HUI KI HO v. YEUNG CHUN FUNG

HCA 2942/2015

[2020] HKCFI 528

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2942 OF 2015

________________

BETWEEN
	HUI KI HO	Plaintiff
and
	YEUNG CHUN FUNG	Defendant

________________

Before: Deputy High Court Judge Leung in Chambers

Date of Hearing and Decision: 11 September 2018

Date of Reasons for Decision: 2 April 2020

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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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1.  These are my reasons for the decision in respect of the defendant’s earlier application to strike out and expunge certain documents from the trial of this action. At the same time, I am handing down separately the judgment after trial. The background and dispute in the present action are set out in the judgment, which I will not repeat here. I adopt the same definitions and abbreviations used in the judgment for the present purpose.

Background

2.  It is common ground that New Loyal and Jolly Concept were the two companies that founded the Mainland Company for the purpose of applying for a cross border vehicle licence.  The Licence was eventually issued to New Loyal. By January 2018, the parties have exchanged witness statements in this action.  Amongst others, Madam Kwok, the first registered proprietor of New Loyal, would testify as to how she came to act as Yeung’s nominee as the registered proprietor of New Loyal back in 2010.

3.  By summons dated 18 January 2018, Hui, the plaintiff, applied for specific discovery from Yeung, the defendant, the following documents:

 (1)  certified extracts of information on the business register of Jolly Concept with Yeung as the owner thereof;

 (2)  communications between Yeung and the Business Registration Office (“BRO”) and the Hong Kong Police in respect of the complaint made by one Ma Kam Lung (“Ma”) in respect of dispute over the ownership of Jolly Concept;

 (3)  communications between Yeung and Ma in respect of the dispute over the ownership of Jolly Concept; and

 (4)  pleadings and witness statements in HCA 1725/2016 commenced by one Wong Ka Yiu (“Wong”) against Yeung.

4.  The dispute involving Ma concerns the ownership of Jolly Concept and another cross border licence which it owns, but no legal action concerning that has been brought yet.  As to HCA 1725/2016, Wong commenced that action against Yeung in respect of the ownership of one Good Venture Development Limited (“Good Venture”) and the cross border licence which Good Venture owns and holds.  As of this moment, neither of these other disputes appears to have been resolved in court.

5.  Hui claims to have been informed by the solicitors who advised Wong and Ma that their claims and complaints were similar in that they were all said to have been removed from their respective companies and replaced by Yeung without their prior knowledge and consent.  The basis for Hui’s specific discovery application was that those other disputes involving Yeung bore strong resemblance in facts to the present case.  It was obvious that Hui intended to rely on the documents sought for effectively similar fact evidence[1].

6.  For the purpose of the specific discovery application, Hui also produced copies and photographs of documents which he had obtained from the solicitors for Ma and Wong, including those of the extracts of business registration information of Jolly Concept, communications between Ma and his solicitors with the Inland Revenue Department (“IRD”), company search of Good Venture, and some of the pleadings in HCA 1725/2016.

7.  On 10 May 2018, the master dismissed Hui’s application with costs, after hearing the parties.  The transcript of that hearing reveals the master’s following reasoning:

“ The Mainland company was duly set up and Ah Chung successfully applied for and obtained a cross-border vehicle licence. This licence is said to have been applied for and on behalf of New Loyal in its capacity as a shareholder of the Mainland company. It appears to be common ground that this licence was issued to New Loyal.

The true owner of this licence is the subject matter of the dispute. Assuming that the background to the formation of the Mainland company which ground the eligibility to apply for the cross-border vehicle licence is relevant to the substantive factual and legal issues in dispute, or would at least enable the plaintiff to put into a train of enquiry, including the owners behind Jolly at the relevant time,the plaintiff is already in possession of such information prior to February 2015 and from September 2015 onwards.

The relevant period in relation to the formation of the Mainland company is in or around October 2010, and the plaintiff is already in possession of such information and therefore already has whatever information he may consider necessary to lead him on to a train of enquiry, including the transfer of interest from City Best to Hon Yiu-Kwan.

…

In contradistinction to class 1, class 2 is related to a complaint over his status as owner of Jolly and has nothing to do with the ownership of New Loyal and the licence, which are the real issues in this case.

I agree with Ms Law that unproven assertions which can in no way be substantiated at the trial of this action do not constitute similar fact evidence for the purpose of the plaintiff’s claim. The specific discovery related here is directly solely--directed solely to credit,namely to put the plaintiff in a position to say a similar complaint was made with Jolly [Concept], therefore, the complaint in respect of New Loyal here must be true.

This cannot be right. An unsubstantiated complaint remains an unsubstantiated complaint and is a far cry from being a fact of similar evidence.

I agree that the complaint have no material bearing on the issues to be decided in this action and that the prejudicial effect far outweighs the potential probative value of such evidence.

Class 2 is not necessary for the fair disposal of this action and I will disallow discovery in respect of this class of documents.

Class 3. Specific discovery requested here relates to a similar complaint made in respect of another company, Good Venture Development Limited, and another licence owned by this company,which again have nothing to do with the issues raised in this case.

I do not see how these similar substantiated complaints can be elevated to similar fact evidence and how it can have any material bearing to the issue raised.

…”

8.  Hui did not appeal the master’s decision.

9.  One week after the above decision, Hui filed his 2^nd supplemental list of documents, consisting of the following items numbered 21 to 29:

 (1)  Copy of the electronic extract of information of Jolly Concept dated 2 March 2017 (Item No 21);

 (2)  Copy of the certified extract of information of dated 7 October 2016 (Item No 22);

 (3)  Documents obtained from the solicitors for Ma and Wong, namely:

 (a)  Copy photograph of the letter from the IRD to Ma dated 3 November 2015 (Item No 23);

 (b)  Copy photograph of the letter from the IRD to Ma dated 24 June 2016 (Item No 24);

 (c)  Copy photograph of the letter from the solicitors to the IRD dated 27 October 2017 (Item No 25);

 (d)  Copy photograph of the certified extract of information of Jolly Concept dated 2 February 2015 (Item No 26);

 (e)  Copy photograph of the Defence and Counterclaim of Yeung as the 1^st defendant in HCA 1725/2016 (Item No 29);

 (4)  Copy of company search of Good Venture (Item No 27);

 (5)  Copy of the writ of summons with statement of claim in HCA 1725/2016 (Item No 28).

10.  It was immediately apparent that what Hui now disclosed were most, if not all, of the documents relied on in support of the previous specific discovery application, which had been dismissed.

The application

11.  By summons filed on 13 June 2018, Yeung applied to strike out and expunge from the trial items nos 21-25 and 27-29 of the documents disclosed by Hui as mentioned above.  The grounds were:

 (1)  they did not relate to any matter in question between the parties in the present action;

 (2)  they were not necessary for the fair disposal of the cause or matter or for saving costs; or

 (3)  they were inadmissible as being scandalous, frivolous, vexatious or oppressive, or tending to prejudice, embarrass or delay the fair trial of the action.

The principles

12.  There is no dispute as to the continuing obligation of the parties to an action to make discovery of documents relating to the questions in the cause or matter in the case: O24, r2(1). It should equally be undisputed that the court has the power and should exercise such power to regulate the process and scope of discovery to ensure that the underlying objectives of the rules of the court are observed.  The Registrar in Wong ToYick Wood Lock Ointment Limited v Bensunville Limited trading as Nanyang(Singapore) Medicine Co HCA 595/2014 (22 January 2016) said this (at §§11 – 14), and I agree with such observation.

13.  The obligation to make discovery of documents should not be confused with the use of the documents at the trial[2]. Documents that are actually irrelevant or unnecessary, albeit disclosed, have no place in the trial.  Documents should not be allowed to remain merely for giving the court the often labelled whole picture of the case or to enable the party disclosing them to use them depending on how things go during the trial.  Apart from the costs consideration, there is the material concern of the party being faced with such documents about the need to prepare for rebuttal.

14.  Relevance of the documents is defined by the pleadings and with reference to the witness statements that are adduced in line with the pleaded case: see Kwok Chin Wing v 21 Holdings Ltd (2013) 16 HKCFAR 663 at §21. So is the necessity for the documents for the purpose of the trial.

Item no 26

15.  Yeung did not take issue as to item no 26.  This set of documents contained the particulars of the business registration of Jolly Concept during the period between 2010 and early 2015.

Items nos 23, 24 and 25

16.  As confirmed by Mr Yip, appearing for Hui, his client no longer sought to rely on items nos 23, 24 and 25.  I would have expunged them.

Items nos 21 and 22

17.  Items nos 21 and 22 contained the particulars of the business registration of Jolly Concept (under different registration numbers) in 2016 and 2017.  According to his affirmation in opposition of the application, Hui essentially referred to the documents being public records of factual information, and argued that they were not objectionable for disclosure.

18.  In his written submissions, Mr Yip explained the relevance of Jolly Concept.  However, the involvement of Jolly Concept is not a matter of dispute.  Mr Yip further explained that both sets of record showed that Yeung became the proprietor of the company in 2015, and such information would cast light on the credibility of his answers to requests for further and better particulars of his pleading, where he stated that he had no (clear) recollection of the shareholders (or owners) of Jolly Concept.

19.  I did not see how.  The answers referred to were given by Yeung to the requests by Hui for further and better particulars of Yeung’s plea about Jolly Concept being mentioned and introduced by Chung, the middleman who was entrusted to procure the acquisition of the Licence, as mentioned earlier in the background set out above.  As pleaded, that took place in late 2011 to 2012. Yeung’s answer was that he had no (clear) recollection about the proprietor(s) of Jolly Concept at the time[3]. He said so too in his witness statement[4].

20.  For the particulars of the proprietors of Jolly Concept during the period between 2010 and early 2015 before Yeung joined, there is now item no 26 which, as mentioned, he did not object to.  Items nos 21 and 22 contained the record from 2015 to 2017, but it is not apparent how they could cast light on the credibility of Yeung’s answer in respect of his recollection, or the lack of it, about the identities of the proprietors of the company in 2011 to 2012.

21.  I should also mention that such elaboration of the reason why Hui sought to rely on these two items of documents were originally put forward by him as the reason for seeking to rely on items nos 23, 24 and 25 instead[5].  However, as mentioned, Hui no longer relies on them.

Items nos 27, 28 and 29

22.  Items nos 27, 28 and 29 relate to the complaint and action of third parties arising out of dispute in respect of other cross border licences involving Tsui/City Best and Yeung.

23.  Insofar as these three documents were said to be evidence of similar facts, there was no pleading of reliance on those as facts.  Nor was here basis for doing so, because the statements contained in those documents at this stage were assertions instead of facts.  Further, it could not be legitimately expected that the court would adjudicate in the trial of the present case any aspects of the allegations contained in such other complaint and action.  I should also mention that Yeung was then represented by a different legal team in HCA 1725/2016.

24.  Insofar as these documents would be relied on as evidence of the mere fact that there are such complaints and other action against Yeung, there was still no pleading of that fact and its relevance to the issues in dispute between the parties.  The fact that there were such other complaint and action against Yeung may not be disputed, but that is neither here nor there for the purpose of the present case: see EG Music v SF (Film Distributors) Ltd [1978] FSR 121 at 123 – 125.  If anything, they only tend to embarrass or prejudice Yeung at the trial: Thorpe v Chief Constableof Greater Manchester Police [1989] 1 WLR 665 at 668 – 670.

25.  In court, Mr Yip confirmed that it was not his intention to rely on the documents as evidence of the factual allegations contained therein or similar fact evidence.  Nor was his intention to rely on the documents as evidence of the fact that there was such other complaint and legal action against Yeung.  In his written submissions, Mr Yip explained that Yeung’s pleaded case in HCA 1725/2016 gives an account of his relationship with Tsui/City Best, their dealings in relation to the licence and his state of knowledge in that case.  Mr Yip suggested that he might use those documents for cross-examining Yeung as to the scope of Tsui/City Best’s authority in the present case.

26.  In court, Mr Yip elaborated that by cross examining Yeung with reference to his pleaded defence in the other action, he might seek to establish that Tsui/City Best was in fact authorized to do things on behalf of Yeung beyond what Yeung has pleaded in the present case, and that Yeung should be bound by those acts of Tsui/City Centre.

27.  As far as the authority of Tsui/City Best is concerned, Hui has pleaded how he came to agree to engage Tsui/City Best to procure the acquisition of the Licence, and that in entering into such agreement, Tsui was acting on behalf of not only City Best but also Yeung.  In defence, Yeung pleaded that he engaged another agent, Chung, to acquire the licence, while Tsui entered the picture subsequently and was entrusted by Yeung to license out the use of the Licence to a driver.  Yeung further particularized the scope of Tsui/City Best’s authority in licensing out the use of the licence.  It was specifically pleaded that Yeung had no knowledge about the dealings between Hui and Tsui/City Best, and any such dealings and representation made by Tsui/City Best in that regard to Hui were not made with the consent or authority from Yeung.

28.  The case of Yeung in HCA 1725/2016 in defence of the claim differs from the present case in that Yeung had admittedly entered into agreement with Tsui/City Best in 2014 for the latter’s service in procuring the acquisition of the licence in that case.  The scope of the authority of Tsui/City Best in that case must be considered in such context.  Even assuming that Mr Yip may intend to put to Yeung that what Yeung says about his engagement of Chung and Tsui/City Best were not true, that could not be based on the circumstances pleaded by Yeung in HCA 1725/2016 as they per se do not contradict his case in respect of Tsui/City Best’s role and authority in the present case.

29.  A possible variation of Hui’s intended case on the authority of Tsui/City Best to bind Yeung would be that notwithstanding their authority prescribed by Yeung as alleged in the defence, Yeung was nevertheless bound by the acts of Tsui/City Best beyond such authority as if Tsui/City Best was put in a position enabling them to bind Yeung to the consequence of their conduct, albeit in breach of the prescribed authority. However, such has not been pleaded as an alternative case of Hui in the present case.

Conclusion

30.  The intended reliance on these newly disclosed documents concerning the other complaint and action by third parties against Yeung lacks legitimate basis, in view of the current state of the pleaded cases of the parties.  In the absence of actual pleading to put in issue what Mr Yip might intend to suggest to Yeung in the course of the evidence, the inclusion of the documents in question for the purpose of such intended reliance was by nature a fishing attempt.  Such documents will only be prejudicial and embarrassing to Yeung, if allowed to remain at large during the trial,and such negative effect will outweigh their probative value for the fair determination of the issues in the present case.

31.  For the above reasons, the discovery by Hui’s 2^nd supplemental list of documents for the purpose of the trial, in my view, was ill advised.  I therefore allowed Yeung’s application to expunge them, except for item no 26 (which was not disputed), with costs summarily assessed.  The trial subsequently commenced on 26 September 2018.  As mentioned, I am handing down the judgment after trial at the same time as these reasons for decision.

	(Simon Leung)
	Deputy High Court Judge

 

Mr Francis Yip, instructed by Fung Wong Ng & Lam LLP Solicitors, for the plaintiff

Ms Jacqueline Law, instructed by L&L Lawyers, for the defendant

HCA 2942/2015

[2020] HKCFI 529

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2942 OF 2015

________________

BETWEEN
	HUI KI HO	Plaintiff
and
	YEUNG CHUN FUNG	Defendant

________________

Before: Deputy High Court Judge Leung in Court

Date of Hearing: 26-27 September; 2 October 2018

Date of Judgment: 2 April 2020

________________

J U D G M E N T

________________

1.  This action concerns a Guangdong–Hong Kong cross border vehicle licence. Such a licence is issued by the Mainland authority to enable a Hong Kong registered vehicle to cross the border and travel within the issuing Mainland province. The licence in question is numbered粵Z. 727C港 (“the Licence”), which was issued to New Loyal Trading Co, an unincorporated company in Hong Kong (“New Loyal”).

2.  The defendant (“Yeung”) claims to be the proprietor of New Loyal, first through his nominee and subsequently through his incorporated company.  The plaintiff (“Hui”) claims that he was and still is the true beneficial owner of New Loyal and thus the Licence.  Common to the cases of both parties is the involvement of a middleman, Thomas Tsui (“Tsui”) and his company, City Best Limited (“City Best”).  It is common ground that Tsui cannot be located and City Best has ceased operation.

Hui’s case

3.  According to Hui[1], he entered into an oral agreement with Tsui in early 2013 to engage Tsui to acquire for him a cross border vehicle licence.  Tsui represented to him that as a pre-requisite, a Hong Kong company and then a sino-foreign company in the Mainland would need to be set up to enable the application for such a licence from the Mainland authority.  There is no dispute as to such pre-requisite as a matter of fact.  Tsui allegedly represented to Hui that he/City Best would provide these companies held by either the staff or persons related to Tsui/City Best, and Hui would be registered as the proprietor of the company to which the licence was issued.  Tsui/City Best would also take care of the annual renewal of the licence in the Mainland and the Closed Road Permit, which would be issued by the Transport Department in Hong Kong (“the HK Permit”).  The consideration was RMB 750,000.  Hui agreed to that (“the Alleged Agreement”).

4.  It was specifically pleaded that in entering into the Alleged Agreement, Tsui was acting on behalf of not only City Best but also Yeung[2]. However, the basis for the alleged agency between Tsui and Yeung in the conclusion of the Alleged Agreement is unknown from the pleading.

5.  Hui says that pursuant to the Alleged Agreement, New Loyal was acquired in Hong Kong, and so was a sino-foreign company formed in the Mainland by the name of 汕屋盈悅首飾器材有限公司 (“the Mainland Company”).  The Licence was issued by the Mainland authority to New Loyal in 2013.  He noted from the business registration record that he would replace a Kwok Fa (“Madam Kwok”) and a Wong Lai Fun (“Madam Wong”) as the registered proprietor of New Loyal.  Hui had paid the agreed consideration to Tsui/City Best in three tranches. In about late September or early October 2013, Hui also came to have the use of the Licence number plate, which was affixed to his Hong Kong vehicle (registration number PY8371).

6.  Arranged by Tsui/City Best, the Licence and the HK Permit were subsequently renewed in 2014.  In 2015, Tsui allegedly represented to Hui that the latter needed to hand over the Licence number plate for the renewal of the Licence.  Tsui acceded to the request, and drove his vehicle to the Shenzhen Bay custom office where the Licence number plate was removed from his vehicle and handed to Tsui in August 2015.  But the Licence number plate has since never been returned to Hui.  Nor could Tsui be contacted.  City Best was also found not operating.

7.  According to Hui, he discovered in September 2015 that a Mainland form來往香港車輛驗車記錄表 (“the Mainland Form”) dated 18 August 2015 was submitted to the Mainland authority, stating that the Licence number plate would be transferred to another vehicle (registration number FJ8999).  Hui also discovered upon search various changes in the business registration of New Loyal in Hong Kong, i.e., Yeung joined and Hui withdrew from New Loyal on 14 and 16 October 2013 respectively.  Hui then re-joined New Loyal on 26 August 2014; but withdrew again on 24 September 2014.

8.  Hui alleges that all the above changes were done without his knowledge or consent, and his signatures on the Mainland Form and the notifications to the Business Registry of his withdrawal from New Loyal were all forgeries.  Hui contends that all those changes were null and void, and he remains the sole beneficial owner of New Loyal and thus the Licence.  He seeks a declaration that Yeung holds the Licence on trust for him, and an order for reinstatement of him as the proprietor of New Loyal.

Yeung’s case

9.  According to Yeung[3], he ran at all material times, and still runs, a car dealer as well as car repair and maintenance business.  In about 2010, with a view to acquiring a cross border vehicle licence, he caused a Hong Kong company to be set up.  Madam Kwok, an acquaintance of his and the mother of his close friend, agreed to act as his nominee proprietor of the company.  New Loyal was thus set up in August 2010.

10.  Together with another Hong Kong company, Jolly Concept International Co (“Jolly Concept”) as co-investors, New Loyal subsequently formed the Mainland Company in 2012.  These arrangements were made by an agent in Shenzhen known as 阿鐘 (“Chung”) whom Yeung engaged.  He paid a service fee of RMB 50,000.  Yeung also engaged Chung to proceed to apply to the Mainland authority for the cross border vehicle licence.

11.  According to Yeung, Tsui has been a frequent customer of the defendant’s garage since 2009-2010.  As appearing to Yeung, Tsui came to learn from him during casual conversation about his acquisition of a cross border vehicle licence in progress.  Tsui offered to license out the use of the licence (to be issued) for Yeung.  Yeung then entrusted Tsui to do so accordingly.  Tsui was entrusted with entering into agreement with the driver for the use of the licensee and handling all the incidental administrative matters.  Yeung would charge a monthly licence fee of HK$8,500, which was increased to HK$9,000 in 2014.

12.  Wong Lai Fun (“Madam Wong”) was first introduced to be the potential user of the licence in February 2013.  Subsequently, Tsui represented that Madam Wong could not take up the licence.  Another driver was found, and Yeung was given to understand that it was Hui.

13.  The user of a cross border vehicle licence was required to apply to the Hong Kong Transport Department for the HK Permit, and that person was required to be on record associated with the entity which holds that licence.  To enable that, Yeung understands that Tsui/City Best would cause the name of the licensee to be registered as a proprietor of New Loyal.  Therefore, when Madam Wong was first introduced as a potential user of the licence, she was registered as a partner of New Loyal in February 2013.  When she backed out and Hui became the user of the licence, he was likewise registered as a partner of New Loyal in April 2013.  The understanding was that once the HK Permit was issued or renewed, the licence user would be removed from the business registration of New Loyal.

14.  The Licence was finally issued to New Loyal in late August 2013.  The HK Permit was issued in late September 2013.  In October 2013, the business registration record of New Loyal was updated so that Madam Kwok, Madam Wong and Hui were removed from the business and Yeung became as the proprietor of New Loyal.

15.  According to Yeung, Tsui/City Best made the above business registration arrangement with his authorization, and that, as Yeung understands, was how there were those changes in the registration of the proprietor of New Loyal in 2013 when the HK Permit was applied for, and in 2014 when the same was renewed.

16.  According to Yeung, in order to eliminate the future hassle of having to change the business registration particulars back and forth every time when the HK Permit had to be renewed, he changed to use a body corporate to be the proprietor of New Loyal in 2015.  Smart Success International Development (“Smart Success”) became such a proprietor, of which Yeung was and is the majority shareholder.

17.  According to Yeung, he received the monthly licence fee from Tsui/City Best by way of cheque or cash.  In his evidence, Yeung explained the occasion when Tsui would request him not to present the cheque[4] for lack of funds.  Eventually, Yeung became unable to receive from Tsui/City Best the monthly licence fee.  He therefore decided to terminate the licence arrangement with Hui in 2015.  In August 2015, Tsui returned the Licence to Yeung.  A Mr Law became the new user of the Licence, and had the plate affixed to his vehicle (Registration No FJ8999).  Again, the arrangement was made by Tsui.  Like Hui, Yeung has also been unable to contact Tsui or locate any staff of City Best after that.

18.  Yeung denies any part in the dealings between Tsui/City Best and Hui as Hui alleges, and contends that he only engaged Tsui/City Best to license out the use of the Licence.  If what happened to Hui was due to Tsui/City Best’s misconduct, Yeung denies that such misconduct was within the authority of Tsui/City Best.  Yeung denies liability for what Tsui/City Best might have done to Hui.

Issues in dispute

19.  To Hui, the Licence came to be issued pursuant to the Alleged Agreement between him and Tsui/City Best.  Yeung was a stranger to him at all material times.  To Yeung, he was entitled to the Licence issued to and held by New Loyal, which he set up for such purpose before Tsui and Hui came into the picture.  He entrusted Tsui/City Best to license out the use of the Licence, and he was given to understand that Hui came to have the use of the Licence that way.  Such difference constitutes the major factual dispute between the parties.

20.  The alleged entitlement of Hui is also based on these pleaded factual allegations, namely: (i) the Alleged Agreement was entered into by Tsui/City Best on behalf of Yeung; (ii) Hui was made the proprietor of New Loyal pursuant to the Alleged Agreement; (iii) the subsequent changes of his business registration status in New Loyal were forgeries and without his knowledge or consent; and (iv) he surrendered the Licence number plate due to the misrepresentation of Tsui.  Hui bears the burden of proving these allegations.

21.  Several other points are worth noting.

22.  First, it is important to note that the primary claim of Hui is by nature a proprietary claim over New Loyal, and the Licence as its asset, being his property.  Yeung is said to be holding the Licence on trust for Hui as the “beneficial owner”.  Ms Law appearing for Yeung questions whether such proprietary claim is legally sound.

23.  Second, Hui claims interest, but there was no plea of claim for monetary compensation for such claim for interest to hinge upon.  Upon this being pointed out when the trial began, Mr Yip appearing for Hui sought to further amend his claim.  What Mr Yip did was to amend the prayer by adding an alternative claim against Yeung for damages in the sum of RMB750,000, which apparently represents the consideration that Hui had allegedly paid to Tsui/City Best pursuant to the Alleged Agreement.  However, Mr Yip confirmed in his opening submissions[5] that Hui is not alleging that any part of such consideration was collected by Tsui/City Best for Yeung.  It is for Hui to make good this alternative claim in these circumstances.

24.  Third, in the reasons for my decision in respect of Yeung’s application to strike out and to exclude various documents from the trial, which is handed down at the same time as this judgment, this court postulated a possible variation of Hui’s case, but warned that it has not been pleaded as an alternative case of Hui[6]. Nevertheless, in his opening submission[7], Mr Yip put forward exactly that.  Specifically, it is contended that Yeung entrusted Tsui/City Best with the authority to arrange for change in the registration of proprietor of New Loyal and to take care of the renewal of the Licence.  The fact that Tsui/City Best had, as Hui alleges, acted to his/its own benefit by misrepresentation to Hui and falsification of documents would not relieve Yeung as principal from the liability for what Tsui/City Best did within such apparent authority.  Ms Law for Yeung criticized the above contention on the ground of apparent authority as both un-pleaded and sea change of case.  Whilst I am prepared for completeness to consider such recent contention of Hui, it suffices at this stage to reiterate that the parties may not travel beyond their pleaded cases.

The parties involved

25.  The various companies involved in the application for the cross-border vehicle licence had been set up by the time when Hui entered into the Alleged Agreement with Tsui/City Best in early 2013.  New Loyal and Jolly Concept were formed by September 2010, and the Mainland Company was formed in July 2012.  It is clear from his evidence in court that Hui had no idea about these companies at the time.  It was only after the relevant documents have been obtained and disclosed in this litigation that various features in the registrations and composition of these business vehicles were known.  On behalf of Hui, those features were highlighted, first to suggest their possible connection with Tsui/City Best, and second to suggest that Tsui/City Best was behind their formation and the acquisition of the Licence.

26.  The business registration records reveal that applications for the registration of New Loyal and Jolly Concept were filed within two days in September 2010.  The place of business of New Loyal[8] was the same as the residential address of the proprietor of Jolly Concept.  Whilst Yeung pleaded that he entrusted Chung, the Mainland agent, to proceed with the establishment of a Mainland company for the purpose of applying for a licence after New Loyal had been set up, Madam Kwok testified[9] to her understanding from Yeung in 2010 that he had already received advice from the Mainland agent in respect of the setting up of a Hong Kong company for the purpose of acquiring a cross border vehicle licence, and it was in such context that she was requested to act as the proprietor of the company to be formed, later known to be New Loyal[10].  In other words, it was probable that Yeung had indeed received advice from such Mainland agent at the early stage of the plan to acquire a licence.

27.  According to Yeung, it was through his business friend who has previously acquired a cross border vehicle licence that he came to know Chung.  He did not know the full name of Chung, but understood that his office was at Sha Tau Kok.  He had indeed met Chung.  In court, he added that he had paid Chung a sum of RMB300,000 in early 2012.  The service fee of RMB50,000 was paid to Chung in mid-2003.  Both were cash paid through Yeung’s relative in the Mainland.  He also explained that the address for the business registration of New Loyal was provided to him.  He understood that it was also Chung who arranged for Jolly Concept to be used as the joint venture partner of New Loyal to establish the Mainland Company.  He had no recollection about the composition of Jolly Concept until the relevant documents were studied in 2016.

28.  The place of business of New Loyal was changed to the address of City Best in mid-2011, which, according to Yeung in court, was the suggestion of Tsui so as to facilitate his subsequent handling of the licensing out and renewal of the licence and HK Permit.  In mid-2012, the Mainland Company was set up, and its personal representative was 秦國富 (“Chun”).  Hui pointed out that Chun was a staff of City Best.  Yeung explained that matters including arrangement of the personal representative of the Mainland Company were handled by the Mainland agent.  Yeung did not deny, but explained that he came to realise much later that Chun was apparently a staff of City Best.  In April 2013, City Best became the registered proprietor of Jolly Concept.  The Licence was eventually granted to New Loyal in late August 2013.  Yeung recalled that he had been informed of when the Licence could be collected.

29.  Obviously Tsui was not heard in the trial.  However, one may question why Chung was not called as a witness to corroborate Yeung’s version of events.  That said, I am not prepared, on the basis of the evidence, including that of the matters in the preceding paragraphs, infer that Chung was merely fictitious.  I accept that the evidence causes one to suspect the existence of connection between Tsui/City Best and Chung as well as the business vehicles set up in connection with the acquisition of the licence.  However, the materials suggest that neither Hui nor Yeung was at the material times aware of such possible connection.

30.  What is clear is that even according to Yeung’s case, Tsui must have entered the picture and involved himself in the matter by early 2012, when the acquisition of the licence was only in progress.  Hui entered the picture, as Yeung and Madam Kwok understood, as the potential user of the licensee in place of Madam Wong only in April 2013.  Those happened before the Licence was granted much later in 2013.

31.  Even assuming that there was connection between Tsui/City Best and the Mainland agent that Yeung engaged, or even that Tsui/City Best was behind the forming of these business vehicles and the acquisition of the Licence, that does not necessarily assist Hui.  Insofar as Hui’s proprietary claim is concerned, unless there was never such thing as Yeung’s acquisition of what eventually became the Licence so that Yeung was a complete free rider of the Licence, Hui will still have to establish that he has a better title to the Licence than that of Yeung.  Hui’s pleaded case is that the Alleged Agreement was made by Tsui on behalf of Yeung.  How that came about is unknown from the pleading. That said, such pleaded case would not have made sense, if there was in the first place not even the situation of Yeung acquiring and/or holding the Licence.

The Agreement on behalf of Yeung?

32.  The pleaded case of Hui is that the Alleged Agreement was entered into with Tsui acting on behalf of not only City Best but also Yeung.  This is a mere assertion without particulars.  That Yeung could have, but had not, sought further and better particulars of such assertion[11] does not absolve Hui from his primary obligation of stating his case.  Nor does that somehow allow him to run his case by seeing how the evidence turned out during the trial.

33.  During the trial and his closing submissions[12], Mr Yip attempted to suggest that Yeung in fact agreed or understood that the licence once issued would be held for Hui and then transferred to Hui in performance of the Alleged Agreement.  That reinforces the only sense that one can make out of the Alleged Agreement between Hui and Yeung.

34.  The alleged agreement or understanding that the licence once issued would be held for Hui and then transferred to Hui in performance of the Alleged Agreement does not sit well with the rest of Hui’s pleaded case.  By the Alleged Agreement, what Tsui/City Best allegedly promised Hui was to acquire a licence that would be issued to and held by a company composed of persons related to Tsui.  Had it been the case that Yeung was allegedly one of those persons so related to Tsui, Yeung could not have been the principal of Tsui. If anything, Yeung would have been holding the Licence through New Loyal subject to the instruction of Tsui.  There is no such allegation either.  As Hui confirmed in court, when the Alleged Agreement was made, Tsui made no mention of New Loyal, notwithstanding its existence.  Nor did Tsui make any mention of Yeung.  Tsui confirmed in court that he had at the time no reason for believing that he was dealing with Yeung.  Yeung was simply a stranger to him in his dealings with Tsui.

35.  In his supplemental opening submissions[13], Mr Yip actually clarified that his client is not saying that the Alleged Agreement bound Yeung to procure for him a licence.  Nor is Hui saying that the alleged consideration of RMB750,000 was paid to Tsui/City Best on behalf of Yeung.  It follows that Yeung could not be the principal of Tsui/City Best in agreeing to provide such service to Hui.

36.  There is equally no allegation or evidence that Hui understood that he was acquiring the right to Licence from Yeung (through New Loyal) as if this were a sale and purchase transaction.  The service that Hui allegedly contracted from Tsui/City Best, as pleaded, was to take the necessary steps for applying for the right to a licence from scratch, not purchasing the right to a licence from an existing licence holder.

37.  Much was also said about the lack of contractual document.  This is actually a common feature.  Both parties are asserting their respective oral agreements with Tsui/City Best without any written record.

Pursuant to the Alleged Agreement with Yeung?

38.  Hui performed his part of the Alleged Agreement for acquiring a licence by payment of the alleged consideration of RMB 750,000.  In view of the relevant receipts and the oral evidence of Hui, I am prepared to accept that such payments were indeed made.  According to Hui, the first tranche of RMB300,000 was deposited into the bank account of City Best.  The second tranche of RMB300,000 was deposited into the bank account of another company at the request of Tsui, but the receipt issued by City Best in respect of this second tranche recorded that it was for yet another company.  There is no evidence as to whether and, if yes, how these companies came into the picture, if at all.  At least, it is clear that New Loyal, albeit existing, was not mentioned in the receipts.  In other words, whilst Hui was given to understand that the payments were made with a view to obtaining a licence, the receipts do not tell him that he was acquiring New Loyal.

39.  Much was said about payments allegedly made by Yeung in connection with the acquisition of a licence.  The alleged payment of RMB300,000 in early 2012 was criticized as a fabrication in court, and the alleged payment of RMB50,000 was doubted for the lack of documentary evidence.  All matters considered, whilst one may say the evidence of Yeung might not be impeccable on all fours, I am not impressed that he made up his evidence.

40.  On behalf of Hui, comparison was also made between the amount paid by the parties respectively.  In my judgment, the comparison lacks relevance because there was to begin with no evidence as to whether and, if yes, to what extent the issuing of the Licence was in fact attributable to the money received by Tsui/City Best from Hui instead of that paid by Yeung.  Whilst Yeung was questioned as to his apparent lack of investment towards the prescribed capital of the Mainland Company, there was likewise no evidence that Hui had done that.  Neither party had apparently been asked to contribute towards the capital investment into the Mainland Company.  Common to both parties was that the application for a licence was basically entrusted to their respective agents, and neither party seemed to have cared much about the details at the material time.

41.  All Hui managed to say in support of his alleged acquisition of the right to the Licence pursuant to the Alleged Agreement was his registration as the proprietor of New Loyal, which held the Licence, in April 2013.

The business registration

42.  Hui was first registered as a proprietor of New Loyal in April 2013, when Madam Kwok and Madam Wong were still on record partners.  The Licence was issued to New Loyal in late August 2013, and the HK Permit was issued in late September 2013.  The business registration record shows that Madam Wong and Madam Wong ceased to be partners in New Loyal on 3 October 2013.  It was argued on behalf of Hui that this signifies the moment when Hui became the sole proprietor of New Loyal, and thus entitled to the Licence.

43.  However, the withdrawal of Madam Kwok and Madam Wong from New Loyal was only registered on 15 October 2013 together with that of Yeung’s joining the company on the day before.  On 16 October 2013, Hui was seen to be withdrawing from New Loyal.  The changes in the public record with the net effect of Yeung becoming the sole proprietor of New Loyal were updated within 2 days.  Ms Law submitted that it would be artificial to focus on what appeared to be a 11-day gap between the departure of Madam Kwok and Madam Wong and the joining of Yeung as signifying Hui’s alleged sole proprietorship of New Loyal and thus entitlement to the Licence.  I agree.

44.  There were subsequent changes to the business registration of the proprietor of New Loyal between 2013 and 2014 and the eventual cessation of Hui as a proprietor of New Loyal together with the transfer of the Licence number plate from Hui’s vehicle to that of another driver in 2015.  Hui alleges forgery, which he has the burden of proving by cogent evidence: see Nina Kung v Wang Din Shin (2005) 8 HKCFAR 387 (at §§180; 626); Phipson on Evidence (19^th ed) at §6-06.  Neither party adduced expert evidence in this respect.

45.  No doubt Hui was in a position to say whether he signed any of those documents.  His pleaded case is that he only came to notice in early September 2015 from the business registration document of New Loyal that Yeung joined and he left the company on 14 and 16 October 2013 respectively, and then he re-joined and left the company on 24 August and 26 September 2014 respectively. Hui claims he had no knowledge or consent about such changes[14]. Specifically, Hui pleaded[15] that the notifications of change of partners dated 16 October 2013 and 24 September 2014 effecting his departures from New Loyal were not signed by him.  Nor did he authorize anyone to sign them on his behalf.

46.  As a matter of pleading, whilst he denied knowledge or consent to the changes, Hui only attacked the notifications recording his withdrawal from New Loyal in October 2013 and September 2014, but not the notifications recording his joining New Loyal in April 2013 and August 2013.  This remained to be the stance when Mr Yip opened the case[16]. For what is worth, what appears to be his signatures in all these documents may appeal to any fair reader to be rather similar.  I am not in a position to say more than that.

47.  In his evidence, Hui did deny having signed any of the above notifications, including those recording his joining and re-joining New Loyal. Whilst he admitted having seen and signed documents of the kind, Hui was unable to identify any other such document that he admitted having signed or to explain the lack of them in the evidence except for those above.  More importantly, if all these notifications were denied, including the one dated April 2013 recording his first joining New Loyal, it is difficult for him to rely on the same as evidence of his becoming a proprietor proper of the company and thus his entitlement to the Licence.

48.  Apart from the signatures in the notifications, Hui also pointed out that the address as per the business registration record of New Loyal was not his or supplied by him.  However, in his evidence in court, Hui confirmed that Tsui/City Best was also supposed to collect and handle the mail received in connection with New Loyal for him.  That does not differ much from Yeung’s case in that the address of New Loyal or its proprietor used in the business registration were provided to him by Chung and then Tsui, which he was given to understood was to facilitate the arrangement to be made by them respectively at different stages.

49.  Hui also alleges that the signature on the Mainland Form was also a forgery.  The form bears on its face the chop “退港” signifying return to Hong Kong.  The receipt issued by City Best for the renewal in 2015 evidences the payment of the requisite fees by Hui.  There is force in his denying any intention to surrender the Licence.  By pleading, Hui admitted that on that occasion (on 18 August 2015), he did sign some documents presented by Tsui to him.  Whilst he denied in court the Mainland Form was amongst what he signed, Hui could provide no clue as to what document he did sign.  He did surrender the Licence number plate, whilst this was not part of the requirement for the previous renewal.  As to that, Hui blamed it on the alleged misrepresentation of Tsui.

50.  Considering all the evidence against the known circumstances, I am impressed that either Hui did sign the documents in question or alternatively the documents, or some of them, were signed for him.  That, I find, was in line with the modus operandi whereby Hui virtually left it to Tsui/City Best to arrange everything in connection with the Licence, and Hui would at times act as requested without query as long as he had the use of the Licence.

51.  As to Yeung, the picture appearing to him was that Tsui/City Best was at all times responsible for the arrangement for the licensing out of the use of the Licence, and from Tsui he expected to receive a monthly licence fee.  The changes to the business registration of the proprietor of New Loyal affecting Hui were understood to be necessary to render him eligible for renewing the HK Permit annually in order to use the Licence.  The timing of the changes of the proprietor of New Loyal recorded in the above notifications tallies with the timing of the renewal of the HK Permit.  It was because of the default in the monthly licence fee payment in 2014 that Yeung decided in 2015 to terminate the arrangement and demanded for the return of the Licence.  Yeung took it from Tsui/City Best that his demand was met, as it was Tsui/City Best that made the arrangement, again without any contact between Hui and Yeung.

52.  Whilst Hui’s pleaded case is that Tsui represented that he/City Best would provide the companies that would be required for applying for the licence and holding the licence once obtained, and those companies would be held by people related to Tsui/City Best, there is no allegation that Yeung was amongst those people.  Nor is there allegation that Yeung was somehow a co-conspirator or had knowledge about how the alleged signatures of Hui came to be put in the various documents.  In court, Hui did not attempt to say that Tsui/City Best acted in concert with Yeung in any way.  The state of the evidence also does not support such adverse implication against Yeung.

53.  The circumstances, according to the parties respectively, suggest that Tsui/City Best managed to secure from the parties their respective trust and authority to handle all the matters incidental to what Tsui represented to Hui and Yeung that he would do for them respectively in connection with the Licence.  The reality was also that the parties got what they believed Tsui/City Best had done for them respectively.  Hui had the use of the Licence which he believed was acquired by Tsui/City Best on his behalf.  Yeung believed Hui was the user of the Licence pursuant to the licence arranged by Tsui/City. Both parties were kept in the dark about what Tsui/City Best was doing behind them.  Tsui/City Best engineered the arrangement to ensure the opportunity to do that.

Apparent authority

54.  In his opening submissions, Mr Yip put forward a further formulation of his client’s case on the basis of apparent authority of Tsui/City Best to bind Yeung as principal to the misconduct mentioned above.  As mentioned, the case based on apparent authority is not pleaded.  I would nevertheless consider that for completeness.

55.  Counsel’s formulation[17] was premised on the authority of Tsui/City Best to change the business registration of the proprietor of New Loyal from Yeung’s nominee, Madam Kwok, to Hui.  Yeung therefore clothed Tsui/City Best with such authority to effectively transfer the ownership of New Loyal, and thus the Licence as its asset.  Mr Yip submitted that in effecting the changes, Tsui/City Best acted in fraud of Yeung as the principal and for own benefit, but that would not necessarily negate actual authority or relieve Yeung of his liability towards Hui for what Tsui/City Best did.

56.  There seems to be no dispute as to the principles.  The notion of apparent authority is premised on the representation by the principal to the third party.  Such representation may take the form of the principal holding the agent out as having certain authority to act on his behalf.  Conduct of the agent within such apparent authority would be said to bind the principal, albeit beyond his actual authority and in breach of the agency relationship.

57.  However, the alleged operation of apparent authority could only be premised on the understanding of Hui at the material time that Tsui/City Best arranged for the change of registration of the proprietor of New Loyal for the purpose of transferring to him from Yeung, or an undisclosed principal of Tsui/City Best, who held the Licence through New Loyal.  However, as mentioned, the pleaded case of Hui is that he engaged Tsui/City Best for service including that to apply for a licence to be held through a Hong Kong company.  Hui had no understanding that Tsui/City Best was transferring to him the ownership of New Loyal and thus the right to the Licence from Yeung, or the undisclosed principal of Tsui/City Best, which currently held or would hold the right to the Licence through that company.  Pleading aside, the necessary factual foundation for the apparent authority of Tsui/City Best to bind Yeung as the principal is lacking.

58.  In 2015, Hui entrusted Tsui to renew the Licence, and was allegedly a labour of the misrepresentation of Tsui regarding the removal of the Licence number plate.  Again, there was no alleged understanding on the part of Tsui that Yeung had anything to do with that episode.  There was no factual basis for the assertion that Tsui was then acting on the apparent authority of Yeung either.  If anything, it was Yeung who was in the position to rely on the apparent authority of Tsui from Hui as the license user to hand over the Licence number plate to him.

The relief claimed

59.  The claim for declaratory relief and order for transfer of New Loyal and the Licence is proprietary in nature.  The claim must be based on Hui’s alleged property right as opposed to either the lack of it or an inferior right of Yeung in the Licence.

60.  Hui contends that his surrender of the Licence number plate was null and void, and he has been deprived of the use of the Licence.  He claims that New Loyal, and the Licence as its asset, belong to him beneficially. Alternatively, Yeung held the Licence through New Loyal on trust for him.  Hui seeks declaration to that effect and order for the transfer of New Loyal by Yeung to him.

61.  On behalf of Yeung, it was submitted that New Loyal is unincorporated and thus lacks separate corporate identity, and it is not capable of being owned beneficially as opposed to legally as such.  However, its business interest and assets are: see Tam Ying Man v Leung Ka Chun [2016] HKCFI 1422 (31 August 2016), per DHCJ Marlene Ng (as she then was) at §§86-87.  This I think is right.

62.  There is no dispute that New Loyal has no business other than asset holding, and the only asset is the Licence.  The Licence is not a chattel, but a right attached to the holder and a specific vehicle subject to regulations and renewal in the Mainland.  In Goel v Pick [2006] RTR 28, Sir Francis Ferris had this to say about the nature of such right (in the context of bankruptcy):

“20. … A VRM [vehicle registration mark] is an item of property only in a very qualified sense. Essentially it is a mark or number assigned to motor vehicles by a governmental agency for regulatory reasons. It is only as an incident of the requirement that every road vehicle shall have a VRM assigned to it that certain marks or numbers have come to be regarded as attractive by reason of their novelty or distinctiveness and thus to have a value. A glance at press advertisements shows that some VRMs are traded, or at least offered for sale, at substantial prices. But if one speaks of the disposal or acquisition of a particular VRM one is inevitably referring to the process of retention and nomination prescribed by the regulations. What … referred to as “the right to the VRM” is, in my view, nothing more nor less than the ability to resort to the regulatory machinery in order to obtain the transfer of a VRM from one vehicle to another. I do not think this can be described as a chose in action. Even if it can, it is not capable of being “assigned”, as distinct from being exercised in accordance with the regulations.

21. It would, I think, be somewhat easier to describe a right of retention, once granted, as a chose in action...”

63.  The issue of whether a licence in the present context is a chose in action traceable in equity has been raised before the Hong Kong court, but there is apparently yet to be a firm view on that: see Tam Ying Man (above) at §§87-89.

64.  Even putting aside the above concern, it is nevertheless apparent that the exact nature of the alleged trust between Hui and Yeung was not spelt out in the pleading.  In the absence of any dealing of the Licence between the parties, albeit through agent, there is no basis for a resulting trust to arise between them.  The closest that one may suggest in this context would be a constructive trust arising out of unjust enrichment or knowing receipt or assistance.  However, in view of the discussion above, it is not proved that Yeung was a party to any misconduct on the part of Tsui/City Best.  Nor was it alleged that any part of the payments made by Hui to Tsui/City Best ever went to Yeung.  I find both parties have made payments to their respective agents for acquiring a licence.  The Licence was indeed issued to New Loyal, which, I find, was first formed for and on behalf of Yeung.

65.  Neither party has adduced evidence as to whether and, if yes, how their respective payment led to the what turned out to the Licence.  Neither party is therefore in a position to say that it was because of his payment that the Licence came to be issued so that the other party may not benefit from it.  One therefore returns to the starting point, namely that Hui has the burden of proving his proprietary claim.  He fails to establish that he has the property right to the Licence as opposed to either no or inferior property right of Yeung to the same.  In the circumstances, he fails to establish that it is unconscionable for Yeung, through holding New Loyal, to be now holding the Licence.

66.  The alternative claim for damages was introduced by way of amendment when the trial began.  It is the claim for damages in the sum of RMB750,000 in the event that Yeung fails or refuses to transfer New Loyal to Hui.  The basis for the claim for what was apparently the alleged total amount of payment made by Hui to Tsui/City Best was not pleaded.  As discussed, there is no allegation or evidence that any part of the payments made by Hui to Tsui/City Best ever went to Yeung.

67.  Even assuming that somehow Yeung could be liable to compensate Hui for what Hui has paid, it would appear that the claim for the amount paid could only be based on wasted expenses or total failure of consideration.  However, Hui’s own case is that he has had the actual use of the Licence until 2015.  He cannot now claim for the amount paid as if the amount has been totally wasted or that the consideration for his payment has totally failed.  Any loss of Hui would have taken the form of loss of the value or use of the Licence subject to the annual renewal.  Yet that has not been pleaded.  Nor has any evidence in that respect been adduced.  In the circumstances, there is simply no way that Hui could discharge his burden of proving the purported claim for damages as an alternative.

68.  In the circumstances, it does appear that the recourse that remains for Hui is to recover from Tsui/City Best as his contracting party for misrepresentation and/or breach of agreement for his loss and damage.

Conclusion and order

69.  All matters considered, including those discussed above, I come to the conclusion that Hui fails to discharge his burden of proving liability on the part of Yeung.  The claim is thus dismissed with costs of the action, including any costs reserved, to Yeung.  Costs shall be taxed, if not agreed.  In the absence of application within 14 days to vary, this costs order shall become absolute without further order of the court.

	(Simon Leung)
	Deputy High Court Judge

Mr Francis Yip, instructed by Fung Wong Ng & Lam LLP Solicitors, for the plaintiff

Ms Jacqueline Law, instructed by L&L Lawyers, for the defendant