YEN WING CHOI & LEE SHUI CHI SHIRLEY AND OTHERS v. MATCH POWER INVESTMENT LTD

HCA1829/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1829 OF 2005

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DECISION

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1. The plaintiffs are purchasers of residential units in a development called One Beacon Hill.  They each purchased one flat and one car park space.  The flats varied in price but they were all offered a car park space for an additional $1. 

2. In clause 4 of the formal agreement there is a provision which entitles a purchaser to claim interest on the purchase price at 2% above prime in the event of vacant possession being delayed. 

3. All seven plaintiffs are making claims under this clause on the basis that the development was delayed, completion was delayed and possession was delayed.  I have described the claim in deliberately general terms because there will be many detailed issues to be determined should the matter ever go to trial. 

4. The actual completion of the sale and purchase of the units was in mid August 2004.  This date is said to be many months overdue by the plaintiffs.  They each claim varying sums of interest, broadly speaking, between $200,000 and $300,000 each.  At the time of this completion, namely August 2004, the defendant was aware that the plaintiffs were claiming, or were going to claim, interest pursuant to clause 4. 

5. In late August 2004 the plaintiffs were invited to the defendant’s offices and asked to sign a document.  The document is at the heart of this appeal so I will set it out in full :

“Date: 30/9/04

Re: One Beacon Hill

The property comprises Car Parking Space No. [P048] on Car Park [C1] and Flat [C], [3] Floor, Block [8], One Beacon Hill.

The purchaser, namely, WU TUAN WEI, LOONG TAK WAI has selected the above car parking space today.  The full purchase price of the above car parking space is HK$1.00.  By signing this letter, the car parking space purchase option letter between the purchaser and Match Power Investment Limited is hereby exercised as the full and final settlement of all the purchaser’s rights relating to the purchase of the property.  The car parking space purchase option letter No. [BHCP-1454] is hereby returned to Match Power Investment Limited for cancellation.  This letter is part of the formal agreement.

Match Power Investment Limited will pay the legal costs for preparing the formal agreement for sale and purchase and the assignment in respect of the above car parking space prepared by solicitors designated by Match Power Investment Limited.

Sealed with the Common Seal of Match Power		Signed Sealed and Delivered by WU TUAN
Investment Limited and Signed by		WEI, LOONG TAK WAI
…”

6. Six of the seven plaintiffs (P2 to P7) signed the document.  P1 did not. 

7. In broad terms, the affirmation evidence of P2 to P7 is that they went to the development offices thinking that they were to sign a document relating to their particular selection of a particular car park space.  The document was neither read nor explained to them.  The defendant agrees that the document was not read or explained to them but by signing it they clearly agreed to forego all their rights relating to the purchase of the property.  P1 enquired at the time whether if by signing she would be forgoing her claim to interest.  She was told that she would.  She did not sign.  She still got her car park space for $1 pursuant to the original agreement. 

8. Relying on the document the defendant applied by summons to a Master for : (a) a strike out of the claims of P2 to P7 or, alternatively (b) a direction for a preliminary trial of an issue, namely the legal effect of the document on the plaintiffs who signed.  On 5 March 2007 Master Lung dismissed both applications.  The defendant now appeals against that dismissal. 

9. The appellant defendant is represented by Mr Benjamin Yu SC, leading Mr Bernard Man of counsel.  The plaintiffs are represented by Mr Alan Leong SC and Mr Michael Yin of counsel. 

The appeal against the refusal to strike out

10. Mr Yu concedes that the test he must satisfy is that it is plain and obvious that the plaintiffs cannot succeed. 

11. Three issues arise on the question of a strike out.  Mr Yu’s answer to each one, in summary form, is as follows :

(i)      Construction issues.  There is no room for debate about what the document means.  It is clear, unequivocal, short and with no “small print”.  Below the plaintiffs’ signatures are words in Chinese which indicate they have understood the contents of the document.

(ii)      Non est factum.  The plaintiffs have pleaded non est factum in relation to their signatures.  This is a notoriously difficult defence to establish.  It does not apply to a party who simply did not read carefully what he or she was signing.  In this case it does not get off the ground.

(iii)     Consideration.  The plaintiffs’ agreement that there was no consideration for the agreement must fail for two reasons.  Firstly, consideration is not required because the document was a “deed”.  The words “signed sealed and delivered” and red circles appear above the plaintiffs’ signatures and the words “sealed with the common seal of” appear above the developer’s signature.  Secondly, if consideration is required it can be found in : (a) the agreement that the developer would pay the legal costs of the sale and purchase of the car park spaces, and (b) the fact that each plaintiff was allowed to choose its own space rather than having an arbitrary space allocated to them.  Thus, those who signed early on would be able to choose a lucky number or a convenient location if they wanted to. 

12. In short, the plaintiffs say this was tantamount to sharp practice, it is unconscionable.  There was no reason whatever why a purchaser would abandon a good claim for approximately $250,000 in return for $3,000 legal costs. 

13. Having considered all the evidence and submissions (helpfully made both in writing and orally), my final decision in this matter is that the defendant has not reached the high threshold that it is plain and obvious that the claim will fail by virtue of the signed document.  However I do agree with the defendant that the matter be resolved by a trial of preliminary issues. 

14. In these circumstances it is plainly preferable not to elaborate on the reasons for not striking out.  The identical issues will be canvassed again in the trial of the preliminary issues.  By the same reasoning it is also preferable that the trial of the preliminary issues be listed in a different court.  It is possible, indeed probable, that oral evidence will be adduced on both sides.  Albeit that the evidence should be brief, I think a bilingual judge would be preferable.  This decision is not the time to consider the many authorities relied on by each party on the three questions of : (a) the construction of the document, (b) whether non est factum and/or unilateral mistake applies, and (c) whether consideration existed or was necessary.  I have decided that the Master was right not to strike out the plaintiffs’ claim.  It is a difficult case in which a strict application of legal principles (as advanced by Mr Yu) could lead to an arguably unjust outcome (as advanced by Mr Leong).  The plaintiffs should be heard. 

The appeal against the refusal to order a trial on preliminary issues

15. I should however give brief reasons why I think the Master was in error not to order a preliminary hearing. 

16. Contrary to the plaintiffs’ submission I consider the issues arising out of the construction and legal effect of the “document” (which has been described as both a “settlement deed” and “settlement agreement”) are separate and discrete.  The issues to be determined will be those set out in paragraph 3 of the defendant’s notice of appeal, namely :

“(i)   Whether, on the true construction of the Settlement Agreement (as defined in paragraph 15(2) of Defence), the 2nd to 7th Plaintiffs have compromised, waived or settled their claim herein;

(ii)   Whether the Settlement Agreement is void on the ground of non est factum;

(iii)   Whether the Settlement Agreement is liable to be set aside on the ground of mistake; and

(iv)  Whether the Settlement Agreement is not enforceable against the 2nd to 7th Plaintiffs for want of consideration.”

17. It seems to me that those issues have, effectively, nothing in common with the issue in the main claim.  The claim for interest depends on proof of delay.  The alleged delay by the developer concerns a variety of claims that the developer was in breach of several terms of its contract with the employer.  They are largely construction (in the building sense) and contractual issues unrelated to the effect of “the document”. 

18. The plaintiffs submit that the two issues do overlap.  When asked in what ways do they overlap, the only response was that they overlap because of the strength of the plaintiffs’ claim on delay.  The argument being, if they had such a good claim for interest why would they sign it away.  I do not see this as an overlap.  Regardless of their perception of the strengths and weaknesses of their own cases on delay, their stance on “the document” is simply that they did not appreciate what they were signing and would not have signed it, for obvious reasons, had it been explained to them. 

19. A second, related, reason for ordering a preliminary trial of an issue, is that it should be relatively short and could lead to a resolution of the entire matter in the cases of P2 to P7.  The main claim however has the potential to become a complicated and lengthy piece of litigation.  Issues involving the building works, the landscaping, the Lands Department, the authorized person, the architect, extensions of time, the meaning of “completion” and so on could all arise.  I am told that the discovery process in the main action will involve 780 lever arch files.  That such a scenario for a claim for $250,000 interest for each plaintiff is disproportionate goes without saying. 

20. Finally, mention should be made of P1, the sole plaintiff who sensibly did not sign “the document”.  It is submitted, why should she have to wait?  Why should her claim, which is wholly unaffected by “the document”, proceed regardless?  The answer is twofold.  Firstly, the plaintiffs are all joint plaintiffs, represented by the same solicitors and funded by the same organization, making the same allegations about delay and involving the same claim in their claim for interest.  In such circumstances P1 cannot complain about the case being stayed because of an issue relating to the other six plaintiffs.  Secondly, to allow her to proceed would defeat the whole object of ordering a preliminary issues trial.  It would make no sense to, possibly, save time and money by the case management of P2 to P7’s claim but, at the same time spend that time and money on P1’s claim regardless. 

21. Thus, I allow the appeal only in relation to paragraph 3 of the notice of appeal.  All interlocutory matters relating to the main claim (for interest and damages) are stayed pending the outcome of the preliminary issues. 

22. I make a costs order nisi that the costs of this appeal and below be in the cause of the preliminary issues trial.