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COMMERCIAL LAW – Court of First Instance strikes out claim for insufficient factual basis and previous contradictory statements

Simon Wong, who acted for the Defendant in Chu Yue Bun v Lai Shiu Woon (formerly known as Ng Lai Shiu Woon) [2020] HKCFI 2195, applied to strike out the Plaintiff’s Statement of Claim. The Court of First Instance held that, given the lack of a sufficient factual basis and the Plaintiff’s previous inconsistent and contradictory statements, it was “plain and obvious” that the pleading ought to be struck out.

The proceedings concerns, inter alia, an appeal by the Plaintiff against a previous decision of a Master to strike out the Plaintiff’s Statement of Claim. The dispute between the Plaintiff and the Defendant related to the ownership of 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 30% of his shares to the Defendant to held on trust for him;

• 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, these pleaded facts were inconsistent with the Plaintiff’s position in another High Court action (HCA 3171/2016), in which the Plaintiff swore in his affirmation that the 30% shares were beneficially owned by his brother, and were held by the Plaintiff on trust for his brother. On this basis, the Defendant applied to strike out the Plaintiff’s Statement of Claim.

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 through a verbal agreement  – an allegation that was never pleaded in the Statement of Claim. The learned Master struck out the Statement of Claim on the ground of abuse of process.

The Judge’s decision

On 18 August 2020, Deputy High Court Judge Maurellet SC in Chambers handed down his judgment.

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)

Moreover, 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.

Simon Wong acted for the Defendant.

For further details of the case and a discussion of the lessons learned, please refer to the case commentary.

Simon Wong

Simon was called to the Bar in 2007 and has built a solid practice specialising in personal injury litigation and commercial dispute resolution. In addition to his experience in company and shareholders’ disputes, insolvency and contractual disputes, he has been instructed in more than 400 personal injury and medical negligence cases. His clients include listed corporations and their directors, and established insurance companies. To find out more about Simon’s practice, please click here.

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.