Documents
Resources
Learning Center
Upload
Plans & pricing Sign in
Sign Out
Your Federal Quarterly Tax Payments are due April 15th Get Help Now >>

COURT OF FIRST INSTANCE - Legal Reference System

VIEWS: 5 PAGES: 28

									A                                                                                     A


B                                                                                     B
                                                                HCA 2608/2006
C                       IN THE HIGH COURT OF THE                                      C

          HONG KONG SPECIAL ADMINISTRATIVE REGION
D                                                                                     D
                        COURT OF FIRST INSTANCE
E                          ACTION NO 2608 OF 2006                                     E

                                  ____________
F                                                                                     F
    BETWEEN
G                                                                                     G
                    BEST JOINT INVESTMENTS LIMITED                        Plaintiff
H                                                                                     H
                                         and
I                                                                                     I
                                KAGANI LIMITED                       1st Defendant
J                           CHAN SIU LING BETTY                     2nd Defendant     J
                                   ____________
K                                                                                     K


L   Before: Hon Suffiad J in Chambers                                                 L
    Dates of Hearing: 20 December 2011
M                                                                                     M
    Date of Decision: 2 April 2012
N                                                                                     N
                                 ______________
O                                                                                     O
                                  DECISION
P                                ______________                                       P


Q   1.           This is an application by the 2nd defendant, Chan Siu Ling           Q

    Betty (“Betty Chan”), by summons dated 29 September 2008 seeking that
R                                                                                     R
    the name of the plaintiff in the Writ and in all documents filed herein by
S   its solicitors for and in the name of the plaintiff be struck off the present     S

    proceedings and that the Action herein be stayed or dismissed on the
T                                                                                     T
    ground that this Action and the proceedings herein were taken out
U                                                                                     U


V                                                                                     V
A
                                        -2-
                                                                                   A


B   without any or any valid or proper authority given by the plaintiff to the     B

    solicitors throughout (“the 2nd defendant’s Authority Summons”).
C                                                                                  C


D                                                                                  D
    INTRODUCTION
E   2.           Central to the dispute herein is a subject property at            E

    Hanking Court in Cloudview Road, Hong Kong (“the Property”).
F                                                                                  F


G   3.           It is not in dispute that the plaintiff, Best Joint Investment    G

    Ltd is the registered owner of the Property. The crux of the dispute
H                                                                                  H
    between the parties is whether the shares in the plaintiff has been sold and
I   validly transferred to one Lau Cheuk Nam (“C N Lau”).                          I


J                                                                                  J
    4.           To properly understand the matters in dispute, it is necessary
K   to go into a large part of the background to this case.                        K


L                                                                                  L

    BACKGROUND
M                                                                                  M
    5.           In the 1980’s Lau Kwok Leung Ron (“Ron Lau”) carried on
N   business as a trader and exporter of general merchandise under the names       N

    of a group of companies including Calgo Development Ltd and
O                                                                                  O
    Calgo Asia Ltd.
P                                                                                  P


Q
    6.           These companies were managed and controlled by him and
                                                                                   Q
    of which he was the principal shareholder and/or director.
R                                                                                  R


S
    7.           In some of these companies, Wayne Lau, the brother of
                                                                                   S
    Ron Lau, was appointed as a nominal director and was issued a small
T                                                                                  T
    allotment of shares but did not take any active role.

U                                                                                  U


V                                                                                  V
A
                                        -3-
                                                                                   A


B   8.           Ron Lau co-habited with Betty Chan since about 1982 and           B

    they lived at the Property since about 1987.
C                                                                                  C


D   9.           Betty Chan entered into a sale and purchase agreement             D

    purchasing the Property for $1.85 million and the Property was assigned
E                                                                                  E
    to her in October 1987. She was and is a director of the 1st defendant, and
F   a shareholder and director of Calgo Asia Ltd and Calgo Development Ltd.        F


G                                                                                  G
    10.          In May 1999, the Betty Chan sold the Property to the
H
    plaintiff for $9.2 million and the Property was assigned to the plaintiff on   H


I
    completion on 15 July 1999.        On that same day, the Property was
                                                                                   I
    mortgaged to the Generale Belgian Bank by the plaintiff.
J                                                                                  J


K
    11.          The plaintiff was incorporated in November 1998 and at all
                                                                                   K
    material times only two shares of $1 each were issued. It was acquired as
L                                                                                  L
    a shelf company in 1999 by Wayne Lau and a nominee company,

M   Beauson Enterprises Ltd (“Beauson”) each holding one share. Ron Lau            M
    and Wayne Lau were appointed as directors and Wayne Lau also as its
N                                                                                  N
    secretary.
O                                                                                  O
    12.          Both Beauson and Wayne Lau had signed a declaration of
P                                                                                  P
    trust each declaring that each of them held their one share in the plaintiff
Q   on trust for Calgo Development Ltd.                                            Q


R                                                                                  R
    13.          By a facility letter dated 31 October 2003 from
S   Citic Ka Wah Bank to Calgo Asia Ltd, general banking facilities were           S

    granted to the latter against a number of securities including a first legal
T                                                                                  T
    charge of the Property and a joint and several personal guarantee from
U                                                                                  U


V                                                                                  V
A
                                        -4-
                                                                                   A


B   Ron Lau and the 2nd defendant. On 17 November 2003, the mortgage of            B

    the Property in favour of Generale Belgian Bank was released and the
C                                                                                  C
    plaintiff executed a mortgage in favour of Citic Ka Wah Bank.
D                                                                                  D

    14.          Between April 2005 and July 2006, Ron Lau caused the
E                                                                                  E
    plaintiff to borrow money from Bestlite Industrial Ltd (“Bestlite”) on six
F   occasions. A second legal charge over the Property was executed by the         F

    plaintiff in favour of Bestlite to secure the credit facilities granted.
G                                                                                  G
    Bestlite is a licensed moneylender and C N Lau is one of its two
H
    shareholders and directors.                                                    H


I                                                                                  I
    15.          On 5 July 2005, C N Lau was appointed as a director of both
J                                                                                  J
    Calgo Development Ltd and Calgo Asia Ltd. The appointment was to

K
    facilitate C N Lau in arranging for further letter or credit facilities from
                                                                                   K
    banks for Ron Lau’s companies as requested by Ron Lau. Ultimately no
L                                                                                  L
    such facilities were arranged.

M                                                                                  M
    16.          In early 2006, Calgo Asia was not able to repay the general
N                                                                                  N
    banking facilities granted by Citic Ka Wah Bank. As at 28 February
O   2006, the plaintiff owed the bank $7,294,117.52.                               O


P                                                                                  P
    17.          To repay the bank, Ron Lau had two alternatives – to sell the
Q   Property or to arrange for re-financing with other banks. He sought the        Q
    help of C N Lau.
R                                                                                  R


S   18.          On 3 March 2006, a provisional sale and purchase agreement        S

    was entered into by which the plaintiff agreed to sell the Property to
T                                                                                  T
    Biotech International Ltd (“Biotech”) for $14 million.        Biotech is a
U                                                                                  U


V                                                                                  V
A
                                        -5-
                                                                                    A


B   company of C N Lau. However, it is common ground that the provisional           B

    sale and purchase agreement was cancelled shortly thereafter.
C                                                                                   C


D   19.          It is Ron Lau’s case that instead of purchasing the Property,      D

    C N Lau agreed to arrange re-financing for the plaintiff with the
E                                                                                   E
    Nanyang Commercial Bank Ltd using the Property as security.
F                                                                                   F

    20.          C N Lau’s version was different. C N Lau alleged that
G                                                                                   G
    although the provisional sale and purchase agreement with Biotech was
H
    cancelled, it was agreed between him and Ron Lau that the sale of the           H


I
    Property would be effected by the sale and purchase of the plaintiff to
                                                                                    I
    him at a nominal sum, in return C N Lau would procure banking facilities
J                                                                                   J
    from the Nanyang Commercial Bank to be granted for the repayment of

K
    the plaintiff’s indebtedness to Citic Ka Wah Bank.           Thereafter the
                                                                                    K
    plaintiff would become C N Lau’s company and the loans and interests
L                                                                                   L
    owed by the plaintiff to Bestlite of over $3.6 million would no longer be

M   repayable by Ron Lau.                                                           M


N                                                                                   N
    21.          The divergence in the two versions stated above by Ron Lau
O   and C N Lau is the crux of the dispute herein.                                  O


P                                                                                   P
    22.          On 4 July 2006, the Nanyang Commercial Bank issued a
Q   facilities letter to Biotech which was the borrower, not the plaintiff.         Q
    C N Lau provided a copy of it to Ron Lau on 6 July 2006. By this letter,
R                                                                                   R
    the bank advised Biotech that the facilities available to it had been revised
S   on the terms and conditions set out. One of the conditions was the              S

    execution of an all-money first legal charge on the Property.
T                                                                                   T


U                                                                                   U


V                                                                                   V
A
                                       -6-
                                                                                 A


B   23.         On 16 August 2006, pursuant to a board resolution of the         B

    plaintiff signed by Ron Lau and Wayne Lau, C N Lau was appointed a
C                                                                                C
    director of the plaintiff and authorized to negotiate with the
D   Nanyang Commercial Bank in using the Property to apply for a mortgage        D

    loan to pay off the existing loan with Citic Ka Wah Bank.
E                                                                                E


F   24.         C N Lau gave instructions to a solicitor Cheng Chi Hung          F

    (“Mr Cheng”) of Messrs Cheng Chan & Co to prepare documents for the
G                                                                                G
    sale and purchase of the shares in the plaintiff to C N Lau which included
H
    a sale and purchase agreement of the shares in the plaintiff with            H


I
    Calgo Development Ltd as the vendor and a deed of assignment of the
                                                                                 I
    director’s loan to Ron Lau of $2,272,176.44. The total consideration for
J                                                                                J
    the transfer of the shares and the assignment of the director’s loan was

K
    $100,000.
                                                                                 K


L                                                                                L
    25.         C N Lau and Mr Cheng say in their affirmations that the

M   documents to give effect to the aforesaid transactions were executed by      M
    Ron Lau and C N Lau on 29 September 2006 and witnessed by Mr Cheng.
N                                                                                N


O   26.         Ron Lau claimed he did not sign any of the documents             O
    allegedly executed by him that day.
P                                                                                P


Q   27.         Wayne Lau alleged that he did not sign on the minutes of the     Q
    plaintiff’s board meeting on 29 September 2006 approving the said
R                                                                                R
    transaction and accepting the resignation of him and Ron Lau as directors
S   with immediate effect and that his purported signature was a forgery.        S


T                                                                                T


U                                                                                U


V                                                                                V
A
                                       -7-
                                                                                 A


B   28.          Mr Cheng also prepared a tenancy agreement dated                B

    28 September 2006 (“the Tenancy Agreement”) between the plaintiff and
C                                                                                C
    the 1st defendant by which the Property was let to the 1st defendant for
D   two years from 1 August 2006 at a monthly rent of $60,000, the minutes       D

    of a board meeting of the plaintiff held on 28 September 2006 by which it
E                                                                                E
    was resolved that the plaintiff should enter into the Tenancy Agreement,
F   and the minutes of a board meeting of the 1 st defendant held on the same    F

    date to like effect. The 1st defendant was by then a dormant company.
G                                                                                G


H
    29.          Mr Cheng had deposed that Ron Lau had signed these              H


I
    documents in his presence, took them away for other relevant parties to
                                                                                 I
    sign and that the documents were returned with the signatures of
J                                                                                J
    Wayne Lau and Betty Chan.

K                                                                                K
    30.          Ron Lau admitted that he had signed and placed the seals of
L
    the plaintiff and the 1st defendant on the last page of the                  L


M   Tenancy Agreement when the agreement itself had not been prepared and        M
                                                                  st
    that his signatures on the minutes of the plaintiff and the 1 defendant
N                                                                                N
    were forgeries.
O                                                                                O
    31.          Wayne Lau and Betty Chan claimed that their signatures on
P                                                                                P
    all the aforesaid documents were falsified.
Q                                                                                Q
    32.          On 22 November 2006, C N Lau caused the writ in this
R                                                                                R
    action to be issued in the plaintiff’s name against the 1st defendant. The
S   solicitors for the plaintiff at the time were Cheng Chan & Co. The           S
                                                                  st
    plaintiff sued on the Tenancy Agreement claiming that the 1 defendant
T                                                                                T
    had defaulted on the payment of rent since the commencement of the
U                                                                                U


V                                                                                V
A
                                        -8-
                                                                                   A


B   tenancy on 1 August 2006. The plaintiff claimed against the 1st defendant      B

    vacant possession, arrears of rent for four months at $240,000 and mesne
C                                                                                  C
    profits thereafter.
D                                                                                  D

    33.           There was a deed of surrender by which the 1st defendant
E                                                                                  E
    agreed to surrender the tenancy of the Property to the plaintiff voluntarily
F   and deliver up vacant possession and the minutes of a board meeting of         F

    the 1st defendant authorizing the execution by a director of the deed of
G                                                                                  G
    surrender. These documents were prepared by Mr Cheng. Both Ron Lau
H
    and Betty Chan denied that the signatures on these documents were              H


I
    signed by them.
                                                                                   I


J                                                                                  J
    34.           Vacant possession of the Property was not delivered up to

K
    the plaintiff pursuant to the deed. On 15 January 2007, the plaintiff
                                                                                   K
                                                 st
    entered judgment in default against the 1 defendant as no notice of
L                                                                                  L
    intention to defend was given.

M                                                                                  M
    35.           On 17 January 2007, the plaintiff executed a mortgage of the
N                                                                                  N
    Property in favour of the Nanyang Commercial Bank and on the same
O   date the second legal charge in favour of Bestlite was released. It is not     O
    in dispute that the plaintiff’s indebtedness to Citic Ka Wah Bank of about
P                                                                                  P
    $7.3 million has been discharged with the facilities granted by the
Q   Nanyang Commercial Bank to Biotech.                                            Q


R                                                                                  R
    THE EARLIER HEARINGS AND DETERMINATIONS HEREIN AS TO
S   PLAINTIFF’S AUTHORITY                                                          S

    36.           The 1st defendant applied by summons on 5 February 2007
T                                                                                  T
    to set aside the default judgment. That application was dismissed by
U                                                                                  U


V                                                                                  V
A
                                         -9-
                                                                                     A


B   Master Lung on 22 August 2007. The 1st defendant appealed to a judge             B

    against that order of Master Lung.
C                                                                                    C


D   37.          Before that appeal from the order of Master Lung was heard          D

    by a judge, on 27 October 2007 the 1st defendant issued a summons to
E                                                                                    E
    dismiss or stay this action on the ground that the plaintiff had no authority
F   to bring the action (“the 1st defendant’s Authority Summons”) claiming           F

    that the documents regarding the sale and purchase of the plaintiff’s
G                                                                                    G
    shares were forgeries and that the plaintiff is still Ron Lau’s company.
H                                                                                    H


I
    38.          On 4 December 2007, the 1st defendant issued another
                                                                                     I
    summons seeking to cross examine C N Lau and Mr Cheng on their
J                                                                                    J
    affirmations at the hearing of its appeal from the order of Master Lung,

K
    set down for hearing before Chung J on 13 December 2007.
                                                                                     K


L
    39.          In support of its various applications, the 1st defendant filed a   L


M   total of 12 affirmations of which five were made by Ron Lau. The other           M
    affirmations were from Wayne Lau and Betty Chan.
N                                                                                    N


O   40.          The plaintiff filed five affirmations in answer.                    O


P                                                                                    P
    41.          The appeal from the order of Master Lung dismissing the
Q   1st defendant’s application to set aside the default judgment was heard by       Q
    Chung J on 13 December 2007. At the same hearing Chung J also dealt
R                                                                                    R
    with the 1st defendant’s Authority Summons as well as the summons
S   seeking leave to cross examine.        After hearing arguments, Chung J          S
                                  st
    dismissed the appeal by the 1 defendant finding, in his written Decision,
T                                                                                    T
    that Ron Lau’s story was, on the evidence before the court, “inherently
U                                                                                    U


V                                                                                    V
A
                                         - 10 -
                                                                                     A


B   impossible and is therefore not believable”. Chung J also dismissed the          B

    1st defendant’s Authority Summons and the summons seeking leave to
C                                                                                    C
    cross examine.
D                                                                                    D

    42.         The 1st defendant appealed against the decision of Chung J
E                                                                                    E
    to the Court of Appeal. That appeal was heard by the Court of Appeal
F   (Kwan JA and Suffiad J) on 19 July 2011.               In its written Judgment   F

    handed down on 23 August 2011, the Court of Appeal dismissed the
G                                                                                    G
    appeal by the 1st defendant concurring with the findings by Chung J and
H
    saying in paragraph 72 of its written Judgment:                                  H


I               “For all the above reasons, the [1st] defendant’s allegations of     I
                forgery in respect of the transfer of shares in the plaintiff and
                the Tenancy Agreement are quite simply unbelievable”
J                                                                                    J


K   THE 2007 ACTION BY WAYNE LAU                                                     K

    43.         On 16 January 2007 Wayne Lau commenced HCA 2602 of
L                                                                                    L
    2007 against the plaintiff and C N Lau seeking declarations against the
M   authenticity of a number of documents bearing the signatures of Wayne            M


N
    Lau and also took out a summons challenging the authority of C N Lau to
                                                                                     N
    represent the plaintiff to defend HCA 2602 of 2007(“Wayne Lau’s
O                                                                                    O
    Authority Summons”).

P                                                                                    P
    44.         On 21 June 2011 Wayne Lau’s Authority Summons was
Q                                                                                    Q
    heard by Chung J who adjourned the summons pending the determination

R   of the Court of Appeal in the appeal by the 1st defendant in the present         R
    case.
S                                                                                    S


T   45.         On 6 December 2011, the hearing of Wayne Lau’s Authority             T
    Summons resumed before Chung J. At the same time, both the plaintiff
U                                                                                    U


V                                                                                    V
A
                                       - 11 -
                                                                                 A


B   and C N Lau took out a joint summons to strike out Wayne Lau’s claim         B

    in HCA 2602 of 2007 relying on the effect of the judgment of the
C                                                                                C
    Court of Appeal herein.
D                                                                                D

    46.          On 12 December 2011 Chung J dismissed Wayne Lau’s
E                                                                                E
    Authority Summons and allowed the striking out summons on the ground
F   that the same issue has been decided by the Court of Appeal and that         F

    Wayne Lau was no more than a nominee of Ron Lau.
G                                                                                G


H                                                                                H
    APPLICATION BY BETTY CHAN TO BE JOINED AS 2ND DEFENDANT
    HEREIN
I                                                                                I
    47.          The Writ issued by the plaintiff herein only claimed against
J
    the 1st defendant.                                                           J


K                                                                                K
    48.          On 31 October 2007, Betty Chan issued a summons to be
L                                                                                L
    joined as the 2nd defendant with leave to defend the action. The basis of
M   that application to be joined as a 2nd defendant herein was that there was   M
    an agreement between the plaintiff and Betty Chan that she could stay in
N                                                                                N
    the Property until the $9.2 million purchase price was paid.
O                                                                                O

    49.          Betty Chan was added as a 2nd defendant on 15 August 2008
P                                                                                P
    by order of Chung J and pleadings have since been filed.
Q                                                                                Q

    50.          After being joined in as a 2nd defendant, Betty Chan issued
R                                                                                R
    the 2nd defendant’s Authority Summons on 29 September 2008.
S                                                                                S

    51.          By order dated 13 October 2008, Master Lung ordered that:
T                                                                                T


U                                                                                U


V                                                                                V
A
                                        - 12 -
                                                                                  A


B         (a)    The 2nd defendant’s Authority Summons be adjourned sine          B

                 die pending the appeal by the 1st defendant;
C                                                                                 C
          (b)    There be liberty to apply.
D                                                                                 D


E   52.          After the appeal by the 1st defendant to the Court of Appeal     E
                                                       nd
    was dismissed, Betty Chan sought to restore the 2 defendant’s Authority
F                                                                                 F
    Summons for hearing, which is the present application being dealt with in
G   this Decision.                                                                G


H                                                                                 H
    THE 2ND DEFENDANT’S AUTHORITY SUMMONS
I                                                                                 I
    53.          In this application, Betty Chan sought to put before the court
J   further evidence as follows:                                                  J

          (a)    Expert opinion by way of a report from Patrick Cheng,
K                                                                                 K
                 handwriting expert, commenting on a number of signatures
L
                 purported to be of Wayne Lau on the following documents –        L


M                (i)     The Instrument of Transfer dated 21 September 2006;      M


N
                 (ii)    The Resolution of an EGM of the plaintiff;
                                                                                  N

                 (iii)   The Minutes of the plaintiff’s directors meeting dated
O                                                                                 O
                         29 September 2006; and
P
                 (iv)    The Certified true copy of a “Companies Registry         P


Q                        Form D4” dated 29 September 2006.                        Q


R         to be forgeries                                                         R

          (b)    Evidence from Ng Oi Che to the effect that –
S                                                                                 S
                 ((i)    The form of the Instrument of Transfer is not one
T                                                                                 T
                         usually used by Beauson;
U                                                                                 U


V                                                                                 V
A
                                    - 13 -
                                                                                  A


B         (ii)    The signature on the Instrument of Transfer is not her          B

                  signature;
C                                                                                 C
          (iii)   The stamp impression on the Instrument of Transfer
D                                                                                 D
                  bearing the name Beauson Enterprises Ltd is not the
E                 same as the one which has always been under her                 E
                  custody and control; and
F                                                                                 F
          (v)     The share number of the share alleged to have been
G                 transferred by Beauson Ltd is wrong; the correct and            G


H
                  true number of Beauson’s share in the plaintiff is one.
                                                                                  H

    (c)   Evidence from Wayne Lau to the effect that –
I                                                                                 I
          (i)     The documents purported to be made by the plaintiff
J                                                                                 J
                  and/or procured, made or signed by C N Lau in the

K
                  capacity     of   the      plaintiff’s   director/shareholder
                                                                                  K
                  submitted for filing in the Companies Registry were
L                                                                                 L
                  unauthorized, unlawful, invalid, void and of no effect

M                 because he had at no time authorized or agreed to or            M
                  signed any of the documents including those dated
N                                                                                 N
                  29 September 2006; and
O         (ii)    On 29 September 2006 he had left his Tai Po home                O

                  early in the morning for Shenzhen and did not return
P                                                                                 P
                  to Hong Kong until the evening of that day. He went
Q                 straight home and remained at home until the next               Q

                  morning, ie 30 September 2006 when he took a flight
R                                                                                 R
                  out of Hong Kong which is supported by his passport
S                                                                                 S
                  and the Statement of Travel Records.

T                                                                                 T


U                                                                                 U


V                                                                                 V
A
                                      - 14 -
                                                                                  A


B   54.         It was submitted on behalf of Betty Chan that when the            B

    1st defendant’s Authority Summons was heard (by the Master, the judge
C                                                                                 C
    in chambers and the Court of Appeal) Betty Chan was not a party to that
D   application and was not heard.                                                D


E                                                                                 E
    55.         Reliance was also placed on the fact that when Master Lung
F   made his order of 13 October 2008 adjourning sine die the                     F

    2nd defendant’s Authority Summons pending the appeal by the
G                                                                                 G
    1st defendant, the Master did not make any order to the effect that the
H
    parties would be bound by the decision of the appeal.                         H


I                                                                                 I
    56.         It was also submitted on behalf of Betty Chan that the further
J                                                                                 J
    evidence which Betty Chan now wished to adduce was not before the

K
    court during the hearing and determination of the 1 st defendant’s
                                                                                  K
    Authority Summons and such further evidence clearly showed that a
L                                                                                 L
    fraud was being perpetrated.

M                                                                                 M
    57.         Lastly, it was said by counsel for Betty Chan that unlike the
N                                                                                 N
    case of Wayne Lau, there is no evidence that Betty Chan is the nominee
O   of Ron Lau and their relationship is not one which the court can find that    O
    Betty Chan is Ron Lau’s privy.
P                                                                                 P


Q   58.         Accordingly, the decision of the Court of Appeal in               Q
                                                                 st
    upholding the order of Chung J and dismissing the 1 defendant’s
R                                                                                 R
    Authority Summons should not be binding on Betty Chan since she was
S   not a party to that application arising from the 1 st defendant’s Authority   S

    Summons. Therefore the decision of the Court of Appeal dismissing the
T                                                                                 T


U                                                                                 U


V                                                                                 V
A
                                        - 15 -
                                                                                     A


B   1st defendant’s Authority Summons cannot be res judicata against                 B

    Betty Chan.
C                                                                                    C


D                                                                                    D
    PLAINTIFF’S OBJECTION TO THE 2ND DEFENDANT’S AUTHORITY
    SUMMONS
E                                                                                    E
    59.           The plaintiff’s objection to this application of the
F
    2nd defendant in a nutshell can be stated as follows:                            F


G         (a)     The judgment of the Court of Appeal herein dismissing the          G

                  appeal by the 1st defendant (inter alia) on the 1st defendant’s
H                                                                                    H
                  Authority Summons is a judgment in rem which binds the
I                 whole world on the issue so decided;                               I


J         (b)     The 2nd defendant is a privy to Ron Lau, the key figure to the     J
                  judgment of the Court of Appeal; and
K                                                                                    K
          (c)     The 2nd defendant’s Authority Summons is an abuse of
L                 process.                                                           L


M                                                                                    M
    (a)   Judgment in rem
N                                                                                    N
    60.           In so far as it is submitted by the plaintiff that the matter is
O                                                                                    O
    res judicata being a judgment in rem goes, the plaintiff submits that the
P   core allegation in the 2nd defendant’s Authority Summons is the same as          P

    the allegations made in the 1st defendant’s Authority Summons as well as
Q                                                                                    Q
    Wayne Lau’s Authority Summons in that the series of documents relied
R   on by C N Lau to claim ownership of the plaintiff were all forged.               R


S                                                                                    S
    61.           The decision of the Court of Appeal upholding the decision
T   of Chung J is a determination of the authenticity of those documents             T


U                                                                                    U


V                                                                                    V
A
                                       - 16 -
                                                                                  A


B   relating to the transfer of shares in the plaintiff to C N Lau which the      B

    defence camp alleged to be forged. By necessary extension, Chung J and
C                                                                                 C
    the Court of Appeal has also determined C N Lau’s legal as well as
D   beneficial ownership of the shares in the plaintiff thus falling within the   D

    classic definition of a judgment in rem on the issue of the authenticity of
E                                                                                 E
    those documents and the ownership of the shares in the plaintiff. That
F   decision should bind the whole world and cannot be challenged in any          F

    subsequent proceedings.
G                                                                                 G


H
    62.          Therefore given that the same subject matter has been            H


I
    conclusively decided by the Court of Appeal, that decision of the Court of
                                                                                  I
                                            nd
    Appeal is a judgment in rem and the 2 defendant’s Authority Summons
J                                                                                 J
    is bound to fail.

K                                                                                 K

    (b)   Privy of Ron Lau
L                                                                                 L

    63.          It was also submitted by the plaintiff that the only person
M                                                                                 M
    who can make a rival claim to the beneficial ownership of the shares in
N   the plaintiff was Ron Lau and given that Ron Lau’s version of events has      N

    already been rejected by both Chung J and the Court of Appeal, there can
O                                                                                 O
    be no other person in the world who can have the necessary locus standi
P   to challenge C N Lau’s ownership in the shares of the plaintiff.              P


Q                                                                                 Q
    64.          As for Betty Chan being a privy of Ron Lau, the plaintiff
R   relies on the fact that Betty Chan was a director of the 1st defendant, the   R


S
    common law wife of Ron Lau and as being trustee of certain shares in
                                                                                  S
    Calgo Development Ltd, the original owner of the shares in the plaintiff
T                                                                                 T


U                                                                                 U


V                                                                                 V
A
                                       - 17 -
                                                                                 A


B   before the plaintiff was sold to C N Lau. It was also Ron Lau who caused     B

    Betty Chan to be appointed as a director of Calgo Development Ltd.
C                                                                                C


D   65.          Given the above relationship, the plaintiff submits that        D

    Betty Chan is no more than a nominee of Ron Lau on the issue of the
E                                                                                E
    ownership of the plaintiff’s shareholding.
F                                                                                F

    66.          Therefore the doctrine of res judicata should bar the
G                                                                                G
    2nd defendant from further raising the issue of ownership of the plaintiff
H
    when that same issue has already been conclusively decided against           H


I
    Ron Lau.
                                                                                 I


J                                                                                J
    67.          In so submitting, the plaintiff relies on the decision of the

K
    Court of Appeal in China North Industries Investment Ltd v Chum [2010]
                                                                                 K
    5 HKLRD 1 as to privity of interest.
L                                                                                L


M   (c)   Abuse of Process                                                       M


N   68.          The plaintiff submits that this further attempt by Betty Chan   N

    to raise the issue of forgery again when that same issue has already been
O                                                                                O
    determined against her principal is an abuse of process of the Court.
P                                                                                P

    69.          It is also submitted that even if the decision herein by the
Q                                                                                Q
    Court of Appeal dismissing the appeal by the 1st defendant is not binding
R   on Betty Chan, and hence res judicata in its strict sense does not apply,    R

    the attempt by Betty Chan to bring up the same issue for the third time by
S                                                                                S
    the defence camp is manifestly unfair to the plaintiff and C N Lau,
T                                                                                T


U                                                                                U


V                                                                                V
A
                                        - 18 -
                                                                                    A


B   thereby bringing the administration of justice into disrepute, thus a blatant   B

    abuse of process.
C                                                                                   C


D   70.          The Court of Appeal had before it 12 affirmations from             D

    Betty Chan, Ron Lau, Wayne Lau and Ng Oi Che all filed on behalf of
E                                                                                   E
    the 1st defendant. The 1st defendant’s application for further evidence to
F   be adduced before the Court of Appeal was rejected in toto due to the           F

    failure to satisfy the test in Ladd v Marshall.
G                                                                                   G


H
    71.          After the decision by the Court of Appeal, Betty Chan,             H


I
    Ron Lau, Wayne Lau and Ng Oi Che all filed new affirmations in an
                                                                                    I
                                nd
    attempt to support the 2         defendant’s Authority Summons.       Those
J                                                                                   J
    affirmations covered old grounds including the further evidence which

K
    had been rejected by the Court of Appeal but conveniently failed to deal
                                                                                    K
    with the Nanyang Bank facility letter (which was one of the main reason
L                                                                                   L
    for Ron Lau’s story being disbelieved by the Court of Appeal).

M                                                                                   M
    72.          The attempt by Betty Chan now to rely on the expert opinion
N                                                                                   N
    evidence to reopen the whole issue and thereby to mount an attack on the
O   decision of the Court of Appeal comes squarely within an abuse of               O
    process.
P                                                                                   P


Q   73.          There is no explanation as to why this evidence could not          Q
                                                                   st
    have been adduced in the earlier application, namely the 1 defendant’s
R                                                                                   R
    Authority Summons.
S                                                                                   S

    74.          The expert opinion relates to the signatures of Wayne Lau.
T                                                                                   T
    Similar expert evidence relating to the signatures of Wayne Lau had been
U                                                                                   U


V                                                                                   V
A
                                        - 19 -
                                                                                  A


B   refused admission by Chung J in HCA 2602 of 2007 brought by                   B

    Wayne Lau. To admit same herein would be another collateral attack on
C                                                                                 C
    HCA 2602 of 2007which amounts to an abuse of process.
D                                                                                 D

    75.          Once again relying on the decision of the Court of Appeal in
E                                                                                 E
    China North Industries Investment Ltd v Chum, the plaintiff submits that
F   to allow such collateral attack on the decision of the Court of Appeal in     F

    its dismissal of the appeal by the 1st defendant herein as well as on the
G                                                                                 G
    decision of Chung J in HCA 2602 of 2007 puts the administration of
H
    justice into disrepute and would constitute an abuse of process.              H


I                                                                                 I

    DECISION
J                                                                                 J
    76.          This is the third attempt by the defence camp to challenge
K   the authority of the plaintiff in bringing these proceedings.                 K


L                                                                                 L
                                                         st
    77.          The earlier two attempts (one by the 1 defendant herein and
M                                                                                 M
    the second by Wayne Lau in HCA 2602 of 2007) had both been

N
    unsuccessful.
                                                                                  N


O                                                                                 O
    78.          The basis of all three attempts were the same, namely that all

P   the documents relating to the sale and the transfer of shares of the
                                                                                  P
    plaintiff from Calgo Development Ltd to C N Lau were forgeries in that
Q                                                                                 Q
    the signatures of Ron Lau, Wayne Lau and Betty Chan were all forged.
R                                                                                 R
    79.          The court (Chung J as well as the Court of Appeal) have, in
S                                                                                 S
    dismissing the application of the 1st defendant in the 1st defendant’s
T   Authority Summons effectively rejected those allegations of forgeries by      T


U                                                                                 U


V                                                                                 V
A
                                          - 20 -
                                                                                             A


B   finding that those allegations were wholly unbelievable given all the                    B

    circumstances of the case.
C                                                                                            C


D   80.         One of the main reason for the Court of Appeal to find that                  D

    the allegations made by the defence and in particular that of Ron Lau was
E                                                                                            E
    wholly   unbelievable      relates     to      the   facilities    letter    of    the
F   Nanyang Commercial Bank to Biotech dated 4 July 2006. This was what                      F

    the Court of Appeal said at paragraphs 70, 71 and 72 of its judgment:
G                                                                                            G
                “70. In the facilities letter of the Nanyang Commercial Bank
H               to Biotech dated 4 July 2006, one of the conditions provided                 H
                that the banking facilities “shall be granted to [Biotech] after
                the shares transfer have been fully completed and a certificate
I               confirming the transaction should have been produced by the                  I
                solicitor to [the bank].” A copy of this letter was handed by
J               C N Lau to Ron Lau on 6 July, according to Ron Lau’s                         J
                1st affirmation. The “shares transfer” referred to must clearly
                be the transfer of the plaintiff’s shares, as, according to
K               Ron Lau’s 5th affirmation, when C N Lau approached the bank                  K
                for     re-financing,   Ron      Lau    had    informed     him
L
                Calgo Development Ltd. was the beneficial owner of the
                                                                                             L
                plaintiff’s shares and he had provided C N Lau photocopies of
                the two declarations of trust made by Beauson and Wayne Lau
M               declaring that each held one share in the plaintiff on trust for             M
                Calgo Development Ltd., for production to the bank.
N               71. Ron Lau has not disputed there was an agreement for a                    N
                tenancy of the Property to be granted by the plaintiff to the
                defendant at $60,000 per month.           He made conflicting
O                                      st
                statements in his 1 affirmation whether the tenancy was for                  O
                two years or four. The major dispute was whether there was an
P               agreement that the rental for two years were to be deducted
                                                                                             P
                from his loan to the plaintiff. Apart from the conflicts in the
                defendant’s own evidence regarding Ron Lau’s alleged loan to
Q               the plaintiff, it would be contrary to the conditions in the                 Q
                facilities letter of the Nanyang Commercial Bank dated 4 July
                2006 for the plaintiff to permit the defendant to set off the
R                                                                                            R
                rentals for the entire term against Ron Lau’s loan to the plaintiff.
                One of the documents Biotech was required to provide to the
S               bank as a condition precedent prior to any drawing under the                 S
                facilities was a rental assignment in respect of all rental
                properties duly executed by its owner in favour of the bank.
T               Another condition provided that all rental incomes of the                    T


U                                                                                            U


V                                                                                            V
A
                                          - 21 -
                                                                                     A


B                charged properties should be deposited into Biotech’s account       B
                 with the bank.
C                72. For all the above reasons, the defendant’s allegations of       C
                 forgery in respect of the transfer of shares in the plaintiff and
                 the Tenancy Agreement are quite simply unbelievable….”
D                                                                                    D


E
    81.           The basis for this application by Betty Chan in the
                                                                                     E
     nd
    2 defendant’s Authority Summons is once again the forged signatures in
F                                                                                    F
    the documents relating to the transfer of the plaintiff’s shares including

G   the minutes and resolutions. Again those signatures related to Ron Lau,
                                                                                     G
    Wayne Lau and Betty Chan.
H                                                                                    H


I   82.           As for the new evidence which the 2nd defendant wished to          I
    adduce, they also cover the same area. Moreover, there is no reason why
J                                                                                    J
    that new evidence which Betty Chan now wish to adduce, could not have
K   been obtained or adduced in the earlier applications challenging the             K
    authority of the plaintiff.
L                                                                                    L


M   83.           As such it is no more than an attempt to have a third bite of      M

    the cherry because the two earlier applications challenging the authority
N                                                                                    N
    of the plaintiff were not successful.
O                                                                                    O

    84.           The 2nd defendant has not sought to put forward any
P                                                                                    P
    explanation or to adduce any evidence to explain away the point made by
Q   the Court of Appeal in paragraphs 70, 71 and 72 of its judgment cited            Q

    above, namely the Nanyang Commercial Bank facility letter.
R                                                                                    R


S   85.           As for the first point taken by the plaintiff, namely, that the    S

    judgment of the Court of Appeal in upholding the decision of Chung J
T                                                                                    T
    and dismissing the appeal by the 1st defendant being a judgment in rem,
U                                                                                    U


V                                                                                    V
A
                                           - 22 -
                                                                                       A


B   the plaintiff relies on the following passage from Res Judicata, Estoppel,         B

    and Foreign Judgments by Peter R Barnett (at para 3.35) which states:
C                                                                                      C
                 “Whilst a judgment in rem affects and binds the immediate
D                parties to it (and, indeed, all persons who may be interested in      D
                 the res), such a judgment nonetheless has for its primary object
                 the determination of the title to property or status of a person,
E                property or thing and, more particularly, the jural relation of       E
                 that person, property or thing to the world generally. Provided
F
                 that the court had jurisdiction over the res, the judgment in rem
                                                                                       F
                 will be conclusive against all the world in respect of the
                 questions of title or status (of those persons or that property) so
G                determined, and will bind ‘the whole world’ even though the           G
                 facts on which it necessarily proceeds are not established
                 against the world.”
H                                                                                      H
    There is no dispute as to the law as stated above.
I                                                                                      I


J   86.          However, I do have the greatest reservation as to whether the         J
    judgment of the Court of Appeal herein is a judgment in rem.
K                                                                                      K


L   87.          It is trite law that whilst judgments in rem determine the            L
    jural relationship of a person, property or thing to the world generally,
M                                                                                      M
    judgments in personam determine the jural relation of persons to one
N   another.                                                                           N


O                                                                                      O
    88.          The decision of the Court of Appeal herein has determined
P   no more than the relationship between Ron Lau and C N Lau in so far as             P

    the sale and transfer of the shares in the plaintiff are concerned.
Q                                                                                      Q


R   89.          I am therefore not persuaded that the decision of the Court of        R

    Appeal can be said to be a judgment in rem as submitted by the plaintiff.
S                                                                                      S


T                                                                                      T


U                                                                                      U


V                                                                                      V
A
                                          - 23 -
                                                                                     A


B   90.          As for the second point taken by the plaintiff, namely that         B

    Betty Chan is a privy of Ron Lau, once again I do not accept that
C                                                                                    C
    submission by the plaintiff.
D                                                                                    D

    91.          What can amount to privity was made quite clear by
E                                                                                    E
    Stock JA in the case of China North Industries Investment Ltd v Chum
F   [2010] 5 HKLRD 1 in paragraph 81 of his judgment at page 30 when he              F

    said:
G                                                                                    G
                 “The required commonality is a direct interest in the subject
H                matter of the litigation, a parallel or corresponding interest in   H
                 that subject matter and not simply a financial interest in the
                 result of the action: Genesee Enterprises Ltd v Abou-Rached, so
I                that:                                                               I

                       Privies include any person who succeeds to the rights or
J                      liabilities of the party upon the death or insolvency, or     J
                       who is otherwise identified in estate or interest. It is
K
                       essential the party to be stopped by privity must have
                                                                                     K
                       some kind of interest, legal or beneficial, in the previous
                       litigation or its subject matter. Privity was described by
L                      the US Supreme Court as a mutual or successive                L
                       relationship to the same right of property, although this
                       cannot be exhaustive.”
M                                                                                    M


N   92.          In the present case, Betty Chan does not enjoy such an              N
    identity of interest with Ron Lau in the subject matter of the action if by
O                                                                                    O
    that what is referred to are the shares in the plaintiff.
P                                                                                    P
                                                                           st
    93.          The fact that Betty Chan was a director of the 1 defendant,
Q                                                                                    Q
    the common law wife of Ron Lau and that she was a trustee of some of
R   the shares in Calgo Development Ltd, which she held for Ron Lau does             R

    not give her the necessary interests to make her a privy of Ron Lau in so
S                                                                                    S
    far as the subject matter of the action is concerned.
T                                                                                    T


U                                                                                    U


V                                                                                    V
A
                                           - 24 -
                                                                                       A


B   94.          From the submission made by the plaintiff, I cannot help but          B

    feel that counsel for the plaintiff has confused privity of interest on the
C                                                                                      C
    one hand with factors which make Betty Chan no more than a nominee of
D   Ron Lau.                                                                           D


E                                                                                      E
    95.          I am therefore unable to accept the plaintiff’s submission as
F   to privity of interest in respect of Betty Chan.                                   F


G                                                                                      G
    96.          Having said the above, on the point of Betty Chan being a
H
    nominee of Ron Lau, (which is altogether a different point from privity of         H


I
    interest) Betty Chan, in her affirmation dated 20 October 2011, at
                                                                                       I
    paragraphs 11 and 13 thereof stated as follows:
J                                                                                      J
                 “Businesses of Ron Lau

K
                 11. During the decades of the 1980s and 1990s, Ron Lau, a
                                                                                       K
                 businessman, was carrying on his businesses as a trader and
                 exporter of general merchandise under a group of several
L                companies acquired and operated by him including Calgo                L
                 Development Ltd. (“Calgo Development”) (acquired in 1987),
                 Calgo Asia Ltd. (“Calgo Asia”) and as a travel agent under the
M
                 name of the 1st Defendant, Kagani Limited (“Kagani”)                  M
                 (acquired in 1987), all of which were managed or controlled by
N                him and of which he was the principal and controlling                 N
                 director/shareholder (“the Group”). Since the inception of
                 Kagani, Ron Lau and I were appointed as and were the
O                directors of Kagani.                                                  O

                 ……
P                                                                                      P
                 13. Ron Lau caused me to be appointed a nominal director of
                 Calgo Development and to be allotted a large number of shares
Q                therein but in fact, I was holding the said shares as a trustee for   Q
                 Ron Lau under a trust document and took no active or
                 executive role therein. Also, in some of the companies in the
R                                                                                      R
                 Group, Ron Lau caused me to be appointed as a nominal
                 director and to be allotted a small number of shares therein.”
S                                                                                      S

    97.          There is here clear admissions by Betty Chan that she was no
T                                                                                      T
    more than a nominee of Ron Lau in so far as the subject matter of the
U                                                                                      U


V                                                                                      V
A
                                        - 25 -
                                                                                     A


B   crux of the dispute is concerned (ie the ownership of the shares of the          B

    plaintiff).
C                                                                                    C


D   98.           Once that issue has been decided by both Chung J and the           D

    Court of Appeal in favour of C N Lau and against Ron Lau, Betty Chan
E                                                                                    E
    (like Wayne Lau in HCA 2602 of 2007) can have no locus standi in
F   seeking to re-litigate that issue concerning the authority of the plaintiff in   F

    bringing this claim.
G                                                                                    G


H
    99.           As for the point taken by the plaintiff as to abuse of process     H


I
    of the court, what we have here is a third attempt by the defence camp to
                                                                                     I
    overturn the decision of Chung J and the Court of Appeal when it
J
    dismissed the 1st defendant’s appeal on the very same issue and identical        J


K
    question, namely the lack of authority of the plaintiff due to the fact that
                                                                                     K
    the sale and transfer of the shares in the plaintiff to C N Lau were as a
L                                                                                    L
    result of forged signatures on the relevant documents. An issue which

M   has already been rejected by the courts in the earlier decisions, albeit to      M
    which Betty Chan was not a party.
N                                                                                    N


O   100.          This third attempt by Betty Chan to re-litigate such issue is      O
    not even a collateral attack on the earlier decisions of the court but a third
P                                                                                    P
    bite of the same cherry.
Q                                                                                    Q
    101.          In these circumstances such third attempt constitutes not
R                                                                                    R
    only harassment but is also manifestly unfair to the plaintiff. It puts the
S   administration of justice into disrepute. As such the court has inherent         S

    power to prevent abuse of its process.
T                                                                                    T


U                                                                                    U


V                                                                                    V
A
                                      - 26 -
                                                                                 A


B   102.        The fact that Betty Chan now seeks to rely on expert opinion     B

    evidence relating to the forged signatures is neither here nor there since
C                                                                                C
    that evidence could have been adduced before the court by the
D   1st defendant on the 1st defendant’s Authority Summons but was not.          D


E                                                                                E
    103.        What seems to me to be more pertinent is the fact that
F   nothing has been put forward by Betty Chan in response to the point          F

    raised and relied on by the Court of Appeal in respect of the
G                                                                                G
    Nanyang Commercial Bank facility letter.
H                                                                                H


I
    104.        In the absence of any cogent response to that point relied on
                                                                                 I
    by the Court of Appeal concerning the Nanyang Commercial Bank
J
    facility letter, this application of the 2nd defendant’s Authority Summons   J


K
    is bound to fail for that same reason expressed by the Court of Appeal.
                                                                                 K


L                                                                                L
    105.        That is a further reason for dismissal of this application by

M   Betty Chan, quite apart from the abuse of process point.                     M


N                                                                                N
    106.        One further matter which I should put on record is the point
O   made by Mr Remedios that when Master Lung made the order on                  O
                                           nd
    13 October 2008 to the effect that the 2 defendant’s Authority Summons
P                                                                                P
    be adjourned sine die pending the decision by the Court of Appeal, there
Q   was nothing in that order to the effect that the parties to the              Q
     nd
    2 defendant’s Authority Summons be bound by the decision of the
R                                                                                R
    appeal. (para 12 of Mr Remedios’ skeleton submissions).
S                                                                                S


T                                                                                T


U                                                                                U


V                                                                                V
A
                                         - 27 -
                                                                                    A


B   107.         The 1st defendant’s Authority Summons was heard by                 B

    Chung J on 13 December 2007. After that hearing, the 1st defendant had
C                                                                                   C
    filed its Notice of Appeal dated 28 December 2007.
D                                                                                   D

    108.         The 2nd defendant’s Authority Summons was only issued on
E                                                                                   E
    29 September 2008 after she was ordered to be added (on her application)
F   as a 2nd defendant by order of Chung J dated 15 August 2008.                    F


G                                                                                   G
    109.         With respect to Mr Remedios, the point taken by him is not a
H
    good point. It would not have been possible for the Master to have made         H


I
    an order to the effect that the parties to the 2nd defendant’s Authority
                                                                                    I
    Summons be bound by the decision of the appeal, since Betty Chan was
J
    not and could not have been a party to the appeal by the 1st defendant, not     J


K
    having been a party in these proceedings when the 1st defendant’s
                                                                                    K
    Authority Summons was heard by Chung J on 13 December 2007.
L                                                                                   L


M   110.         Accordingly, and for the reasons given, the 2nd defendant’s        M
    Authority Summons must be dismissed.
N                                                                                   N


O   COSTS                                                                           O


P   111.         There will be a costs order nisi that Betty Chan pays the
                                                                                    P
                     nd
    costs of the 2        defendant’s Authority Summons to the plaintiff to be
Q                                                                                   Q
    taxed and paid forthwith if not agreed.
R                                                                                   R


S                                                                                   S

                                                        (A R Suffiad)
T                                                                                   T
                                             Judge of the Court of First Instance
                                                         High Court
U                                                                                   U


V                                                                                   V
A
                                      - 28 -
                                                                            A


B                                                                           B


C   Mr Issac Chan, instructed by Tung, Ng, Tse & Heung, for the plaintiff   C


D   Mr John Ip, of John Ip & Co, for the 1st defendant (As an observer)
                                                                            D

    Mr Leo Remedios, instructed by K H Yuen & David Cheung, for the
E
      2nd defendant                                                         E


F                                                                           F


G                                                                           G


H                                                                           H


I                                                                           I


J                                                                           J


K                                                                           K


L                                                                           L


M                                                                           M


N                                                                           N


O                                                                           O


P                                                                           P


Q                                                                           Q


R                                                                           R


S                                                                           S


T                                                                           T


U                                                                           U


V                                                                           V

								
To top