The Estate Of Yang Sen Hui And Others v Pao Yuen Tung Hsing Yieh Co Ltd

Judgment Date12 March 1982
CourtCourt of Appeal (Hong Kong)
Judgement NumberCACV79/1981
Subject MatterCivil Appeal


Civil App. 77 and 79 of 1981

Applications to dismiss action pursuant to R. S. C. O.18 r,19 and to the inherent jurisdiction on the ground that it was bound to fail as regards legal claims by reason of S's 4(1) and 26 of the Limitation Ordinance (Cap. 347) and as regards equitable claims by reason of the Respondents' laches. Approach of Courts to such applications, matters to be taken into account and the judgment of Megaw LJ in Merlyn Alerty-Speyer & anor v. BP Oil Ltd & anor (CA) 2nd May 1980 (unreported) considered.

By writ issued on 3rd February 1981 the Respondents, alleged to be a corporation situate in and entirely owned by the Peoples' Republic of China, claimed against the Appellants, named as the Estates of three men who had died in 1963, 1966 and 1977 respectively, a declaration that the shares in a Hong Kong company comprised in such estates had fraudulently and in bread of trust been appropriated by the three deceased between 1948 and 1953 and were beneficially owned by the Respondents. The Respondents also claimed consequential and other relief. The Appellants' applications to dismiss which were based (inter alia) on the lapse of time since 1953 and the resulting difficulty of ensuring a fair trial were refused by the Judge on June 16, 1981. On appeal

Held: per Leonard V-P and Kempster, J

(i) That the Respondents' claims at law were barred because, with reasonable diligence, they could have discovered the alleged frauds more than six years before the date of writ

(2) That the Respondents' claims in equity were barred because, since 1953, they had been aware of facts indicating that any beneficial rights they had might be in jeopardy and had stood by until the principal witnesses for the Appellants, namely the three deceased, had long been dead

(3) That this was a plain and obvious case in which the Court of Appeal was entitled to interfere with the decision of the Judge who had heard the applications at first instance.

(4) Per Rhind, J (dissenting). That the facts relevant to the potential. defences were not clear or obvious and warranted examination at trial.

Appeal allowed. Action dismissed


77& 79 OF 1981



1st Appellant


2nd Appellant


3rd Appellant




Coram: Leonard V-P, Rhind and Kempster JJ.

Date: 12 March 1982




Leonard, V-P:

1. This is an appeal by the estates of Yang Sen Hui (decd), Chang Jye An (decd) and Tung Teh Mei (decd) which were the 2nd, 3rd and 4th defendants, so named without objection in the writ, and the applicant in the Court below from a judgment of Power, J. when he refused to strike out under 0.18 r.19 of the Rules of the Supreme Court and the inherent jurisdiction of the Court the respondents' Statement of Claim, as disclosing no cause of action and as being frivolous, vexatious and an abuse of the process. Since, so the appellants maintain, the respondents' claims face inevitable defeat because of protracted and inexcusable delay. I will refer to the three deceased persons as "Yang", "Chang" and "Tung" respectively and the respondent as the "China Company".

2. The Statement of Claim details a sequence of events which at first sight indicates a marked reluctance on the part of the China Company to approach the Courts of the Colony. It is set out in full in the judgment of Power, J. and what follows below is a precis of the facts as alleged in it and in the affidavits filed, with indications of some omissions which seem to me to call for mention. These facts I accept for the purposes of this appeal.

3. The China Company is a corporation incorporated in the People's Republic of China. It was so incorporated some time before 1948. At an undisclosed date it became and still is entirely owned by the People's Republic of China. There is no information available as to the businesses it carries or has carried on nor where, save. that it carried on a textile business in Hankow, Wuhan in Pupei up to 18th May 1948, nor where its head of office is or was. Mr. Fan Tao Tsai who appears to reside at either 1A Des Voeux Central, Hong Kong or at Unit 6, No. 3, Block 20, San Li Ho, District 2, Beijung and also to have some connection with both Shanghai and ChungKing avers that he is its "principal representative". He is also the Deputy Director of Commerce in the People's Republic of China. It would appear that he is not an employee of the China Company nor one of its directors. The China Company is described in the writ as "having a place of business at 1A Des Voeux Road, Central, Prince's Building, Ground floor, Hong Kong," but precisely what business it carries on there is undisclosed. It began to use that premises as its office after 23rd October 1980. It would also appear that on the 13th October 1956 it was carrying on business in Chungking.

4. In May 1948 the China Company decided to transfer its textile business from Wuhan to Hong Kong and to that end sent Yang here from Shanghai in June 1948. At that time Mr. Fan was apparently the manager of Pao Yuen Tung Trading Co. Ltd. which is referred to in the writ as "the plaintiffs' Hong Kong branch". Of this organisation we know little. Thus we do not know where it had its registered office. It cannot have had its head office at Prince's Building at 1A Des Voeux Road. Central since Prince's Building was not then built. We do not know the nature of the business it carried on, nor whether it was ever "entirely owned by the People's Republic of China". It may, indeed, well be that the People's Republic of China did not acquire its interest in the plaintiff until after the winding up of the “Hong Kong branch" which was contemplated on the 7th April 1950 but did not occur until 1957. We do not know. Apparently the Hong Kong branch had in 1950 "residual funds" premises at 153, Wing Lok Street, a staff dormitory at Gloucester Road, Wanchai and land at Tsuen Wan. In paragraph 3(d) of the Statement of Claim Mr. Fan is described as its manager as at June 1948 but in paragraph 6 Mr. Chow Shu Yuen is so described as at 28th May 1948.

5. On Yang's arrival here he took steps to establish the 1st defendant ("the Hong Kong Company") in conjunction with one Hwang Liang Chen who is described as "the general manager of plaintiffs' head office in the People's Republic of China” (we have no more precise address) and Mr. Fan. The name of the Hong Kong Company was decided upon, its authorised capital of $5,000,000, that there should be 21 shareholders-representatives of the China Company and 7 directors. In 1948 and 1949 Chang and Tung and 8 others were sent here from China to work with Yang and on 14th August 1948 the Hong Kong Company was incorporated here with a paid up capital of $3,500,000 entirely contributed by the China Company part (the Tsuen Wan land and $100,000) which came from the Hong Kong branch. The Hong Kong branch also resolved (in 1950) that the Wing Lok Street property and the staff dormitory be made available to the Hong Kong Company.

6. Yang, Chang and Tung had been employees of the China company since the early 1940s and on the Hong Kong Company's incorporation in 1948 they became shareholders in it with Mr. Hwang Liang Chen, Mr. Fan Tao Tsai and 16 others, Hwang being allotted 4,000 shares; Fan 2,000 shares; Yang 2,000 shares and Tung and Chang 1,500 shares each. The other shareholders held parcels varying, between 4,000 and 1,000 each. The shares had a nominal value of $100 each of which $70 was regarded as paid up but none of the shareholders had personally paid any sum for them all having been contributed by the China Company. All 21 shareholders held the shares vested in them as nominees and trustees of the China Company which was the beneficial owner of the entirety of the shareholding. When the Hong Kong Company was incorporated Hwang, Fan and Yang were together with four others, appointed its directors with Hwang as president of the Board, Yang as its manager, Chang as submanager and Tung assistant manger. Most, if not all, of the other 21 persons were at all material times resident in China apparently in Chungking, Yang, Chang and Tung were left in defacto control here. It is implicit in the Statement of Claim that Hwang (the President of the Board of. Directors), and Fan (a director) did not concern themselves. with the affairs of the China Company except in minor capacities with which I will deal later although it would appear that both were managers of the Hong Kong branch.

7. In the two years following its incorporation the Hong Kong Company failed to prosper. At the end of 1950 it had an accumulated loss of over $900,000 and in 1951 a loss of over $125,000. By the 31st December 1951 Yang was the only director in the Colony and while the affairs of the Hong Kong Company had, improved they were still critical. Although its affairs looked up in 1952 and thereafter it appears in the minutes of the ordinary general meeting held on the 31st December 1951 that a call had been made on shares during that year but no payment had been made. Apparently the call was irregularly made. The meeting of the 31st December 1951 concerned. itself with the election of new directors the old directors being deemed to have retired by virtue of Article 36 of its Articles of Association; it was thought that 2 directors should be elected from the shareholders in Hong Kong and "the other three from the retiring directors...

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