XCHRX YUEN MAN WAI v. YUEN MAN PUI AND OTHERS

1992 No. A8454

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. This is an appeal brought by the 1st Defendant against the decision of Master Burrell given on 4th November 1993 whereby he entered summary judgment against the 1st Defendant in the sum of $9.8 m.

2. The Plaintiff sued the 1st Defendant, the present appellant, on an agreement entered into between themselves in 1988 ('the 1988 Agreement') and joined two companies, Wing Ming and Wing Park, of which the 1st Defendant is one of the directors, as 2nd and 3rd Defendants respectively.

3. The Plaintiff and the 1st Defendant were among the seven surviving children of a Madam Lam who married their father Mr. Yuen Hoi-to. Since the death of their father in 1951, the majority of the family assets had been held by Mr. Yuen Yun (one of these seven children) and his branch of the family by virtue of their controlling majority shareholdings of the 2nd and 3rd Defendants which in turn held most of the landed properties.

4. In 1975, Mr. Yuen Yun died. His surviving spouse, Madam Liu and her children, took control of the 2nd and 3rd Defendants. This triggered off a major conflict between this branch of the family and the rest of the family. For convenience, counsel has referred to the two rival groups as the 'Liu family', that is the fraction comprising Madam Liu (the widow of Mr. Yuen Yun) and her children; and the 'Lam family', that is Madam Lam and her remaining six children, including the Plaintiff and the 1st Defendant.

5. The Lam family started legal action against the Liu family in September 1987. Negotiations ensued for a global settlement. The 1st Defendant represented the Lam family, as to how the assets could be shared upon final settlement with the rival Liu family. The Plaintiff, part of the Lam family, was however unwilling to settle on the terms proposed.

6. In order therefore to form some sort of a united front, the 1st Defendant entered into a written agreement with the Plaintiff whereby the Plaintiff would accept a lump sum out of what the Lam family would receive under any anticipated settlement with the Liu family, in exchange for the Plaintiff giving up all his rights to whatever the Lam family might receive upon such settlement. This is the 1988 Agreement and I set out its principal terms in full:

2. In the event that the Action is compromised and settled between all the parties thereto:

(a) The 1st Defendant will cause to be paid to the Plaintiff out of the funds or the proceeds of sale of the properties or assets comprised in the settlement a sum of Hong Kong Dollars Ten billion (HK$10,000,000.00) upon receipt of the same by the 1st Defendant on behalf of all the Lam family in the Action pursuant to the terms of settlement. For the avoidance of doubt, whenever cash is received by the 1st Defendant pursuant to the settlement, the same shall, without deduction for any purposes whatsoever, be paid to the Plaintiff until the Plaintiff shall have received the sum of HK$10,000,000.00 in full.

(b) In the event that the Plaintiff does not receive the said sum of HK$10,000,000.00 in full within 3 months from the date of the settlement of the Action, the 1st Defendant will cause to be paid to the Plaintiff interest on the sum of HK$10,000,000.00 or on the balance remaining unpaid, at the rate of 3% per annum from the date immediately after the expiry of the said 3 months' period until full payment, such interest to be paid in a lump sum immediately after full payment of HK$10,000,000.00 has been made.

(c) The Plaintiff shall accept the sum of HK$10,000,000.00 in full and final satisfaction of all claims which he has or may have in the Action and be hound by the terms of settlement thereof concluded by the 1st Defendant as the Lam family (including the Plaintiff) as the 1st Defendant shall think fit.

(d) Upon the receipt by the Plaintiff in full of HK$10,000,000.00, the Plaintiff shall have no claim whatsoever against any of the parties to the Action (the Lam and Liu families) arising out of or in connection with the matters therein including but not limited to the respective estates of Yuen Hoi To deceased....., Yuen Yun deceased, the shares in or assets of Wing Ming Garment Factory Limited, Wing Park Investment Limited and Wing Ming Garment Manufacturing Company and shall have no claim whatsoever in respect of the aforesaid estates or companies.

(e) Unless and until the Plaintiff has received the said sum of HK$10,000,000.00 in full, any cash and the title deeds of landed properties received by the 1st Defendant on behalf of the Lam family pursuant to the terms of the settlement, to the extent of HK$10,000,000.00 or the balance thereof not received by the Plaintiff (whichever is applicable), will be held by Messrs. Johnson, Stokes & Master or its successors as stakeholder and will not be released save for paying the Plaintiff. The 1st Defendant shall notwithstanding be entitled to sell the said landed properties but the proceeds of sale thereof shall likewise be held by Messrs. Johnson, Stokes & Master or its

7. In February 1990, the Lam and Liu families finally reached a settlement agreement. Both Wing Ming and Wing Park were also parties to this settlement agreement. The following properties were involved:

(i) a sum of HK$200,000 cash;

(ii) the 'Hunghom Shops';

(iii) the shares of Wing Ming and Wing Park;

(iv) US entities and properties (it is agreed that the property at 33rd Avenue, San Francisco has nothing to do with this settlement and therefore is no longer in dispute).

8. It is important to see how these properties were to be dealt with under the settlement agreement and how they have in fact been handled since the settlement.

9. Under the settlement agreement, HK$200,000 cash was to be paid by Wing Park to "such person as the [Lam] family may nominate" under Clause 6.10.1 therein. The amount was accordingly paid to the 1st Defendant who transferred it to the Plaintiff in March 1990 pursuant to the 1988 Agreement in part satisfaction of the HK$10 million owed to the Plaintiff.

10. The clause concerning the so-called 'Hunghom Shops' was drafted in similar terms and reads as follows:

"6.10.2 The transfer by Wing Park to such person as the [Lam] family may nominate of all of Wing Park's right title and interest to the property at Ground Floor, Ming Wah Court, No. 28-30 Sung Chi Street, Hunghom, Kowloon ..."

11. Although the Hunghom Shops, like the HK$200,000 cash, were held under Wing Park, they were to be disregarded in valuing the net assets of Wing Park for the purpose of settling the ownership of its shares between the-Lam and Liu families. I shall return to the scheme under which the shares of Wing Ming and Wing Park are to be settled. So far as the Hunghom Shops are concerned, they appear to be vacant at the moment and have been advertised for sale. The latest valuation, according to the 1st Defendant, is around HK$6-7 million.

12. Under a rather convoluted scheme, the shares of Wing Ming and Wing Park were to be transferred from its existing shareholders comprising mainly the Liu family to members of the Lam family in order to achieve an apportionment of the companies' landed properties between the Lam and Liu families in the ratio of 40% - 60%. Under the settlement agreement, the Lam family would pay certain sums of money to Madam Liu before the companies' shareholders would transfer their shares to members of the Lam family. Until such sums were paid to Madam Liu in full, the shares would be subject to a charge as continuing security for payment. In the meantime, the registered shareholders were to make a declaration of trust to hold such shares for the benefit of the Lam family subject to the said charge.

13. Under the scheme, a sum in excess of HK$250m was paid to Madam Liu by May 1991. However, more litigation ensued because Madam Liu claimed that she had not been paid in full under the scheme. The matter came before Keith, J. in April 1992 and he ruled that Madam Liu had in fact been overpaid by the Lam family. However, I am told that the over-payment is only in the region of $1m which in the context of the sum paid to her is virtually de minimis. No transfer of the shares has yet been made between the families.

14. The Liu family were to relinquish their claims over the U.S. entities and properties by accepting HK$60m from the Lam family in full and final settlement. Some of the U.S. properties are unencumbered and income generating over the years while others are running at a loss.

The Order 14 approach in cases such as this.

15. It is common ground that if there are disputed issues of fact raised in an Order 14 summons, then it is not appropriate to grant summary judgment.

16. If a point of law is involved, the approach is somewhat different. Several cases have dealt with this issue over the years, such as Cow v. Casey [1949] 1 KB 474; European Asian Bank v. Punjab & Sind Bank (No.2) [1983] 1 WLR 642 at 654; Israel Discount Bank of New York v. Hadjipateras [1984] 1 WLR 137 at 145 and more recently R.G. Carter Ltd. v. Clarke [1990] 1 WLR 578 at 584.

As Lord Donaldson put the matter in the most recent case referred to above:

" If a judge is satisfied that there are no issues of fact between the parties, it would be pointless for him to give leave to defend on the basis that there was a triable issue of law. The only result would be that another judge would have to consider the same arguments and decide that issue one way or another. Even if the issue of law is complex and highly arguable, it is far better if he then and there decides it himself, entering judgment for the plaintiff or the defendant as the case may be on the basis of his decision. The parties are then free to take the matter straight to this court, if so advised. This was the situation in the classic case of Cow v. Casey [1949] I K.B. 474. But it is quite different if the issue of law is not decisive of all the issues between the parties or, if decisive of part of the plaintiff's claim or of some of those issues, is of such a character as would not justify its being determined as a preliminary point, because little or no savings in costs would ensue. It is a fortiori case if the answer to the question of law is in any way dependent upon undecided issues of fact.

A qualification has also to be made for those cases in which, in order to determine whether there is an issue of law capable of being resolved on Order 14, prolonged examination over a number of days of a vast quantity of documents or other evidence is required. As has been pointed out by Sir Nicolas Browne-Wilkinson V.-C. in British and Commonwealth Holdings Plc. v. Quadrex Holdings Inc. [1989] Q.B. 842, 867 the expenses and delay which can result from seeking to determine the complex issues involved in those cases on a summons under Order 14, and in particular on an appeal from the decision of the judge, can make those cases not suitable subjects for Order 14 proceedings. In such cases there will always be a real risk that in the end leave to defend will be given and if this happens the time and expenses of the prolonged Order 14 proceedings will be wasted. The parties, and other litigants who otherwise might be kept waiting, are better served by seeking to have the action tried as soon as possible."

17. I am quite satisfied that this application for summary judgment can be dealt with on the basis of uncontested evidence. It seemed to me as it did to the master (a note of whose judgment has helpfully been prepared) that the issue is one of construction of Clause 2(a) of the 1988 Agreement. The 1st Defendant does not deny that he will be liable to pay the $9.8m at some stage - he only asserts that the claim is premature.

18. At the end of the day, the issue is really this; has the 1st Defendant received "the funds or the proceeds of sale of the properties or assets comprised in the settlement."? The 1st Defendant says that he has not because no sale has taken place. The Plaintiff says that the 1st Defendant is in control of some of the assets, and even if they have not been sold, some were income producing whilst others could easily be sold. It is to be noted that the case is not pleaded on the basis of any implied term to the effect that the 1st Defendant is obliged to sell assets otherwise within his control, nor is it pleaded that the 1st Defendant is in fundamental breach of the agreement. The Plaintiff takes his stance simply on the wording of Clause 2(a).

19. I have to say I do not find this matter entirely easy. I have considerable sympathy for the Plaintiff. I think it likely that he understood that he would get his $10m once the settlement had been effected. However, that is not what Clause 2(a) states. Clause 2(a) contemplates, so it seems to me, a realization of assets as a condition of the 1st Defendant's liability to pay the Plaintiff.

20. Mr. Mills-Owens, Q.C.'s attempt to circumvent the words of Clause 2(a) by praying in aid rental income from the U.S. properties within the 1st Defendant's control is not persuasive in the light of the words used in Clause 2(a)

21. I find myself in agreement with the submissions of Mr. Swaine, Q.C. to the effect that the claim is premature because the only sum received by the 1st Defendant from the settlement is $200,000 which has already been paid.

22. I do not find this is a very satisfactory conclusion given the submissions made by Mr. Mills-Owens, Q.C. which demonstrated that the 1st Defendant has control of substantial assets which he and the Lam family have chosen not to realise. However, I have to do justice to the terms of the 1988 Agreement regardless of the result that it produces.

23. Mr. Swaine, Q.C. made an unconditional offer to the effect that if I were to grant him leave to defend, it should be on condition that the 1st Defendant should lodge or charge as security for the claim, title deeds to the value of the claim plus interest. I leave it to the parties to work out the mechanics and will give liberty to apply in the event of any disagreement. I order that as a condition of leave to defend, the 1st Defendant shall secure the sum of $10.8m in a manner agreed between the parties whether by way of lodging title deeds with the stakeholder or with the Registrar of the Supreme Court or otherwise. I have taken a figure in excess of $9.8m to take into account not only the question of interest but also the possible declines in property values which seem to be happening at the present time.

24. As to costs, I propose to make a costs order nisi to the effect that the costs here and below shall be in cause.