PROBUS LTD v. TREBLE & TRIPLE LTD

HCA 2723/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2723 OF 2008

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BETWEEN

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J U D G M E N T

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1.  Probus agreed to purchase 2 premises (including car parks) from a Vendor. Probus (as confirmor) then on-sold the premises to Treble. Treble, however, failed to complete. This in turn prompted Probus not to go ahead with its purchases from the Vendor. Probus then sued Treble for damages, including any damages for which Probus would be liable to the Vendor. Probus now seeks summary judgment on its claim against Treble.

2.  In my view, Treble has an arguable case. I would therefore grant unconditional leave.

3.  This case is similar (and related) to Fortune Asset Development Ltd. V. De Monsa Investments Ltd. HCA 167 of 2009. There, Saunders J on 21 August 2009 gave De Monsa unconditional leave to defend against a claim by Fortune Asset for failure to complete an agreement for the sale and purchase of office floors. At the material time, De Monsa was controlled by the same one person (Mr. Lauw Siang Liong (an octogenarian)) who (it is alleged) also single-handedly controlled Treble.

4.  Here, just as in Fortune Asset, the defence is that Mr. Lauw was obviously demented when he entered into agreements to purchase the relevant pieces of land. The argument is that the estate agent (Mr. Frankie Lau) acting for Probus knew that Mr. Lauw was so demented. It is suggested that Mr. Lau unconscionably took advantage of Mr. Lauw’s senility and gullibility and pressed him to enter into the agreements with Probus. In those circumstances, it is contended that the agreements are voidable by Treble. Much the same contentions were urged on Saunders J by the plaintiff vendor in Fortune Asset. For similar reasons to those which Saunders J gave in Fortune Asset, I think that this matter has to go to trial.

5.  Ms. Yvonne Cheng (appearing for Probus) submits that this case is distinguishable from Fortune Asset.

6.  First, Ms. Cheng argues that Mr. Lau’s knowledge cannot be imputed to Probus at law. Although Mr. Lau was working for Midland (Probus’ estate agent) and Mr. Lau signed the Provisional Agreement for the sale of the properties in October 2007, Ms. Cheng submits that Mr. Lau was so acting (on behalf of Midland) as an independent third party. It does not follow as a matter of law (Ms. Cheng says) that an estate agent’s knowledge is automatically attributed to the vendor of land.

7.  Ms. Cheng may or may not be right in her submission. Mr. Lau may have signed the Provisional Agreement solely as representative of Midland. But the real issue is what role Mr. Lau played in persuading Mr. Lauw at an October 2007 meeting to buy the properties from Probus. Was Mr. Lau then negotiating with Mr. Lauw on behalf of Probus? Would Mr. Lau have known of Mr. Lauw’s alleged mental disability? If so, did Mr. Lau take advantage of that on behalf of Probus? I think that the correct legal analysis of Mr. Lau’s role must ultimately depend upon facts found at trial.

8.  Ms. Cheng submits that the focus must be the signing of the Formal Sale and Purchase Agreement in November 2007. Mr. Lau (Ms. Cheng points out) played no role in that and was not even present at the signing of the Formal Agreement.

9.  Again, there may be force in Ms. Cheng’s submission. But I think that the Court has to look more carefully at the steps between the Provisional and Formal Agreements before it can be satisfied that the effect of Mr. Lau’s alleged October 2007 representations (whatever those might have been) had been “spent” and a clearer mind had decided to proceed with the purchases. No one apparently questioned Mr. Lauw in Treble, so that it may have been that the inertia of signing the Provisional Agreement simply carried on to the execution of the Formal Agreement. I am unable to decide such issue on a summary basis.

10.  Second, Ms. Cheng submits that the Provisional and Formal Agreement were ratified by the conduct of Treble’s solicitors (Lovells) and whoever instructed them to act. That conduct included Lovells paying further deposit, seeing that the Formal Agreement was executed, and raising requisitions. These acts were presumably done on someone’s instructions on behalf of Treble. Probus (Ms. Cheng contends) was entitled to take such conduct at face value as ratifying whatever irregularities may have transpired in the October 2007 meeting between Mr. Lau and Mr. Lauw.

11.  On the assumption that Mr. Lauw was obviously suffering from dementia when Mr. Lau met him, I am doubtful that an apparently invalid act by a company officer can be impliedly ratified later by the conduct of solicitors or by the company officer where he remains under the initial disability. Even if I am wrong in my doubt, I think the Court has to consider more closely the chain of events between the October 2007 meeting and Lovells’ acts. It is possible that pre-completion steps were automatically taken in consequence of the signing of the Provisional Agreement, without anyone addressing their mind to the validity of the initial signing of that Agreement.

12.  Third, Ms. Cheng submits that Treble’s defence is “shadowy” at best. Like Saunders J, I am sceptical of Treble’s defence. For instance, the evidence as to what happened between Mr. Lau and Mr. Lauw during their October 2007 meeting is “thin”. But I am unable to say that the case advanced is truly shadowy as opposed to being fairly arguable (albeit an uphill struggle). In those premises, it would be wrong for me to give only conditional leave.

13.  I should add that I think the Court would have to examine the proposed measure of damages more closely at trial. I am not certain that Probus’ pleaded claim is the correct measure at law.

14.  For the above reasons, I would give unconditional leave.