CHOW CHIU WAI v. CHOW TIN LOY

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J U D G M E N T

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Power, J.A.:

1. The appellant plaintiff claimed $210,000, being money said to be owing by the respondent defendant on a dishonoured cheque dated 3rd December 1981, together with interest. The Statement of Claim which was filed on 1st December 1987 simply asserted a claim upon the dishonoured cheque.

2. Master Jennings gave summary judgment to the plaintiff under 0.14. The defendant then appealed to Mayo, J. who gave him unconditional leave to defend.

3. The plaintiff's affidavit filed in support of his 0.14 application states that in December of 1980, one CHAN Wing Fai (hereinafter referred to as Chan) and the Plaintiff agreed that Chan would transfer his "rights" in seven parcels of land, each of which was owned by a New Territories villager, situated at Sai Kung to the plaintiff.

4. The facts, as they came to reveal themselves, showed that the matter was more complicated than the plaintiff's affidavit revealed. Chan had, it appears, at the time when he approached the plaintiff, agreed with the defendant that he would Purchase each parcel for S220,000.

5. The matter is, however, further complicated by the fact that, although Chan had agreed with the defendant that he would purchase the land from the defendant the defendant himself was still not the owner of the land. The defendant, it seems, had, in his turn, entered into an agreement with the villagers to purchase the land from them and his agreement with Chan was, therefore, upon the basis that he, having completed his purchase of the land from the villagers, would transfer it to Chen.

6. It was, according to the plaintiff, also agreed by Chan and the defendant that the defendant had agreed "to be responsible for applying to the relevant government authority for the issue of the necessary permits for the building of one village house upon each of the said 7 parcels of land".

7. It appears to he common ground that Chin had given the defendant $210,000 as a "deposit" and that the defendant had given him a post-dated cheque in that sum which, according to the plaintiff as given so that Chan could recover, that amount if the permits were not issued.

8. The plaintiff states that he agreed to Day Chan $210,000 for his rights. He states that on 12th January 1981 he paid Chan $210,000 and that he was introduced to the defendant who agreed that "since I agreed to take the place of Chan, the new agreement between him and me would he subject to the same terms" as contained in the earlier written agreement between Chan and the defendant the existence of which the plaintiff says was then for the first time disclosed to him by Chan.

9. The plaintiff says that the parties then e document signifying their agreement to the novation. This document Exh.CCW-1 to the affidavit had originally been dated "3rd December 1980" but was, it would appear from the words on the face thereof, at the time of the novation re-dated "12th January 1981". It recites that the plaintiff "is willing to purchases at HK$220,000 each village house land bought in the name of" the defendant and names the villagers who were, it seems, the owners of the lots at that time. No village houses were, of course, erected at this time as the scheme involved the obtaining of permission and the erection while the land was still in the names of the villagers and that the transfer take place thereafter.

10. The agreement goes on to state that the plaintiff shall pay to the defendant a deposit of $30,000 per house which sum amounts, of course, to $210,000. It states that the defendant "shall be responsible for all procedures to be done at the District Land office"; that if the Government does not grant land to the plaintiff in one year the defendant is to refund the $210,000; that if "the Government grants the house land to" the defendant he "must sell the land to" the plaintiff "and mush not for any reason sell the land to others".

11. The plaintiff states that the defendant, Chan having returned his cheque in the sum of $210,000 to him gave him the postdated cheque the subject of this action.

12. The plaintiff states that the defendant told him that he had bought the land from the seven villagers and that he would apply for permits to build one house per parcel and that if such were not granted by 3rd December 1981 he could present the cheque for payment.

13. The plaintiff states that no permits were issued by 3rd December 1981 and that he presented the cheque which was dishonoured and that notice of dishonour was giver by the solicitors letter of 23rd December 1981.

14. The Plaintiff in this affidavit goes on to explain that he did not commence proceedings until 1987 because that he had "had to rely" on the defendant for assistance in other land sales and because he was reluctant to incur legal expenses.

15. The defendant filed an affidavit in the O.14 proceedings in which he confirmed the correctness of his defence. In his defence he says that he introduced Chan to be the contractor to build the 7 houses and that Chan agreed to purchase the houses and that $210,000 was given to him by Chan, as a deposit, which he distributed to the village owners, $30,000 to each. It is not unfair to say that this defence is almost unintelligible unless read against the background of the facts set out above. It goes on to indicate that the defendant was informed that the rights of chart were to be transferred to the plaintiff.

16. The essence of the defence is stated in paragraph 3(b) which sets out that the defendant and the plaintiff agreed orally that the defendant would deposit a post-dated cheque with the plaintiff in the sum of $210,000 "for custody as security" that the villagers would not refuse honour the sale and that the plaintiff undertook not to present the cheque unless the villagers did so refuse. It asserts that the villagers have never refused to do so and that the cheque was therefore wrongly presented.

17. As well as alleging that the plaintiff had the cheque for "custody and as security" the defence alleges in the alternative that "the handing over was only delivery in escrow" and was subject to the condition precedent that the delivery be not effective until the villagers refused to honour the said agreement and that "the condition precedent has never been fulfilled."

18. The plaintiff in his Reply and Defence to Counterclaim asserts that the express terms of the "first agreement", by which he appears to mean the agreement referred to in paragraph 2 of the Reply as the "agreement evidenced in writing dated 3rd December 1980, were that the vendor, i.e. the defendant, be responsible for obtaining Hone Kong Government licences and permits for building village houses on the seven properties and for making all arrangements therefor and that in the event of no licence or permit for building being issued by 3rd December 1981 the vendor shall return the deposit of $210,000. When, however, one looks at the words at the words of the written agreement, there are in fact no such express terms therein.

19. The agreement states that the defendant:

"shall be responsible for all procedures to be done at the District Land Office."

Nowhere does it set, out, as does the Reply and Defence to Counterclaim, that he

"should to responsible for obtaining from the Hong Kong Government licences and/or permits for building village houses on the said 7 properties and for making all arrangements therefor."

20. The agreement states further that:

"If the Government does grant the land to party A (the defendant) within one year, Party A shall refund to Party B (the plaintiff) the deposit totalling HK$210,000."

Nowhere does it state, as does the Reply and defence to Counterclaim, that:

"In the event of there being no licence or permit issued by the Hong Kong Government within the period of 1 year, namely, by 3rd December 1981 for building village houses on the said 7 properties, the vendor should return to the purchaser the deposit in the total sum of $210,000."

21. It seems clear that both parties contend that the written contract was varied. It may he that evidence will show that the written agreement was varied in the way the plaintiff says it was. On the other hand it is the contention defendant that the variation was in very different terms.

22. In his decision Mayo, J said:

     "I accent that where it is established that delivery of a cheque is conditional it is open to the Court to consider whether the condition has been fulfilled.

    The transaction surrounding the present dispute relates to the development of a village house in the Sat Kung Penisula. The defendant and another party entered into an agreement in connection therewith in late 1980. The other party did not wish to proceed and the plaintiff agreed to step into his shoes. Exhibited to the papers was a translation of the novation. I must say immediately that the term of this document are lacking in clarity. It is certainly not clear on the face of the novation that the terms of the condition leaded by the plaintiff are the same as those referred to in the novation.

    It is also quite possible indeed likely that even on the plaintiff's own evidence as disclosed by the documents that the cheque was presented for payment prematurely. That is a year may not have elapsed without the Government having given consent to the development contemplated being proceeded with.

    All that the defendant has is that there ism triable issue. I am satisfied that he has succeeded in establishing this so far as the fulfilment of the condition is concerned. I am therefore prepared to grant leave to the defendant to defend this action. The appeal is allowed."

23. It is certainly correct to say, as the judie did, that the agreement was lacking in clarity and that the terms pleaded, were not those which appear in the agreement itself. Given the terms of the agreement and of the pleading set out above, I found difficulty in following the argument of Mr. Edward Chan, who appeared for the plaintiff, when he argued that the pleading correctly sets out the express terms of the agreement.

24. While a number peripheral matters were canvassed in the course of the appeal the real question for the decision of this court was whether the pleading in para.3 raised a defence which was so shadowy that leave to defend should only be given upon terms as to payment in or was so totally lacking in substance that the plaintiff should be given leave to enter judgment

25. We are satisfied that we: must look at this against the background of the judgment of Sir John Donaldson, M.R. in Llovds Bank v. Ellis-Fewster [1983] 1 W.L.R. 559 where he states at 562:

"This was essentially a matter for the judge's discretion. He thought there was a triable issue. In a case where the triability of the issue depends upon evidence as opposed to law, I would think it a very surprising situation if the Court of appeal was prepared to disturb the judge's view. If one judge thinks there is a triable issue, it would be surprising if two or three judges think there is not. It is quite different if you are dealing with a triable issue which arises as a matter of law. When it arises as a matter of evidence and fact, it is most unlikely that the Court of appeal would interfere with the discretion of the judge below. Of course, it is only recently that it has been possible to appeal at all against the decision of the judge of first instance that there should be unconditional leave to defend. I cannot believe that it was ever intended that the Court of Appeal should move into a new era in which it regularly questions decisions of judges to grant leave to defend on the basis that there is a triable issue of fact."

26. I do not accept the, arguments of Mr. Chan that, where a judge is deciding only matters of fact, there is no real discretion involved and that this court should approach the matter afresh putting aside entirely the view formed by the judge. I am satisfied that the correct approach is stated above. I am fully aware of the words of Goff L.J. in European Asian Bank v. Punjab and Sind Bank [1983] 2 All E. R. where he states at 515:

"We wish however to conclude with this comment. If the judge has already decided, on the evidence, that there is a triable issue on a question of fact, it must in the very nature of thin s be unlikely that this court will interfere with his decision and decide that no trial should take place; because, where such a conclusion has already been reached by a judge, this court will he very reluctant to bold that there is no issue of question which ought to be tried."

These words, however, although referred to by Mr. Chan, give little support to hit argument. Indeed the words of Goff L. J. Seem to me to echo what was said in the Ellis Fewster case. I find -further support for my view in the Israel Discount Bank v. Hadjipateras [1984] 1 W.L.R. 137 where at 144 Stephenson, L.J. dealing with the proper approach to an 0.14 application said:

"We aid not in so doing, interfering, with the Judge's decision in what is essentially a matter for his discretion. When the judge thinks that these is a triable issue upon evidence as opposed to law, it is not the intention of the new right of appeal given by the Supreme Court Act 1981; against a grant of unconditional leave to defend, that this court should often dissent from the judge's view that there is a triable issue of fact: Lloyds Bank Ltd. v. Ellis-Fewster [1983] 1 L.R. 559, 562, per Sir John Donaldson M.R."

27. Indeed the take is that taken by the of Appeal in Hong Kong in Worldcap Investment Ltd. v. Bosswell Estates Ltd. Civic Appeal No. 108 of 1988. I would be loathe to interfere with the decision of the trial judge upon the facts unless it could be demonstrated that he was clearly wrong. We are satisfied that, in the convoluted and unusual circumstances of this case, this has not been so demonstrated.

28. The appeal is dismissed.

29. We make an order nisi that the costs of the appeal be to the Defendant/Respondent. Order to be made absolute in 14 days.

Hunter, J.A. :

30. I agree with the reasoning and conclusion of my Lord Power J.A., and desire only to comment upon two particular aspects of this appeal.

31. First, upon the correct approach of this Court to an appeal against the grant of unconditional leave to defend, Mr Edward Chan for the appellant in effect invited the Court to qualify what I said on this subject in Worldcap Investment Ltd. v Bosswell Estates Ltd., Civil Appeal No. 108 of 1988. Lord Donaldson, M.R., argued Mr Chan, was wrong in Lloyds Bank v Ellis Fewster [1983] 1 WLR 559 in saying that a judge's decision as to whether a triable issue of fact had been raised in Order 14 proceedings: "was essentially a matter for the judge's discretion". The analysis of Robert Goff, L.J. in European Asian Bank AG v Punjab & Sind Bank (Ho. 2) [1983] 1 WLR 642 is to be preferred. Both in fact reach the same conclusion that the occasions when an appellate court would interfere with such a decision by a judge of first instance would be rare :"surprising" per Donaldson, M.P.; "very reluctant" per Goff L.J. Rut Mr Chan was anxious to remove what he perceived as an additional appellate harrier. Had it then been available to him Mr Chan would no doubt also have adopted the view of Staughton, L.J. expressed in the English Court of Appeal in Attock Cement Company y Ltd v Romanian Bank for Foreign Trade, the Times Newspaper 13th January 1989, that a judge's decision under Order 11 Rule 1 as to whether a case for service out of the jurisdiction had been made out was "not the exercise of a discretion", which had been the unanimous view reached by the House of Lords in Vitkovice Horni v Korner [1951] AG 869; but : "it was a judgment as to Past or existing fact"

32. Despite this apparent conflict of high judicial opinion I would he minded to regard such decisions as both judgments and exercises of discretion. The particular feature of an appellate court's approach to what are undisputably discretion cases is that it recognises the absence of a single true answer and the possibility of a hand or range of "correct" soutions. The position was felicitously described by Lord Fraser in G v G [1985] 1 WLR 647 thus: "The reason for the limited role of the Court of Appeal in custody cases is not that there are cases are subject to any special ruses, but that there are often two or more possible decisions, any one of which might reasonably be thought to be the best, and any one of which therefore a judge may make without being held to be wrong" p 651.

33. When Donaldson M.R. used the word "discretion", he was, I think, doing more than acknowledging the impact of the phrase "the court may give such judgment for the plaintiffs….. as may he just" in 0. 14 r 3. He was also, I think, acknowledging that in arriving at a conclusion as to whether a triable issue of fact had been raised, a judge was performing an exercise in judgment in attempting to assess the impact of the written material before him, but in so doing was performing an exercise where, by reason of the subject matter and of the constraints within which he has to act, different minds could fairly and legitimately arrive at differing conclusions. I therefore remain of the view that the word "discretion" is a convenient way to describe the particular appellate function raised by this appeal.

34. Secondly, a Particular feature of this case was that the 0.14 summons was only taken out after the close of pleadings; after a simple statement of claim had been largely overtaken by an extensive plea of the underlying contract in the reply; and where the supporting affidavit canvassed even wider factual issues. Had the plaintiff then proceeded with discovery and setting down, the action would already have been tried. A party who rejects this course and instead chooses to seek 1ate order for conditional leave to defend upon the basis that the defence filed is shadowy, and advanced for the purposes of delay, should not in my view expect sympathetic treatment from the court.