XCHRX BEHRENS NG MO CHEE CINDY AND OTHERS v. CREDIT WORLD LTD.

HCA 4404/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4404 OF 1999

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REASONS FOR DECISION

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The eighteen Plaintiffs in this case are the owners of 11 residential units situated on the podium level of various blocks in a development called Grand Palisades in Tai Po, New Territories (the podium units). The Defendant is the nominal developer of the Grand Palisades. I am told that the real developer is actually Sino Land.

2. Each of the podium units has an open space linked to it ("the podium garden"). The shapes of the podium gardens vary and their sizes range from 300 odd to over 1,000 square feet. The Plaintiffs bought their respective podium units as uncompleted flats. According to the Amended Statement of Claim, before the Plaintiffs bought their respective podium units, the Defendant mounted a promotion campaign through newspaper advertisements and display of a scaled model of the development in its sales office. The newspaper advertisements also contain a picture of the scaled model. Both the picture and actual scaled model show the podium garden linked to the respective podium unit by an access door that can only be opened from inside the podium unit. Also, each podium garden is enclosed. The Plaintiffs aver that they were attracted by this exclusive podium garden feature.

3. Before the Plaintiffs actually acquired their respective podium units, they made enquires with either the sales staff of the Defendant or staff of solicitors handling the conveyance for the Defendant. The enquiries and responses are particularized in the Third Schedule to the Amended Statement of Claim. The responses to the enquiries are not all the same. In some cases, the response is that the owner of the podium unit would have exclusive use of the podium garden linked to the podium unit. In other cases, the owners were allegedly told that the podium garden would be "included in the plan but not included in the deed of assignment." In due course, the Plaintiff completed their purchase and entered into a deed of mutual covenant. The deed of mutual covenant defines the podium gardens as part of the common areas and facilities.

4. Whilst the Plaintiffs believe that they were entitled to exclusive use of the podium garden linked to their respective podium units, the owners of other flats in development take the view that, since the podium gardens are part of the common area or facilities, the podium gardens should be open to common use. The Owners' Committee demands, inter alia, that the enclosure walls of the podium gardens be pulled down to allow general access. The Plaintiffs, therefore, claim against the Defendant for misrepresentation and pray for rescission of the assignment.

5. The problem presented to me by the Defendant's summons is this: the case for each podium unit/podium garden is different from the others in that the alleged oral representations in the response to enquiries by the Plaintiffs concerned who were potential buyers then were not the same and/or the shapes and sizes of the podium gardens are so different. Hence the Plaintiffs should pursue their claim on per podium unit basis rather than in one action involving multiple plaintiffs. The court is invited to either strike out the Amended Statement of Claim as it is or sever the Plaintiffs' action into separate cases on per podium unit basis.

6. Mr. Wong for the Defendant relied on Order 18 rule 19(1) and Order 15 rule 5(1) of the Rules of the High Court, Cap. 4. I will not set out in full the relevant rules because both Mr. Yau for the Plaintiffs and I accepted that if the Defendant is prejudiced or embarrassed by the Plaintiffs' pleaded case as it is, there should be severance. The question is what prejudice or embarrassment there is to the Defendant? I shall try to deal with the powerful arguments advanced by counsel under separate headings.

Pleadings

7. Mr. Wong contended that because the particulars in the Third Schedule to the Amended Statement of Claim relating to the pre-contract enquiries and responses are different for each podium unit, the Defendant cannot frame its Defence. With respect, I cannot accept that. Basically, there are four types of misrepresentation pleaded by the Plaintiffs:-

(1) misrepresentation by newspaper or picture of the scaled model;

(2) misrepresentation by display of the actual scaled model;

(3) oral misrepresentation by alleged agents that the owners of the podium units would have exclusive use of the corresponding podium garden; and

(4) oral misrepresentation by alleged agents that the podium gardens would be included in the plan but not included in the deed of assignment for the corresponding podium unit.

So far as (1) and (2) are concerned, they are relied upon by all the Plaintiffs. The third type of misrepresentation is relied upon by some Plaintiffs only whilst the fourth type of misrepresentation is relied upon by others. For the last two types of misrepresentation, the Defendant may well have a schedule to their Defence to traverse specifically the particulars pleaded for each podium unit. There is no prejudice or embarrassment at all. The Defendant is free to deny, not admit or otherwise demur to each set of particulars.

Individuality

8. Mr. Wong contended that the particulars pleaded for each individual podium unit are so different that the Plaintiffs should not be joined in one action. Counsel fairly accepted that the alleged representations in the newspaper and by display of actual scaled model are common to the Plaintiffs. But he said that these pale into the background when the crucial issues are the alleged oral representations. He in effect said that the Plaintiffs cannot possibly succeed on the pleaded common representations because each of the Plaintiffs by pleading subsequent pre-contract oral enquiries admits that he or she did not rely on the earlier common representations.

9. My view was and still is that the point raised by Mr. Wong is the very sort of argument for either trial or hearing for determination of preliminary issues. I suggested that perhaps the better thing to do is to frame issues based on the common threads relied upon by the Plaintiffs and place those issues before a judge to determine as preliminary issues. Depending on the ruling of the judge dealing with the preliminary issues, either the commonality is removed as irrelevant or is accepted as relevant and then the court is in a better position to consider the question of severance. For all we know, the judge dealing with the preliminary issues may find, for instance, that even accepting every one of the four misrepresentations pleaded by the Plaintiffs as proven, the Plaintiffs' claim of exclusive right to use common area is unknown or unsustainable in law. I may add that the Plaintiffs face formidable legal obstacles because they executed the deed of mutual covenant acknowledging the podium gardens as common area despite all the earlier representations.

Evidence

10. Mr. Wong argued that a hearing for determination of preliminary issues would not be helpful, it could complicate matters, because the Defendant challenges in the very least the third and fourth types of representations alleged by the Plaintiffs. I would have thought that Mr. Wong with his reputation should know every well that at a hearing for determination of preliminary issues, the issues can be framed on the basis of putting one or the other side's case at its highest as pleaded. If on assumed proven facts, the court decides as a matter of law against the party relying on the assumed proven facts, obviously trial involving hearing of evidence is averted or shortened. If on the other hand, the court decides as a matter of law in favour of the party relying on the assumed proven facts, there is still nothing to prevent the other party to ask for trial putting the successful party in the hearing for preliminary issues to strict proof of the assumed proven facts. Really, I could not see how the Defendant can object to framing preliminary issues.

Similar fact

11. Counsel for the Defendant was concerned that some Plaintiffs will use individual instances of oral misrepresentation to strengthen the case of those Plaintiffs whose credibility or alleged misrepresentation may be doubtful. I wondered if it is a hard and fast rule that similar fact evidence is inadmissible in civil cases. Mr. Wong conceded that he cannot advocate such rule but he says that similar fact evidence is not admissible in the circumstances of this case. In the event, Mr. Yau for the Plaintiffs made it clear that the Plaintiffs will not ask the trial judge to rely on similar fact evidence. But Mr. Wong would not rest on that.

12. Mr. Wong went on to argue that if the Plaintiffs are not intending to prove a pattern of misrepresentation in an action, there is all the more reason for the action to be severed. The Plaintiffs should prove their respective case individually through separate trials even though all the trials may be heard by one judge sequentially. I thought once the Plaintiffs make it clear to the trial judge that he or she should not decide on similar fact evidence, there must be confidence in the judge to separate the evidence for each Plaintiff in a consolidated trial. The evidence in relation to oral misrepresentations, as can be seen from the Third Schedule to the Amended Statement of Claim, are easily capable of compartmentalisation. It may be argued, as indeed Mr. Wong did, that the decision of the trial judge may be coloured by similar fact evidence even though he or she conscientiously tries to separate the evidence for one Plaintiff's case from that for another. Mental gymnastics is easier said than done. But, if the risks of confusion or sub-conscious prejudice are so great, I did not understand why Mr. Wong envisaged that separate trials can be conducted by one judge sequentially.

Trial

13. According to Mr. Wong, the Plaintiffs' action should be severed. There should be a series of trials. Whatever common issues linking the cases of the Plaintiffs can be resolved at the first trial which in effect will be a test case. Then the subsequent trials will take heed of the decision in the test case on common issues and concentrate on the particular facts of each Plaintiffs' case. In my view, the test case is no better than a hearing to determine preliminary issues. The advantage of a hearing to determine preliminary issues over a test case is that at least much paperwork required for issuing multiple writs can be avoided. Moreover, having had the action severed, there is nothing to prevent the Defendant from applying for trial by different judges for speedy disposal. I cannot image the consequences should different judges come to diverse decisions on issues common to each Plaintiff's case.

14. As I saw it, the major difference in the Plaintiffs' cases lie in the part relating to alleged oral misrepresentations. These oral misrepresentations were allegedly made during very brief conversations. I should think the relevant part of each conversation cannot last more than 10 minutes. No matter how important these conversations are, surely it is not good case management to have a series of at least 11 trials each requiring formal proof of common representation by newspaper and display of scaled model and then a very short battle over oral evidence.

Costs

15. Mr. Yau submitted that in this unified action the Plaintiffs are pooling their financial resources. Split actions will force each Plaintiff to foot the entire bill of costs of a full High Court action. Some of the Plaintiffs will have difficulty in pursuing their claim due to financial difficulties. Mr. Wong counters by saying that the Plaintiffs may still retain the same set of solicitors and counsel to achieve savings. I thought the suggestion from Mr. Wong does not overcome the problem of each Plaintiff in a separate action having to repeatedly prove facts common to all of them. Indeed, I had a lurking suspicion that it is exactly on account of the costs burden on individual Plaintiffs taking separate action that the Defendant is so keen for severance.

Conclusion

16. The more I thought of it, the more I was convinced that a hearing for preliminary issues should be held. A decision on severance should not be made until the court has fully considered the significance of common issues. Even if the alleged subsequent oral misrepresentations are crucial, the court may find that those misrepresentations cannot be the basis of a recognizable right contended by the Plaintiffs. Moreover, as I have already mentioned in passing, the fact that each of the Plaintiffs has executed the deed of mutual covenant acknowledging that the podium gardens are part of the common area may be fatal to their claim, collectively or individually. In either case, it is better that the parties have judgment on decisive legal issues as soon as possible rather than stringing the unfortunate Plaintiffs along.

17. The alternative application for striking out, actually, is the corollary to severance. It is not supported by any separate ground. I did not think it merits attention on its own.

18. Accordingly, I framed the following preliminary issues.

"The legal effect of the alleged representation made in newspapers and the remedy or relief that should follow on such effect."

"The legal effect of the alleged representation made by [the display of model at the sales office of the Defendant] and the remedy or relief that should follow on such effect."

"The legal effect of the alleged oral representation that a podium flat owner would have the exclusive use of the "garden" annexed there to and the remedy or relief that should follow on such effect."

"The legal effect of the alleged oral representation that the "garden" annexed to a podium flat would be included in the building plan for the flat but not in the title deed for the flat and the remedy or relief that should follow on such effect."

19. I have already indicated in court that the issues are not meant to be exhaustive or binding upon the judge at the hearing to determine preliminary issues. He or she may well discard, add or modify the issues. The parties may also suggest additions or modifications.

20. I should also explain that the part relating to "the remedy or relief that should follow on such effect" is meant to elicit a ruling on whether the Plaintiffs should be entitled to rescission, instead of just damages, in the circumstances of the case. If rescission is not a just option in this particular case, the parties might be more inclined to settle.

Order

21. For the reasons given, I made the following order:-

(1) there be a hearing to determine preliminary issues by a judge; two days reserved;

(2) the question of severance or consolidation be reserved to the judge at the hearing to determine preliminary issues;

(3) liberty to the parties to frame additional preliminary issues;

(4) costs of the hearing before me be costs in the cause.

22. On second thought, I think it is better that the hearing to determine preliminary issues be presided by a judge other than me. I hereby direct the Listing Officer to bear this in mind.