SANG KEE KNITTING FACTORY LTD v. CHEUNG WAH FU AND OTHERS

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JUDGMENT

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1. This is an appeal from the Order of the Master granting unconditional leave to the Plaintiff to defend the Counterclaim.

2. In 1992, Yiu Lap Fai ("Yiu") was the owner of the suit premises ("Flat") together with his wife. Yiu was indebted to the Plaintiff who brought High Court Action No. 4799 of 1992 against Yiu and on the 14th of August 1992 the Plaintiff obtained Judgment against Yiu. The Judgment was followed very quickly by Charging Order Nisi on 3rd September 1992 which was registered on 9th September 1992 against the Flat at the Land Office. Charging Order Absolute was made against Yiu on 24th September 1992 and this was registered at the Land Office against the Flat on 15th October 1992.

3. The Defendants' case against the Plaintiff in the Defence is that parallel with and a little bit before the Plaintiff obtained the Judgment against Yiu and registering the Charging Order against the Flat, Yiu had sold his Flat to the Defendants and that in fact by the time the Plaintiff obtained Judgment and Charging Order against Yiu, Yiu had already sold the Flat to the Defendants and had no longer any beneficial interests in the Flat on which the Plaintiff could levy execution. The case of the Defendants is based on Affidavits and documents exhibited to Affidavits. The broad issue which divides the parties is this:-

4. Much material had been put before the Court in support of the Defendants' case but the vital question on this appeal is whether the Court can be satisfied on an interlocutory basis that the defence of the Defendants to the claim of the Plaintiff must succeed. I put it on the basis of the Defence succeeding because in reality this is what the case is about and not whether there is any defence to the Counterclaim. The Plaintiff relies on the Judgment and the registration of the Charges against the Flat. In order to succeed in its defence, the Defendants must prove to the Court that there was such a sale of the Flat by Yiu to the Defendants on or about the 10th August 1992 so that on that day or shortly thereafter (but before 9th September 1992), Yiu ceased to have any beneficial interests in the Flat.

5. The evidence from the Defendants are very full, explaining the whole genesis of the purchase of the Flat by the Defendants from Yiu. What seems to me particularly crucial is the evidence of the exchange of the correspondence between the Solicitors for the Vendors and Solicitors for the Purchasers, ending with the exchange of the letters dated 10th August 1992 and 19th August 1992. There is really nothing to indicate or even to suggest that these letters produced by Herbert Smith from the Third Party Solicitors files are not genuine documents written at the time the transaction was carried out. These documents proved that on the 10th August 1992 or shortly thereafter (certainly before the 19th August 1992) the Purchasers paid to the Vendors the balance of the purchase price and that the beneficial ownership of the Flat had been transferred from Yiu to the Defendants by the 19th August 1992, when the Vendors' Solicitors letter of 19th August 1992 was written enclosing the Assignment signed by the Vendors. No scintilla of evidence had been adduced by the Plaintiff to suggest that payments were not made by the Purchasers' Solicitors to the Vendors' Solicitors as acknowledged in the letter of 19th August, which payments enabled the Mortgage of Standard Chartered Bank to be discharged around the 13th August 1992 (certainly before the 19th August 1992) thereby giving the Purchasers a good title to the Flat.

6. Mr. Wong for the Plaintiff argued that the Plaintiff should be given an opportunity to go to trial and that there is scope for the operation of the "other reasons for trial". I understand the desire of the Plaintiff to go to trial but there is on the totality of the material placed before me nothing which suggests that the hope of the Plaintiff that something might turn up on the investigation at the trial ought to be indulged in this case. Having regard to the abandondment of the Plaintiff of an earlier pleaded case of sham transaction to defraud the Plaintiff creditor, the Plaintiff is confined to challenging the case of the Defendants really on a very narrow basis. On that narrow basis, I am satisfied that the Defendants' case must succeed and that they would be able to show at the trial that the purchase price was paid before 9th September 1992 and that the beneficial interests in the Flat had been transferred to the Defendants before that date.

7. In my judgment, the Plaintiffs claim must fail and notwithstanding the high burden placed on the Defendants on what amounts to a strike out application, the defence in my view must succeed. Judgment is to be entered in favour of the Defendants and the Action must be dismissed with costs.

8. As further evidence was adduced on appeal which resulted in the appeal being successful, I order that the Plaintiff is to have half of the costs in the court below and that the Defendants are to be given the costs of this appeal.