SIU BAN & SONS LTD v. SUN TAI HING GARMENT MAKING CO LTD

HCA 31/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 31 OF 2015

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J U D G M E N T

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1. The plaintiff seeks a declaration that the purported assignment of the subject property to the defendant is void and of no effect on the ground of lack of completion.

2. The writ and notice of hearing have been served on the defendant but it has never entered an appearance.  I thus proceeded in its absence.

The background

3. The plaintiff is a company incorporated in Hong Kong and founded by the late Mr Siu Ban and his wife the late Madam Pang Chi Ying (“Madam Pang”). Madam Pang remained a shareholder and director until she died on 3 October 2013.  The other shareholders and directors are members of the Siu family.

4. The current director of the plaintiff is Mr Shamson Zeall (“Mr Zeall”).  Its current shareholders are Daisy Shiu (sister of Mr Zeall), Christina Zeall (wife of Mr Zeall) and Poly Wealth Creation Ltd (owned by Mr Zeall and his siblings – Siu Kwok Min, Siu Kwok Keung and Daisy Shiu).

5. The defendant was a Hong Kong company.  It was struck off the register of companies on 13 April 2012 but was restored on 11 December 2014.  Its holding company was a BVI company called Sun Ace Group Ltd (Corporate), which had also been struck off on 1 November 2005 without restoration.  Its directors and shareholders are unknown except that one Madam Tsui was Garry Siu’s wife.

6. Between 12 January 1993 and 24 May 2002, the plaintiff had been the registered owner of the subject property known as Flat B, 22nd Floor, Hove Court, 7 Perth Garden, Kowloon, Hong Kong (“the Property”).

7. By a sale and purchase agreement dated 25 May 2002 (“the SPA”), the plaintiff purportedly sold the property to the defendant at a consideration of $4,100,000 (“the consideration”).  The assignment was dated the same date and was registered at the Land Registry by Memorial No. UB 8695417 (“the Assignment”),

8. In fact, Madam Pang had resided at the property since the plaintiff became owner until 2013 when she passed away.  Thereafter, Mr Zeall and his wife have remained in possession. 

9. The defendant has never sought possession of the property.  The title deeds had been in the possession of the Madam Pang.

10. Notwithstanding that the Assignment contained an acknowledgement by the plaintiff that the purchase price had been received, the plaintiff asserts that its documents had no record of receipt of the purchase price.

11. Out of abundance of caution the plaintiff had given notice of this action to the Department of Justice.  By a letter dated 29 December 2015, the Department of Justice replied that they did not wish to attend or be represented at the hearing of this case.

The plaintiff’s case

12. The plaintiff says that the Assignment should be avoided as there had been “no completion” due to objection of Madam Pang and the purchase price had never been paid.  The plaintiff has decided not to pursue the claim in adverse possession. Rather, it invites the court to consider the case from 3 angles:

(i) Non-payment of purchase price;

(ii) Possession of title deeds; and

(iii) Possession of the Property.

13. The plaintiff’s case is supported by the evidence of Mr Zeall, a solicitor by profession.  Mr Zeall has supplemented his evidence by way of oral testimony in answer to queries raised by the court.  In the absence of a competing version, I accept his evidence, including the matters set out under the background section.   

Non-payment of purchase price

14. Mr Zeall explained that the “sale” of the Property arose because his father (separated from the mother) returned from Australia.  The Property was “sold” to the defendant whose real owner was a third party (whom Mr Zeall was unable to identify).  The proceeds of sale would be used to buy a property for the father and mother respectively. Mr Zeall was asked by his sister, Siu So Ha Melisa to simply sign on the SPA and Assignment, both dated the same date.  In the end, there was no “completion” of the sale, no purchase of new properties and the parents lived under the same roof at the property, quarrelling each day. 

15. There were a lot of peculiar features in the “sale”:

(a)  Mr Zeall was not on good terms with Melisa. For him, a solicitor by profession, to have executed the SPA and Assignment without question was already very strange. 

(b)  The SPA and the Assignment were on the same date.  Mr Zeall could not explain why.

(c)  The SPA and the Assignment were executed by Mr Zeall and Melisa for both the plaintiff and the defendant.

(d)  The assignment acknowledged receipt of the consideration. Mr Zeall said that it was upon Melisa’s representation (apparently without verification) that the money was ready that he signed.  He now says that the purchase price had never been received.

16. Allegedly Madam Pang told Mr Zeall that the plaintiff would never receive the consideration.  Mr Zeall chased up Melisa who confirmed the same.  But nothing was done to set aside the Assignment.

17. I place little weight on the fact that the plaintiff had no bank documents to prove the receipt of the consideration.  Apparently it only requested the bank for records on 16 December 2014, and, as expected, bank records for 2002 or thereabouts are no longer available.

18. Mr Zeall stated in §8 of his witness statement that, having gone through the financial statements and records of the plaintiff, he could not find any hint of the plaintiff’s parting with the Property or received any purchase price.  He claimed that those documents had always been in the possession of Melisa, to which he had been denied access.  They were only discovered by him among the papers of Melisa after her death on 17 May 2010.

19. In fact, Mr Zeall’s evidence was not supported by the documents. The financial statements of the plaintiff for the year ending 31 March 2002 [B128] was for the financial year immediately before the Assignment. Note 15 recorded:

“EVENTS AFTER BALANCE SHEET DATE

On 25 May 2002, the Company (plaintiff) sold a leasehold land and building and carparking space to Sun Tai Hing Garment Making Company Limited for a total consideration of $4.3 million.”

Note 15 tallied with the date and consideration for sale of the Property to the defendant and the car park in the same building to Mr Zeall’s brother.

20. Mr Cheung submits that the entries in the plaintiff’s books are not (at least not conclusive) evidence of payment.  All that one can confidently say is that the Property was said to have been sold to the defendant.  That must be judged against Mr Zeall’s knowledge that the plaintiff was not going to receive the purchase price.  Mr Zeall distanced himself from the affairs of the plaintiff and did not speculate on the meaning of the financial entries.

21. Mr Zeall explained that he had been told not to tamper with the 2 companies and he lacked company papers. With respect, I cannot accept this explanation. What company papers would be needed to prove that the purchase price had not been paid?

22. What was more important was that the plaintiff had not reflected the failure to receive the purchase price in the subsequent financial statements.  The profits tax computation of the plaintiff for the year ending 31 March 2003 covered the financial year in which the Assignment was executed.  There was a reference to disposal of fixed assets and the Property was specifically referred to.  Again, the sum of $4,300,000 was mentioned as sale proceeds. Computation of the loss was with reference to the cost and sale proceeds of the Property.  See B166.

23. The financial statements of the plaintiff for the year ended 31 March 2003 (AGM copy) covered the financial year in which the Assignment was executed.  It was on its face signed by 2 directors.  It was noteworthy that:

(i)   The fixed assets had substantially reduced from $7,004,240 in the previous financial year to $2,221,789 for the year ending 31 March 2003, a reduction of $4,782,451.  This amount was strikingly close to the purported sale price of $4,300,000 for the Property and the car park.

(ii)  This reduction was explained by Note 6 to the financial statements, which stated that there was a “disposal” of land and buildings in the value of $5,146,915.  Mr Zeall was unable to explain the $5 million figure or identify the property involved.

24. In the financial statements for the year ended 31 March 2005 (which the auditors declined to form the opinion that they gave a true and fair view of the state of the plaintiff’s affairs), the value of fixed assets remained at about $2 million, as for the previous financial year.

25. All of these pointed to the fact that the plaintiff had treated itself as having sold the Property and received the consideration for that sale.  Despite the absence of the defendant, I am not satisfied on balance that there had been failure to pay the purchase price. 

Possession of title deeds

26. The title deeds to the Property had been in the possession of Madam Pang.  Mr Zeall believed that the title deeds were with Melisa and Garry before the Assignment.  When she learnt about the Assignment, Madam Pang kept demanding for the title deeds and Melisa gave them to her in June 2002, a month post-Assignment.  Madam Pang had since kept the title deeds in a locked drawer and kept the key to it.

27. Mr Zeall testified that Madam Pang showed him a bundle of documents (probably the title deeds).  For fear that his siblings would dispose of the Property without his mother’s consent, he drafted and tried to register a memorandum of deposit of title deeds (“the Memorandum”) dated 20 June 2002 at the Land Registry. He hoped that it would make it difficult for his siblings to sell the Property.  The registration has been withheld, according to the land search record.

28. The Memorandum was signed and sealed by Mr Zeall on behalf of the defendant.  It stated that the defendant was the registered owner; that the defendant deposited the title deeds with Madam Pang who was described as the “custodian”.  It further stated that:

“As directed by the board of directors of the [defendant] Owner, I hereby declare that any purported transaction by anybody other than the Custodian [Madam Pang] by the production of a statutory declaration of loss of title deeds shall be void and of no effect.”

29. The filing date of the Memorandum was 19 August 2004.  Hence, 2 years after the Assignment, Mr Zeall was asserting to the whole world the defendant’s status as owner of the Property.  Such conduct could not support a case that the Assignment was void.  It was also premature, to say the least, for the plaintiff to pursue a case of adverse possession in 2015.

Possession of the Property

30. Madam Pang had been in possession of the Property ever since 1993.  She remained in possession despite the requirement for delivery of vacant possession in the Sale and Purchase Agreement.  Up to the date of her death she had remained in possession for over 12 continuous years since the date of the Assignment. He said that “everybody” appeared to be content to let her live there.

31. Both before and after the date of the Assignment, the plaintiff had been paying for the water, electricity, gas and management fees in respect of the Property.  This was reflected in the financial statements of the plaintiff for the years ending 31 March, 2002 to 2005.

32. At no time had the defendant sought recovery of possession or the title deeds in relation to the Property. 

33. What was more, the defendant and its holding company were struck off.

Findings

34. The only pleaded case for avoiding the Assignment was lack of completion for failure to pay the consideration.  I am not satisfied that that has been made out.  Madam Pang’s possession of the Property and the title deeds as custodian was not inconsistent with the defendant being the owner.  Notwithstanding the absence of the defendant, I am not satisfied that the Assignment ought to be set aside.  I dismiss the claim.

35. I thank Mr Cheung for his assistance.