KING'S CITY HOLDINGS LTD v. DE MONSA INVESTMENTS LTD

CACV 205/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 205 OF 2012

(ON APPEAL FROM HCA NO. 1714 OF 2011)

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BETWEEN

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J U D G M E N T

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Hon Fok JA:

Introduction

1.  The plaintiff (King’s City) sued the defendant (De Monsa) for damages for failing to complete a sale and purchase agreement in respect of Flats 38A, 38B and car parks 215, 216, 217 and 218 at No. 31 Robinson Road (the Property).

2.  By his judgment dated 20 July 2012, Reyes J granted summary judgment on liability to King’s City against De Monsa and ordered that damages be assessed.

3.  This is De Monsa’s appeal against that judgment.  The principal issue raised in the appeal is whether De Monsa’s attempt to re-litigate the issue of the mental capacity of Mr Lauw Siang Liong (Lauw Senior), its controlling director, to enter into the agreement is an abuse of process so that this defence should not be open to it.

The facts

4.  The facts giving rise to the action are straight forward and may be briefly summarised.

5.  On 25 March 2008, King’s City as seller entered into a provisional sale and purchase agreement for the Property with De Monsa as purchaser at a price of HK$124,865,000.  The formal sale and purchase agreement that followed was dated 25 April 2008 and provided for completion on 25 March 2009.  De Monsa paid a total of HK$18,729,750 by way of deposits.

6.  De Monsa did not complete the purchase and King’s City served a notice to complete on De Monsa pursuant to clause 17 of the sale and purchase agreement on 2 April 2009.  When De Monsa then failed to complete the purchase within 21 days thereafter (i.e. before 24 April 2009), King’s City served a letter dated 24 April 2009 to terminate the sale and purchase agreement.

7.  King’s City sold the Property to third parties for HK$100,000,000 and claims the difference between that sale price and the price which De Monsa had agreed to pay together with the expenses involved in re-selling the Property, less the deposits (which King’s City has forfeited).  King’s City’s pleaded claim is in the sum of HK$9,407,940.

The defences raised and rejected by the Judge

8.  De Monsa raised three defences in answer to King’s City’s application for summary judgment.  The Judge considered and rejected each and these are maintained on appeal.

9.  First, De Monsa contends that the provisional and formal sale and purchase agreements in respect of the Property are not binding on it.  Its case is that Lauw Senior was suffering from dementia when he signed the provisional and formal sale and purchase agreements in respect of the Property and that the Midland Realty estate agents who dealt with De Monsa on behalf of King’s City (namely Frankie Lau, Zoe Hui and Kanee Fung) knew or ought to have realised from Lauw Senior’s behaviour that he was not of sound mind at that time.

10.  The Judge rejected this argument on the basis that, in the light of his previous findings in HCA 167/2009 and HCA 1004/2009[1], it would be an abuse of process for De Monsa to re-litigate the same defence in this action.  He held that there was issue estoppel in the wider sense identified in paragraphs 93 to 96 of his decision in Parakou Shipping Pte Ltd v Jinhui Shipping and Transportation Ltd [2011] 2 HKLRD 1.

11.  Secondly, De Monsa contends that King’s City disabled itself from performing, and therefore repudiated, the sale and purchase agreement because it had sold one of the car park spaces (218) forming part of the Property to a third party before the expiry of the 21 days stipulated in its completion notice served under clause 17.

12.  The Judge rejected this argument on the basis that the subsequent provisional sale and purchase agreement in respect of car park 218 did not disable King’s City from completing the sale and purchase to the defendant.

13.  Thirdly, De Monsa says that clause 17(3) of the sale and purchase agreement, properly construed, precludes King’s City’s claim against it by reason of the fact that the provisional sale and purchase agreements for the re-sale of parts of the Property pre-dated the determination of the sale and purchase agreement between King’s City and De Monsa.

14.  The Judge rejected this argument on the basis that the word “resold” in clause 17(3) (set out below) referred to the whole process of sale of the property including completion and not just to the entry into agreements to sell.  Therefore, the fact the provisional sale and purchase agreements were entered into before the determination of the De Monsa agreement does not mean that the parts of the Property subject to them were not sold within the 6 month period following determination.

The nature of the appeal

15.  Although interlocutory in nature, the judgment below determined, in a summary way, the substantive rights of De Monsa and, accordingly, by reason of O.59 rr.21(1)(a) and 21(2)(a), leave to appeal is not required and its appeal to this Court lies as of right.

16.  It is convenient to mention the following points that apply to an appeal to this Court against the grant of summary judgment by the Court of First Instance:

(1) Since the application for summary judgment will have been determined on the basis of affidavit evidence, the Court of Appeal is in as good a position as the judge below to determine if there is some technical defect in the application which suggests that the O.14 summons should be dismissed, or if the defendant has shown that there is a triable issue in respect of the claim or part of the claim, or that there ought for some other reason to be a trial of that claim or part: see O.14 rr.3 and 4.

(2) The same principles governing the grant of leave to defend applicable before the judge below apply on appeal when considering the asserted triable issues or other reason why it is said there should be a trial: see paragraphs 14/4/9 to 14/4/16 of Vol. 1 of Hong Kong Civil Procedure 2013.

(3) The discussion in paragraph 14/4/44 of Hong Kong Civil Procedure 2013, addressing as it does the circumstances in which the Court of Appeal will interfere with a judge’s dismissal of an O.14 summons or his grant of leave to defend, conditionally or unconditionally, is not relevant.

The appeal

17.  At the hearing before us, Mr Johnny Mok SC, leading counsel for De Monsa, maintained the three defences asserted before the Judge below.  However, in his oral submissions, he took these points in reverse order and I shall do likewise in this judgment.

(1)   Does clause 17(3) of the sale and purchase agreement preclude King’s City’s claim?

18.  Clause 17(3) provides as follows:

“(3) Upon determination of this Agreement, the Vendor may resell the Property either by public auction or private contract subject to such stipulations as the Vendor may think fit and any increase in price on a resale shall belong to the Vendor. On a resale, any deficiency in price shall be made good and all expenses attending such resale shall be borne by the Purchaser and such deficiency and expenses shall be recoverable by the Vendor as and for liquidated damages Provided That the Purchaser shall not be called upon to bear such deficiency or expenses unless the Property is resold within 6 months of the determination of this Agreement.”

19.  It was De Monsa’s case that the proviso in clause 17(3) amounts to an exclusion of liability and that, on the facts of this case, it applies to preclude King’s City’s claim for the price difference and expenses arising from the re-sales of the Property.

20.  De Monsa contended that it is clear (or at least arguable) that the re-sales in the present case took place outside the 6 month period from the determination of the agreement so that King’s City is precluded from claiming any remedy in respect of those re-sales.

21.  The facts relied on by De Monsa in this regard are as follows:

(1) The formal sale and purchase agreement between King’s City and De Monsa was not determined until the service of a notice under clause 17 by King’s City on De Monsa on 24 April 2009.  The 6 month period for the purposes of clause 17(3) therefore ran from 24 April 2009.

(2) However, on 21 April 2009, King’s City had entered into a provisional sale and purchase agreement with a third party, surnamed Wong, in respect of car park 218 (which was the subject of the agreement with De Monsa) and other property (not the subject of the sale to De Monsa).

(3) Further, on 24 April 2009, King’s City had also entered into a provisional sale and purchase agreement with a third party, called Tin Chak Enterprises Company Limited, in respect of Flat 38B and car park 215 (which was the subject of the agreement with De Monsa) and other property (not the subject of the sale to De Monsa). Since it is unclear whether this was before or after the notice of termination, it was therefore arguable that this was before the determination of the De Monsa agreement.

22.  The Judge rejected this argument on the basis that the word “resold” in clause 17(3):

“… must refer to the property being effectively ‘sold’ (that is, to the whole process of sale including completion) not just to King’s entering into an agreement to sell (which may or may not be effective).”[2]

23.  Mr Mok challenged this interpretation of “resold” contending that it referred to the time of the initial contractual commitment to the sale, or provisional sale and purchase agreement, rather than any later stage.

24.  In my judgment, it is not necessary to determine this controversy.  That is because it is clear from authority that clause 17(3) is not a clause excluding liability but, rather, is a liquidated damages clause.  It is important to note that clause 17 is in a standard form and provisions virtually identical to it have previously been considered by the courts.

25.  In Diamond Jubilee Investment Ltd v Chan Yiu Chung Sidney [2010] 1 HKLRD 638, the Court of Appeal considered a virtually identical clause to clause 17.  Ma CJHC (as he then was) held[3] that the clause was “clearly a liquidated damages clause” and that there was nothing in the suggestion that it might be a penalty clause.

26.  More directly on point, in Woomera Co Ltd v Provident Centre Development Ltd [1985] HKLR 263, the Court of Appeal considered the question of whether, in view of a clause also in substance identical to clause 17, vendors would be entitled to claim common law damages in the alternative for the purchasers’ failure to complete.  It was held that the clause was not an exhaustive statement of the vendors’ rights and did not preclude a claim for common law damages.  Sir Alan Huggins VP said (at p. 269D-G):

“I am not persuaded that there is anything which prevents us from holding that the common law remedy has not been excluded. I see that clause as providing the vendor with an alternative remedy at common law – a remedy which on the one hand is limited by the conditions contained in the clause and on the other hand is more readily available and also enables the vendor to obtain a liquidated sum more speedily than he could obtain unliquidated damages at common law. It might even be that the speedy remedy under cl.16 could be worked out by solicitors acting for both parties, without the necessity of their being separately represented. … The ‘protection’ it affords to the purchaser is protection available only where the vendor seeks the remedy granted by the clause.”

27.  In Goldspeed Investment Ltd v Easy Success Enterprises Ltd [2000] 2 HKC 183, Deputy Judge Susan Kwan (as Kwan JA then was), in considering a clause also in substance identical to clause 17, held that the conclusion in Woomera was binding notwithstanding that it was an interlocutory appeal concerning whether amendments to pleadings should be disallowed because the Court of Appeal made a decision on the question of the construction of the clause in question.[4]

28.  In the present case, regardless of the correctness of the Judge’s construction of the word “resold”, the conclusion that clause 17(3) does not preclude a common law claim for damages against De Monsa is sufficient to support the Judge’s grant of summary judgment for damages to be assessed.  At that assessment, for which the Judge gave directions for trial, it will be open to De Monsa to contend that the damages claimed are not liquidated damages so that King’s City was under a duty to mitigate its loss.  A failure of the duty to mitigate has been pleaded in De Monsa’s defence[5] and that plea can be considered and determined at the assessment.

(2)   Did King’s City evince an intention to repudiate the sale and purchase agreement?

29.  It was De Monsa’s case that King’s City disabled itself from performing the agreement with De Monsa and so repudiated that agreement.  The argument is based on clause 17(1) of the formal sale and purchase agreement between King’s City and De Monsa and the sequence of events following the initial completion date, which was 25 March 2009.

30.  Clause 17(1) of the formal sale and purchase agreement between King’s City and De Monsa provides as follows:

“(1) Should the Purchaser fail to observe or comply with any of the terms and conditions herein contained or to make the payments in accordance with Schedule 4 or any interest payable hereunder within 7 days of the due date, the Vendor may give to the Purchaser notice in writing calling upon the Purchaser to make good his default. In the event of the Purchaser failing within 21 days from the date of service of such notice fully to make good his default, the Vendor may by a further notice in writing forthwith determine this Agreement.”

31.  De Monsa relies on the fact that, on 2 April 2009, King’s City’s solicitors wrote to give notice to De Monsa under clause 17 of the formal sale and purchase agreement requiring De Monsa to pay the balance of the purchase price within 21 days, i.e. on or before 23 April 2009.

32.  De Monsa contended that, by entering into the Wong agreement in respect of car park 218 (see above) on 21 April 2009, King’s City rendered itself unable to perform the agreement to sell car park 218 to De Monsa.  Since De Monsa still had until 24 April 2009 to perform, King’s City had acted prematurely and thereby itself repudiated the agreement.

33.  The Judge held that there was nothing to this argument and I agree.

34.  The proposition that underlies De Monsa’s case on this point is that, where one party makes a contract, but has or undertakes inconsistent obligations under another engagement with a third party, he is to be treated in law as being unable to perform the contract.  That proposition was rejected by Saville J (as he then was) in Alfred C Toepfer International GmbH v Itex Itagrani Export S.A. [1993] 1 Lloyd’s Rep 360 at p. 362 where he said:

“In my judgment this proposition does not represent English law. What must be established (apart from the other requirements of repudiation) is quite simple: namely that on the balance of probabilities the party in question cannot perform his obligations. The fact that that party has entered into inconsistent obligations does not in itself necessarily establish such inability, unless those obligations are of such a nature or have such an effect that it can truly be said that the party in question has put it out of his power to perform his obligations. …”

35.  In my view, that also represents Hong Kong law and, on the facts, the argument clearly fails on the basis of the priorities of equitable interests, specifically the rule that where the equities are equal the first in time is to prevail.  The provisional sale and purchase agreement between King’s City and Wong merely created an equitable interest in favour of Wong in respect of car park 218 (and the other property the subject of that agreement).  That equitable interest clearly ranked subsequent to the equitable interest of De Monsa in car park 218 and could not defeat De Monsa’s prior equitable interest.  Had De Monsa tendered the balance of the purchase price on or before 23 April 2009, King’s City would have been obliged to convey car park 218 to De Monsa.  The fact that this might put King’s City in breach of agreement with Wong does not affect the position of De Monsa.  King’s City would have been liable to Wong for damages, the quantum of which would depend on the market value of the car park but Wong would not have been able to prevent King’s City conveying the car park to De Monsa.

36.  De Monsa also relied on the fact that, on 24 April 2009, King’s City entered into the Tin Chak Enterprises agreement in respect of Flat 38B and car park 215, which was arguably entered into before the notice of termination (see above), so that the same point argued by reference to the Wong agreement applied in respect of the Tin Chak Enterprises agreement.  However, for the same reasons that the Wong agreement did not amount to a repudiatory breach of the De Monsa agreement, neither could the Tin Chak Enterprises agreement.

37.  At the hearing before us, Mr Mok put the argument based on the “pre-sales” on a different basis.  He contended that King’s City was itself in repudiatory breach by withholding and failing to provide to De Monsa the agreements it had entered into with Wong and Tin Chak Enterprises.  These were, he argued, encumbrances on the title and therefore fell to be supplied to De Monsa so that it could raise requisitions of title pursuant to clause 9 of the formal sale and purchase agreement.

38.  I would reject this new formulation of the argument also.  This argument was neither pleaded nor advanced to the Judge below.  In any event, I do not think the subsequent encumbrances go to the question of title by reason of the rules of priority.  They were merely circumstances indicating a potential liability of King’s City to pay damages to Wong or Tin Chak Enterprises in the event the properties in question were actually conveyed to De Monsa.

(3)   Is it an abuse of process for De Monsa to seek to raise the dementia issue?

39.  Under what has sometimes been described as the extended doctrine of res judicata, the court has the power to strike out attempts to re-litigate a decided issue as an abuse of the process of the court, even where the parties to the subsequent proceedings are not the same and cannot be described as privies of the original parties: see per Stock JA (as he then was) in China North Industries Investment Ltd v Chum [2010] 5 HKLRD 1 at §52 citing Lord Diplock in Hunter v Chief Constable of the West Midlands Police [1982] AC 529 at p. 536.

40.  Stock JA went on to say that, given the nature of the conditions precedent to an abuse finding, the resolution of the issue in any case will be highly fact sensitive (§53) and that the burden of establishing abuse rests on the party that relies on the earlier decision (§54).

41.  In a more recent judgment of the Privy Council[6], Calyon v Michailaidis & Ors [2009] UKPC 34, 23 July 2009, Lord Rodger of Earlsferry identified the relevant principle and stated the test to be applied.  He said:

“35. In Hunter v Chief Constable of the West Midlands Police [1982] AC 529 at 536, Lord Diplock referred to ‘the inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people’. The authorities show that re-litigating an issue can indeed amount to an abuse of process even where the parties to the proceedings are different from those in the earlier proceedings: Bradford & Bingley Building Society v Seddon [1999] 4 All ER 217 at 226 per Auld LJ. But in such a case the onus is on the person who alleges that it is an abuse of process to establish what makes the further litigation an abuse. In Bragg v Oceanus Mutual Underwriting Association (Bermuda) Ltd [1982] 2 Lloyd’s Rep 132 at 138 Sir David Cairns said:

‘I do not accept the proposition … that when an issue has already been decided in proceedings between A and B it is prima facie an abuse of the process of the court for B to seek to have the issue decided afresh in proceedings between himself and C and that in such circumstances there is an onus on B to show some special reason why he should be allowed to raise the issue against C. On the contrary, I consider that it is for him who contends that the retrial of the issue is an abuse of process to show some special reason why it is so.’

36. It is accordingly for the claimants in these proceedings to show some special reason why it would be an abuse of process for them to have to prove their title to the collection.  The test to be applied is exacting: the claimants must show that it would be manifestly unfair to them that the same issues should be re-litigated or that to permit such re-litigation would bring the administration of justice into disrepute: Secretary of State for Trade and Industry v Bairstow [2003] EWCA Civ 321, [2004] 4 All ER 325 at [38] per Sir Andrew Morritt V-C. …”

42.  I do not perceive there to be any difference in the statement of the principle or the relevant test between China North and Calyon. In Parakou Shipping, on which, as I have noted above, the Judge relied in reaching his decision in this case, China North was applied.

43.  Mr Mok submitted, in my view correctly, that a re-litigation of an issue previously decided between different parties does not in itself per se amount to an abuse of process: see, in this context, Calyon at §37.  Instead, he submitted that the onus lay on King’s City to show “special circumstances” to demonstrate that the re-litigation would amount to an abuse of process.

44.  It is clear that the onus lies on King’s City to demonstrate an abuse of process.  However, if it is shown to the satisfaction of the court that permitting De Monsa to advance the defence based on Lauw Senior’s mental capacity to contract would either be manifestly unfair to King’s City or would bring the administration of justice into disrepute, I do not agree that any further “special circumstances” are required.  As stated in Calyon at §36 (supra), by demonstrating manifest unfairness or the bringing of the administration of justice into disrepute, a party will have shown the necessary special reason why it would be an abuse of process for an issue to be re-litigated.

45.  Mr Mok appeared to derive support for his argument relating to the need for further “special circumstances” from a recent judgment of Teare J in Michael Wilson & Partners Ltd v Sinclair and Ors [2012] EWHC 2560 (Comm), 21 September 2012.[7]

46.  There, a company commenced arbitral proceedings alleging that a director had breached certain contractual and fiduciary duties.  The arbitral tribunal held that the director did not breach those duties.  The company then commenced court proceedings against a third party on the basis he assisted and procured those breaches of duty.  The third party applied to strike out the proceedings as an abuse.  Teare J found that the court proceedings were a collateral challenge to the findings of the arbitral tribunal but he said that this could be justified because the third party was not a party to the arbitration and so the court action was the only way the company could bring its claim against the third party so that it could not be said to be an abuse to seek to use the court process in those circumstances (§59).  Had those been the only circumstances, he would not have been persuaded that the proceedings were an abuse.  However, he found that there were other special circumstances (see §60) that did lead him to conclude that abuse was made out (§62).

47.  I do not read Teare J’s judgment as suggesting that, where re-litigation of an issue would constitute manifest unfairness or bring the administration of justice into disrepute, further “special circumstances” need to be established before it can be concluded that the re-litigation is an abuse.  Instead, I read his judgment as indicating that the features identified by him (in §60) are the reasons leading to his conclusion that the administration of justice would be brought into disrepute if the issue decided in the arbitration were permitted to be re-litigated.

48.  In the present case, Reyes J did not find that re-litigating Lauw Senior’s mental capacity would constitute manifest unfairness and King’s City did not suggest this was the case.  Since it was not a party to the Probus actions, it would be difficult to see how it would be unfair to permit De Monsa to run the defence of mental incapacity.  However, the Judge found that allowing the issue of Lauw Senior’s mental capacity to be re-litigated would bring the administration of justice into disrepute.

49.  Mr Mok submitted that Reyes J was wrong so to find.  In support of this submission, he relied on a number of factors and arguments.

50.  First, Mr Mok submitted that the raising of the issue of Lauw Senior’s mental capacity in this action was not seeking to reverse the outcome in the Probus actions because De Monsa’s utilisation of that defence in this case was limited to seeking a finding that Lauw Senior did not have capacity to enter into the provisional sale and purchase agreement between King’s City and De Monsa dated 25 March 2008 (the 25 March 2008 PS&PA).

51.  Secondly, Mr Mok submitted that the transaction in the present case, specifically the 25 March 2008 PS&PA, was a different transaction to those considered in the Probus actions and there are the factual differences between the present case and those actions so that a finding in favour of De Monsa in this case will not contradict the findings in the Probus judgments.  The factual differences relied upon between this case and the Probus actions were:

(1) The agreements the subject of the Probus actions were negotiated by Lauw Senior between different estate agents and on different occasions to the 25 March 2008 PS&PA.

(2) The 25 March 2008 PS&PA was signed on a different and later date to the dates of the provisional sale and purchase agreements considered in the Probus actions.

(3) Lauw Senior’s dementia would have manifested itself as poor memory and, if the estate agents had regular dealings with him over a period of time or asked him to recap the true meaning and effect of the 25 March 2008 PS&PA and the underlying property transaction, they would have become aware of his impairment in memory, judgment and executive functioning.

(4) The estate agency involved in this case, Midland Realty, was not involved in the relevant actions involving De Monsa that were tried as part of the Probus actions (viz. HCA 167/2009 and HCA 1004/2009).

(5) Neither Hui nor Fung of Midland Realty, who were involved in the negotiation of the sale in this case, gave evidence in HCA 167/2009 and HCA 1004/2009.

52.  Mr Mok also submitted that there was new, cogent evidence in the present case so that the Judge was wrong to find that De Monsa had “adduced almost exactly the same evidence”[8] and was seeking to have a second bite of the cherry “with almost the same evidence (albeit topped up with an additional report from a neurologist)”[9].

53.  Thirdly, Mr Mok submitted that it would be a most exceptional course to strike out a defence simply because the issue sought to be raised had been decided in another action brought against the same defendant by a different plaintiff (see per Sir David Cairns in Bragg v Oceanus Mutual Underwriting Association (Bermuda) Ltd [1982] 2 Lloyd’s Rep 132 at 139).  He also relied on Bragg and Gleeson v J Wippell & Co Ltd [1977] 1 WLR 510 to suggest that defendants wishing to re-litigate a particular line of defence in a subsequent action are in an a fortiori position relative to plaintiffs (see per Kerr LJ in Bragg at p. 138) and that factors such as the non-availability of discovery or inability to cross-examine witnesses in the previous action might weigh against a finding of abuse (see per Megarry V-C in Gleeson at p. 516H).

54.  I do not agree that the Judge below was wrong to find that De Monsa’s attempt to raise the issue of Lauw Senior’s mental capacity to enter into the 25 March 2008 PS&PA is an abuse of process which would bring the administration of justice into disrepute.

55.  Turning to Mr Mok’s first argument summarised above, there is nothing in any of the authorities cited to us to suggest that it is necessary in order to establish abuse of process arising from re-litigation of an issue that the subsequent re-litigation should have the effect of reversing the outcome of the earlier litigation.  It is true, as Mr Mok contended, that this might be said to have been the effect of permitting the second action to proceed in China North, where the subsequent litigation was found to constitute an abuse, but there is no suggestion in that case (or elsewhere) that this is a pre-requisite for invocation of the principle.  On the contrary, in Michael Wilson, the result was that the company was precluded from making the same factual allegations which it had made in the arbitration and had been rejected.  Making, and even establishing, those allegations against the third party would not have reversed the outcome of the earlier arbitration against the director.

56.  Mr Mok’s second argument summarised above necessitates an examination of what was previously determined in the Probus actions.  Three actions were tried together: HCA 2723/2008, HCA 167/2009 and HCA 1004/2009.  Only the latter two involved De Monsa; the first involved a company called Treble & Triple Limited (Treble), another member of the so-called De Monsa Group[10] and of which Lauw Senior was director.  On behalf of De Monsa and Treble, Lauw Senior signed provisional sale and purchase agreements dated 18 October 2007, 7 December 2007 and 8 January 2008.  He also negotiated the formal sale and purchase agreement on behalf of De Monsa in HCA 167/2009, which was signed on 2 July 2008.  In the judgment at first instance, Reyes J framed the first issue for decision as being:

“A.1 Whether Lau[w] Senior was suffering from dementia when he signed the sale and purchase agreements which are the subject matter of the 3 actions?”

57.  At paragraph 52 of the judgment, Reyes J noted:

“I stress that my task is to decide whether Lauw Senior was suffering from dementia during the material period (that is, October 2007 to July 2008). This involves a retrospective evaluation. Even on a premise that Lauw Senior has been suffering from dementia since (say) April 2009, I must determine with regard to the available evidence (including the opinions of Prof. Mak and Dr. Tsang) whether on the balance of probability Lauw Senior was demented when he entered into contracts on 18 October 2007, 7 December 2007 and 8 January 2008 such that he could not understand what he was doing.” (Emphasis added)

58.  On this issue, having considered the factual and medical expert evidence, the Judge found (§104) “no cogent evidence that Lauw Senior in the material period could not understand the nature of a contract or was of unsound mind due to dementia” (emphasis added).

59.  On appeal, Tang VP identified the issues thus:

“3. These appeals concern three real estate transactions which took place between 18 October 2007 and 8 January 2008. The relevant provisional agreements were dated 18 October 2007, 7 December 2007 and 8 January 2008 respectively, and covered a period of just under three months. However, when measured from the first provisional agreement dated 18 October 2007 to the last S & P Agreement dated 2 July 2008, we are concerned with a period of almost 9 months. The evidence is that during this period, indeed, at least until April 2009, Lauw Senior was in sole control of the De Monsa Group.” (Emphasis added)

60.  In addressing this issue, Tang VP analysed the factual evidence which included the fact that between 9 March 2007 and 8 September 2008, Lauw Senior had entered into a total of 151 transactions at a cost of some $7 billion.[11]  He also analysed extracts from newspaper and magazine articles and reports relating to Lauw Senior between the period 7 December 2006 to 6 July 2009 and held that they gave no indication that Lauw Senior was suffering from dementia or that he lacked the mental capacity to understand the transactions that he had entered into.[12]  He also referred to evidence of profitable transactions negotiated by Lauw Senior in the period between September 2007 and January 2008.[13]

61.  So far as the expert evidence was concerned, Tang VP noted that the medical records included records of Dr Norman Chan and also Dr Clarence Leung, a neurosurgeon who operated on Lauw Senior in July 2007.  Dr Leung saw Lauw Senior on at least five occasions between August 2007 and August 2008 and provided a report in June 2008 to show that he was fit to give evidence in court proceedings in Singapore, which took place in July and August 2008 and in which Lauw Senior testified.  Tang VP analysed the Judge’s treatment of the evidence of Professor Lieh-Mak (that Lauw Senior was not suffering from dementia) and Dr Jenny Tsang (that he was) and held that:

“… the evidence that Lauw Senior was not suffering from dementia and that, more relevantly, he had the mental capacity to enter into the transactions is overwhelming.”[14]

62.  Although there was a suggestion in Mr Mok’s submissions that the there was a dichotomy, and therefore ambiguity, in Reyes J’s and Tang VP’s judgments as to whether the issue concerned the mental state of Lauw Senior on the specific dates of the provisional sale and purchase agreements in the Probus actions (namely 18 October 2007, 7 December 2007 and 8 January 2008) or over a longer period from October 2007 to July 2008, I did not understand him to quarrel with the proposition that we should proceed on the basis of what Reyes J and the Court of Appeal said were the issues before them.  On that basis, it is tolerably clear that the mental capacity of Lauw Senior to enter into property transactions in the period from October 2007 to July 2008 was in issue and that it was found he was not suffering from dementia in that period and had the necessary mental capacity to enter into property transactions in that period.

63.  On that basis, the fact that the 25 March 2008 PS&PA was signed on a different date to the provisional sale and purchase agreements in the Probus actions is not, it seems to me, a significant feature.  Nor is the fact that Lauw Senior negotiated the former with different estate agents to those involved in the latter and that Hui and Fung of Midland Realty did not give evidence in the Probus actions.  The point that Midland Realty was not involved in the actions involving De Monsa tried as part of the Probus actions recedes into insignificance in the face of the fact that Midland Realty was the estate agency involved in the Treble transaction, Treble being a member of the De Monsa Group, and that Lauw Senior negotiated that purchase on behalf of Treble.  Indeed, Frankie Lau of Midland Realty, who was involved in the King’s City transaction was also involved in the Treble transaction.  In view of the findings in the Probus actions, the suggestion that Lauw Senior might, on the basis of the same evidence considered in the Probus actions, be found to have been suffering from dementia at the time of signing the 25 March 2008 PS&PA is fanciful and, in my opinion, wholly unarguable.

64.  But, as I have said, re-litigation of an issue per se between different parties is not an abuse.  What makes the re-litigation of this issue an abuse in the present case, in my opinion, is that the same evidence is relied upon by De Monsa to support the allegation of Lauw Senior’s mental incapacity.

65.  As indicated above, Mr Mok’s submission was that there was new evidence in the present case and that the Judge was wrong to say the evidence relied upon in this case was almost exactly the same as in the Probus actions.

66.  I do not agree with that submission.

67.  There are only two additional items of medical evidence additional to that adduced in the Probus actions.  The first consists of a 1½-page letter dated 22 June 2012 from Dr Norman Chan, the endocrinologist who was treating Lauw Senior between May 2007 and March 2009, suggesting that during that time Lauw Senior “did have abnormal behavior and showed signs of dementia” and opining that “it is clear that Mr. Lauw is suffering from dementia”.  However, I do not consider that this letter adds any probative value to the earlier evidence disclosed in the records of Dr Norman Chan that were already before Reyes J in the trial of the Probus actions.

68.  The second consists of a report dated 19 June 2012 from Professor Raymond T.F. Cheung, a neurologist.  This report is based on information made available to him when he was engaged as an expert in the Probus actions and from his professional assessment of Lauw Senior on 28 July 2010 in the context of preparing an earlier report dated 25 September 2010 for use in the Probus actions.  The report said to be new is, in my opinion, no more than a recitation of the earlier report which was served on behalf of De Monsa in the Probus actions.  There is nothing new in substance in it.

69.  Given that the evidence relied upon in support of the allegation of dementia is, in substance, the same evidence already adduced and very thoroughly considered after trial by Reyes J and on appeal by the Court of Appeal in the Probus actions, and subject to my views on Mr Mok’s third argument (see below), I consider that the Judge was correct in reaching the conclusion that it would bring the administration of justice into disrepute, and was therefore an abuse of process, to allow De Monsa a second bite of the cherry in these circumstances.

70.  I would add that the circumstances include the fact that a very large number of property transactions were apparently terminated by non-performance on the part of companies in the De Monsa Group in the period to September 2008.  Mr Derek Hu, counsel for King’s City, drew our attention to a chart[15] showing the property transactions entered into by companies in the De Monsa Group.  In the period from November 2007 to July 2008 there are well over 50 transactions which were terminated. Allowing the issue of Lauw Senior’s mental capacity to be re-litigated in the present action on the basis of what amounts in substance to the same evidence relied on in the Probus actions would potentially lead to the same issue being tried over and over again on the same evidence in multiple actions.  This would be contrary to the public interest in the finality of litigation and the proper use of judicial resources.

71.  I now turn to the matters raised in Mr Mok’s third argument.

72.  It is correct that striking out a defence seeking to raise an issue decided in another action would be an exceptional course or, in the words of Sir David Cairns in Bragg, “a most exceptional course”.  But a conclusion that re-litigating a particular issue will bring the administration of justice into disrepute seems to me to provide the basis for taking making an exception in any given case and to justify striking out the defence as an abuse of process.

73.  I also acknowledge that a litigant’s disadvantage in previous proceedings may weigh against a conclusion that re-litigation of an issue in a subsequent action is an abuse of process.  However, I do not agree that there is any material disadvantage to De Monsa in the present case.  Mr Mok submitted that Reyes J’s direction that the parties in the Probus action be limited to one expert each at trial was a material disadvantage. I do not agree.  That was a trial management decision and, if De Monsa wished to challenge it, should have been the subject of appeal.  There is no basis for suggesting that the trial management decision was susceptible to being overturned or that it worked any material prejudice to De Monsa.  It would have been open to De Monsa to call Professor Cheung rather than Dr Jenny Tsang but that was a matter for it to decide and it cannot complain of being at a disadvantage simply because it would have wished to second-guess its own decision as to which expert to call.  The suggestion that there is a disadvantage arising from the unavailability of discovery from or cross-examination of the two estate agents involved in this case who were not involved in the Probus action seems to me to be unrealistic.  Those matters were considered to be a disadvantage in Bragg and Gleeson but, in my view, those cases must turn on their own facts in this respect.  Indeed, as with other cases in which abuse of process has been found to arise from re-litigation of an issue, this case depends very much on its own facts too.

74.  Moreover, I do not accept that there is any special rule for defendants as against plaintiffs in respect of the application of the principle of abuse of process.  The reference in Kerr LJ’s judgment in Bragg to defendants seeking to re-litigate a particular line of defence in a subsequent action being in an a fortiori position was a statement made specifically with reference to the position of defendants as compared to the plaintiff in Gleeson.  I do not understand Kerr LJ’s remark to mean that defendants are always in an a fortiori position compared to all plaintiffs.  However, I would certainly accept that a court should not deprive a defendant of his day in court lightly and should only conclude that a defence should be struck out in a plain and obvious case.

75.  I therefore do not consider that the matters raised in Mr Mok’s third argument lead to a conclusion that, on the facts of the present case, the Judge was wrong in concluding that, in view of the findings in the Probus judgments, it would bring the administration of justice into disrepute, and therefore be an abuse of process, for De Monsa to be permitted to seek to challenge Lauw Senior’s mental capacity to enter into the 25 March 2008 PS&PA with King’s City on materially the same evidence as that relied upon in the Probus actions.

Miscellaneous points

76.  I have not addressed a further basis on which the Judge concluded that De Monsa’s defence based on Lauw Senior’s alleged mental incapacity was an abuse of process, namely that the findings in the Probus judgments amount to a finding as to the existence of a state of things.[16]  It is not necessary to reach this conclusion to uphold the Judge’s decision.  Mr Mok criticised the Judge’s conclusion in this regard and submitted that a finding of mental capacity on any given date is a far cry from a finding of, say, the existence of a debt[17] or employment status.[18]  Mental capacity, he submitted, is sensitive to the particular transaction involved and its surrounding circumstances.  For my part, whilst acknowledging the difference between mental capacity and other states of things, I am inclined to the view that the Judge was probably right in concluding that, in the present case, the finding in the Probus actions was in the nature of a finding as to the existence of a state of things.  But, as I have said, since it is not necessary to my decision on this appeal, I stop short of reaching a conclusion on this issue.

77.  We were referred to the decision of Deputy High Court Judge Le Pichon in HCA 548/2012, another action against De Monsa in respect of a failed property transaction in which the same defence of mental incapacity was sought to be raised.  The Deputy Judge granted summary judgment to the plaintiff (Richly Bright) and held that the defence in that action based on Lauw Senior’s mental incapacity was an abuse of process and fell within the extended res judicata doctrine.  We were informed that her judgment is under appeal and due to be heard later this year.  Although traversing some of the matters of law that may fall to be debated in that appeal against that holding, this judgment in respect of King’s City’s transaction with De Monsa is not, of course, addressed to the facts of the Richly Bright action.

78.  Finally, I would mention that Mr Mok referred to the common law principle that judicial findings are generally inadmissible as evidence of facts in subsequent proceedings since such findings represent only the opinions of the judge.[19]  King’s City’s action does not seek to circumvent that principle because its case does not depend on the admission into evidence in this action of findings of fact made in the Probus actions.  Instead, King’s City’s case invokes a different principle, namely abuse of process arising from re-litigation of an issue.

Conclusion

79.  For these reasons, in my judgment, the Judge was correct to conclude that De Monsa had not discharged its burden of showing that there was a triable issue in respect of the claim or part of the claim, or that there ought for some other reason to be a trial of that claim or part.

80.  Accordingly, I would dismiss the appeal.

81.  I would make an order nisi that De Monsa pay the costs of the appeal to King’s City, to be taxed if not agreed.

Hon Lam JA:

82.  I respectfully agree with the judgment of Fok JA and have nothing to add.

Hon McWalters J:

83.  I agree with the judgment of Fok JA.