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Chan Shu Chun And Another v Dr Kung Yan Sum And Others

Judgment Cited authorities 24 Cited in Precedent Map Related
Vincent
Judgment Date18 May 2017
Subject MatterCivil Action
Judgement NumberHCA832/2014
CourtHigh Court (Hong Kong)
HCA832/2014 CHAN SHU CHUN AND ANOTHER v. DR KUNG YAN SUM AND OTHERS

HCA 832 /2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 832 OF 2014

____________

BETWEEN
CHAN SHU CHUN (陳書春) 1st Plaintiff
KING BASE ENGINEERING LIMITED
(卓基工程有限公司) 		2nd Plaintiff
and
DR KUNG YAN SUM (龔仁心) 1st Defendant
HERO FORTUNE LIMITED (雄福有限公司) 2nd Defendant
CHINACHEM CHARITABLE FOUNDATION LIMITED (華懋慈善基金有限公司) 3rd Defendant
MESSRS PHILIP KH WONG, KENNEDY YH WONG & CO (黃乾亨黃英豪律師事務所) 4th Defendant

____________

Before: Deputy High Court Judge Marlene Ng in Chambers
Date of Hearing: 22 April 2016
Date of Handing Down Judgment: 18 May 2017

_______________

JUDGMENT

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I. INTRODUCTION

1. On 14 May 2014, Mr Chan Shu Chun (1st plaintiff, “P1”) and a Hong Kong company King Base Engineering Limited (2nd plaintiff, “P2”) (collectively, “Ps”) commenced the present action against Dr Kung Yan Sum (1st defendant, “D1”), a British Virgin Islands (“BVI”) company Hero Fortune Limited (2nd defendant, “D2”), a Hong Kong company Chinachem Charitable Foundation Limited (3rd defendant, “D3”) and a solicitor firm practising in Hong Kong Messrs Philip KH Wong, Kennedy YH Wong & Co (4th defendant, “D4”) (collectively, “Ds”) to claim for a sum of $50,000,000 (“$50M”) and damages for conversion together with interest and costs.

2. Ps’ Statement of Claim (“SoC”) was endorsed on the Writ of Summons (“WoS”). On 13 June 2014, Ps filed the Amended WoS (“AWoS”) with Amended SoC (“ASoC”) endorsed thereon. On 25, 11 and 10 July 2014, D1, D3 and D4 respectively served their Defence. At that stage, Ps had not issued any Concurrent AWoS against D2.

3. As seen below, Ps’ claim against D4 as pleaded in the AWoS/ ASoC essentially included allegations of (a) breach of duty of care owed to Ps, (b) negligence and/or (c) conversion.

4. On 23 September 2014, D4 filed a summons (“D4 Summons”) for the following reliefs:

(a) the ASoC be struck out and Ps’ action be dismissed as against D4 under Order 18 rule 19 of the Rules of the High Court (“RHC”) and/or under the inherent jurisdiction of the court on the grounds that (i) it disclosed no reasonable cause of action against D4, (ii) it was scandalous, frivolous and vexatious and/or (iii) it was an abuse of the process of the court;

(b) alternatively, there be a determination by the court under Order 14A of the RHC for the following question of law, ie “whether [D4] owed [Ps] a duty of care to comply with the obligation to make disclosure to the relevant authorities under the Organised and Serious Crimes Ordinance (Cap 455) [“OSCO”]” (“Question”), and upon such determination Ps’ action as against D4 be dismissed;

(c) Ps do forthwith pay D4’s costs of the action and of the applications in (a) and/or (b) above to be taxed if not agreed.

5. On 15 January 2015, Ps filed a summons (“Ps Summons”) for leave to re-amend the AWoS/ASoC in the manner marked in green as per the draft annexed thereto and set out in the Schedule to this Judgment (“Draft Amendments”) and to file/serve the same within 7 days, and for costs of the application to amend and costs of and consequential upon the amendments to Ds in any event to be taxed if not agreed. The Draft Amendments proposed to introduce a new claim against all Ds for conspiracy to defraud and also additional heads of damages arising from Ds’ alleged conspiracy.

6. The main protagonists in respect of the Ps and D4 Summonses were Ps and D4 with Ps opposing the D4 Summons and D4 opposing the Ps Summons. D1, D2 and D3 did not take any active part in relation thereto.

II. PARTIES

7. Ps claimed (but D4 did not admit) P1 was/is the sole director/ shareholder of P2 and the sole shareholder of a BVI company Tian Liang Limited (“Tian Liang”), which in turn was/is the sole shareholder/operator of a PRC company Tian Yao (Xiamen) Property Development Limited (“Tian Yao”) whose main business was/is real estate development of a residential building in Xiamen, PRC (“Xiamen Project”). Ps claimed that by a Chinese tripartite agreement dated 16 January 2009 (“Tripartite Agreement”) made by Tian Liang, Tian Yao and a company wholly owned the Chinachem Group[1] called Right Margin Limited (“Right Margin”), it was agreed inter alia to appoint Right Margin as the sales agent of the Xiamen Project.[2]

8. Ps claimed (but D4 did not admit) P2 maintained/maintains a bank account with DBS Bank (Hong Kong) Limited (formerly known as Dao Heng Bank Limited, “DBS”) (“P2 Account”).

9. There was no dispute between Ps and D4 that (a) D1 was/is a director and the chairman of D3 and the chairman of the Chinachem Group, (b) D2’s sole director/shareholder was a Madam Song Hui Fang (“Song”) who was born on 8 September 1934 and who held a PRC identity card, (c) D2 had a bank account with DBS, Macau branch (“DBS Macau”) (“D2 Account”), and (d) D3 was engaged in litigation against a Mr Chan Chun Chung over disputed entitlement to the estate of the late Madam Nina Wang (“Estate Litigation”).

III. PLEADINGS OF Ps AND D4

10. Alleged investment agreement Ps averred P1 and D1 became friendly during negotiations leading to the Tripartite Agreement, and on/ about 20 January 2009 D1 in his personal capacity presented to P1 an “investment opportunity in real estate properties, land development and securities” in Hong Kong and Macau with his good friend Song (whose full name and background were not disclosed to P1 at that time) (“Investment Opportunity”) for an investment sum of $50M. Relying on D1’s representation that the proposed investment was for Ps’ participation in the Investment Opportunity (“D1 Representation”), P1 agreed to invest with Song. On 21 January 2009, P1 delivered to D1 a cheque (without naming the payee) for $50M drawn on the P2 Account (“Cheque”), and D1 produced an undated Chinese memorandum of investment cooperation in duplicate that Song executed on behalf of D2 (“MOU”).[3]

11. D4 in their Defence put Ps to strict proof of the matters in the above paragraph, and averred as follows:

(a) D4 was retained to act for Song during January 2009, and her initial instructions were that she intended to invest in projects in Macau and to incorporate a company (eventually D2) for such purpose;

(b) once D2 was incorporated D4 acted for both Song and D2, and Mr Wong Sui Wah Michael (“Wong”) was D4’s sole solicitor, partner and/or fee‑earner who dealt with matters on behalf of Song and D2;

(c) Wong ceased to be D4’s partner by end of December 2013 and passed away in January 2014, and save for D4’s file in relation to Song/D2 (“D4 File”) the current partners of D4 (“D4 Partners”) had no knowledge of the nature of instructions to Wong by and on behalf of Song and/or D2 in connection with the subject matter of the ASoC.

12. Shanghai meeting Ps claimed (but D4 did not admit) nothing further was heard from D1/D2 on the proposed investment, so at P1’s request D1 accompanied him to Shanghai on 12 January 2011 to introduce Song to him, but Song did not turn up. D1 told P1 Song wanted to cancel the MOU and return $50M within 12 months. After their return from Shanghai, in/about January or early February 2011 D1 produced for P2’s execution an undated cancellation agreement for the MOU (executed in duplicate by Song on behalf of D2) (“Cancellation Agreement”).[4]

13. Money trail Ps averred that on 16 July 2012 (a) P1 on behalf of P2 wrote to D1 enclosing a copy letter of even date to D2 demanding payment of $50M under the Cancellation Agreement and (b) P2’s former solicitors requested D1 to inter alia disclose details of D2, but there was no reply.[5] It was common ground between Ps and D4 that (a) on 9 August 2013 P2 commenced HCMP1949/2013 against DBS, (b) on 11 September 2013 Lok J ordered DBS to disclose details of the D2 Account with relevant bank statements, and (c) discovery by DBS pursuant thereto (“DBS Discovery”) revealed that in February 2009 a sum of $49,950,009 (“Sum”) was transferred from the D2 Account to D4’s bank account with DBS in Hong Kong (“D4 Account”) (“D2/D4 Transfer”).[6] Ps averred they learned from the DBS Discovery Song’s full name/identity and the D2/D4 Transfer was made on 9 February 2009.

14. D4 in their Defence averred (and the documents in the D4 File revealed):

(a) the D4 File had a copy Cheque (with D2 named as payee), and an attendance note dated 30 January 2009 (“Attendance Note”) that recorded Wong attended Song in Shanghai on that day and Song informed him (i) monies from P2 had been deposited in the D2 Account, (ii) she would instruct DBS Macau to remit such monies to the D4 Account, and (iii) she was considering donating the money to “Chinachem Charity” and would confirm her instructions;

(b) on/about 3 February 2009 D2 gave DBS instructions for collection of the Cheque and (if paid) to credit the proceeds to the D2 Account upon deduction of charges;

(c) on/about 9 February 2009 DBS deducted bank charges of $40 and $49,951 leaving the Sum “to be transferred” to the D4 Account;

(d) on/about 10 February 2009 Song on behalf of D2 signed a written confirmation that as no suitable investment project was available so D2 would unconditionally donate the company funds to D3 (“Donation Confirmation”);

(e) on/about 9-10 February 2009 Song on behalf of D2 gave instructions to DBS Macau to remit $50M to the D4 Account and to deduct bank charges from the remittance amount;[7]

(f) D4 received written instructions dated 10 February 2009 from D2 (signed by Song) confirming its unconditional donation of $25,000,000 (“$25M”) to D3 with no future repayment required (“1st Confirmation”);

(g)...

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