LAW PAK FUN AND ANOTHER v. TAI LEE FAT INTERNATIONAL LTD AND OTHERS

HCA 2003/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2003 OF 2013

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JUDGMENT
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Introduction

1.  There is before this court an application by the 1^st Defendant (“TLF”) for:

(1) A determination in the affirmative of the following question of law under RHC O 14A:

“Whether Law (or Lo) Chak (or Chek) Tong (“the Deceased”), who entered into a Memorandum of Agreement dated 5 June 1998 and a Supplemental Agreement dated 30 January 2002 (“the Agreements”), which were prepared by solicitors acting for the Deceased, was in pari delicto in regard of the illegality of the Agreements.”

(2) An Order striking out the entire Amended Statement of Claim on all grounds set out in RHC O 18 r 19.

2.  The application is opposed by the Plaintiffs.

The principles

3.  Before examining the merits of the application, this court should remind itself the governing legal principles.

4.  RHC O 14A r 1 provides:

“(1) The Court may…determine any question of law…where it appears to the Court that–

(a) such question is suitable for determination without a full trial of the action; and

(b) such determination will finally determine (subject only to any possible appeal) the entire cause or matter or any claim or issue therein.

(2) Upon such determination the Court may dismiss the cause or matter or make such order or judgment as it thinks just.”

5.  In order to invoke RHC O 14A, it must be shown that this is a suitable case for the procedure and the determination of the question of law is one which will finally determine the entire cause or matter (or any claim or issue therein). The court will not make such a determination if, for instance, the court’s decision will not have the effect of finally resolving the controversy between the parties, or there are serious disputes of fact: B + B Construction Ltd v Sun Alliance and London Insurance Plc (2000) 3 HKCFAR 503, 507I-508A; Shell Hong Kong Ltd v Yeung Wai Man Kiu Yip Co Ltd (2003) 6 HKCFAR 222, 230C-J.

6.  It is only in plain and obvious cases that the court should exercise its summary power to strike out. There should be no trial upon affidavits and importantly disputed facts must be taken in favor of the party sought to be struck out. Where the legal viability of a cause of action is sensitive to the facts, an order to strike out should not be made. The power to strike out is exercisable only when the claim is obviously unsustainable and that it must be impossible, not just improbable, for the claim to succeed: Hong Kong Civil Procedure 2015 Vol. 1 para. 18/19/4; E  (A Minor) v Dorset County Council [1994] 3 WLR 853, 865 (Sir Thomas Bingham MR); X (Minors) v Bedfordshire CC [1995] AC 633, 771 (Lord Browne-Wilkinson); Yue Xiu Finance Co Ltd v Dermot Agnew [1996] 1 HKLR 137, 141 (Litton VP).

Facts

7.  The following background facts are set out for the purpose of the present application only. Save where otherwise indicated, they are taken from the Plaintiffs’ pleadings and affidavit evidence.

8.  The Deceased was, prior to 26 July 1999, the registered and beneficial owner of a piece of land situated at Sub-section 1, Section A, Lot No. 1564, D.D.76 (“Lot”) in the New Territories. The Lot is situated at Kan Tau Tsuen (“Village”), Fanling, New Territories where the Deceased used to live. The Deceased was once the Resident Representative of the Village.

9.  The Deceased passed away in December 2005. The Plaintiffs, Mr Law Pak Fun and Mr Law Pak Ying Raymond, are his sons.

10.  In 1998, Mr Wan Han Ping, a director of TLF, approached the Deceased and other residents of the Village and proposed that they provided their land to TLF for the development of village type houses on the basis that TLF would be responsible for (i) making all necessary applications, (ii) construction of the houses, and (iii) all the costs and expenses of the development. Eventually, the Deceased and some other villagers agreed to TLF’s proposal. It was the first time the Deceased had participated in such a development.

11.  By a Memorandum of Agreement dated 5 June 1998 (“MOA”), the Deceased, as owner, and TLF, as developer, agreed to develop the Lot by erecting four village type houses on it. The MOA was prepared by Messrs Donald Yap, Cheng and Kong (“DYCK”) and executed before Mr Donald Yap (“Yap”), a partner of DYCK. The Plaintiffs said DYCK was TLF’s solicitors. TLF said DYCK acted for both the Deceased and itself. DYCK’s fee note for inter alia the preparation of the MOA only named TLF as its client.  

12.  The material terms of the MOA are:

(1) The Deceased shall provide the Lot to TLF for the development of four 3-storey village type houses (clauses 1 and 2).

(2) TLF shall at its own costs and expenses instruct a surveyor to survey the land and draw up plans to divide the land into such number of parcels, each suitable to erect a 3‑storey village type house, and such strip of land suitable to be used as a road (clause 3).

(3) Each parcel of land will be assigned to a suitable indigenous villager who shall make the necessary application to the District Lands Officer North for a building licence to erect thereon a 3-storey village type house. All legal costs, stamp duty and expenses etc. shall be the responsibility of TLF. Any parcel of land which cannot be granted a building licence shall be retained by the Deceased and TLF for the common use by the other parcels of land (clause 4). 

(4) On the completion of the development, each party shall be entitled to have two houses (clause 7).

(5) After the issue of the Certificates of Compliance, TLF shall be entitled to apply in the name of the building licence holders [i.e. the indigenous villagers] to the said District Lands Officer for consent for alienation of the parcels of land and houses thereon to which TLF is entitled and to be wholly responsible for the premium payable to the Government, legal costs and expenses. The Deceased shall be responsible for any government premium, legal costs and expenses if he should apply for alienation (clause 8).

(6) The Deceased shall at all times use his best endeavour to assist TLF in completing the development. TLF shall be responsible for all costs and expenses required and incurred in the development (clause 11). 

13.  Pursuant to the MOA, the Deceased executed a deed of assignment dated 26 July 1999 assigning the Lot to TLF. The assignment was also prepared by DYCK. The assignment took the form of an assignment on sale and stated at clause 1 that the consideration for the assignment was HK$1 million, the receipt of which was acknowledged by the Deceased. The Plaintiffs said the consideration for the assignment ie  the HK$1 million was never paid or intended to be paid by TLF. This was not admitted by TLF in its Defence. In his affirmation, Mr Tiu Sum Fat (“Mr Tiu”), a director of TLF, said he was unable to confirm or deny whether TLF had paid the HK$1 million to the Deceased.

14.  By a Deed Poll also dated 26 July 1999, TLF divided the Lot into six separate and distinct portions known as Section A, Section B, Section C, Section D, Section E and Remaining Portion (“sub-lots”).

15.  At the request of TLF, the Deceased signed a Supplemental Agreement dated 30 January 2002 (“SA”) with TLF to vary the Deceased’s entitlement under the MOA. Under the SA, the Deceased exchanged his entitlement to two houses to be built on the Lot for another house to be built on Lot No. 1573B/2 in DD 76 and another plot of land situated at Lot No. 1573B/4 in DD 76.

16.  Other than signing the MOA, the deed of assignment and the SA, the Deceased played no part in the development on the Lot.  The  Deceased had no knowledge of the progress of the development.   

17.  By two assignments both dated 15 July 2005, TLF assigned Section B of the Lot to the 2^nd Defendant and Section C of the Lot to the 3^rd Defendant. Both the 2^nd and 3^rd Defendants were indigenous villagers in the New Territories.  The consideration of HK$200,000 stated in each of the assignments was never paid by the 2^nd or 3^rd Defendant to TLF.

18.  The aforesaid assignments by TLF to the 2^nd and 3^rd Defendants were for the purpose of enabling them to apply for building licences from the Government. According to TLF, the Government granted to the 2^nd Defendant in December 2008 and the 3^rd Defendant in October 2009 licences to build a village type house on their respective sub‑lots. Judging from the application numbers, the 2^nd and 3^rd  Defendants’ applications for building licences were made in 2007, after the Deceased had passed away.

19.  Condition 3(a)(iv) of both licences provides:

“The Licensee expressly warrants, represents and declares that he has never entered into any arrangements or agreement with any person or persons to transfer, alienate, dispose or otherwise deal with the lot or any part thereof or any interest therein or his rights in and over the lot, including but not limited to the right to develop the lot or any part thereof.”

20.  By a letter dated 6 May 2013, the Plaintiffs indicated their refusal to provide any further assistance to TLF regarding the development of the Lot and their withdrawal from the MOA and SA (“Agreements”), on the ground that they were tainted with illegality.

21.  By a writ of summons dated 21 October 2013, the Plaintiffs sought a declaration that the sub-lots are held by TLF, the 2^nd and 3^rd Defendants on trust for the Deceased and an order for the transfer of them to the Plaintiffs.

The parties’ pleaded case

22.  Put simply, the Plaintiffs seek recovery of the sub-lots on two grounds:

(1) The Lot was transferred to TLF without consideration and therefore a resulting trust arose in favour of the Deceased: paragraph 4 Amended Statement of Claim; paragraph 3 Reply.

(2) The implementation of the Agreements would involve procuring indigenous villagers who were assigned the sub‑lots to falsely represent to the Government that they had made no arrangement with TLF for the sale of their village type houses and therefore both Agreements are void and invalid for illegality: paragraphs 11-12 Amended Statement of Claim.

23.  In its Defence, TLF:

(1) makes no admission as to whether it has paid the HK$1 million to the Deceased;

(2) admits the Agreements are illegal but avers that the Deceased was aware of the illegality and was in paridelicto in entering into the Agreements;

(3) further avers that the illegal features of the Agreements ie the making of false representations to the Government in applying for building licences, had already been performed since the 2^nd and 3^rd Defendants had been granted building licences on their sub‑lots.

24.  In their Reply, the Plaintiffs deny the Deceased was aware of the illegal nature of the Agreements or was involved in their implementation other than assigning the Lot to TLF.  The Plaintiffs further rely on the doctrine of locus poenitentiae upon their voluntary withdrawal from the Agreements by letter dated 6 May 2013.

Gratuitous transfer and resulting trust

25.  I shall begin with a number of legal propositions which, in my view, are well-established by the authorities.

26.  Where a transferor of property causes the legal interest in it to vest in another person in circumstances where it is unclear whom the transferor intends to have the beneficial interest in it, a resulting may arise by operation of law for the benefit of the transferor. One such circumstance is the gratuitous transfer of property. In this regard, the law gives effect to a default presumption about the intention of a person in making a gratuitous transfer of property - although he has transferred the legal interest, he would generally not intend the transferee to take the property beneficially: Snell’s Equity 32^nd Ed. para. 25-001.

27.  If a plaintiff proves he has voluntarily ie gratuitously transferred property to a defendant, the plaintiff will have established his claim under a resulting trust unless the presumption of advancement applies or the defendant leads evidence (on the parties’ actual intention) to rebut the presumption of resulting trust: Tinsley v Milligan [1994] 1 AC 340, 371E-H (Lord Browne-Wilkinson); Snell’s Equity 32^nd Ed. para. 25‑011.

28.  A claimant to an interest in property, whether based on a legal or equitable title, is entitled to recover the property if he is not forced to plead or rely on an illegality, even though it transpires, on the pleadings or in evidence, that the title on which he relies is acquired in the course of carrying through an illegal transaction. In the present context, the crucial question is: “Does a plaintiff claiming a resulting trust have to rely on the underlying illegality?”. Where the presumption of resulting trust applies, the plaintiff does not have to rely on the illegality: Tinsley v Milligan [1994] 1 AC 340, 371F-G (Lord Browne-Wilkinson); Tsui Hoi Pan v Wong Chun Ling & Ors unrep.; CACV 150 of 1999; Godfrey, Mayo & Rogers JJA; 1 December 1999 at pp 4-5 (Godfrey JA) and p 6 (Rogers JA); Best Sheen Development Ltd v Official Receiver [2001] 1 HKLRD 866, 874D‑G (Yuen J, as she then was); Tang Wai Cho v Tang Wai Leung [2011] HKLRD 1 at [13] and [15] (Cheung JA).

29.  On the basis of these legal propositions, the Plaintiffs’ case is exceedingly straightforward. They have pleaded a case of gratuitous assignment of the Lot by the Deceased to TLF and seek to recover it by relying on the presumption of resulting trust. They have adduced evidence in support of the plea in the form of (i) an affirmation of Mr Lo Chun Wah (“Mr Lo”), a relative of the Deceased, a resident of the Village and has entered into a similar arrangement with TLF and (ii) an affirmation of Mr Law Pak Fun. Both Mr Lo and Mr Law said they were informed by the Deceased that the HK$1 million was never paid. Mr Lo further said he himself received no consideration for the assignment of his land to TLF. The Plaintiffs argue that TLF’s “non-admission” of the plea of gratuitous assignment and Mr Tiu’s ambivalent stance on the payment as suggesting that TLF has never paid the HK$1 million in question.

30.  In order to defeat the Plaintiffs’ claim based on resulting trust, TLF has to establish either (i) the assignment of the Lot by the Deceased was not gratuitous, or (ii) the actual intention of the Deceased was that the beneficial (as well as legal) title to the Lot should pass to TLF upon the assignment. In that case, the presumption of resulting trust would either not arise or would be rebutted.

31.  Mr Chan, for TLF, made a number of points in the course of the hearing to counter the Plaintiffs’ reliance on the presumption of resulting trust.

32.  First, Mr Chan said he put the Plaintiffs to strict proof of the non‑payment of HK$1 million. He submitted to this court that, while he was prepared to argue on the basis that the acknowledgment of receipt in the deed of assignment did not bar the Plaintiffs from proving the non‑payment, the probative value of the acknowledgment could not be disregarded. Mr Chan criticized the Plaintiffs’ evidence on the non‑payment as merely a repetition of the self-serving declaration by the Deceased and should be excluded under the principle endorsed by the House of Lords in Shephard v Cartwright [1955] AC 431.

33.  In Shephard v Cartwright, a father caused shares in several private companies to be allotted to his three children, there being no evidence as to the circumstances in which the allotments were made. The Court held the shares registered in the names of the three children were an advancement since the presumption of advancement applied as between father and children. The question then arose whether the presumption was rebutted by evidence. In that context, Viscount Simonds, at p 445, approved as settled law a passage from Snell’s Equity 24^th Ed. p 153 as follows:

“The acts and declarations of the parties before or at the time of the purchase, or so immediately after it as to constitute a part of the transaction, are admissible in evidence either for or against the party who did the act or made the declaration …. But subsequent declarations are admissible as evidence only against the party who made them, and not in his favour.”

34.  At p 446, Viscount Simonds went on to say this:   

“But although the applicable law is not in doubt, the application of it is not always easy. There must often be room for argument whether a subsequent act is part of the same transaction as the original purchase or transfer, and equally whether subsequent acts which it is sought to adduce in evidence ought to be regarded as admissions by the party so acting, and whether, if they are so admitted, further facts should be admitted by way of qualification of those admissions.”

35.  In my judgment, if this were the trial of the action, Mr Chan might have a valid point when he said the issue of payment (or non‑payment) of the HK$1 million can be decided by properly applying the burden of proof. Since the Plaintiffs are asserting a case of gratuitous transfer of the Lot to TLF, they bear the burden of proof. But this is not the trial of the action. This is TLF’s application to strike out the Statement of Claim. It would be contrary to all established principles if this court were to make findings of disputed facts on affidavit in TLF’s favour and strike out the Plaintiffs’ claim in resulting trust when the legal viability of that claim is fact-sensitive. On the contrary, this court is obliged to take disputed facts in favour of the party to be struck out: Ha Francesca v Tsai Kut Kan (No. 1) [1982] HKC 383, 392G (CA).

36.  No doubt, the acknowledgment of receipt in the deed of assignment is evidence in support of payment and cannot be disregarded. But equally, Mr Lo’s evidence that he himself, as well as other residents of the Village including the Deceased, had not been paid (and were not intended to be paid) the stated consideration when they assigned their land to TLF, is evidence in the opposite direction. So is Mr Tiu’s ambivalent stance in his affirmation. The question of payment or non payment of the HK$1 million, in my view, should not be decided on affidavit evidence. Instead, they should only be resolved at trial when the credibility of witnesses on both sides can be tested in cross-examination.

37.  Further, I am not satisfied that Mr Lo’s and Mr Law’s evidence on what they had been told by the Deceased must be excluded from the evidence under the rule in Shephard v Cartwright.

38.  First, as acknowledged by Viscount Simonds, there is room for argument as to how subsequent the “declaration” by the Deceased had to be in order to fall within the exclusionary rule. According to the rule, declarations of the parties “so immediately after [the transfer] as to constitute a part of the transaction, are admissible in evidence either for or against the party who … made the declaration”. Presently, it is unclear from the affidavit evidence when the “declaration” was made by the Deceased or the circumstances under which it was made. It would therefore be inappropriate and indeed impossible for this court to rule on the admissibility of Mr Lo’s and Mr Law’s evidence in accordance with Shephard v Cartwright without first ascertaining the full factual picture.

39.  Second, even the current editors of Snell’s Equity have reservations about the desirability of a strict application of the exclusionary rule in Shephard v Cartwright. At paragraph 25-013 of the current edition, they suggest the preferable approach nowadays is to treat the parties’ subsequent conduct or declaration as admissible, and leave the court free to assess its probative weight.

40.  At the moment, it seems to this court at least arguable that the approach suggested by the current editors of Snell’s Equity is to be preferred to the rigid rule in Shephard v Cartwright, since the modern tendency is to admit all relevant evidence, leaving the question of weight of any particular piece of evidence to the good sense of the trial judge as part of the fact‑finding exercise. In Lavelle v Lavelle [2004] EWCA Civ 223 at [19] Lord Philips MR said:

“It seems to me that it is not satisfactory to apply rigid rules of law to the evidence that is admissible to rebut the presumption of advancement. Plainly, self-serving statements or conduct of a transferor, who may long after the transaction be regretting earlier generosity, carry little or no weight. But words or conduct more proximate to the transaction itself should be given the significance that they naturally bear as part of the overall picture.” (emphasis added)

41.  I would respectfully align myself with the sentiment expressed by Lord Philips in that passage. I should also note in passing that, echoing the views expressed by the current editors of Snell’s Equity, Shephard v Cartwright was regarded by Lord Philips MR in Lavelle v Lavelle at [17] as among the older authorities which “have lost much of their force in modern times”.

42.  Mr Chan’s next point was that the presumption of resulting trust only arises if there is no or no sufficient evidence on the actual intention of the transferor at the time of the transfer. In his submission, there is, in the present case, sufficient evidence on the Deceased’s intention to pass his beneficial interest in the Lot to TLF. If so, there is no room for the operation of the presumption of resulting trust:  Yuen Yat Shan Fiona v Sit Hin Kau [2005] 4 HKC 170 at [17] (Tang JA, as he then was).

43.  As evidence of the Deceased’s intention to pass the beneficial (as well as legal) interest in the Lot to TLF, Mr Chan relied on the deed of assignment being an assignment on sale, the description of the Deceased and TLF in it as vendor and purchaser, and the fact that the HK$1 million was described as the “consideration” for the assignment. If so, in the absence of any other evidence, the position is the Deceased was merely an unpaid vendor even if the HK$1 million had not been paid – it does not mean the Deceased had no intention to pass the beneficial interest in the Lot to TLF. Mr Chan further relied on a number of clauses in the MOA ie clauses 4(b) and 7 in support of his contention that as a result of the assignment, TLF should have the whole legal and at least half of the beneficial title to the Lot since it was envisaged in the MOA that upon completion of the development, TLF would be entitled to two of the four houses erected on the Lot.   

44.  The difficulty with Mr Chan’s submission is that what we are concerned with here is the state of mind of the Deceased when he assigned the Lot: Lavelle v Lavelle at [19]. That is very much a disputed fact.  The Plaintiffs’ evidence is that while, pursuant to the arrangement with TLF, residents of the Village, including Mr Lo and the Deceased, were to transfer their land to TLF, the transfers “were just the formality for the development of the land”: see Mr Lo’s affirmation at paragraph 17. Mr Chan might be able to criticize the Plaintiffs’ evidence as incredible in any number of ways, but it is really not the function of the court in a striking out application to try disputed facts on affidavits.

45.  In the view of this court, the Deceased’s intention at the material time can only be ascertained as a matter of inference to be drawn from all the circumstances surrounding his agreement to provide the Lot to TLF for the purpose of development, his signing of the MOA and his execution of the deed of assignment. On the evidence presently available, this court is unable to conclude it is plain and obvious that the Deceased must have intended to pass the entire beneficial title of the Lot to TLF upon execution of the deed of assignment.

46.  It is true that, under the terms of the MOA, TLF would upon completion of the development be entitled (beneficially) to two of the four houses to be built on the Lot. That however does not answer the question whether the Deceased intended to pass any beneficial interest in the Lot to TLF prior to completion of the development. It is not inconceivable that unless and until TLF has fulfilled its promise to carry out all its obligations under the MOA, the Deceased would wish to retain his beneficial interest in the Lot. It is also not inconceivable that, given TLF’s entitlement to only two of the four houses in question, the Deceased would not intend was to pass more than half of the beneficial interest of the Lot to TLF. 

47.  To conclude, this court is not satisfied that the Plaintiffs’ claim that the sub-lots are held on trust for the Deceased is obviously unsustainable or impossible to succeed. If so, the Plaintiffs’ claim must be allowed to proceed to trial and the application to strike out the amended Statement of Claim must fail.

Illegality and whether the Deceased was in pari delicto with TLF  

48.  Given this court’s conclusion at paragraph 47 above, this part of TLF’s application can be dealt with more briefly.

49.  It is common ground that the implementation of the Agreements would involve procuring indigenous villagers who were assigned the sub-lots to falsely represent to the Government regarding beneficial ownership of the sub-lots and/or that they had made no arrangement with TLF for the sale of their village type houses. The Agreements are therefore void and invalid for illegality. The illegality of agreements of this nature is well covered by authorities: Best Sheen Development Ltd. v Official Receiver [2001] 1 HKLRD 866; Chung Mui Teck v Hang Tak Buddhist Hall Association Ltd [2001] 2 HKLRD 471; Tiu  Sum Fat v Shun Sing Development Ltd.[2010] 1 HKLRD 553; Chan Yau v Chan Calvin & Anr [2014] 5 HKLRD 304.

50.  While the illegality of the Agreements is not in issue, the parties are at odds as to its consequences.

51.  Where a contract is void and illegal in its inception, neither party can claim any remedy under the illegal transaction in which he has participated: ex turpi causa non oritur actio.  Further, and importantly for the present purpose, neither party can recover what he has given to the other under an illegal contract if in order to substantiate his claim he is driven to disclose the illegality: in pari delicto potior est conditio defendentis. The result of the application of the principle in pari delicto potior est conditio defendentis is that where both parties, contracting on an equal footing, are aware of the illegal nature of the contract, whether it be on its face illegal or whether the common intention be to carry out the contract in an illegal manner, neither party can recover anything transferred under it: Chitty on Contracts 31^st Ed. Vol. 1 para. 16‑180.

52.  TLF’s submission is that the present case is plainly one where the Deceased and TLF had entered into “a contract of conspiracy to ask indigenous villagers to make false representations to the Government” and the contract is void and illegal in its inception: paragraphs 17 and 20 TLF’s written submissions.

53.  If by that submission, it is intended to suggest the Deceased and TLF had expressly agreed to do something that is clearly prohibited by law; in other words, their agreement is on its face illegal, this court is unable to accept that submission.  The material terms of the MOA have already been set out in paragraph 12 above. Not surprisingly, one cannot find anything in the MOA about procuring (whether by TLF alone or jointly with the Deceased) indigenous villagers to make false representations to the Government.  

54.  Of course, a contract can also be illegal in its inception if both parties intend to exploit it for an illegal purpose or accomplish an unlawful end.  That, in my view, is the real crux of TLF’s case.

55.  In Tiu Sum Fat v Shun Sing Development Ltd supra at [32], Deputy Judge H Wong SC, in the context of a contract for the development of small houses which involved the making of false declarations to the Government, explained the position as follows:

“…whether the plaintiffs are entitled to recover the Deposits depends on whether the plaintiffs and the defendants are in pari delicto i.e. whether they are equally “at fault” in relation to the illegality that taints the said Agreements.  In essence, this requires an investigation into the parties’ respective knowledge of the circumstances that gave rise to the illegality, and whether they had assented to or participated in the acts of illegality in question.  An innocent party who is ignorant of the facts or circumstances that would make performance of a contract illegal may be allowed to recover money paid by him under the illegal contract:…”

56.  In a similar context, G Lam J adopted the same approach in Chan Yau v Chan Calvin & Anr supra at [103] and [104].

57.  Hence, in order for the Deceased to be precluded from recovering the sub-lots on the ground that he was in pari delicto, TLF must establish his knowledge of the circumstances that gave rise to the illegality of the Agreements, and that he had assented to or participated in the acts of illegality in question ie the making of false declaration to the Government.

58.  In their Reply, the Plaintiffs have categorically denied the Deceased was aware of the illegal nature of the Agreements. The Plaintiffs have also affirmed that the Deceased (i) had no knowledge of the procedure and process of applications for building licences under the Government’s Small House Policy, (ii) had played no part in the development other than signing the MOA, deed of assignment and the SA and (iii) had no previous experience in developments of small houses in the New Territories.

59.  TLF, at paragraphs 27 to 29 of its written submissions, set out at length the reasons why the Plaintiffs’ case is “simply unbelievable”. It is not necessary to recite those reasons in any detail here. What the submission boils down to is that the court should reject the Plaintiffs’ evidence, accept without question what Mr Tiu said in his affirmations and the contents of a letter dated 9 September 2013 from DYCK, and make a finding of fact that the Deceased was aware of the illegal nature of the Agreements and hence in pari delicto.

60.  In light of the legal principles set out in paragraph 6 above, it is wholly inappropriate for this court to make findings of disputed facts on affidavit evidence. In my view, the existence or otherwise of the Deceased’s “guilty” knowledge is something which should only be determined at trial, and not summarily at a striking out application.

61.  As for the determination of the question under RHC O 14A, this court accepts Mr Ho’s submission that the question is not and cannot be a pure question of law. It presupposes that DYCK was acting for the Deceased in preparing the Agreements, which is disputed by the Plaintiffs and contradicted by DYCK’s feenote. It also presupposes that the Deceased was aware of the necessity of making false declarations to the Government and the illegality of the Agreements, and hence was in pari delicto. That, again, is disputed by the Plaintiffs.  Where there are conflicting allegations of facts, or issues of fact interwoven with the legal issues to be determined, the O 14A procedure is not appropriate: Shell Hong Kong Ltd v Yeung Wai Man Kiu Yip Company Ltd supra.

62.  In my view, the so-called point of law is not suitable for determination without a full trial of the action and this court will decline to determine the point of law set out in TLF’s summons.

Disposition and Costs Order nisi

63.  For the above reasons, TLF’s application under RHC O 14A and RHC O 18 r 19 is hereby dismissed.

64.  There shall be an order nisi that costs be to the Plaintiffs, to be taxed if not agreed, with certificate for two counsel.

65.  Lastly, I thank counsel for their detailed and helpful submissions.