KIN MING HOLDINGS INTERNATIONAL LTD v. LAM MOON YUEN

HCA 2350/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2350 OF 2005

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BETWEEN

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D E C I S I O N

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1.  This is an application by the defendant for an order that the plaintiff do retrieve from 厦门鹭江公证处 (Xiamen Lujiang Notarial Public, “the Notarial Public”) the sum of RMB 125 million deposited therewith by the plaintiff and pay the same together with a sum being the difference between RMB 5 million and the taxed costs of HK$454,813.35 to the defendant’s designated account in Xiamen.

The present custody of the money

2.  The application was first heard on 19 April 2011 but could not be resolved on that day.  Since the RMB 125 million would be forfeited by the Notarial Public or the mainland government if not retrieved on or before 28 April 2011, I made an interim order requiring the plaintiff to retrieve that money from the Notarial Public on or before 21 April 2011 and pay the same plus the RMB 5 million less the taxed costs into a joint account to be opened in the joint names of the plaintiff and the defendant in a bank in Xiamen.

3.  The RMB 125 million and the RMB 5 million less the taxed costs amount to RMB 129,527,267.  This sum is now kept in an account opened in the joint names of the defendant and one Mr Hsu Ming Chi 〔许明棋〕 with the China MinSheng Banking Corporation Limited (中国民生银行厦门金榜支行) under account number 290500000391 (“the Joint Account”).  Mr Hsu is a director and representative of the plaintiff.  He, in opening the Joint Account and depositing the said sum into it, was acting for and on behalf of the plaintiff.  The reason being that the plaintiff, being a company domiciled in Hong Kong, would have required much longer time to open a bank account in the Mainland. 

4.  Owing to this change of custody of money, the defendant now applies for the retrieval of the said sum from the Joint Account.  She also wants to have it deposited into a bank account of 厦门福滿集团有限公司 (“Fuman Co.”) opened with the 中国工商銀行股份有限公司厦门城建支行 of account number 41000-2400-900-9111-250.

The background

5.  The plaintiff used to own the development rights in a piece of land in Xiamen.  The plaintiff and the defendant entered into an agreement dated 16 April 2004 to co-operate in developing the land.  Pursuant to the agreement, the defendant paid the plaintiff several deposits totalling RMB130 million.  The last deposit of RMB 30 million was paid on 17 August 2004.  Clause 6.2 of the agreement provided that the plaintiff had to obtain from the Xiamen Government a Notice of Payment of Land Price (“Notice of Payment”) no later than 30 June 2004, failing which the plaintiff would have to return the deposits to the defendant within 15 working days after 30 June 2004.  The agreement would then be terminated.

6.  It appears to be the understanding of the parties that if the Notice of Payment could not be obtained by 30 June 2004, the development of the land could not go ahead.  However, the agreement further provided in clause 7.1 that if the plaintiff should obtain the development rights of the land again within 2 years after the refund of the deposits to the defendant, then the plaintiff had to co-operate with the defendant again to develop the land according to the agreement.

7.  It turned out that the plaintiff indeed could not have obtained the Notice of Payment by 30 June 2004.  However, the plaintiff and the defendant still wanted to pursue the development by pleading with the Xiamen Government for leave to develop the land as per the Government’s previous plan.  They did not want the agreement to come to an end.  That was why a further deposit of RMB 30 million was paid by the defendant to the plaintiff on 17 August 2004. 

8.  Nevertheless, the lobbying of the Xiamen Government failed and the development as contemplated in the agreement between the plaintiff and the defendant could not go ahead.  The plaintiff then sought to return the deposits totalling RMB 130 million to the defendant, but the defendant refused to take the deposits back.  Hence, the plaintiff started this action on 22 November 2005 for various declarations.

9.  On the basis of these facts, which were provided by the plaintiff in this action, I think the agreement should have terminated after the tender of the RMB 130 million by the plaintiff to the defendant though the defendant declined the tender.  However, there is no evidence on the date of tender though it should be sometime after 17 August 2004 when the last deposit of RMB 30 million was paid by the defendant to the plaintiff.

Judgment in this action

10.  The defendant did not take part in this action. She later said on affirmation that she had not received the Writ of Summons and was not aware of this action.

11.  On the plaintiff’s application for default judgment, I declared that the agreement dated 16 April 2004 and signed between the plaintiff and the defendant was terminated but without prejudice to its possible revival pursuant to clause 7.1 therein.  Subject to the first declaration, I further declared that both the plaintiff and the defendant were discharged from further performance of the agreement.  I also granted the plaintiff liberty to deduct from the RMB 130 million the taxed costs of this action.  These costs were later taxed at HK$454,813.35 as referred to above.  I contemplated that the RMB 130 million less the taxed costs would be returned to the defendant.

12.  I also said in the judgment that the agreement had been terminated at the latest by the end of 15 July 2004, but I was merely summarising the facts as presented by the plaintiff.  I do not think that was a correct statement.

13.  The plaintiff then deposited RMB 125 million of the deposits with the Notarial Public on 29 April 2006 for the defendant to collect.  For the remaining RMB 5 million, the plaintiff withheld it at its own volition to cover the taxed costs, but it still did not pay the balance to the Notarial Public after the costs were taxed.

The 2nd Action and the terms of the agreement alleged by the defendant

14.  On 6 February 2008, the defendant started HCA216/2008 (“the 2nd Action”) against the plaintiff.  The defendant claimed in the 2nd Action that the agreement had revived pursuant to its clause 7.1.  She seeks in the 2nd Action specific performance of the agreement and/or damages. She however pleaded that the agreement between her and the plaintiff was partly made orally and partly embodied in the written agreement dated 16 April 2004. 

15.  For the purpose of this application, I do not think I have to go into the details of the alleged oral part of the agreement. The merits of this application do not depend on whether the agreement was partly made orally and partly in writing or was made exclusively in writing.

16.  The plaintiff contests the 2nd Action.  It denies that there is an oral part of the agreement.  It also denies that the agreement, which it said was made solely in writing, had revived.  Its stance is simply that the agreement had terminated and there was nothing to perform with the defendant.

Events leading to this application

17.  Given my judgment in this action, which the defendant does not find it necessary to challenge, and given the plaintiff’s stance in the 2nd Action, the deposits at RMB 130 million less the taxed costs should be returned to the defendant.  If the defendant should succeed in the 2nd Action, then the court could decree specific performance of the agreement, whether it be partly orally and partly written or wholly written.  The defendant could then tender the deposits again in accordance with the terms of the agreement as may be found by the court in the 2nd Action.

18.  However, the defendant did not collect the RMB 125 million from the Notarial Public or to ask the plaintiff for payment of the withheld RMB 5 million less the taxed costs.  She gave an explanation in an affirmation, which was filed on 11 April 2011 in support of this application.  She said she did not collect the money because the agreement had revived and the plaintiff should co-operate with her to develop the land under clause 7.1 of the written agreement and her alleged oral part of the agreement. Furthermore, she was unsure if taking the money back might prejudice her claim in the 2nd Action under the law of the mainland.

19.  Putting aside the issue of the law of the mainland, I do not think the defendant should refrain from taking the money back pending the 2nd Action as the plaintiff is denying that there is any agreement to be performed and is refusing to take the money as deposits under any agreement. 

20.  The defendant later received legal advice from a Mainland lawyer that if the money deposited with the Notarial Public was not withdrawn after 5 years from the date of deposit, it would be forfeited by the mainland government.  That means that if the RMB 125 million was not retrieved from the Notarial Public by 28 April 2011, it would be forfeited by the mainland government. The defendant then tried to withdraw the money without prejudice to her claim in the 2nd Action.  However, in doing so, she needed the co-operation of the plaintiff, which was not forthcoming.  Hence, she had to make this application.

21.  She has also said in an affirmation in the 2nd Action that she entered into the agreement with the plaintiff not in her own right, but for and on behalf of Fuman Co. 

The grounds of the plaintiff’s opposition and decisions thereon

22.  The plaintiff opposes this application and insists that the money should continue to be kept in the Joint Account and not to be returned to Fuman Co.

23.  The first point taken by the plaintiff is that I have already given judgment in this action.  I am therefore functus official in relation to this application as made under Order 29 rule 1.  I disagree.  I have jurisdiction under Order 29 rule 1 to make injunction orders whether before or after judgment has been given in an action.

24.  This application seeks a mandatory injunction to procure the release and return of the deposits to Fuman Co.  This is a matter consequential to my judgment.  The return of the deposits to the defendant, or to Fuman Co. as directed by the defendant, is the result of my declaration of the termination of the agreement.  This is so whether the agreement was made only in writing or was made partly orally and partly in writing, as the defendant alleges.  The reason being that whatever might have been the nature of the agreement, it is the defendant’s stance that it had been terminated and the plaintiff is not obliged to perform it with the defendant.  The defendant therefore must return the deposits and has no right to dictate where and how they should be kept.  If the defendant wants to have them back, the plaintiff has no ground to disagree.

25.  I also reiterate that if the defendant should succeed in the 2nd Action and should obtain a decree of specific performance, then she will have to tender the deposits again according to the agreement, the terms of which are to be found by the court in the 2nd Action, and the plaintiff will have to accept them.  If the defendant should fail to do so, then she would not be entitled to the fruit of the decree.  The court will then consider whether she should be given any other relief.  But these are all matters for the future and I should not speculate.  In the meantime, there is, however, no reason why the money should not be returned to Fuman Co. as per the defendant’s direction.  I therefore consider that I do have jurisdiction to deal with this application as it is an aftermath of my judgment in this action.

26.  The plaintiff further argued that the defendant should apply for payment of the money in the Joint Account by accepting unequivocally the judgment in this action as the final determination of the disputes between the parties under the agreement, which existed only in written form, and that is the only circumstances that the defendant can be entitled to have the money back.

27.  I understand this submission to mean that unless the defendant accepts that the agreement was only in written form and that it has been terminated absolutely and there is no basis for the defendant to launch the 2nd Action, she should not be entitled to the return of the deposits.  I think this stance of the plaintiff is utterly unreasonable.  I do not see why there should be these conditions imposed on the defendant before she can have the money back.

28.  I also do not see why the defendant has to accept that the agreement was made only in writing before she can get the money back. The money belongs to her principal.  The money was paid to the defendant for the purposes of an agreement, the terms of which are now disputed.  But the important point is that the plaintiff does not want the money.  Then it should return it to the defendant’s principal.  The fact that the parties dispute on the terms of the agreement is neither here nor there.

29.  The plaintiff’s attempt to keep the money out of the defendant’s reach is in effect an attempt to make it a ransom to demand the defendant to yield to its demand.  I think such conduct is wrong.

30.  I further say that if the defendant should have taken back the money as soon as it was tendered to her and before this action was instituted by the plaintiff, she will still be able to start the 2nd Action and to allege therein the revival of the agreement which was allegedly made partly orally and partly in writing.  The fact that she has not taken the money back does not make a difference and will not allow the plaintiff to dictate how and where the money should now be kept.

31.  The plaintiff further submitted on balance of convenience and so forth under the principle of American Cyanamid, but I think there is no issue that needs to be tried on the defendant’s entitlement to have the money back.  The plaintiff does not even have a straw to clutch at for support of its opposition.

32.  Finally, the plaintiff submitted that if I should order the money to be returned to Fuman Co., then the order should be conditional upon the defendant procuring an affirmation filed in court by a duly authorised representative of Fuman Co. confirming that the defendant has been duly authorised to take the money out of the Joint Account as its agent pursuant to the court’s directions.

33.  I do not think I should impose such condition. There is clear evidence that the money was initially from Fuman Co.  The defendant has already acknowledged that she is the agent of Fuman Co. and she seeks the return of the money to the company.  I see no reason why Fuman Co. would want the money to remain in the Joint Account.  To keep the money in this account is not a pre-requisite for the defendant to succeed in the 2nd Action. If Fuman Co. should desire the money to be kept in a bank account to gain interest or for other purposes, it is at liberty to deposit it in its own bank account.  Furthermore, the defendant is still Fuman’s agent and the plaintiff does not suggest otherwise, then there is no reason to require another agent of Fuman Co. to make an affirmation to confirm the agency

34.  The plaintiff also reiterated that I should provide that this application is a consequence of the default judgment and I should not say that the release of the money to Fuman Co. is without prejudice to the defendant’s claim in the 2nd Action. 

35.  I again disagree.  This application is indeed the consequence of the default judgment, but it does not mean that the deposits were initially paid by the defendant to the plaintiff pursuant to the agreement as alleged by the plaintiff and not as alleged by the defendant.  That issue has not been canvassed at all in this action as the defendant had not taken part in it. 

36.  Whether the deposits were paid pursuant to the agreement as alleged by the plaintiff or as alleged by the defendant is a matter to be resolved in the 2nd Action.  The return of the deposits to Fuman Co. shall not affect the determination of that issue.

Decision

37.  I therefore order:

(1)   The Plaintiff and Mr Hsu Ming Chi (许明棋) do forthwith take all necessary steps and co-operate with the defendant to procure the payment of all the moneys deposited in the Joint Account together with all interest accrued therein into the defendant’s designated account in Xiamen, namely:

Account name: 厦门福滿集团有限公司,

Account number: 41000-2400-900-9111-250,

Branch name: 中国工商銀行股份有限公司厦门城建支.

(2)   Thereafter, the plaintiff, Mr Hsu Ming Chi (许明棋) and the defendant shall jointly close the Joint Account.

(3)   For the avoidance of doubt, the payment made pursuant to paragraph (1) hereinabove is without prejudice to the defendant’s claims in HCA216/2008.

(4)   There be an order nisi that the costs of and incidental to the defendant’s application herein including all costs reserved be paid by the plaintiff to the defendant, to be summarily assessed if not agreed, with certificate for two counsel.

(5)   The summary assessment of costs shall take place at a 9.30 am hearing to be fixed outside the next 14 days if no application for variation of the order nisi should be made within the next 14 days.

(6)   The defendant shall furnish the plaintiff and the court her bill for summary assessment no less than 10 days before the hearing, and the plaintiff shall furnish its comments on the bill no less than 4 days before the hearing.

(7)   There be no costs for counsel for today.