Yat Tung Investment Company Ltd v Dao Heng Bank Ltd

JurisdictionUK Non-devolved
Judgment Date1975
Date1975
Year1975
CourtPrivy Council
[PRIVY COUNCIL] YAT TUNG INVESTMENT CO. LTD. APPELLANT AND DAO HENG BANK LTD. AND ANOTHER RESPONDENTS [ON APPEAL FROM THE FULL COURT OF THE SUPREME COURT OF HONG KONG] 1974 Oct. 15, 16, 17; 1975 Jan. 27 Lord Morris of Borth-y-Gest, Lord Cross of Chelsea and Lord Kilbrandon

Estoppel - Per rem judicatam - Issue. whether previous opportunity for decision - “Contract - Validity of auction sale by bank of property mortgaged to it - Whether sales collusive - Lack of economy of litis contestation - Matters which could and should have been litigated in prior proceedings - Whether abuse of process

The owners of a property borrowed money from the first respondent (the bank) which loan was charged upon the property. The owners defaulted on payment of the loan interest due to the bank and absconded. The bank, in exercise of its rights, sold the property to the appellant. The bank assigned the property, pursuant to the sale, to the appellant and the appellant borrowed money from the bank on the security of a mortgage of the property. The appellant defaulted on the payment of interest under the mortgage and the bank exercised its right of sale thereunder and sold the property to the second respondent. The appellant brought an action against the bank (no. 969 of 1969) claiming that the sale of the property to it was a sham; that the property had been conveyed to it as trustee for the bank and the mortgage was accordingly a nullity. The bank denied that the sale was a sham and counterclaimed for the loss suffered on the re-sale of the property to the second respondent. The court dismissed the appellant's claim and upheld the bank's counterclaim. One month after that judgment the appellant brought an action against the bank and the second respondent (no. 534 of 1972) claiming that the sale by the bank to the second respondent was void or voidable as fraudulent in that the bank and the second respondent “were in fact essentially one certain interest and/or alternatively acting in concert with a common design calculated to obtain the … property at a low price and to extinguish the plaintiff's interest therein.” The bank and the second respondent applied by summons for an order that the statement of claim be struck out as (inter alia) being vexatious, frivolous and/or otherwise an abuse of the process of the court. The judge held that the allegation of fraud and the voidability of the sale by the bank to the second respondent were matters which were available for litigation in action no. 969, and ordered that the statement of claim be struck out. The order striking out the statement of claim was affirmed by the Full Court.

On appeal to the Judicial Committee: —

Held, dismissing the appeal, that there was no reason why a defence impugning the bona fides of the sale by the bank to the second respondent could not have been pleaded as a counterclaim to the counterclaim in action no. 969; that, accordingly, the doctrine of res judicata in its wider sense applied and it would be an abuse of the process of the court to raise in subsequent proceedings matters which could and should have been litigated in the earlier proceedings (post, pp. 696C–697C).

Henderson v. Henderson (1843) 3 Hare 100 and Greenhalgh v. Mallard [1947] 2 All E.R. 255, C.A. applied.

Judgment of the Full Court of the Supreme Court of Hong Kong affirmed.

The following cases are referred to in the judgment:

Greenhalgh v. Mallard [1947] 2 All E.R. 255, C.A.

Henderson v. Henderson (1843) 3 Hare 100.

Hoystead v. Commissioner of Taxation [1926] A.C. 155, P.C.

Koenigsberg, In re [1948] Ch. 727; [1949] Ch. 348; [1949] 1 All E.R. 804, C.A.

The following additional cases were cited in argument:

Asher v. Secretary of State for the Environment [1974] Ch. 208; [1974] 2 W.L.R. 466; [1974] 2 All E.R. 156, C.A.

Caird v. Moss (1886) 33 Ch.D. 22, C.A.

Davis v. Hedges (1871) L.R. 6 Q.B. 687.

Eshelby v. Federated European Bank Ltd. [1932] 1 K.B. 254; [1932] 1 K.B. 423, C.A.

Herbert v. Vaughan [1972] 1 W.L.R. 1128; [1972] 3 All E.R. 122.

Lewis Falk Ltd. v. Jacobwitz (1944) 171 L.T. 36.

Lopes v. Valliappa Chettiar [1968] A.C. 887; [1968] 3 W.L.R. 92; [1968] 2 All E.R. 136, P.C.

Public Trustee v. Kenward [1967] 1 W.L.R. 1062; [1967] 2 All E.R. 870.

Renton Gibbs & Co. Ltd. v. Neville & Co. [1900] 2 Q.B. 181, C.A.

APPEAL (No. 14 of 1973) from a judgment (March 21, 1973) of the Full Court of the Supreme Court of Hong Kong (Blair-Kerr C.J., Huggins and McMullin JJ.) dismissing an appeal by the appellant, Yat Tung Investment Co. Ltd., against a judgment and order of the Supreme Court of Hong Kong (Briggs J.) that the appellant's statement of claim in an action against the respondents, Dao Heng Bank Ltd. and Choi Kee Ltd., be struck out as being an abuse of the process of the court.

The facts are stated in the judgment of their Lordships.

Robert Gatehouse Q.C. and David Vaughan for the appellant.

G. B. H. Dillon Q.C. and Charles Ching Q.C. (of the Hong Kong Bar) for the respondents.

Cur. adv. vult.

1975. January 27. The judgment of their Lordships was delivered by LORD KILBRANDON.

In 1968 a building was in course of construction in Hong Kong. The owners of the site, in order to finance the building operations, had borrowed, in two separate transactions, $ 1,400,000 from the first respondent (“the bank”), which loans were charged upon the property. The work of building was being carried out by contractors, a company (“the construction company”) for practical purposes owned by one Lai Yung-Kwong (“Mr. Lai”). The owners got into difficulties and absconded, leaving interest on the bank loans in arrear and owing money to the construction company. The bank therefore, in exercise of its rights, sold the premises by auction, on May 13, 1968, to the appellant (“Yat Tung”), for $ 880,000. Yat Tung was another company effectively owned by Mr. Lai. On May 23, 1968, the bank assigned the property, pursuant to the sale, to Yat Tung, and on the same day Yat Tung borrowed from the p bank on the security of the property the sum of $ 1,000,000. This sum was devoted largely to satisfying the purchase price. Yat Tung defaulted on the payment of interest under the mortgage, the bank exercised its right of sale thereunder, and on November 26, 1969, sold the property by auction to the second respondents (“Choi Kee”).

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