Civil Procedure – Court of First Instance strikes out claim for insufficient factual basis and previous contradictory statements
Chu Yue Bun v Lai Shiu Woon (formerly known as Ng Lai Shiu Woon)
|Reference:|| HKCFI 2195|
|Court:||Court of First Instance|
|Before:||Deputy High Court Judge Maurellet SC in Chambers|
|Date of Judgment:||18 August 2020|
|Appearance:||Simon Wong (for the successful Defendant)|
On 18 August 2020, the Court of First Instance handed down its judgement striking out the Plaintiff’s Statement of Claim, on the grounds that there was no sufficient factual basis to sustain the claim and the Plaintiff had previously made inconsistent and contradictory statements.
The proceedings concerns, inter alia, an appeal by the Plaintiff against a previous decision of a Master in which the learned Master struck out the Plaintiff’s Statement of Claim.
The dispute between the Plaintiff and the Defendant concerned shares of one limited company in Hong Kong (“the Company”).
In the Statement of Claim, the Plaintiff pleaded that the ownership of the Company was: the Plaintiff, 30%; the Defendant, 50%; and the Defendant’s daughter, 20%. In March 2008, the Plaintiff transferred his 30% of shares to the Defendant to be held on trust for him due to his health and medical condition. Since March 2014, around HK$5 million arising from a sale of the Company’s property was distributed to the paper shareholders (amongst them, the Defendant). Consequently, the Plaintiff claimed his entitlement to the 30% shares of interest in the Company including the sale proceeds.
However, the Defendant pointed out that the pleaded facts in the Statement of Claim were inconsistent with the Plaintiff’s position in another High Court action, HCA 3171/2016. In that action, the Plaintiff’s brother was a party, and the Plaintiff filed an affirmation as his brother’s witness swearing that the 30% shares were beneficially owned by his brother and that the Plaintiff held those shares on trust for his brother. The Defendant applied to strike out the Plaintiff’s Statement of Claim on that basis.
In opposition to the Defendant’s striking out application, the Plaintiff filed an affirmation stating that in January 2019, the 30% shares were gifted to the Plaintiff by his brother by way of a verbal agreement. The allegation of gift was however not pleaded in the Statement of Claim.
The Plaintiff argued that the matter concerned the veracity of the allegation of the gift in January 2019. There was no evidence contradicting the allegation, nor was there any cross-examination. That was plainly arguable and ought to go to trial.
The Master’s decision
The learned Master struck out the Statement of Claim on the ground of abuse of process. Previous inconsistent and contradictory statements made by a party to a claim may amount to the abuse of process. It was held in Yifung Properties Ltd v Manchester Securities Corp (unreported, HCA 1341 & 1359/2014, 19.10.2015) that a claim is liable to be struck out as frivolous and an abuse of process if the party knew or ought to have known that it has no substance, or it is bound to fail, or it is so manifestly misconceived that it can have no prospect of success. Where a party in one action adopts a position which is “fundamentally inconsistent with and diametrically opposite to” the position adopted by him in a previous set of proceedings, there is an abuse of process: see Chan Chun Chuen v Kao, Lee & Yip (unreported, HCA 597/2015, 12.10.2017) and Mystar Holdings Ltd v 247037 Alberta Ltd  ABQB 480. The Plaintiff appealed.
The Judge’s decision
After considering the apparent inconsistency between the Plaintiff’s claim in this action and his previous position as confirmed on oath, the learned Judge dismissed the Plaintiff’s appeal and affirmed that the Statement of Claim be struck out. The Judge considered that the Plaintiff had not made out a sufficient factual basis to sustain his claim: “If the Plaintiff’s averment [in] his affirmation were true about the gift, one would have expected the matter to be put in fairly and squarely in the statement of claim given the previous averments in the affidavits, yet there was not a word about that.” (§31)
The Judge found it unnecessary to consider the alternative ground of striking out namely the abuse of process by reason of the Plaintiff’s taking a diametrically opposed position in different proceedings.
Lessons to learn
This judgement once again affirmed the importance of pleading sufficient factual basis in the Statement of Claim.
Furthermore, if there have been previous inconsistent and contradictory statements made by a party, it is not merely a matter of credibility. The Court will go into considering whether the claim will not enjoy any prospect of success based on those different positions.
Taking diametrically opposed positions in different sets of court proceedings may also be seen as an abuse of court process, and the claim may be struck out on that ground.
Disclaimer: This article does not constitute legal advice and seeks to set out the general principles of the law. Detailed advice should therefore be sought from a legal professional relating to the individual merits and facts of a particular case.