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HCA 672/2009
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 672 OF 2009
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BETWEEN
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TSANG SIU SEE |
Plaintiff |
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and |
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JOSEFIN INVESTMENT LIMITED |
1st Defendant |
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LAW PIK HAN ELSA trading as
ELSA LAW & COMPANY, SOLICITORS |
2nd Defendant |
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Coram: Before Madam Registrar Au-Yeung in Chambers
Date of Hearing: 30 July 2009
Date of Further Written Submission: 24 August 2009
Date of Judgment: 26 August 2009
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REASONS FOR DECISION
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1. There are 3 applications before me:
(A) An interpleader summons taken out by the 2nd Defendant (“the Solicitor”);
(B) A summons for judgment taken out by the Plaintiff vendor based on admission of facts (“the admission summons”);
(C) An application for costs by the 1st Defendant purchaser (“JIL”).
(A) The Interpleader Summons
2. The Provisional Sale and Purchase Agreement (“the Agreement”) governed the sub-sale between the Plaintiff and JIL.
Clause 2(b) provides that:
“ Upon signing of the Formal Agreement for Sale and Purchase on before 5 p.m. of 5 day of 9 month 2008 year further deposit shall be paid in the sum of HK$272,000.00.
In Chinese, it is: 於簽署正式買賣合約之時或以前，即5時間5日9月2008年加付訂金港幣272,000.00.”
Clause 7 provides that:
“ Should the purchaser fail to complete the purchase in the manner herein contained, the deposit shall be forfeited to the Vendor …
In Chinese it is: 如買方未能履行本合約條款完成買賣，賣方除將買方已付之訂金沒收外，….”
Clause 17 provides that in case of ambiguities, the Agreement should be interpreted in its Chinese version.
Clause 18(4) provides that:
“ 賣方同意所有訂金須由賣方律師行托管，並在確保該樓價餘款足夠清還現存按揭及債務，方可將訂金餘款轉交賣方”。
（emphasis added in above clauses）
3. The parties held different views over these clauses. JIL indicated that it would not proceed to completion. It claimed that he was entitled to the return of the further deposit of $272,000 (“the Further Deposit”) because there had been no signing of the formal sale and purchase agreement. Its claim in correspondence was purportedly backed up by authorities. On the other hand, both the Plaintiff and the Solicitor contended (with the support of counsel’s advice) that the Further Deposit was liable to forfeiture. The Plaintiff had no outstanding mortgage and the Further Deposit should thus be released to the Plaintiff. JIL did not agree to the views of the Plaintiff and the Solicitor. It even objected to the Solicitor transferring the Further Deposit to the new firm of solicitors appointed by the Plaintiff who was expected to continue to stakehold the Further Deposit. The Plaintiff complained that the Solicitor should not have sought the consent of JIL to transfer the Further Deposit and demanded the Solicitor to return the Further Deposit to the Plaintiff without delay. It was apparent that the new firm of solicitors acting for the Plaintiff had no intention to continue to stakehold. In such circumstances, the Solicitor has, in my view, rightly taken out the interpleader summons.
4. The Plaintiff disputes the interpleader summons on several grounds:
(1) that the Solicitor was not a stakeholder within the meaning of the Agreement;
(2) that assuming that the 2nd Defendant were a stakeholder, she would be obliged to hold the money and was under a duty to deal with the same in accordance with the terms of the Agreement;
(3) that the Solicitor was not entitled to make any deduction from the Further Deposit before paying over to the Plaintiff.
5. With regard to ground (1), the Plaintiff relies on the Chinese version of clause 18(4) which states that “賣方同意所有訂金須由賣方律師行托管，……”. The Plaintiff submits that the Solicitor is a trustee as opposed to a stakeholder.
6. Even if the Plaintiff is correct, that does not prevent the interpleader procedure from applying. The word “stakeholder” used in “stakeholder’s interpleader summons” bears a different meaning from that used in conveyancing transactions. The former is merely a short form for describing “a person under a liability in respect of a debt or in respect of any money who expects to be sued for or in respect of that debt or money by two or more persons making adverse claims thereto” within the meaning of Order 17, rule 1(1)(a). It does not mean the relief is only available to a person in the position of a stakeholder. When the “trustee” Solicitor in the present case faced a competing claim from the Plaintiff and JIL over the “money” the Solicitor had every right to take out the present summons.
7. With regard to ground (2), I cannot understand the reasoning of the Plaintiff. The Solicitor is not denying her duty as stakeholder. It is the conflicting views held by the Plaintiff and JIL that entitled her to take out the interpleader summons to protect her own position. As pointed out by Mr. Tsui for the Solicitor, the issue in dispute disappeared only on JIL’s concession to the interpleader at the first hearing.
8. With regard to ground (3), the Solicitor has at the time of taking out the interpleader Summons asked for costs to be deducted before paying over the balance. Her total costs are $29,000 but she intends to claim:
(1) $4,000 initially described as “conveyancing costs” but which turned out to be the cost of time spent by her in dealing with the large volume of subsequent correspondence with legal representatives of the Plaintiff and JIL on the Further Deposit.
(2) $8,000 for her costs relating to the interpleader application, the associated affirmations and attendances at hearings.
(3) $3,000 for her counsel’s fees for the present (third) hearing.
In terms of quantum, I do not think anyone can dispute the reasonableness of these 3 amounts.
9. The Plaintiff opposes the $4,000 on the ground that it forms costs of the action and all conveyancing costs having been paid. I agree. The Solicitor is to hold the stake upon the happening of an event. The Agreement does not permit her to use that stake as some sort of security against liabilities due to her. See Rockeagle Ltd. v. Alsop Wilkinson [1991] 3 WLR 573. Further, when there is an unresolved issue of negligence against her related to the release of the Further Deposit, she might not be able to recover “conveyancing costs” or costs of the interpleader summons. The Plaintiff rightly insists on proceeding to argue the interpleader summons. Had the Solicitor duly informed me of the real nature of the $4,000, this head of deduction could, at the latest, have been disposed of at the 2nd hearing. Unfortunately, the Solicitor only stated her case in this respect at the 3rd hearing and then abandoned this head of claim for costs.
10. The Plaintiff opposes the $8,000 and $3,000 counsels’ fees on the ground that the interpleader summons was not rightly taken out. I disagree as can be seen from my reasons above.
11. But who should be bear the costs of the interpleader summons?
12. For the 1st call-over date, JIL should bear costs of the Plaintiff because it was his fault which gave rise to the summons. It has been agreed between JIL and the Solicitor that there should be no order as to costs.
13. For the 2nd call-over date, the Plaintiff should bear costs of JIL and the Solicitor as the matter could have proceeded to disposal then but for the adjournment to deal with the Plaintiff’s taking out an admission summons in the meantime.
14. For the 3rd hearing costs should not be borne by the Plaintiff who has successfully contested the issue of deduction from the Further Deposit. Neither should JIL because it did not contest the proceedings. Rather, the 2nd Defendant should in principle bear the Plaintiff’s costs because it was only at the 3rd hearing that she revealed the full extent of her costs and abandoned them in part. I am of the view that no costs should be deducted from the Further Deposit. I will come back to the question of costs in paragraphs 29-33 below.
(B) The Admission Summons
15. The admission summons asks for judgment in terms of prayer 1 of the statement of claim against JIL and the Solicitor. That prayer is for:
“(a) A declaration the Plaintiff is entitled to forfeit the Further Deposit and that the same has been forfeited pursuant to the Sub-Sale Agreement;
(b) A declaration that the Solicitor, as solicitors and agents for the Plaintiff, is obliged to release the Further Deposit (with all accrued interest thereon) to the Plaintiff;
(c) An order that the Solicitor do forthwith release the Further Deposit to the Plaintiff or at his directions; and
(d) Damages for detinue/conversion.”
I will first deal with prayers 1(c) and (d).
16. Both JIL and the Solicitor agreed to release the Further Deposit to the Plaintiff. As a result of my decision on the interpleader summons, the release will be without deduction. There is no need to seek judgment under prayer 1(c).
17. The claim for judgment under a cause for detinue/conversion under prayer 1(d) is unfounded. Detinue lies at the suit of a claimant having a right to immediate possession for the wrongful detention of his chattel or failure to deliver it up on demand: General & Finance Facilities Ltd. v. Cooks Cars (Ramford) Ltd. [1963] 2All ER 314. The wrongful detention is normally evidenced by the defendant’s refusal to deliver it up on demand. Conversion lies in the unlawful appropriation of another’s chattel. Monies stakeheld/held on trust is a chose in action but not corporeal chattels. Hence no action lies for conversion in respect of dealings with money once it passes into currency, which is the case of the Further Deposit. See Clerk and Lindsell on Torts, 19th edition paragraphs 17-34 and Chong Kwok Tung v. Liu Chong Hing Bank Ltd. & another, HCA 7285/1992 at page 15.
18. In his further submission, Mr. Chong of the Plaintiff made a distinction between causes of action and relief claimed. The former depends on facts pleaded in the statement of claim and the latter is the remedy sought. This much I agree. The statement of claim does plead valid causes of action. However, what I am dealing with under the admission summons is the prayer for relief. There is inconsistency between the cause of action as pleaded and the relief claimed. Different causes of action may give rise to difference in the computation of damages and the Court cannot ignore a prayer for relief when giving judgment.
19. I am satisfied that I do have power to grant the declarations but for the interpleader summons. However, I do not see how this relief will add anything of substance if I give (or decline to give) judgment under prayers 1(c) and (d). As against JIL, if a declaration were made under prayer 1(a), what substantive relief can the Plaintiff get from it when it is not holding the Further Deposit and the only prayer in damages for detinue/conversion is bad in law? As against the Solicitor, even if a declaration under prayer 1(b) were given that the Solicitor was obliged to release the Further Deposit to the Plaintiff as at 3 November 2008 (when JIL first intimated that he would not proceed to completion), the substantive relief that the Plaintiff can get will only be the release of the Further Deposit. This, he can get anyway under the interpleader summons. The other substantive relief is bad in law.
20. The admission summons should be dismissed. It is otherwise unnecessary as the only substantive relief recoverable has been covered by the interpleader summons. Costs including those of the 2nd and 3rd hearings should be to JIL and the Solicitor.
(C) JIL’s Claim for Costs
21. Between JIL and the Solicitor, there is no issue of costs. JIL is only seeking costs against the Plaintiff. He claims that there was no “letter before action” before the writ was issued on 10 March 2009 and he also relies on 3 letters dated respectively:
(1) 26 March 2009
(2) 8 April 2009
(3) 11 May 2009
22. I am of the view that the letter dated 13 January 2009 from the Plaintiff to JIL was the “letter before action”.
23. After that, the last letter involving JIL before issue of the writ was from the Solicitor dated 5 February 2009 (“the last letter”). The Solicitor informed JIL that the Plaintiff’s solicitors were demanding release of the Further Deposit and unless a contrary view be forthcoming from JIL, the Solicitor would release the same to the Plaintiff’s solicitors. There was no response from JIL and the Solicitor did not release the Further Deposit. JIL explains its lack of response as an act to save costs.
24. With respect, silence did not amount to consent to release. JIL’s failure to respond thus led to the litigation and more costs being incurred. From November 2008 when JIL first wrongfully demanded the return of the Further Deposit until issue of the writ, there had been 4 months’ correspondence on one issue. In any case, JIL maintained his stance up to issue of the writ and filed an acknowledgement of service stating that he would contest the proceedings. A letter before action would not have changed his position. Mr. Pao for JIL submitted that JIL was contesting the claim for damages but not the release of the Further Deposit. However, this distinction was never made clear by way of a remark in the acknowledgement of service, a defence or correspondence.
25. As for the 1st letter dated 26 March 2009, JIL’s Calderbank offer was to consent to forfeiture of the Further Deposit with no order as to costs and the parties entering into a cancellation agreement.
26. As for the 2nd letter dated 8 April 2009, JIL’s Calderbank letter alleged that it believed that the Further Deposit had already been transferred to the Plaintiff on or after 10 February 2009. It again suggested that the Plaintiff’s claim be dismissed with no order as to costs.
27. The 3rd letter dated 11 May 2009 was an open letter. JIL indicated that it had not, since 5 February 2009, maintained any claim over the Further Deposit. JIL suggested that the Plaintiff’s claim be discontinued and there be no order as to costs.
28. I do not blame the Plaintiff for not conceding any of those 3 offers. Clearly the Plaintiff was entitled to costs. Entering into a cancellation agreement or discontinuance of the action would bar further claims including one for damages (though not for detinue/conversion as claimed). The 3 letters have not been given to the Solicitor. Any plaintiff would not have released JIL from liability without clearing the position with the Solicitor first. A claim for costs on the bases advanced by JIL must be refused, with costs to the Plaintiff.
Overall Costs
29. There is an important event on 1 June 2009 affecting the question of costs which I must not ignore. On that day, the 3 parties reached an agreement along the lines of a draft consent summons in the following terms (pages 92 to 107):
(1) The Further Deposit be forfeited and transferred to the Plaintiff forthwith;
(2) Each party shall discontinue its claim against each other in respect of the Further Deposit (including the Solicitor’s Notice of Indemnity against JIL and the interpleader summons);
(3) The interpleader summons be withdrawn;
(4) The hearing dated 3 June 2009 (1st hearing for the interpleader summons) be vacated;
(5) The question of costs of this action concerning the Further Deposit up to the date of the consent summons be adjourned for argument with one hour reserved.
Note that the Solicitor, in first proposing terms along these lines, had by letter dated 29 May 2009 made clear to the Plaintiff that “no doubt your client’s other claims against our client will continue”. This means the Plaintiff was not required to waive, amongst others, its claim for negligence against the Solicitor.
30. After taking counsel’s advice, the Plaintiff sought to amend the draft consent summons by (page 109):
(a) adding a new paragraph 1 for a declaration that the Plaintiff is entitled to forfeit the Further Deposit.
(b) Deleting the reference to discontinuance in paragraph 2 and simply stated that the Solicitor’s Notice of Indemnity against JIL be withdrawn.
The reasons were:
“ The addition of 1st paragraph is that our client is entitled to obtain judgment against the 1st and 2nd Defendant in respect of Further Deposit and it is our counsel’s view that ‘Declaration’ should be made in favour of the Plaintiff.
The deletion of discontinuance in (original) paragraph 2 is necessary. It is our counsel (sic) opinion that the claim could not be discontinued which would have otherwise disentitled the costs of the Plaintiff in any event and the (new) paragraph 6 will serve no purpose.”
31. The Solicitor replied as follows (page 112):
“ We agree to the addition of the 1st paragraph for the sake of clarity only and do not agree that your client is entitled to obtain judgment against the Defendants.
We do not feel the deletion of the discontinuance in the original paragraph 2 would affect the question of costs. It appears that your Counsel’s advice is relevant only when the Plaintiff withdraws or discontinues the action that the Plaintiff is not entitled to costs. But here we are talking about consent to discontinue. Therefore the question of costs to be heard is also part of the Consent. The safest way forward would be to seek discontinuance with leave and summons is required.”
32. I agree entirely with the Solicitor. Unfortunately neither the Plaintiff nor JIL responded. Had the consent summons been entered into with the addition of the new paragraph 1, the Plaintiff’s position on costs would have been best secured. The admission summons and the 3 hearings would have been unnecessary; likewise for the further submissions on the cause of action in detinue/conversion.
33. Taking into account all the circumstances, I am of the tentative view that there should be no order as to costs in the round.
Summary
34. I order as follows:
(A) Under the interpleader summons, there be an order that D2 do release the Further Deposit to the Plaintiff without deduction.
(B) The admission summons is dismissed.
(C) JIL’s claim for costs against the Plaintiff is dismissed.
(D) On a nisi basis, there shall be no order as to costs on any of the summonses/application.
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(Queeny Au-Yeung)
Registrar |
Mr. K.M. Chong instructed by Messrs. Chan, Wong & Lam for the Plaintiff
Mr. Jin Pao instructed by Messrs. Tung, Ng, Tse & Heung for the 1st Defendant
Mr. Wilfred Tsui instructed by Messrs. Hau, Lau, Li & Yeung for the 2nd Defendant
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