HCA2464/2003 WIN SOURCE INTERNATIONAL LTD v. WILLIAM ALVIN HUI AND OTHERS t/a HUI & LAM, SOLICITORS - LawHero
HCA2464/2003
WIN SOURCE INTERNATIONAL LTD v. WILLIAM ALVIN HUI AND OTHERS t/a HUI & LAM, SOLICITORS
高等法院（民事訴訟）Yam J15/6/2008
HCA2464/2003
由此
A A
HCA2464/2003
B B
IN THE HIGH COURT OF THE
C HONG KONG SPECIAL ADMINISTRATIVE REGION C
COURT OF FIRST INSTANCE
D D
ACTION NO.2464 OF 2003
E --------------------------- E
F BETWEEN F
WIN SOURCE INTERNATIONAL LIMITED Plaintiff
G G
H and H
I I
WILLIAM ALVIN HUI, Defendants
LAM CHING WAN and
J YEUNG MAN SING J
all trading as HUI & LAM, SOLICITORS
K K
---------------------------
L L
Before : Hon Yam J in Chambers
M Dates of Hearing : 23 October 2007 and 16 June 2008 M
Date of Judgment : 16 June 2008
N N
--------------------------
O JUDGMENT O
--------------------------
P P
The defendants’ striking out summons
Q Q
1. This is the adjourned hearing of the defendants’ application to
R R
strike out the plaintiff’s action. The original summons was dated
S 29 January 2007 and it simply said that : S
T “The action should be dismissed or stayed on the ground that the T
plaintiff being a limited company has not duly authorized its
U U
V V
由此
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A A
solicitors, Messrs Kitty So and Tong, to commence or to
B maintain the action.” B
C and with costs of the action to the defendants including costs of this C
application.
D D
E 2. There was an application to amend this summons by a E
summons dated 18 April 2007 and in paragraph 1 thereof they applied to
F F
amend by adding a new paragraph 2 which said :
G G
“in the alternative pursuant to Order 18, rule 19(1) of the Rules
of the High Court and the court inherent jurisdiction the
H statement of claim be struck out and the action dismissed as an H
abuse of process and therefore the defendant asked for indemnity
I costs for the application.” I
J J
3. The matter appeared before Mr Registrar C. Chan on 26 April
K 2007. By then, solicitor appearing for the defendant applied for leave to K
withdraw paragraph 1 of the summons and leave was granted to them to
L L
withdraw the amendment. They further obtained a direction from
M Mr Registrar Chan that their striking out application would be heard by a M
judge on a date to be fixed in consultation with counsel’s diaries. The
N N
plaintiff’s costs for this summons were summarily assessed at $800.
O O
4. In other words the original summons was maintained and the
P P
matter came before me on 23 October 2007. At that time, Mr Kenneth
Q K.L. Chan and Mr Victor Chiu were instructed by Messrs Kitty So & Tong Q
to appear for the plaintiff and the defendants had the same set of solicitors
R R
and counsel before me now.
S S
5. It was Mrs Campbell-Moffat’s submission for the defendants
T T
that the defendants said that the purported resolution dated 21 March 2003
U U
V V
由此
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A A
passed by the plaintiff’s directors in the directors meeting authorizing Kitty
B B
So & Tong to act for the company to take legal action against the present
C firm of solicitors of the defendant was a bogus document. They do not C
believe that it came into existence on or about 21 March 2003. It was just
D D
disclosed shortly before Suffiad J when his Lordship heard the case on
E 16 October 2007. That was actually filed and exhibited in an affirmation E
on 14 September 2007. I was persuaded on 23 October 2007 to allow
F F
cross-examination of deponents on their affirmations and the hearing was
G adjourned to a date to be fixed with five days reserved as assessed by G
counsel.
H H
I 6. However, in between time there was a total change of the I
J
team of lawyers representing the plaintiff’s company. Further, the J
plaintiff filed an affirmation on 3 June 2008 exhibiting the written
K K
resolutions of the company in general meeting on 27 May 2008 signed by
L
all four shareholders, Ho Siu Ping, Ho Siu Kuen, Liu Yuk Kiu and L
Liu Kwai Man and a board resolution also dated 27 May 2008 signed by
M M
the two directors. There are only two directors of the company and they
N are Ho Siu Ping and Ho Siu Kuen. The two resolutions were passed to N
the effect that the company ratified the authority of Kitty So & Tong to
O O
commence this action for and on behalf of the company and to carry on
P and continue the said action as they did up to the present until the present P
solicitors, Messrs Chan & Tsu, should file a notice to act in the High Court,
Q Q
in this action to take over to act for the company in place of Kitty So &
R Tong and to carry on and continue the said action. Mr Chan Siu Hung SC, R
who appeared with Ms Christine Tam for the plaintiff now told me that the
S S
two resolutions were passed was (a) by way of ex abundante cautela, and
T T
U U
V V
由此
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A A
(b) without prejudice to the previous resolution of the company dated
B B
21 March 2003.
C C
7. Thus, Chan & Tsu, the present solicitor for the plaintiff
D D
thereafter filed a notice to act and continue with the carrying of the present
E action and they appeared before me and instructed two other counsel as E
aforesaid.
F F
G 8. Mr Chan Chi Hung, SC submitted that even if, which is G
denied, there was anything improper in the previous resolution, the whole
H H
situation is now ratified and he cited page 355 of the Hong Kong Civil
I Procedure whereby a liquidator can ratify and validate the proceedings I
J
begun by a solicitor without authority and the case of Danish Mercantile J
Co. v. Beaumont [1951] 1 All ER 925 and also Kammy Town Limited v.
K K
Super Glory Corporation Limited (unreported), HCA3524/2003. The
L
latter judgment was delivered by A. Cheung J on 14 January 2005 and in L
paragraph 9 thereof A. Cheung J cited Airways Limited v. Bowen [1985]
M M
BCLC 355 C.A. in which it was said at 361 that :
N N
“Furthermore, as counsel for the solicitors reminded us, if an
action is started without authority, that position may nevertheless
O be cured by subsequent ratification. The authority is Danish O
Mercantile Co. Ltd v. Beaumont [1951] 1 All ER 925, [1951] 1
Ch 680, where an action improperly instituted by a company,
P which was subsequently wound up, was retrospectively and P
effectively ratified by the liquidator who was thereafter
Q appointed. …” Q
R R
9. To that, Mrs Campbell-Moffat who appeared with
S Mr Edward Ng for the defendants, submitted that the present case is an S
exception. It is an exceptional case in that from day one, the plaintiff
T T
company, as alleged by the defendants, was used as a vehicle to commit
U U
V V
由此
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A A
fraud and there was conspiracy among a number of persons. Originally it
B B
was designed to defeat one C.W. Lam’s wife’s divorce proceedings and to
C put certain assets out of the reach of the divorcing wife. I do not want to C
go into the detail of the alleged scheme in respect of the sale of four named
D D
properties which was alleged to be arranged in such a way that the
E properties would be sold to the plaintiff. The defendants’ firm of E
solicitors were instructed to act for the plaintiff company. The allegation
F F
was that one Mr Ringo Ho Kwan Chuen, who was a solicitor of Ho &
G Partners, was the main architect behind the whole fraudulent scheme. G
The further allegation was Kitty So & Tong knew from the outset that
H H
plaintiff was part of the fraudulent scheme and therefore their submission
I is that Kitty So & Tong could not have the proper authority. That was I
J
coupled with the allegation that Messrs Kitty So & Tong knew from the J
outset that the alleged purported resolution of 21 March 2003 was a forged
K K
document in the sense that it did not come into existence there and then; it
L
was just made thereafter to defend the application of the defendants to L
strike out the action for lack of authority.
M M
N 10. Be that as it may, it must be remembered that the original N
application (which is also the present striking out application today) was
O O
made under Order 32, rule 1, simply on the only ground that the plaintiff
P has not duly authorized its solicitor Messrs Kitty So & Tong. The undue P
authorization as alleged by the defendants was because this resolution was
Q Q
just a bogus resolution. It did not come into existence there and then, it
R was just made up subsequently before the hearing, as I have said before, in R
September 2007 shortly before the hearing before Suffiad J on 16 October
S S
2007. But now the whole matter has been ratified and Mr Chan’s
T submission is that the whole matter is now an academic exercise because T
U U
V V
由此
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A A
even if there was an action begun by a firm of solicitors without authority,
B B
it can be ratified by a proper resolution. There are two resolutions : one is
C the shareholders’ general meeting resolution and the other directors’ C
resolution. There is no question of lack of authority of Kitty So & Tong
D D
and obviously no question of lack of authority of the present solicitors
E acting for the plaintiff. E
F F
11. In other words, the whole application of the defendants now is
G boiled down to this : the allegation of conspiracy to defraud and the whole G
conspiracy scheme according to the defendants’ allegation, was designed
H H
by Mr Ringo Ho and this is also the main defence to the whole action.
I The defendants were and still are applying to strike out the plaintiff’s I
J
action on the same premises of facts as alleged by them. If I allow the J
cross-examination of the deponents in order to establish Kitty So & Tong’s
K K
lack of authority as part of the conspiracy scheme involving Messrs Kitty
L
So & Tong, this is part and parcel and in fact the main issue to be tried in L
the main action. At the moment, there is no lack of authority of the
M M
present solicitors; and even if Messrs Kitty So & Tong was not duly
N authorized, the situation has now been ratified by the two said resolutions. N
O O
12. The next question of course is : should I allow
P cross-examination to be conducted at this stage, in order to establish that P
from day one, it was a fraudulent scheme and Kitty So & Tong, as alleged
Q Q
by the defendants, knew from the very beginning that Win Source was a
R vehicle used by all the co-conspirators to defraud certain person or R
persons?
S S
T T
U U
V V
由此
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A A
13. I accept Mr Chan’s submission that I should not allow this
B B
issue to be tried as a preliminary issue because to allow the same to be
C done would depart from the original application. On the face of it, Kitty C
So & Tong at least have now been duly authorized by the ratification
D D
resolutions. More importantly, this is the main issue to be tried at the trial.
E The authorities in support of disallowing certain preliminary issues to be E
tried is quite clear. I start with the case of Mai Gou and Mak Chik Lun
F F
[2001] 3 HKLRD 248 in which Le Pichon JA at page 251 said :
G G
“Preliminary issues — applicable principles
H H
The annotation in The Supreme Court Practice 1999 is a useful
starting point. At para.33/4/10 it is stated that :
I I
An order for the separate trial of separate issues is a departure
from the beneficial object of the law that all disputes should be
J tried together, and therefore, generally speaking, such an order J
should only be made in exceptional circumstances or on special
grounds (per Jessel MR in Piercy v. Young (1880) LR 15
K K
Ch D 475 at p.479 and p.480; per Scrutton LJ in Bottomley v.
Hurst and Blackett Ltd and Houston (1927-28) 44 TLR p.451 at
L p.452). L
This approach was echoed by Lord Wilberforce in his speech in
M Tilling v. Whiteman [1980] AC 1 at pp.17H-18A : M
I, with others of your lordships, have often protested against the
N N
practice of allowing preliminary points to be taken, since this
course frequently adds to the difficulties of courts of appeal and
O tends to increase the cost and time of legal proceedings. If this O
practice cannot be confined to cases where the facts are
complicated and the legal issue short and easily decided, cases
P P
outside this guiding principle should at least be exceptional.
Q Indeed, as Lord Roskill observed in his speech in Allen v. Gulf Q
Oil Refining Ltd [1981] AC 1001 at p.1022A :
R The preliminary point procedure can in certain classes of case R
be invoked to achieve the desirable aim both of economy and
simplicity. But cases in which such invocation is desirable are
S few. Sometimes a single issue of law can be isolated from the S
other issues in a particular case whether of fact or of law, and its
T decision may be finally determinative of the case as a whole. T
Sometimes facts can be agreed and the sole issue is one of law.
U U
V V
由此
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A A
Lord Roskill went on to urge those whose task it is to decide
B whether or not the trial of preliminary points should be ordered B
to be ‘extremely cautions’ before acceding to pleas for the
making of such orders as a result of attractively advanced
C C
submissions founded upon pleas of supposed economy.”
D D
14. Since this case was decided, Hong Kong Civil Procedure
E E
2008 was amended with the addition of the authority of Mai Gou as
F follows : F
“ An order for the separate trial of separate issues is a
G departure from the general rule that all disputes should be tried G
together, and therefore, generally speaking, such an order should
only be made in exceptional circumstances or on special grounds
H (per Jessel M.R. in Piercy v. Young (No. 2) (1880) 15 Ch.D. 475 H
at 479 and 480; per Scrutton L.J. in Bottomley v. Hurst and
I Blackett (1927-28) 44 T.L.R. 451 at 452 and cited with approval I
in Mai Gou v. Mak Chik Lun [2001] 3 H.K.L.R.D. 248 and Re
Tai Ping Yeung Motors Ltd [2001] 2 H.K.C. 61)). Such an
J order will not be made on the application of the defendant to J
have the issues raised by his counterclaim tried before the
plaintiff’s issues in the action (Piercy v. Young, above) nor will
K K
such an order be made to try the liability of sureties before the
other issues in the action (Tasmanian Main Line Ry Co. v. Clark
L (1879) 27 W.R. 677). …” L
M M
15. For the aforesaid reason, I rule in favour of Mr Chan for the
N plaintiff and therefore dismiss paragraph 1 of the summons dated N
29 January 2007. That is I dismiss the defendants’ application to dismiss
O O
or stay the plaintiff’s action on the ground that the plaintiff has not duly
P authorized its solicitors Kitty So & Tong to commence or to maintain the P
action.
Q Q
R 16. This application was made under the court’s inherent R
jurisdiction to strike out on the facts of this case. To my mind, the facts
S S
will have to be established at the trial. Unless it is a plain and obvious
T T
case that the statement of claim should be struck out on Order 18,
U U
V V
由此
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A A
rule 19(1); the application to amend was coined in such a way that the
B B
court should strike out the statement of claim under its inherent jurisdiction
C and Order 18, rule 19(1). But then this application to amend was C
withdrawn and in both hearings, Mrs Campbell-Moffat had fairly pointed
D D
out that she could not succeed on the plain and obvious ground of striking
E out the case. Today she submitted that even in not a plain and obvious E
case, she should be allowed to succeed under the inherent jurisdiction of
F F
the court to strike out on the ground that there are special circumstances in
G this case. More specifically she submitted that after cross-examination, G
the finding of facts by me would be in the defendants’ favour in that the
H H
case of fraud would have been established.
I I
J
17. This to my mind is a circular argument. This amounted to J
the submission that I should try this issue on a preliminary basis. I have
K K
said that according to decided authority, this should be refused and for the
L
similar reason, the application under inherent jurisdiction to dismiss or stay L
the plaintiff’s action is not accepted. I have been repeating myself many
M M
times that the pure and single application was only on the ground that the
N plaintiff has not duly authorized its solicitors Messrs Kitty So & Tong to N
commence or to maintain the action. Under this apparently very simple
O O
application, which apparently is only the tip of an iceberg, the defendants
P say underneath this iceberg, there was a serious allegation that Kitty So P
was not duly authorized because they were part of the fraudulent scheme.
Q Q
That has to be established through finding of facts and, I have already said
R many times, it is not a case where I should try this point as a preliminary R
issue because this is the main issue to be tried at the trial.
S S
T T
U U
V V
由此
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A A
A further issue
B B
18. There was also an objection at the beginning of the hearing
C C
that the affirmation exhibiting the two resolutions came quite late and
D according to the previous direction, it was filed and served without leave. D
However I would in this case exercise my discretion and grant leave to the
E E
plaintiff to file and serve the affirmation and I therefore relied on the two
F resolutions. F
G G
Costs
H H
19. In respect of costs, originally I find the alternative in
I paragraph 18 of Mr Chan’s submissions more inviting and that is : “the I
issue of costs, and cross-examination, if any, should be reserved and
J J
adjourned to the trial, to be dealt with by the trial judge”.
K K
20. But then Mr Chan for the plaintiff referred me to a
L L
Calderbank letter. It was written without prejudice save as to costs. It
M was dated 5 June 2008 and was received by the defendants’ solicitors on M
Friday 6 June. The latter were given a deadline by 12 noon Friday,
N N
13 June, to accept this offer failing which the offer would be withdrawn.
O On 12 June 2008, solicitors for the defendants wrote back and said : O
P “ You are mistaken to assume our clients’ application is ‘now P
unarguable’. The circumstances of, and reasons for, the
Q
purported ratification are themselves most relevant to the Q
question of the bona fides of the Plaintiff’s action. After all,
you cannot at law ratify an act done to advance an illegal or
R improper purpose. R
It follows that our clients do not accept your proposal.”
S S
T T
U U
V V
由此
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A A
21. I must say that this is exactly on this point that the defendants
B B
have lost the argument. According to my decision, I do not think there is
C anything before me which should compel me to take it as an exceptional C
case in respect of costs when the Calderbank letter was given, albeit it was
D D
only received by the solicitors for the defendants on 6 June. They have
E amble of time to consider it and they rejected it after due consideration on E
those grounds which I have decided against them. That was 12 June.
F F
Their rejection should have the usual consequence of a Calderbank letter.
G Therefore, even if the defendants succeed at the trial to establish their G
defence or defences, it is to my mind unarguable that the ratification is a
H H
proper ratification of Kitty So & Tong’s purported lack of authority and
I also a proper authorization of present solicitors to act for the plaintiff. I
J
Whether Kitty So & Tong was part of the conspiracy is an issue to be tried. J
K K
22. Further, I want to say this at the end : if I were the defendants,
L
I would give notice to the firm of solicitors when allegations were made L
against them in the defence. It is a matter for the solicitors acting for the
M M
defendants to take the proper course.
N N
23. Perhaps I will furthermore say this : I am so amazed that the
O O
defendants who is a firm of solicitors, is represented by another firm of
P solicitors and two counsel, and they all as lawyers took the view that these P
allegations against a firm of solicitors which is the main defence of the
Q Q
defendants’ case, could be an issue to be tried on a preliminary basis.
R Anyway, I do not think I should say anything more. R
S S
24. It is my decision that in respect of costs, in view of the
T Calderbank letter, I shall make the following order of costs : costs of the T
U U
V V
由此
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A A
summons of the application of the defendants’ application by their
B B
summons dated 29 January 2007 be reserved to the trial judge except that
C the costs of the hearing fixed before me from 16 to 20 June 2008 be to the C
plaintiff in any event with certificate for two counsel.
D D
E E
F F
G G
(D. Yam)
H Judge of the Court of First Instance H
High Court
I I
J
Mr Kenneth C.L. Chan leading Mr Victor K.H. Chiu, instructed by J
Messrs Kitty So & Tong, for the Plaintiff on 23 October 2007
K K
Mr Chan Chi Hung, SC leading Ms Christine Y.K. Tam, instructed by
Messrs Chan & Tsu, for the Plaintiff on 16 June 2008
L L
Mrs A.P. Campbell-Moffat and Mr Edward Ng, instructed by
M Messrs Fred Kan & Co., for the Defendants M
N N
O O
P P
Q Q
R R
S S
T T
U U
V V
由此
A A
HCA2464/2003
B B
IN THE HIGH COURT OF THE
C HONG KONG SPECIAL ADMINISTRATIVE REGION C
COURT OF FIRST INSTANCE
D D
ACTION NO.2464 OF 2003
E --------------------------- E
F BETWEEN F
WIN SOURCE INTERNATIONAL LIMITED Plaintiff
G G
H and H
I I
WILLIAM ALVIN HUI, Defendants
LAM CHING WAN and
J YEUNG MAN SING J
all trading as HUI & LAM, SOLICITORS
K K
---------------------------
L L
Before : Hon Yam J in Chambers
M Dates of Hearing : 23 October 2007 and 16 June 2008 M
Date of Judgment : 16 June 2008
N N
--------------------------
O JUDGMENT O
--------------------------
P P
The defendants’ striking out summons
Q Q
1. This is the adjourned hearing of the defendants’ application to
R R
strike out the plaintiff’s action. The original summons was dated
S 29 January 2007 and it simply said that : S
T “The action should be dismissed or stayed on the ground that the T
plaintiff being a limited company has not duly authorized its
U U
V V
由此
- 2 -
A A
solicitors, Messrs Kitty So and Tong, to commence or to
B maintain the action.” B
C and with costs of the action to the defendants including costs of this C
application.
D D
E 2. There was an application to amend this summons by a E
summons dated 18 April 2007 and in paragraph 1 thereof they applied to
F F
amend by adding a new paragraph 2 which said :
G G
“in the alternative pursuant to Order 18, rule 19(1) of the Rules
of the High Court and the court inherent jurisdiction the
H statement of claim be struck out and the action dismissed as an H
abuse of process and therefore the defendant asked for indemnity
I costs for the application.” I
J J
3. The matter appeared before Mr Registrar C. Chan on 26 April
K 2007. By then, solicitor appearing for the defendant applied for leave to K
withdraw paragraph 1 of the summons and leave was granted to them to
L L
withdraw the amendment. They further obtained a direction from
M Mr Registrar Chan that their striking out application would be heard by a M
judge on a date to be fixed in consultation with counsel’s diaries. The
N N
plaintiff’s costs for this summons were summarily assessed at $800.
O O
4. In other words the original summons was maintained and the
P P
matter came before me on 23 October 2007. At that time, Mr Kenneth
Q K.L. Chan and Mr Victor Chiu were instructed by Messrs Kitty So & Tong Q
to appear for the plaintiff and the defendants had the same set of solicitors
R R
and counsel before me now.
S S
5. It was Mrs Campbell-Moffat’s submission for the defendants
T T
that the defendants said that the purported resolution dated 21 March 2003
U U
V V
由此
- 3 -
A A
passed by the plaintiff’s directors in the directors meeting authorizing Kitty
B B
So & Tong to act for the company to take legal action against the present
C firm of solicitors of the defendant was a bogus document. They do not C
believe that it came into existence on or about 21 March 2003. It was just
D D
disclosed shortly before Suffiad J when his Lordship heard the case on
E 16 October 2007. That was actually filed and exhibited in an affirmation E
on 14 September 2007. I was persuaded on 23 October 2007 to allow
F F
cross-examination of deponents on their affirmations and the hearing was
G adjourned to a date to be fixed with five days reserved as assessed by G
counsel.
H H
I 6. However, in between time there was a total change of the I
J
team of lawyers representing the plaintiff’s company. Further, the J
plaintiff filed an affirmation on 3 June 2008 exhibiting the written
K K
resolutions of the company in general meeting on 27 May 2008 signed by
L
all four shareholders, Ho Siu Ping, Ho Siu Kuen, Liu Yuk Kiu and L
Liu Kwai Man and a board resolution also dated 27 May 2008 signed by
M M
the two directors. There are only two directors of the company and they
N are Ho Siu Ping and Ho Siu Kuen. The two resolutions were passed to N
the effect that the company ratified the authority of Kitty So & Tong to
O O
commence this action for and on behalf of the company and to carry on
P and continue the said action as they did up to the present until the present P
solicitors, Messrs Chan & Tsu, should file a notice to act in the High Court,
Q Q
in this action to take over to act for the company in place of Kitty So &
R Tong and to carry on and continue the said action. Mr Chan Siu Hung SC, R
who appeared with Ms Christine Tam for the plaintiff now told me that the
S S
two resolutions were passed was (a) by way of ex abundante cautela, and
T T
U U
V V
由此
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A A
(b) without prejudice to the previous resolution of the company dated
B B
21 March 2003.
C C
7. Thus, Chan & Tsu, the present solicitor for the plaintiff
D D
thereafter filed a notice to act and continue with the carrying of the present
E action and they appeared before me and instructed two other counsel as E
aforesaid.
F F
G 8. Mr Chan Chi Hung, SC submitted that even if, which is G
denied, there was anything improper in the previous resolution, the whole
H H
situation is now ratified and he cited page 355 of the Hong Kong Civil
I Procedure whereby a liquidator can ratify and validate the proceedings I
J
begun by a solicitor without authority and the case of Danish Mercantile J
Co. v. Beaumont [1951] 1 All ER 925 and also Kammy Town Limited v.
K K
Super Glory Corporation Limited (unreported), HCA3524/2003. The
L
latter judgment was delivered by A. Cheung J on 14 January 2005 and in L
paragraph 9 thereof A. Cheung J cited Airways Limited v. Bowen [1985]
M M
BCLC 355 C.A. in which it was said at 361 that :
N N
“Furthermore, as counsel for the solicitors reminded us, if an
action is started without authority, that position may nevertheless
O be cured by subsequent ratification. The authority is Danish O
Mercantile Co. Ltd v. Beaumont [1951] 1 All ER 925, [1951] 1
Ch 680, where an action improperly instituted by a company,
P which was subsequently wound up, was retrospectively and P
effectively ratified by the liquidator who was thereafter
Q appointed. …” Q
R R
9. To that, Mrs Campbell-Moffat who appeared with
S Mr Edward Ng for the defendants, submitted that the present case is an S
exception. It is an exceptional case in that from day one, the plaintiff
T T
company, as alleged by the defendants, was used as a vehicle to commit
U U
V V
由此
- 5 -
A A
fraud and there was conspiracy among a number of persons. Originally it
B B
was designed to defeat one C.W. Lam’s wife’s divorce proceedings and to
C put certain assets out of the reach of the divorcing wife. I do not want to C
go into the detail of the alleged scheme in respect of the sale of four named
D D
properties which was alleged to be arranged in such a way that the
E properties would be sold to the plaintiff. The defendants’ firm of E
solicitors were instructed to act for the plaintiff company. The allegation
F F
was that one Mr Ringo Ho Kwan Chuen, who was a solicitor of Ho &
G Partners, was the main architect behind the whole fraudulent scheme. G
The further allegation was Kitty So & Tong knew from the outset that
H H
plaintiff was part of the fraudulent scheme and therefore their submission
I is that Kitty So & Tong could not have the proper authority. That was I
J
coupled with the allegation that Messrs Kitty So & Tong knew from the J
outset that the alleged purported resolution of 21 March 2003 was a forged
K K
document in the sense that it did not come into existence there and then; it
L
was just made thereafter to defend the application of the defendants to L
strike out the action for lack of authority.
M M
N 10. Be that as it may, it must be remembered that the original N
application (which is also the present striking out application today) was
O O
made under Order 32, rule 1, simply on the only ground that the plaintiff
P has not duly authorized its solicitor Messrs Kitty So & Tong. The undue P
authorization as alleged by the defendants was because this resolution was
Q Q
just a bogus resolution. It did not come into existence there and then, it
R was just made up subsequently before the hearing, as I have said before, in R
September 2007 shortly before the hearing before Suffiad J on 16 October
S S
2007. But now the whole matter has been ratified and Mr Chan’s
T submission is that the whole matter is now an academic exercise because T
U U
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A A
even if there was an action begun by a firm of solicitors without authority,
B B
it can be ratified by a proper resolution. There are two resolutions : one is
C the shareholders’ general meeting resolution and the other directors’ C
resolution. There is no question of lack of authority of Kitty So & Tong
D D
and obviously no question of lack of authority of the present solicitors
E acting for the plaintiff. E
F F
11. In other words, the whole application of the defendants now is
G boiled down to this : the allegation of conspiracy to defraud and the whole G
conspiracy scheme according to the defendants’ allegation, was designed
H H
by Mr Ringo Ho and this is also the main defence to the whole action.
I The defendants were and still are applying to strike out the plaintiff’s I
J
action on the same premises of facts as alleged by them. If I allow the J
cross-examination of the deponents in order to establish Kitty So & Tong’s
K K
lack of authority as part of the conspiracy scheme involving Messrs Kitty
L
So & Tong, this is part and parcel and in fact the main issue to be tried in L
the main action. At the moment, there is no lack of authority of the
M M
present solicitors; and even if Messrs Kitty So & Tong was not duly
N authorized, the situation has now been ratified by the two said resolutions. N
O O
12. The next question of course is : should I allow
P cross-examination to be conducted at this stage, in order to establish that P
from day one, it was a fraudulent scheme and Kitty So & Tong, as alleged
Q Q
by the defendants, knew from the very beginning that Win Source was a
R vehicle used by all the co-conspirators to defraud certain person or R
persons?
S S
T T
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A A
13. I accept Mr Chan’s submission that I should not allow this
B B
issue to be tried as a preliminary issue because to allow the same to be
C done would depart from the original application. On the face of it, Kitty C
So & Tong at least have now been duly authorized by the ratification
D D
resolutions. More importantly, this is the main issue to be tried at the trial.
E The authorities in support of disallowing certain preliminary issues to be E
tried is quite clear. I start with the case of Mai Gou and Mak Chik Lun
F F
[2001] 3 HKLRD 248 in which Le Pichon JA at page 251 said :
G G
“Preliminary issues — applicable principles
H H
The annotation in The Supreme Court Practice 1999 is a useful
starting point. At para.33/4/10 it is stated that :
I I
An order for the separate trial of separate issues is a departure
from the beneficial object of the law that all disputes should be
J tried together, and therefore, generally speaking, such an order J
should only be made in exceptional circumstances or on special
grounds (per Jessel MR in Piercy v. Young (1880) LR 15
K K
Ch D 475 at p.479 and p.480; per Scrutton LJ in Bottomley v.
Hurst and Blackett Ltd and Houston (1927-28) 44 TLR p.451 at
L p.452). L
This approach was echoed by Lord Wilberforce in his speech in
M Tilling v. Whiteman [1980] AC 1 at pp.17H-18A : M
I, with others of your lordships, have often protested against the
N N
practice of allowing preliminary points to be taken, since this
course frequently adds to the difficulties of courts of appeal and
O tends to increase the cost and time of legal proceedings. If this O
practice cannot be confined to cases where the facts are
complicated and the legal issue short and easily decided, cases
P P
outside this guiding principle should at least be exceptional.
Q Indeed, as Lord Roskill observed in his speech in Allen v. Gulf Q
Oil Refining Ltd [1981] AC 1001 at p.1022A :
R The preliminary point procedure can in certain classes of case R
be invoked to achieve the desirable aim both of economy and
simplicity. But cases in which such invocation is desirable are
S few. Sometimes a single issue of law can be isolated from the S
other issues in a particular case whether of fact or of law, and its
T decision may be finally determinative of the case as a whole. T
Sometimes facts can be agreed and the sole issue is one of law.
U U
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A A
Lord Roskill went on to urge those whose task it is to decide
B whether or not the trial of preliminary points should be ordered B
to be ‘extremely cautions’ before acceding to pleas for the
making of such orders as a result of attractively advanced
C C
submissions founded upon pleas of supposed economy.”
D D
14. Since this case was decided, Hong Kong Civil Procedure
E E
2008 was amended with the addition of the authority of Mai Gou as
F follows : F
“ An order for the separate trial of separate issues is a
G departure from the general rule that all disputes should be tried G
together, and therefore, generally speaking, such an order should
only be made in exceptional circumstances or on special grounds
H (per Jessel M.R. in Piercy v. Young (No. 2) (1880) 15 Ch.D. 475 H
at 479 and 480; per Scrutton L.J. in Bottomley v. Hurst and
I Blackett (1927-28) 44 T.L.R. 451 at 452 and cited with approval I
in Mai Gou v. Mak Chik Lun [2001] 3 H.K.L.R.D. 248 and Re
Tai Ping Yeung Motors Ltd [2001] 2 H.K.C. 61)). Such an
J order will not be made on the application of the defendant to J
have the issues raised by his counterclaim tried before the
plaintiff’s issues in the action (Piercy v. Young, above) nor will
K K
such an order be made to try the liability of sureties before the
other issues in the action (Tasmanian Main Line Ry Co. v. Clark
L (1879) 27 W.R. 677). …” L
M M
15. For the aforesaid reason, I rule in favour of Mr Chan for the
N plaintiff and therefore dismiss paragraph 1 of the summons dated N
29 January 2007. That is I dismiss the defendants’ application to dismiss
O O
or stay the plaintiff’s action on the ground that the plaintiff has not duly
P authorized its solicitors Kitty So & Tong to commence or to maintain the P
action.
Q Q
R 16. This application was made under the court’s inherent R
jurisdiction to strike out on the facts of this case. To my mind, the facts
S S
will have to be established at the trial. Unless it is a plain and obvious
T T
case that the statement of claim should be struck out on Order 18,
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A A
rule 19(1); the application to amend was coined in such a way that the
B B
court should strike out the statement of claim under its inherent jurisdiction
C and Order 18, rule 19(1). But then this application to amend was C
withdrawn and in both hearings, Mrs Campbell-Moffat had fairly pointed
D D
out that she could not succeed on the plain and obvious ground of striking
E out the case. Today she submitted that even in not a plain and obvious E
case, she should be allowed to succeed under the inherent jurisdiction of
F F
the court to strike out on the ground that there are special circumstances in
G this case. More specifically she submitted that after cross-examination, G
the finding of facts by me would be in the defendants’ favour in that the
H H
case of fraud would have been established.
I I
J
17. This to my mind is a circular argument. This amounted to J
the submission that I should try this issue on a preliminary basis. I have
K K
said that according to decided authority, this should be refused and for the
L
similar reason, the application under inherent jurisdiction to dismiss or stay L
the plaintiff’s action is not accepted. I have been repeating myself many
M M
times that the pure and single application was only on the ground that the
N plaintiff has not duly authorized its solicitors Messrs Kitty So & Tong to N
commence or to maintain the action. Under this apparently very simple
O O
application, which apparently is only the tip of an iceberg, the defendants
P say underneath this iceberg, there was a serious allegation that Kitty So P
was not duly authorized because they were part of the fraudulent scheme.
Q Q
That has to be established through finding of facts and, I have already said
R many times, it is not a case where I should try this point as a preliminary R
issue because this is the main issue to be tried at the trial.
S S
T T
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由此
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A A
A further issue
B B
18. There was also an objection at the beginning of the hearing
C C
that the affirmation exhibiting the two resolutions came quite late and
D according to the previous direction, it was filed and served without leave. D
However I would in this case exercise my discretion and grant leave to the
E E
plaintiff to file and serve the affirmation and I therefore relied on the two
F resolutions. F
G G
Costs
H H
19. In respect of costs, originally I find the alternative in
I paragraph 18 of Mr Chan’s submissions more inviting and that is : “the I
issue of costs, and cross-examination, if any, should be reserved and
J J
adjourned to the trial, to be dealt with by the trial judge”.
K K
20. But then Mr Chan for the plaintiff referred me to a
L L
Calderbank letter. It was written without prejudice save as to costs. It
M was dated 5 June 2008 and was received by the defendants’ solicitors on M
Friday 6 June. The latter were given a deadline by 12 noon Friday,
N N
13 June, to accept this offer failing which the offer would be withdrawn.
O On 12 June 2008, solicitors for the defendants wrote back and said : O
P “ You are mistaken to assume our clients’ application is ‘now P
unarguable’. The circumstances of, and reasons for, the
Q
purported ratification are themselves most relevant to the Q
question of the bona fides of the Plaintiff’s action. After all,
you cannot at law ratify an act done to advance an illegal or
R improper purpose. R
It follows that our clients do not accept your proposal.”
S S
T T
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A A
21. I must say that this is exactly on this point that the defendants
B B
have lost the argument. According to my decision, I do not think there is
C anything before me which should compel me to take it as an exceptional C
case in respect of costs when the Calderbank letter was given, albeit it was
D D
only received by the solicitors for the defendants on 6 June. They have
E amble of time to consider it and they rejected it after due consideration on E
those grounds which I have decided against them. That was 12 June.
F F
Their rejection should have the usual consequence of a Calderbank letter.
G Therefore, even if the defendants succeed at the trial to establish their G
defence or defences, it is to my mind unarguable that the ratification is a
H H
proper ratification of Kitty So & Tong’s purported lack of authority and
I also a proper authorization of present solicitors to act for the plaintiff. I
J
Whether Kitty So & Tong was part of the conspiracy is an issue to be tried. J
K K
22. Further, I want to say this at the end : if I were the defendants,
L
I would give notice to the firm of solicitors when allegations were made L
against them in the defence. It is a matter for the solicitors acting for the
M M
defendants to take the proper course.
N N
23. Perhaps I will furthermore say this : I am so amazed that the
O O
defendants who is a firm of solicitors, is represented by another firm of
P solicitors and two counsel, and they all as lawyers took the view that these P
allegations against a firm of solicitors which is the main defence of the
Q Q
defendants’ case, could be an issue to be tried on a preliminary basis.
R Anyway, I do not think I should say anything more. R
S S
24. It is my decision that in respect of costs, in view of the
T Calderbank letter, I shall make the following order of costs : costs of the T
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A A
summons of the application of the defendants’ application by their
B B
summons dated 29 January 2007 be reserved to the trial judge except that
C the costs of the hearing fixed before me from 16 to 20 June 2008 be to the C
plaintiff in any event with certificate for two counsel.
D D
E E
F F
G G
(D. Yam)
H Judge of the Court of First Instance H
High Court
I I
J
Mr Kenneth C.L. Chan leading Mr Victor K.H. Chiu, instructed by J
Messrs Kitty So & Tong, for the Plaintiff on 23 October 2007
K K
Mr Chan Chi Hung, SC leading Ms Christine Y.K. Tam, instructed by
Messrs Chan & Tsu, for the Plaintiff on 16 June 2008
L L
Mrs A.P. Campbell-Moffat and Mr Edward Ng, instructed by
M Messrs Fred Kan & Co., for the Defendants M
N N
O O
P P
Q Q
R R
S S
T T
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V V