WONG SAI PONG v. WONG KIM POR

HCA390/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 390 OF 2006

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JUDGMENT

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1.  This is an application by the defendant for, in summary :

(i)      leave to re-amend his defence and counterclaim;

(ii)     leave to file and serve his third witness statement and a witness statement of a Mr Wong Sun Woo; and

(iii)    an order for specific discovery.

These are my brief reasons for the order I propose to make on the defendant’s summons.

The existing state of the pleadings

2.  The plaintiff claims as the registered owner of a property in Tai Po on the basis of an agreement dated 12 June 1998 said to have been entered between his agent, Tecco Investments Ltd, the defendant and a company called Triumph Award Ltd.  Under that agreement, the plaintiff alleges the defendant agreed to purchase the property from them for the price of HK$5.7 million which sale was to be completed within 30 days from the date of the Demand Note for Premium issued by the Government.

3.  Notwithstanding that the Demand Note for Premium was issued and given to the defendant through his solicitors on 24 June 2005, the plaintiff claims that the defendant has failed to complete the purchase or pay the balance of the purchase price in the sum of HK$4.93 million.  The plaintiff claims that the defendant has wholly renounced the agreement and so, in order to mitigate his loss, he sold the property on 8 September 2005 for HK$3.58 million, leaving a deficiency of HK$2.12 million, which the plaintiff claims from the defendant.

4.  By the amended defence the defendant pleads that the plaintiff is and was an indigenous villager of the New Territories.  Issue is taken as to whether the plaintiff was a party to the 12 June 1998 agreement.  On that basis it is denied that the defendant is liable to the plaintiff at all.  It is pleaded that, if the defendant was a party to the agreement, he was never in a position to give good title to the property in that, in breach of an express term of the agreement, there was no vehicular access to the property.

5.  The defendant also pleads an amended counterclaim against Tecco, the plaintiff and a Mr Chan Choi Sing. The counterclaim pleads that Tecco is and was a corporate vehicle of Mr Chan and specialised in the development of small houses in the New Territories under the Government’s concessionary Small House Policy.

6.  The defendant’s presently pleaded amended counterclaim is that the agreement dated 12 June 1998 was an agreement arrived at after Mr Chan and/or Tecco made various representations to the defendant in respect of the sale of the property to him. The amended counterclaim alleges that Tecco failed to complete the construction of the Small House on the property as it represented it would.  The amended counterclaim alleges that Mr Chan made himself scarce between August 1998 and May 2005 so that the defendant was unable to contact him in relation to the agreement and the progress of the construction of the Small House on the property.  In May 2005, the defendant alleges he discovered that a Small House was erected on the property but he had not been approached by Tecco or the plaintiff in respect of completion.  The amended counterclaim asserts three causes of action, namely :

(i)      breach of the agreement by Tecco, alternatively the plaintiff, by sale of the property on 8 September 2005 to third parties;

(ii)     fraud on the part of Tecco and Mr Chan on the basis that they never intended to complete the sale and purchase of the property with the defendant; and

(iii)    procurement by Mr Chan of a breach of contract by causing Tecco or the plaintiff to sell the property to third parties.

7.  It is relevant to note that part of the original counterclaim, which was deleted by amendment, alleged that there was an express or implied term of the agreement that Tecco and the plaintiff would not enter into any mortgage or charge of the property after signing the agreement and that in breach of that term Tecco and the plaintiff mortgaged the property to secure loans, advances and general credit facilities by way of a building mortgage dated 3 May 2001, a building mortgage dated 24 February 2003 and a collateral mortgage dated 27 July 2004.

The timing of the application to amend

8.  The application is very late.  This action was commenced in 2006 and the amended defence and counterclaim which it is now proposed to re-amend was filed on 7 May 2008.  The pleadings were closed in 2008 and requested further and better particulars and interrogatories filed by the defendant were respectively responded to by the plaintiff in February 2009.  In listing questionnaires filed by the defendant’s former solicitors dated 2 December 2009 and 31 December 2009, the defendant confirmed, amongst other things, that his pleadings were in order and required no amendment and that he had no intention to take out any other interlocutory applications.  Witness statements were exchanged and served in January 2010.

9.  The trial of the action is due to commence on 30 November 2010, 35 days from today.  On 5 October 2010, I gave directions on the pre-trial review as regards the timing of the filing of trial bundles and written openings.  The present application to amend was first mentioned only on 5 October 2010 at the pre-trial review, the summons to amend having been issued the previous day.  In the circumstances, the court must look carefully at the nature of the amendments sought to be added and also the defendant’s explanation for the delay in making the application to amend.  This is particularly relevant since, if leave to re-amend were granted I am satisfied that it would necessarily mean having to vacate the trial dates.  That being the case, since a date for the trial of an action is a milestone date, it is necessary for the defendant to show exceptional circumstances why an order should be made that would have the consequence of varying that milestone date.

10.  As to the explanation for the delay, this is addressed in paragraphs 6 and 7 of the defendant’s affirmation filed on 5 October 2010 and paragraphs 4 and 5 of his second affirmation filed on 21 October 2010 in support of this application.  In essence, the explanation in his first affirmation is that in late July to early August 2010 the defendant lost confidence in his former solicitors and had to change legal representation.  In his second affirmation, the defendant seeks to explain the reasons for his delay in making this application by asserting a mistaken understanding as to the nature of his duty of discovery and his entitlement to rely on exhibits at trial.  Since the introduction of the Civil Justice Reform, a change of legal representation is unlikely to provide a good excuse on its own for a late application.  Likewise, an allegation of mistaken understanding as to a matter of procedure by a legally represented litigant is unlikely to carry much weight.  I am not impressed by the explanations provided by the defendant in this regard.

11.  As against the lateness, it is necessary to bear in mind the need for the court to recognise that the primary aim in exercising its powers is to secure the just resolution of disputes in accordance with the substantive rights of the parties.

The proposed re-amended defence and counterclaim

12.  In the course of the hearing, Mr Lau, counsel for the plaintiff, helpfully indicated that there were no objections to various of the proposed re-amendments.  Those are the re-amendments to paragraphs 2A, 3, 3A, 5A, 5G, 5J, 6, 6A, 7, 10, 11, 13, 18, 19, 20 and 22(a) and paragraph 2 of the prayer to the counterclaim.

13.  There are three particular aspects of the proposed amendments that remain controversial between the parties.  They are :

(i)      a new allegation concerning an admission by the plaintiff as to be amount of his damages at paragraph 6B;

(ii)     a new allegation of implied terms at paragraphs 14A to 14C; and

(iii)    a new allegation that the agreement is illegal and unenforceable originally to be inserted in paragraph 18A but which Ms Hui, counsel for the defendant, indicated she would like to insert instead in paragraph 6C of the defence, together with a new paragraph 2A of the prayer to the counterclaim.

14.  I propose to address the new allegation concerning illegality first.  In this regard Ms Hui has cited various authorities in support of the viability of the plea.  These include Madam Chung Mui Teck & ors v Hang Tak Buddhist Hall & ors [2001] 2 HKLRD 471, Sino Favour Development Ltd & anor v Kan Wai Chung & ors, unrep., HCA1517/2005, 17 June 2010 and China Credit Motors Trading Co. Ltd v Or Kwong Chuen & ors, unrep., HCA6347/1998 16.5.00.  Relying on those cases, the underlying basis of the defendant’s proposed plea of illegality appears to be that, since the Government’s Small House Policy was intended to benefit indigenous villagers personally and no one else, the plaintiff must have made a misrepresentation in his statutory declaration leading to the grant of the building license.

15.  For his part, Mr Lau objected to the amendment on the grounds of its lateness but did not contend that the plea was bad in law or otherwise bound to fail on the facts.  I have given this application careful thought.  On the one hand, it is extremely late and there does not appear to be a good excuse for the delay in making the application to amend.  On the other hand, the plea may give rise to a valid defence.  As Fung J observed in Sino Favour Development Ltd, it is necessary for the court to be careful in considering a late amendment when illegality is raised lest the court be unwittingly used as an instrument of fraud.

16.  But for the fact that the allegation raises an issue of illegality, I would not have been inclined to exercise my discretion to allow the proposed amendment since I am not satisfied that there is a satisfactory explanation excusing the delay in making the application to amend.  However, I am prepared to accept that the fact that the amendment seeks to raise a plea of illegality may constitute an exceptional circumstance justifying an amendment which will have the result of the trial dates having to be vacated.  I am therefore prepared to grant leave to make the re-amendment proposed in paragraph 6C of the defence and paragraph 2A of the prayer to the counterclaim.

17.  I turn then to consider the other re-amendment applications which are contested.  At this point, it seems to me that the question of whether leave to re-amend should be granted falls to be considered simply on the merits of the particular amendments sought.  This is because the issue of delay is less important since, as a consequence of my decision to grant leave in respect of the plea of illegality, it necessarily follows that the imminent trial dates will have to be vacated.  This in turn means that there will be adequate time for the plaintiff to respond to the re-amendments as may be necessary.

18.  As to the proposed re-amendment in paragraph 6B of the defence, the only basis of objection advanced by Mr Lau was that this is a new line of defence which it will take time for the plaintiff to respond to and would interfere with its preparation for trial.  As I have noted, the trial dates will have to be moved in any event and in the absence of any other substantive objection to this re-amendment I see no reason why leave should not be granted for it to be made.

19.  As to the allegation concerning the implied terms of the agreement, the defendant seeks to raise two such terms: first, that Mr Chan and Tecco would not, after entering into the agreement with the defendant, enter into any mortgage or charge of the property or any part thereof without the prior consent or knowledge of the defendant; secondly, that the property would be fit for occupation with a supply of water and electricity and for residential purposes prior to the completion of the sale and purchase of the property.

20.  The first of these alleged implied terms is not a new allegation at all as I have noted above. On the contrary this plea was included in the original counterclaim and deleted by way of amendment on 7 May 2008.  No explanation whatsoever has been given by or on behalf of the defendant by way of evidence in support of this application for why it is now sought to resurrect a plea previously considered by counsel to be one which should be deleted by amendment.  Furthermore, when the original plea was deleted, a new plea was added by amendment alleging a second cause of action for the counterclaim that Tecco and Mr Chan never intended to complete the sale and purchase of the property with the defendant, one of the particulars of which is that the property was mortgaged twice even after the completion of the small house in January 2003. In the circumstances, particularly the absence of any explanation for this change of stance, I am not prepared to exercise my discretion to allow the proposed re-amendments to add paragraphs 14A(1), 14B and 14C(1).

21.  The second of the alleged implied terms does appear to be a new allegation, as is accepted by Ms Hui. In her skeleton argument, Ms Hui contends that the implied term is based on the mutual intention of the parties or in order to give the agreement business efficacy.  Reliance has also been placed on clause 2C of the agreement dated 12 June 1998 and clause 38(d)(2) of the agreement dated 30 May 2005.

22.  For the plaintiff, Mr Lau submitted that, even if the allegations could be established, it is difficult to see how they would constitute a material breach justifying the defendant’s refusal to complete the purchase.  He pointed out that if the defendant intended to claim damages, there was no related pleading and evidence.  In addition, he submitted that further discovery would have to be obtained and given in order to establish the water and electricity supply status at the material time.

23.  Again, whilst I have some sympathy for the plaintiff in light of the lateness of this particular re-amendment, it does not seem to me that it causes any prejudice to the plaintiff which cannot be compensated by costs, particularly in view of the fact that the trial dates will have to be vacated in any event.  The plea in respect of the breach of the implied term concerning the fitness of the property for occupation is relied upon in support of the second cause of action in the counterclaim against Mr Chan and would also appear to be relevant to the counterclaim that the relevant agreement has been rescinded by reason of Tecco’s or the plaintiff’s breaches of the agreement.  In the circumstances, I am prepared to grant leave for the re-amendment to add paragraphs 14A(2) and 14C(2), although these will need to be renumbered as 14A and 14B respectively, with a corresponding amendment to paragraph 14A to reflect the fact that only one implied term is to be pleaded.

The balance of the summons

24.  I propose therefore to grant leave to the defendant to re-amend the defence and counterclaim filed on 7 May 2008 to the extent indicated above.  I grant leave to the defendant to file and serve on the plaintiff, Tecco and Mr Chan, the re-amended defence and counterclaim within seven days from today’s date.

25.  I grant leave to the plaintiff, Tecco and Mr Chan to file and serve their re-amended reply and defence to counterclaim within 28 days thereafter.

26.  I am prepared to grant leave to the defendant to file his 3^rd witness statement dated 4 October 2010 as well as the witness statement of Mr Wong Sun Woo dated 4 October 2010, service of such statements to be dispensed with.

27.  I grant leave to the plaintiff, Tecco and Mr Chan to file and serve witness statements in reply within 14 days after service of the re-amended reply and defence to counterclaim.

28.  Since the application form including any statutory declaration and power of attorney provided in support of the plaintiff’s application for grant of building licence No.35/96 in respect of the property is clearly now relevant to the issue of illegality raised by the re-amendment, I make an order in terms of paragraph 8 of the defendant’s summons.

29.  As regards the directions I made on the pre-trial review, I see no reason why paragraph (1) of that order should not remain operative.  The directions in paragraphs (2) to (6), however, would appear to be redundant in light of the trial dates being vacated.

30.  I will now hear the parties on costs and other directions.