the above, Mdm Szeto also claims that by a settlement agreement dated 28 July 2006, the defendants agreed to procure the transfers of:

(1) shares in CS Finance and CL Holdings;

(2) the Macau properties;

(3) the Macau shopping arcade,

to Mdm Szeto, on condition of her procuring the discharge of personal guarantees given by Samuel, and her payment of $13 million (“the 2006 settlement agreement”).

5. Her claim is denied by the defendants.  In essence, they plead that the only monetary sum which came from Mdm Szeto was a gift of $50 million in about November 1998 (“the 1998 gift”).

6. With the 1998 gift, Samuel operated a profitable money lending business, CS Finance.  The defendants also allege that Mdm Szeto has been a heavy gambler who lost huge sums in gambling.  As a result, throughout the years, the defendants have paid various sums for her:

(a) US$10 million in September 2002, in return for a share option agreement to purchase shares of an SEL Properties (HK) Ltd;

(b) $13 million in April 2004;

(c) in mid-2005, the defendants caused SEL Macau to borrow $300 million from a third party for Mdm Szeto.  Samuel has to give a personal guarantee for the loan;

(d) between August 2005 and April 2006, about $47.68 million.

7. The defendants claim in effect that deterioration in the relationship between them and Mdm Szeto became apparent since about late-2005 because of her gambling debts and the above sums. Referring to the 1998 gift (but which Mdm Szeto claimed was her money), Mdm Szeto took the view that everything owned by the defendants came from her.

8. The above family dispute resulted in the 2006 settlement agreement, which was:

(1) made for the purpose of the personal relationship between Mdm Szeto and the defendants, and not intended to have legal effect;

(2) not binding or enforceable for want of consideration and/or uncertainty.

PROPOSED AMENDMENTS REFUSED BY THE REGISTRAR

9. The parts of the proposed amendments which the registrar refused to give leave are para 5, 5A, 5B, 9A to 9D and 25A of the draft amended statement of claim.

10. The gist of the averments in the proposed para 5, 5A and 5B is:

(a) the shares of CS Finance were acquired with Mdm Szeto’s own funds but registered in the names of Samuel and others;

(b) the operation and business of CS Finance was funded by Mdm Szeto.

Consequently, those shares were held “upon resulting trust” for her.

11. The gist of the averments in the proposed para 9A to 9D is:

(1) in about 1999, Mdm Szeto set up a Century Legend Ltd (“CL Ltd”) with her own fund and caused its shares to be registered in the names of people including Samuel;

(2) Mdm Szeto caused CL Ltd to acquire shares of CL Holdings with her own funds;

(3) by end of 2002, CL Ltd held about 42% of the shares of CL Holdings;

(4) in about 2003, persuaded by Samuel, Mdm Szeto caused the other of the above shareholders to transfer 90% of CL Ltd shares in their names to the defendants, who held the same on resulting trust for Mdm Szeto;

(5) it was under such circumstances the CL Ltd shareholders caused the transfer of CL Holdings shares to Barsmark;

(6) in October 2003, about 209 million CL Holdings shares were acquired by Mdm Szeto with her own fund and they were registered in the name of Barsmark.

12. Finally, the proposed para 25A pleads the minutes of a meeting on 23 August 2006 (the meeting is pleaded in para 22, statement of claim) during which the 2006 settlement agreement was “further confirmed” also contained the defendants’ admission that they were holding the properties referred to in para 3 above on trust for Mdm Szeto.

(a)  Proposed para 5 to 5B

13. In support of the sufficiency of the averments in the proposed para 5 to 5B, Mdm Szeto argued during the appeal hearing that a plea that properties were acquired with the use of one’s money is adequate to ground a cause of action based on resulting trust, without the need to plead other facts.

14. For this reason, Mdm Szeto disagreed with the defence argument that:

“[Mdm Szeto] … has to plead/set out the factual basis upon which she claims … the [resulting] trust [was] constituted by :- (a) identifying the subject matter (which she did), and stating the basis how there was/is a resulting trust by (b) pleading the nature of payment … and (c) identifying what money of hers was used to purchase what shares” (para 15, defendants’ skeleton submission).

In relation to point (b) above, the defendants also argued that Mdm Szeto had to set out why she alleged there should be a trust for the shares, as opposed to an entitlement to monetary repayment: para 25, defendants’ skeleton submission.

15. A perusal of:

(a) para 4 to 8, statement of claim;

(b) para 3 (especially para 3(2)), reply and defence to counterclaim,

shows that they contain averments which resemble the proposed para 5 to 5B.

16. When asked why, in spite of para 15 above, she should need to include the proposed para 5 to 5B, Mdm Szeto claimed initially that they were needed to prevent any technical objection which may be raised in this action later.  However, she later accepted that the averment is needed to add a cause of action based on resulting trust (further to the original pleading which is only based on contract (that is, the 2006 settlement agreement)).

17. Further, when asked why she did not specify:

“her own funds” (para 5 and 5A) (the equivalent averment at para 3(2), reply and defence to counterclaim being “all capital injections”)

was in fact the sum of $50 million (pleaded at para 3 and 4, defence), Mdm Szeto offered to give an undertaking to give the particulars upon leave to so amend having been given.

18. Such an offer does not sit well with RHC Ord 1A rr 1(a), 2(1)(a), 4(2)(h) and (i) and Ord 1B r 1(2)(l), which are post-Civil Justice Reform provisions of the Rules of the High Court (Cap 4A) the essence of which is to promote the efficiency of legal proceedings.  If the particulars can be given at the time of the proposed amendments, there is no valid reason to postpone doing so until later.

19. Taking into account all of the above, I agree with the Registrar’s decision (as reflected in para 1 of his order).

(b)  Proposed para 9A to 9D

20. These averments also rely on the use of “[Mdm Szeto’s] own funds” for the acquisitions of shares in CL Holdings as the basis for pleading a resulting trust concerning those shares (held in the name of Barsmark) (see para 3(b) above).

21. The defendants raised 3 grounds of objection: para 27, defendants’ skeleton submission.  I shall mention two of them.

22. The statement of claim pleads that the shares of CL Holdings, held in the names of Barsmark and ST79 Investment, were held on trust for Mdm Szeto and she was their beneficial owner (para 12 thereof).

23. In answer to the related averments in the defence, the reply and defence to counterclaim refers to:

“a conditional sale and purchase agreement dated 26 June 2003 made between [CL Ltd, the seller] and Barsmark [the purchaser]” (para 11(6) thereof)

(“the 2003 conditional S&P agreement”) which is said to be the mechanism proposed by Samuel for acquiring some 42% of CL Holdings shares.  The sums allegedly belonging to Mdm Szeto which were utilized for such share acquisitions were:

(1) $27 million transferred from Mdm Szeto to the defendants in June 2003;

(2) about $11.29 million, being the price mentioned in the 2003 conditional S&P agreement;

(3) about $2.7 million, being the price for acquiring CL Holdings shares pursuant to a conditional cash offer in October 2003

(para 11(5), (6) and (8) thereof).  The total price paid for the shares came to about $14 million ($11.29 million + 2.7 million).  The unused $13 million or so was repaid to Mdm Szeto.

24. The proposed para 9A to 9D plead the following sums to have been used for the acquisitions of CL Holdings shares:

(a) about $34.7 million in about 1999 for CL Holdings shares: para 9A(b) thereof;

(b) para 9D pleads the same share acquisition pleaded at para 11(7) and (8), reply and defence to counterclaim (the conditional cash offer at para 23(3) above).

These sums appear to be different from those in the reply and defence to counterclaim (see para 23 above).

25. Such being the case, the need for specifying the amounts of “[Mdm Szeto’s] own funds” is even more than that set out in para 17 above.

26. Further, the schemes set out in the reply and defence to counterclaim (para 23 above) and in the proposed para 9A to 9D are not entirely the same.  Specifically:

(1) the 2003 conditional S&P agreement has not been mentioned in the proposed amendments;

(2) as stated above, there is no attempt to reconcile the different amounts used for the share acquisitions.

In relation to sub-para (1) above, Mdm Szeto explained during the appeal hearing the 2003 conditional S&P agreement can be added to the end of the proposed para 9C.

27. The proposed para 9A to 9D are therefore also embarrassing pleas.  Mdm Szeto’s proposal to give an undertaking to provide particulars concerning the matters mentioned in para 25 to 26 above (proposed during the appeal hearing) reinforces that conclusion.

(c)  Proposed para 25A

28. This has been summarized in para 12 above.

29. Ord 18 r 7(2) stipulates:

“…the effect of any document or the purport of any conversation referred to in the pleading must, if material, be briefly stated, and the precise words of the document or conversation must not be stated, except in so far as those words are themselves material” (emphasis supplied).

Further, Hong Kong Civil Procedure 2014, Vol 1, para 18/7/13 explains the above in these terms:

“The general rule is that only the gist is to be pleaded (para.2) … ”.

30. The effect of the minutes has been briefly stated in the proposed para 25A to be an admission of resulting trusts in Mdm Szeto’s favour.  This should satisfy the requirement of Ord 18 r 7(2).

OTHER MATTERS

31. It should be noted the registrar’s order was apparently not intended to totally prevent Mdm Szeto from putting forth properly formulated amendments (see para 1 thereof).

COSTS ORDER

32. The usual rule that costs should follow the event was accepted by the parties.

33. However, Mdm Szeto argued that, because the appeal has in effect been partly allowed, she should be awarded half of the costs.  And because the defendants would also be awarded half of the costs, the two orders should “cancel out” each other.

34. I disagree.  The hearing time spent on the proposed para 25A has been much less than that spent on the other proposed amendments.  This is also reflected by the contents of the parties’ skeleton argument/skeleton submission.

35. I assessed the time spent on it to be one-quarter of the total costs.  The defendants should therefore be entitled to three-quarters of the costs of the appeal and those in the court below.