SIMPLY POWER LTD v. BILLY CHUA AND OTHERS

HCA 2452/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2452 OF 2013

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J U D G M E N T

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Background

1.  By a generally indorsed Writ of Summons issued on 16 December 2013, the plaintiff instigated the present action against three defendants. The plaintiff claimed damages against 1^st to 3^rd defendants for damages for misrepresentations whereby the plaintiff was induced to entering into (i) a Provisional Agreement for Sale and Purchase dated 22 February 2013 (“PASP”); and (ii) a Formal Agreement for Sale and Purchase dated 26 March 2013 (“FASP”).  These two agreements were made between the plaintiff as purchaser and the 3^rd defendant as vendor in relation to a property known as Hing Wai Ice and Cold Storage Building, No 9 Tin Wan Praya Road, Hong Kong (“the Property”).  It was said that due to the misrepresentations made by the 1^st to 3^rd defendants, the sale and purchase of the Property was not completed and the deposit paid by the plaintiff was forfeited by the 3^rd defendant. The plaintiff prayed for rescission of the PASP and FASP; the return of the deposit; and damages etc.

2.  In the Statement of Claim filed on 24 January 2014, the plaintiff elaborated on its causes of action against the 1^st and 2^nd defendants.  The 1^st defendant was sued as a licensed Estate Agent.  It was pleaded that the 1^st defendant was employed by the 2^nd defendant.  It was further pleaded that the 1^st and 2^nd defendants were acting as agents for the 3^rd defendant in advertising the Property for sale.  The subject misrepresentations were alleged to be both oral and written:

(i) oral misrepresentation made by the 1^st defendant to Ms Li Yanan (“Ms Li”) of the plaintiff for which the 2^nd defendant is vicariously liable; and

(ii) written misrepresentation contained in a Proposal of Sale (“the Proposal”) given by the 1^st defendant to Ms Li in the course of introducing a number of potential properties to her.

Paragraph 12 then pleaded that “the Written Representation and the Oral Representation were made by the 1^st and/or 2^nd defendants with the express/implied, apparent/ostensible authority, permission/consent, knowledge, or acquiescence of the 3^rd defendant”.

3.  Prior to the issuance of the Writ, the plaintiff had issued a pre‑action letter dated 31 October 2013.  This letter was addressed to the 2^nd defendant. It alleged that the 1^st defendant was one of the 2^nd defendant’s estate agents.  It alleged that the 2^nd defendant and its agent, namely the 1^st defendant, are liable for the damages caused to the plaintiff.  It threatened to issue proceedings if no constructive reply was received within 14 days.

4.  The 2^nd defendant replied on 8 November 2013 and informed the plaintiff that its pre‑action letter had been passed to “our subsidiary Midland Realty (Comm. & Ind.) Limited which carries on estate agency business for further handling”.

5.  By another letter dated 8 November 2013 issued by Midland Realty (Comm & Ind) Limited (“Midland Realty”) to plaintiff’s solicitors, the former informed the latter that it was in the course of looking at the matter.  It continued to say: “Please do not take any action against us and/or the estate agent in this case before we shall revert to you in due course”.

6.  This was followed by a letter dated 17 November 2013 from Tony Kan & Co (“Tony Kan”) as solicitors for Midland Realty to plaintiff’s solicitors.  It stated that they were in the course of obtaining client’s instructions to reply to the plaintiff’s letter.  This must have been a reference to the plaintiff’s pre‑action letter dated 31 October 2013.  The plaintiff was also requested to withhold legal proceedings.

7.  Then on 13 December 2013, the plaintiff’s solicitors wrote to Tony Kan.  They first noted that Tony Kan acted for Midland Realty.  They then complained of lack of constructive reply for over a month.  Tony Kan was demanded to confirm by 12 noon on 14 December 2013 whether they had instructions to accept service of proceedings for and on behalf of “your client, [the 2^nd defendant] and/or [the 1^st defendant], failing which, we shall serve the Writ on them directly.”

8.  Tony Kan wrote back on 14 December 2013.  They stated that “our client” could let the plaintiff’s solicitors have its reply within next 14 days and stated that “our client” invited the plaintiff to withhold proceedings.  They also stated that if their invitation was not acceded to, they had instructions to accept service “on our client’s behalf”.  Tony Kan was referring at all times to Midland Realty as their client.

9.  Then on 16 December 2013, the Writ was issued.  Midland Realty was not made one of the defendants.  The plaintiff had chosen to sue the 2^nd defendant instead.  By an Acknowledgement of Service filed 30 December 2013, Tony Kan became acting for the 1^st and 2^nd defendants.

The summonses

10.  On 24 January 2014, the Statement of Claim was filed.  Essentially, the 1^st defendant was sued as the estate agent making the misrepresentations; the 2^nd defendant was sued as employer of the 1^st defendant; and the 3^rd defendant was sued as principal of both the 1^st and 2^nd defendants. The Statement of Claim also pleaded that the 2^nd defendant was a Hong Kong incorporated company carrying on the business of providing estate agency services and a holder of Estate Agent (Company) Licence No C‑000951.

11.  On 4 April 2014, two events took place:

(i) The 1^st defendant filed his Defence denying in particular that he was employed by the 2^nd defendant. He also denied that the 2^nd defendant was carrying on the business of providing estate agency services and a holder of Estate Agent (Company) Licence No C‑000951.

(ii) The 2^nd defendant wrote (through Tony Kan) to the plaintiff’s solicitors demanding the plaintiff to withdraw its claim against the 2^nd defendant.

In the said letter, the 2^nd defendant set out the following grounds on which it argued that the plaintiff’s case against it was unsustainable:

(1) The 2^nd defendant was not the employer of the 1^st defendant and had never held itself out as such.  There was no basis of attaching vicarious liability onto the 2^nd defendant.

(2) The 2^nd defendant was not the holder of Estate Agent (Company) Licence No C-000951.

(3) So far as the plaintiff’s case may be founded upon the conduct of the 2^nd defendant independent of the 1^st defendant, there was no basis to sue the 2^nd defendant because:

(a) It was not a party to the PSAP.

(b) The Proposal was not issued by the 2^nd defendant.  It was expressly stated in the Proposal that it was issued by Midland Realty, the estate agent company under the PSAP.

12.  By the aforesaid letter, the plaintiff was given until 4 pm of 7 April 2014 to withdraw its claim against the 2^nd defendant, failing which the 2^nd defendant would apply to strike out the claim against it.  The 2^nd defendant also reserved its right to seek indemnity costs should it succeed in the striking out application.

13.  No Defence was filed by the 2^nd defendant.

14.  By a letter dated 7 April 2014, the plaintiff replied through its solicitors.  It stated that it was not privy to the company structure and employment relationship of the 1^st and 2^nd defendants.  It blamed 2^nd defendant of not pointing that out in their two letters dated 8 November 2013 and in Tony Kan’s letter dated 18 February 2014 seeking for time extension for the filing of the Defence.  The letter continued to suggest that no sufficient information had been provided to show that Midland Realty was the employer of the 1^st defendant.  The plaintiff thus asked the 2^nd defendant to confirm in writing that Midland Realty was the employer of the 1^st defendant and if not, would disclose the identity of the 1^st defendant’s direct employer within the next seven days so as to allow the plaintiff to make necessary amendments.  The letter further stated that once the plaintiff received confirmation from the 2^nd defendant as requested, it would certainly make the necessary amendments and asked the plaintiff to withhold making the striking out application.

15.  It is perhaps ironic that both in the 2^nd defendant’s letter dated 4 April 2014 and the plaintiff’s reply letter dated 7 April 2014, the spirit of the Civil Justice Reform was quoted.  Has any party truly adhere to the spirit of the Civil Justice Reform?

16.  What followed was a 4‑page letter from Tony Kan dated 10 April 2014 setting out a full chronology of the pre‑action correspondences as seen from paragraphs 3 to 8 above.  The 2^nd defendant pointed out that it was the duty of the plaintiff to choose the right party to sue and that both itself and Midland Realty had never acted evasively.  It was only upon service of the Statement of Claim that it appeared that the plaintiff was erroneously suing the 2^nd defendant as an employee of the 1^st defendant.  The demand for withdrawal was then reiterated.  A new deadline was imposed: 4 pm on 11 April 2014.  Indemnity costs order was threatened.  The letter then continued with the following paragraph:

“The request made in the last two paragraphs of your letter for employment information about the 1^st defendant cannot be a valid ground for refusing to withdraw the plaintiff’s claim against the 2^nd defendant forthwith. It is elementary the 2^nd defendant and Midland Realty (Comm. & Ind.) Limitedare two separate legal entities, and we hereby confirm with you that the 2^nd defendant is not in possession of the requested information.

In any event, whether your client’s pleading needs to be amended and how that should be done are completely irrelevant, and cannot constitute valid grounds for maintaining the plaintiff’s claim against the 2^nd defendant, not to mention that the joinder is clearly erroneous.  So far, it is your suggestion that the 2^nd defendant or Midland Realty (Comm. & Ind.) Limited has a duty to make whatever disclosure in order to assist your client in pleading its claims in these proceedings, we cannot agree to that and indeed find the suggestion nonsensical.  You are cordially invited to advise your client properly as to how its claims in these proceedings should be formulated.  Negligence is no excuse for suing an innocent party, i.e. the 2^nd defendant.”

17.  The plaintiff’s solicitors Hoosenally & Neo (“Hoosenally”) replied in its letter dated 11 April 2014 as follows:

“There is no dispute that your firm is now acting for both the 1^st and 2^nd defendants. By letter dated 17 November 2013, you informed us that your firm was acting for Midland Realty (Comm & Ind) Limited.

In our earlier letter dated 7 April 2014, when we stated ‘we hereby ask your clients to confirm in writing whether Midland Realty (Comm & Ind) Limited was the 1^st defendant’s employer…’ we referred to the 1^st defendant (D1), 2^nd defendant (D2) and Midland Realty (Comm & Ind) Limited (‘Midland Realty’).

The identity of the D1’s employer at the time is now an issue, namely, whether it was D2, or Midland Realty or another person. D1 would certainly know the identity of his employer at the time. If Midland Realty were indeed D1’s employer, it would no doubt be in possession of such information. Both of them would be in possession of the relevant employment contract, salary records, MPF contribution records or the Employer’s Returns. Such documents are discoverable for fairly disposing of the issue.

As stated in our last letter, our client is not privy to your client’s company structure or their actual employment relationship.

It is clear that your clients, namely, D1, D2 or Midland Realty would have the necessary knowledge (i.e. identity of D1’s employer). The withholding of such information would certainly cause delay and incur costs unnecessarily, especially when your client D2 intends to apply to strike out. To save time and costs, we hereby serve the Interrogatories without order against D1 with a view to fairly disposing of this matter.

As previously stated, once we have the information from your clients in this regard, we will make necessary amendments. Similarly, we ask you to withhold any application to strike out since such application, in all the likelihood, is unnecessary in the present circumstances.

We do not intend to engage in unproductive and unnecessary acrimonious exchanges.  We sincerely hope that the matter can be dealt with sensibly and expeditiously.”

18.  Interrogatory was thus served on the 1^st defendant asking him whether he was at the material time an employee of Midland Realty and if not, to name his employer.

19.  On 15 April 2014, the 1^st defendant provided (through Tony Kan) his answers to the Interrogatories.  He stated that he was not an employee of Midland Realty.  He named Metro Winner Limited as his employer.

20.  By a letter dated 16 April 2014 from Hoosenally to Tony Kan, the former stated that after perusing the 1^st defendant’s answers and consulting counsel, it would make appropriate and necessary amendments to the Statement of Claim within the next 14 days.

21.  On the same day, Tony Kan wrote back and asked the plaintiff’s solicitors to confirm whether the plaintiff would, by 3 pm of 16 April 2014, withdraw its claim against the 2^nd defendant with costs to the 2^nd defendant forthwith.  Otherwise, the 2^nd defendant would take out a striking out application without further notice.  By a second letter of the same date, Tony Kan stated that the 2^nd defendant was only prepared to withhold taking out a striking out application on condition that the plaintiff would confirm by 4 pm on the same day that the intended amendment to the Statement of Claim must include withdrawing its claim against the 2^nd defendant with costs.

22.  Hoosenally then replied on the same day saying that they were considering the appropriate amendments.  They did not give the confirmation demanded.

23.  On 17 April 2014, the 2^nd defendant issued a summons seeking to strike out the plaintiff’s claim against it on the basis that it was frivolous or vexatious and/or it was otherwise an abuse of the process of the court (the “Striking Out Summons”).

24.  In support of the Striking Out Summons was an affirmation filed by Mr Wong Hon Shing dated 17 April 2014.  In this affirmation, Mr Wong:

(1) exhibited printout of the on‑line enquiry with the Estate Agents Authority which showed that Midland Realty is the holder of the Estate Agent (Company) License No C‑000951;

(2) exhibited the Employment Agreement entered into between Metro Winner Limited and the 1^st defendant; and

(3) explained that the 2^nd defendant was incorporated in the Cayman Islands and is a listed holding company of a number of subsidiaries in the Midland Realty Group including Midland Realty (Comm & Ind) Limited.

25.  The said Employment Agreement contained the following preambles:

“Whereas:

(A) MIDLAND REALTY (COMM. & IND.) LTD. (‘Estate Agents Company’), its subsidiaries and/or associated companies engage in the business of provision of estate agency services and derive income primarily from commission and/or agency fees earned from transactions of sale, purchase and/or leasing of properties in and throughout Hong Kong, Macau, Mainland China and other oversea markets.

(B) The Company [Metro Winner Limited] and the Estate Agents Company are both companies in the Midland Group (as defined hereinafter).  The Company is an entity designated within the Midland Group to be responsible for human resources and recruitment and from time to time, frontline employees of the Company will be seconded by the Company to work for and provide his services to the Estate Agents Company, and/or any member of the Midland Group.  ‘Midland Group’ shall mean (i) the Company; (ii) the Estate Agents Company; (iii) the holding, subsidiary and/or associated companies of the Company and/or the Estate Agents Company; and (iv) other companies within the same group of companies as the Company and/or the Estate Agents Company.  The term ‘holding company’ and ‘subsidiary’ in this Agreement shall have the same meaning as in Section 2 of the Companies Ordinance…”

Clause 1.2 of the Employment Agreement obliged the 1^st defendant to serve Metro Winner Limited in all aspects of the estate agency business of the Midland Group.  Clause 1.3 stated that the 1^st defendant would be assigned to work at the “Relevant Branch” with branch code I & O2 or such other branches as Metro Winner Limited, Midland Realty and/or the relevant member of the Midland Group may from time to time assign.

26.  It was also pointed out in the said affirmation of Mr Wong that the plaintiff was clearly mistaken in the following material respects resulting in a misjoinder of the 2^nd defendant in the Statement of Claim:

(i) The 2^nd defendant was wrongly described as a Hong Kong incorporated company.

(ii) It was wrongly described as the entity that carried on the business of estate agency services.

(iii) It was wrongly described as the holder of Estate Agent (Company) Licence No C‑000951.

(iv) It was not the employer of the 1^st defendant.

27.  On 13 June 2014, the plaintiff issued a Summons (the “Amendment Summons”) seeking inter alia to: (i) add Midland Realty as the 4^th defendant; (ii) add Metro Winner Limited as the 5^th defendant; (iii) amend the Writ and the Statement of Claim as per drafts attached.  These are the main changes to the proposed amendments to the Statement of Claim:

(1) The 1^st defendant was employed by the 2^nd and/or 4^th and/or 5^th defendants.

(2) The 1^st defendant was acting as agent for the 2^nd defendant and/or 4^th defendant.

(3) The Proposal was issued/published by the 4^th defendant.

(4) The Written Representation was made by the 1^st defendant in the course of his employment with the 2^nd and/or 4^th and/or 5^th defendants.

(5) The Oral Representation was made by the 1^st defendant in the course of his employment with the 2^nd and/or 4^th and/or 5^th defendants.

(6) Both representations were made by the 1^st defendant with the expressed/implied, apparent/ostensible authority, permission/consent, knowledge or acquiescence of the 2^nd defendant and 4^th defendant.

28.  The two summonses have been ordered to be heard together.  The joinder of the 4^th and 5^th defendants and the related amendments to the Writ and the Statement of Claim in relation to them are not opposed.  The issue I have to decide is whether the 2^nd defendant should remain as a defendant.  I will have to look at the original grounds for striking out as well as the merits of the proposed amendments in relation to the 2^nd defendant.

The approach

29.  Mr Wong SC for the 2^nd defendant (as well as for the 4^th and 5^th defendants) accepted that the court’s power to strike out should be exercised in plain and obvious cases.  He submitted however that where the claim is demonstrated to be plainly unsustainable, unarguably bad and impossible, the court will not hesitate to strike it out.  In exercising the discretion, the court will apply commercial and common sense.  He referred me to Infinity Development (Holdings) Company Limited & anorv Bank of China & oths[1] in which Chu J (as she then was) referred to the dictum of Laddie LJ in Microsoft Corporation vElectro‑Wide Ltd[2]:

“So here the court has to ask whether there is a fair or reasonable probability of the defendants having a real or bona fide defence in relation to these issues. In answering that question it is not sufficient just to look at each factual issue one by one and to consider whether it is possible that the defendant’s story in relation to that issue is credible. The court must look at the complete account of events put forward by both the plaintiff and the defendants and, to use Ackner LJ’s words, look at the whole situation. The mere fact that the defendants support their defence by sworn evidence does not mean that the court is obliged to suspend its critical faculties and accept that evidence as if it was probably accurate. If, having regard to the inconsistency with contemporaneous documents, inherent implausibility and other compelling evidence, the defence is incredible, the court must say so. It should not let the filing of evidence which surpasses belief deprive a plaintiff of its entitlement to relief. ...” (my emphasis)

The case before Laddie LJ was one of summary judgment application.  After referring to the above dictum, Chu J said:

“28. These observations are equally applicable when the credibility and probability of the claim are called in to question on a striking out application. In the present case, insofar as the defendants’ application is made on the basis that the allegations in the Statement of Claim are incredible and implausible, it is, in my view, important to approach the matter from a commercial and common sense point of view and not to lose sight of the overall picture present to the court.”

30.  Mr Wong SC also referred me to the commentary in Hong Kong Civil Procedure 2015 at §18/19/12 where the learned author stated that the courts are becoming increasingly vigilant to ensure wastage of costs, court time and resources does not occur and that an action is kept “on track” for resolution of the real dispute.

31.  I agree with this approach which is in line with the spirit of the Civil Justice Reform.  The court now has wide‑ranging case management powers under Order 1B including the power to exclude an issue from consideration[3] and take any other step or make any other order for the purpose of managing the case and furthering the underlying objective set out in Order 1A[4].  Such powers can even be exercised by the court on its own motion[5].

32.  Also related is the principle that the court will not allow amendments to pleadings if the amendment is not sustainable.  An opposition to the application for amendment is essentially a mirror image of an application to strike out a pleading.  If a proposed amendment is demonstrated to be plainly unsustainable, unarguably bad and impossible, the court would not exercise its discretion to allow it.  To do so would be contrary to the underlying objectives set out in Order 1A.

33.  Mr Grossman SC for the plaintiff did not disagree with the above approach.  He merely stressed that the court should not strike out a party’s case unless it is a clear and obvious case to do so.  I will certainly subscribe to that warning.

The issues

34.  In the present case, in examining whether there is valid basis for keeping the 2^nd defendant as one of the defendants, the following broad issues are involved:

(i) Is there any valid basis to argue that the 2^nd defendant was at the material time the employer of the 1^st defendant?

(ii) Is there any valid basis to argue that in making the Oral and Written Representations, the 1^st defendant was acting as an agent of the 2^nd defendant?

(iii) Is there any valid basis to argue that in making the Oral and Written Representations, the 1^st defendant did so with the apparent/ostensible authority of the 2^nd defendant?

The employment point

35.  As mentioned, the original plea was that the 2^nd defendant was the employer of the 1^st defendant.  The proposed amendment pleads that “1^st defendant was employed by the 2^nd and/or 4^th and/or 5^th defendant(s)”.

36.  Now in evidence is the Employment Agreement between the 5^th defendant as employer and the 1^st defendant as employee[6].  The authenticity of this Employment Agreement is not in dispute.  It is also not in dispute that the 1^st defendant was at the material time providing services as an estate agent to the plaintiff.  The preamble of the Employment Agreement states that the 5^th defendant is designated as the “human resources” vehicle of the Midland Group.  The 4^th defendant is specifically named as one of the companies within the Midland Group engaging in the provision of estate agency services.  The reference to “holding company” in the preamble is a reference to the 2^nd defendant as can be seen from a corporate structure chart accessible from the 2^nd defendant’s website[7].  The same shows that it is the 4^th defendant that actually engages in the provision of property agency services in respect of “industrial properties”.  Other subsidiaries of the 2^nd defendant would be engaged in similar services but in respect of other categories of properties.  It is not disputed that at the material time, the plaintiff was seeking out to purchase an industrial property.

37.  The preamble then continues to state that frontline employees of the 5^th defendant will be seconded by the 5^th defendant to work for the 4^th defendant and/or any member of the Midland Group.  It expressly includes the 2^nd defendant which is the holding company.  When it comes to the actual terms, Clauses 1.2 and 1.3 are in line with the above secondment arrangement.

38.  It is not insignificant to note that the 4^th defendant is specifically defined as the “Estate Agents Company” in the Employment Agreement of the 1^st defendant.  One can also see that each page of this Employment Agreement bears a reference “MR (Comm. & Ind.)” which must be a reference to the abbreviated company name of the 4^th defendant: Midland Realty.  It is quite clear that the 1^st defendant was at all material times employed by the 5^th defendant and that the 1^st defendant was intended primarily to be seconded to work for the 4^th defendant as an estate agent specializing in industrial properties.

39.  I have also been referred to the name cards of the 1^st defendant[8].  They all bear the prominent logos of the 4^th defendant[9].  The logos of the 2^nd and 4^th defendants are different, each bearing its respective abbreviated Chinese and English company names[10].  On top of the logo in a grey banner was a reference that the 4^th defendant is a member of the listed 2^nd defendant’s group (459) “集團成員” followed by the internet website of the 2^nd defendant. At the back page of each name cards are the different logos and names of other four members of the 2^nd defendant’s group. There were other logos and names of companies described as associated organizations “聯屬機構” of the 2^nd defendant.  At the bottom of the front page of the name card, it was printed with the full company name of the 4^th defendant and a reference to its Estate Agent (Company) Licence No C‑000951.  It is clear that the 1^st defendant was acting as an estate agent of the 4^th defendant which is one of the members of the 2^nd defendant’s group of companies.

40.  It is also important to look at the transactions actually conducted between the plaintiff and the 1^st defendant.  As said, the plaintiff was admittedly looking for an industrial property to purchase.  Through the agency services provided by the 1^st defendant, the plaintiff eventually entered into the PSAP.  The contents of the PSAP are intuitive in the following ways:

(i) It is a pro forma document bearing the logo of the 4^th defendant.

(ii) The 4^th defendant is specifically named as “the third party” of this agreement with its Business Registration No 13691967, Estate Agent (Company) Licence No C‑000951, and registered address set out.

(iii) The 4^th defendant is also defined as “the Agent”.

(iv) Clause 12(a) stipulated that the 4^th defendant is entitled to commissions in consideration of the services rendered by the 4^th defendant.

(v) At the execution portion, the full name of the 4^th defendant is set out and the 1^st defendant executed the PSAP for and on behalf of the 4^th defendant.  Apart from setting out his personal Estate Agent (person) Licence number, the 1^st defendant also set out his branch code “I & O2” which is the same branch code mentioned in Clause 1.2A of the Employment Agreement[11].

41.  Furthermore, the Proposal[12] which is alleged to constitute the Written Representation made by the 1^st defendant is in fact a proposal made by the 4^th defendant.  It bears the same logo of the 4^th defendant prominently on the top of each page.  Under the section “Important Notes”[13], a disclaimer is made on behalf of the 4^th defendant.  Similar features can be observed in the Revised Proposal[14].

42.  In the light of the above indisputable evidence, Mr Wong submitted that the plaintiff has no sustainable case of “employment by the 2^nd defendant”.  The proposed amendments in this regard[15] are nothing but hollow and bare assertions.  No material facts in support of the allegation of “employment by the 2^nd defendant” have been pleaded.  There is not even a plea of secondment to the 2^nd defendant.  He also referred me to paragraph 11C of the proposed amendment to show that all acts carried out by the 1^st defendant in the course of his dealing with the plaintiff are pleaded as particulars of agency between the 1^st and 4^th defendants.  Whilst in paragraph 11A where particulars are pleaded to establish an agency between the 1^st and 2^nd defendants, these acts of the 1^st defendant have not been pleaded.

43.  In addition to the pleading deficiencies observed by Mr Wong SC, I have set out the clear contemporaneous documentary evidence showing that the 1^st defendant was at the material time employed by the 5^th defendant and seconded to work for the 4^th defendant.  Mr Grossman SC was unable to provide any cogent reply.  He relied on the authority of Pang Kwok Lam v Schneider Electric Asia Pacific Ltd, HCPI 90/2010, unreported, 5 January 2011,and submitted that there could be “double‑employment”.  I accept that depending on the facts of a given case, a person could be employed by two persons at the same time.  There is simply no basis to suggest that the situation arose from the facts of this case.  Mr Grossman SC said that the plaintiff has no knowledge of the internal structure of Midland Group and the employment relationships.  That may well be so at the time the Writ was issued and the Statement of Claim filed.  Now the plaintiff has the 1^st defendant’s answer to the Interrogatories and the Employment Agreement.  Moreover, the plaintiff all along has the name card and the PSAP. A careful reading of all these documents points irresistibly to the conclusion that there is not a scintilla of evidence to substantiate an employment relationship between the 1^st and 2^nd defendants.

44.  Mr Grossman SC then resorted to two pieces of evidence:

(i) That in the website of the 2^nd defendant,[16] the 2^nd defendant referred to a “Midland ICI Top Agent Club” and the 1^st defendant’s picture and name appeared as one of the top agents.  Through a hyperlink of the 1^st defendant’s name, one is brought to another page dedicated to the 1^st defendant describing him as “高級客戶經理” of “工商部東九龍”.

(ii) The email address of the 1^st defendant as set out in his name cards and in the aforesaid dedicated page bears the domain name “midlandici.com.hk” which is that of the 2^nd defendant.

With respect, one must distinguish between the concept of “employment” and “agency by holding out”.  I will in due course deal with the latter.  Yet in the context of the plea of “employment”, it is a plea based in “contract of employment”.  The question is: is there any evidence to substantiate a contractual relationship of employment between the 1^st and 2^nd defendants?

45.  The evidence under (i) above should be understood in its proper context.  It is not a statute or a legal document and should not be construed with such stricture.  The 2^nd defendant is a holding company that has a number of operating subsidiaries one of which is the 4^th defendant.  The 1^st defendant was contractually employed by the 5^th defendant which seconded him to work at Branch Code I & O2 operated by the 4^th defendant. In layman terms, the 1^st defendant can broadly be described as one of the Group’s estate agents as much as that of the 4^th defendant. In any event, the homepage of the 2^nd defendant’s website is divided into three sections: industrial, commercial, and shops[17].  If one clicks under “industrial”, one would be directed to the section of the 4^th defendant bearing its individual logo.  As for the pages concerning the Top Agents Club, the photograph of each top agent[18] bears reference to his name and the type of property and his branch.  In the case of the 1^st defendant, he is referred to as belonging to “Industrial/Kowloon”.  The evidence under (ii) is even more innocuous.  The same domain name is used by all operating subsidiaries of the 2^nd defendant. The email address of the 1^st defendant merely shows in general that he worked under the 2^nd defendant’s group of companies.

46.  In my judgment, these two pieces of evidence are neither here nor there on the issue of “employment”.  They cannot possibly have the effect of offsetting the clear and obvious conclusion that can be drawn from the indisputable contemporaneous documents as mentioned in paragraphs 36 to 41 above.

47.  Mr Grossman lastly submitted that the plaintiff may be able to obtain evidence through discovery as to who actually paid the salary of the 1^st defendant; filed Employer’s Return; paid for MPF etc.  With respect, such kind of submission can be dismissed by a mere reference to the dictum of Fok JA in The New China Hong Kong Group Limited (in Creditors’ Voluntary Liquidation) & anor v Ng Kwai Kai, Kenneth & or, HCA 519/2010, unreported, 11 February 2011 at §70:

“70. …It is an abuse of the court’s process to start a case without a solid foundation hoping that something will turn up in the course of the proceedings, for example at the stage of discovery or cross‑examination …”

In my judgment, on the facts of this case and the materials before me, the proposed plea that the 1^st was employed by the 2^nd defendant is clearly and obviously unsustainable.

The agency point

48.  I am here talking about the proposed amendment of paragraph 1(7) which is, as Mr Wong submitted, an equally bare and hollow assertion that the 1^st defendant was acting as an agent of the 2^nd defendant.  In any event, he submitted that according to the PSAP, the 4^th defendant was clearly the named principal of the 1^st defendant.  The Proposal and Revised Proposal that the 1^st defendant presented to the plaintiff were prepared by and/or for the 4^th defendant.  He again relied on the fact that all acts conducted by the 1^st defendant in the transactions with the plaintiff are pleaded under paragraph 11C of the proposed amendments as having been done for the 4^th defendant and as its agent.  There is simply no basis to suggest that the 1^st defendant made the alleged Oral and Written Representations as an agent of another unnamed principal, ie the 2^nd defendant.

49.  Similar to his argument made under the “employment point”, Mr Grossman submitted that “double agency” is a possibility and it will depend on facts and evidence.  Again with respect, I cannot see how the plaintiff can get out of the clear and unambiguous terms in the PSAP.  The plaintiff case is that it was misled into entering the PSAP by the misrepresentations made by the 1^st defendant. As a result, she executed the PSAP which is an agreement with the Vendor and the 4^th defendant.  The 1^st defendant executed the PSAP expressly for and on behalf of the 4^th defendant.  If there were such misrepresentations, they must have been made by the 1^st defendant as agent for the 4^th defendant.

50.  In my judgment, on the facts of this case and the materials before me, the proposed plea that the 1^st defendant was acting as an agent of the 2^nd defendant is again clearly and obviously unsustainable.

The apparent/ostensible authority point

51.  This relates to paragraph 11A of the proposed amendments.  It is pleaded that the 2^nd defendant at all material times represented that the 1^st defendant was its agent in the conduct of its estate agency business.  The alleged representation by the 2^nd defendant is said to have arisen from:

(i) That the 2^nd defendant allowed the 1^st defendant to use his name card which contained the name of the 2^nd defendant, its stock code 459, and its website address.

(ii) That the 2^nd defendant’s website represented that it engages in the business of estate agency.

(iii) That the “Top Agents Club” pages in the 2^nd defendant’s website represented the 1^st defendant as one of its top agents.

(iv) That the 2^nd defendant allowed the 1^st defendant to use the domain “midlandici.com.hk” in his email address.

52.  Mr Wong SC referred me to Agency Law and Principles, Munday, 2^nd edn, page 84, §4.37 to 4.39 for the following general principle:

“As will now be evident, apparent authority requires both (i) that a representation must have been made to a third party; and (ii) that the third party can be shown to have relied upon that representation…

As regards (i), Lord Lindley made clear in Farquharson Bros & Co v King & Co that the “holding out” must be to the particular individual who says he relied on it, or under such circumstances of publicity as to justify the inference that he knew of it and acted upon it.

As regards (ii), a third party can only rely upon the agent’s apparent authority provided that a causal link can be shown between the representation and the third parties actions.  This causal relation may need to be proved.”

I have also been referred to The Raffaella, [1985] 2 Lly R 36 at 41in which Browne‑Wilkinson LJ said:

“It is important to bear in mind that the doctrine of holding out is a form of estoppel. As such, the starting point is that the principal must be shown to have made a representation, which the third party could and did rely on, that the agent had the necessary authority. The relevant enquiry, therefore, in all cases is whether the acts of the principal constitute a representation that the agent had a particular authority and were reasonably so understood by the third party.”

53.  The first issue is whether the 2^nd defendant had represented to the plaintiff that the 1^st defendant was its agent?  The plaintiff’s evidence is essentially based on Ms Li’s allegation that her colleagues checked out the website and found that the 1^st defendant was a top agent of the 2^nd defendant[19].  The 1^st defendant’s name card is also relied upon.  I have set out in paragraphs 36, 39, and 45, the correct reading and understanding of the 1^st defendant’s name card and email address; the 2^nd defendant’s website; and the Top Agent Club page.  In my judgment, these matters do not constitute any representation that the 1^st defendant was an agent of the 2^nd defendant.  The problem with the plaintiff’s case is that it is based on a selective and blinkered collation of information from the name card and website.  It wholly fails to read and understand such information in its full and proper context.

54.  Secondly, one has to scrutinize the plaintiff’s evidence that it (acting through Ms Li) actually relied upon the alleged representation.  In so doing, I have to adopt the approach of Chu J in Infinity Development.

55.  In submitting that it is inherently implausible and incredible (with reference to undisputed evidence and contemporaneous document) that Ms Li had so relied upon the alleged representation, Mr Wong SC referred me to the following important points:

(1) There was this undisputed previous course of dealing between the plaintiff, the 1^st defendant and the 4^th defendant.  This is the so‑called Sunbeam transaction[20] in 2010 in which Ms Li equally engaged the 1^st defendant’s service as estate agent resulting in the plaintiff purchasing the Sunbeam Property.  A similar PSAP was entered into with the 4^th defendant as the Estate Agent Company[21].  The 1^st defendant equally executed that PSAP for and on behalf of the 4^th defendant.  More importantly, the plaintiff paid agency commissions to the 4^th defendant as evidenced by an official receipt issued by the 4^th defendant[22].

(2) Then, based on the terms of the present PSAP, the plaintiff must have been aware that the 4^th defendant was the Estate Agent Company with whom it was contracting.  The PSAP stated in black and white that the 1^st defendant was signing it on behalf of the 4^th defendant.  This was consistent with the Proposal and Revised Proposal showing that they were prepared by the 4^th defendant. Mr Wong submitted that Ms Li’s evidence that the plaintiff factually relied upon the alleged representation (by the 2^nd defendant) of authority (in the 1^st defendant as its agent) arising out of the name card and website is plainly incredible.

(3) Furthermore, in a case of Mr Y holding out Mr X as his agent, it must logically involve Mr X doing something for Mr Y.  Yet, in the present proposed amendments, whilst pleading (under paragraph 11A) that the 2^nd defendant held the 1^st defendant out as its agent, when it comes to what the 1^st defendant actually did in the transactions with the plaintiff, it is pleaded (under paragraph 11C) that such acts of the 1^st defendant were done as agent for the 4^th defendant.  Mr Wong submitted that the plaintiff’s case on its own plea is absurd.

56.  I agree with Mr Wong’s observations.  In my view, the contents of the PSAP alone would have demonstrated the incredulity of the plaintiff’s case.  Having expressly contracted with the 4^th defendant as the estate agency company that introduced the Property and hence entitled to commission, and seeing the 1^st defendant’s execution of the PSAP expressly acting for and on behalf of the 4^th defendant, I cannot see how the plaintiff can possibly argue that it factually relied upon the alleged representation of agency between the 1^st and 2^nd defendants. For the same reason, any such alleged reliance would be wholly irrational[23].

Conclusion

57.  In my judgment, all three bases upon which the plaintiff now seeks to pursue against the 2^nd defendant are clearly and obviously unsustainable.  I accept Mr Wong’s submission that the plaintiff’s summons is a hopeless attempt to salvage a clear mistaken joinder of the 2^nd defendant in the original Statement of Claim.  I will strike out the plaintiff’s claim against the 2^nd defendant as prayed for in the Striking Out Summons.  In respect of the Amendment Summons, I will grant leave to the plaintiff to amend the Writ and the Statement of Claim save that all proposed amendments relating to the plaintiff’s claim against the 2^nd defendant be disallowed.  The 2^nd defendant shall not remain as a defendant in this action.

Costs

58.  I will also make an order nisi that the plaintiff do pay to the 2^nd defendant costs of the action, to be taxed forthwith if not agreed, on party‑and‑party basis.  As for the hearing on 8 January 2015, I grant a certificate for two counsel.

59.  In relation to the Amendment Summons, it now affects only the 4^th and 5^th defendants who have not resisted the joinder on the basis of the proposed amendments introducing them into the action.  I make an order nisi that costs of the Amendment Summons as between the plaintiff and the 4^th and 5^th defendants be costs in the cause.