WELLSINO LTD v. ELLA HOLDING COMPANY LTD

HCA 1903/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1903 OF 2013

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R E A S O N S   F O R   D E C I S I O N

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1.  This is an application by the plaintiff in the counterclaim action, Ella Holding Company Limited (“EHCL”) seeking default judgment against the 2nd defendant by counterclaim, Li Wah Kwong Rex, (“LWKR”) the manager of Li Sz Shing Tso (“the Tso”).

2.  After hearing counsel for EHCL, I dismissed the summons with costs and indicated that I would give my reasons in writing which I now do.

The Original Action

3.  The original action was brought by Wellsino Limited (“Wellsino”) against EHCL seeking to set aside a Chinese agreement entered into between Wellsino and EHCL dated 18 April 2004.

Background

4.  The Tso was at all material times the registered owner of land known as Lot Nos. 207, 365, 366 and 367 in Demarcation District 209 (“the Land”) and registered in the Land Registry.

5.  On 12 August 1993, Wellsino had entered into a written Chinese agreement with the Tso through its then manager, one Li Loi Fuk, for the sale by the Tso of the Land to Wellsino for the price of HK$1,014,152.00.  Pursuant to that Chinese agreement, the Tso undertook to apply to the District Office, Tai Po, for permission to sell the Land to Wellsino as soon as practicable. Pursuant thereto Wellsino had paid $40,000 to the Tso as deposit.

6.  By 2004, when nothing had been done by the Tso to obtain the permission from the District Office, Tai Po for the sale of the Land and therefore had failed to convey the Land to Wellsino, Wellsino had commenced HCA 1535 of 2004 against the Tso for breach of the said Chinese agreement between them.

7.  In the meantime, on 18 April 2004, it would appear that another written Chinese agreement was entered into between Wellsino and EHCL (“the 2004 Chinese Agreement”) whereby EHCL agreed to purchase the Land from Wellsino at the price of $200 per square feet.

8.  Nothing appears to have been done by EHCL in relation to the 2004 Chinese Agreement until 4 March 2012 when an attempt was made by solicitors for EHCL to register the 2004 Chinese Agreement in the Land Registry against the Land.

9.  In the original action herein, Wellsino seeks to set aside the 2004 Chinese Agreement with EHCL on the basis that the 2004 Chinese Agreement is void for uncertainty, has been statute-barred by section 4 of the Limitation Ordinance, and has ceased to have any legal effect due to laches and/or acquiescence and it therefore not registrable in the Land Registry against the Land.

The Defence and Counterclaim by EHCL

10.  EHCL filed its Defence and Counterclaim on 4 December 2013.

11.  For present purpose it is not necessary to go into the details of all of the defence raised by EHCL to the original claim by Wellsino and for that matter the counterclaim raised by EHCL against Wellsino.

12.  It would be sufficient for present purpose to deal with those matters which form the counterclaim of EHCL in particular where that counterclaim touches on LWKR the manager of the Tso, being the 2^nd defendant in the counterclaim.

13.  It was pleaded by EHCL that in the early part of 2007, LWKR, being the manager of the Tso had represented to one Koon Yau Kuen, a director of EHCL that Wellsino was in breach of the Chinese agreement between Wellsino and the Tso and so was not entitled to what was claimed by Wellsino in HCA 1535 of 2004.

14.  It was also pleaded by EHCL that in the premises the Tso had entered into an oral agreement (“the Oral Agreement”) with EHCL by which EHCL may acquire the Land from the Tso on the same terms as the 2004 Chinese Agreement.

15.  Pursuant to the Oral agreement, EHCL had paid a deposit of $20,000 to LWKR as deposit for the Land on 12 December 2009 which was evidenced in writing by LWKR.

16.  Despite the payment of the deposit, LWKR failed and or refused to convey the Land to EHCL or even to acknowledge the beneficial ownership of EHCL in the Land.

17.  It is on this basis that EHCL seek default judgment against the LWKR as the manager of the Tso.

The Application for default judgment

18.  In seeking default judgment against the 2^nd defendant by counterclaim,  EHCL ask for the following orders:

(a) An order directing the 2^nd defendant (by counterclaim) as manager of Li Sz Shing Tso to assign and/or transfer Lot Nos. 207, 365, 366 and 376 in DD 209 (“the Land”)  to the plaintiff in the counterclaim action;

(b) A declaration that the plaintiff in the counterclaim action is the beneficial owner of the Land;

(c) A declaration that the plaintiff in the counterclaim action is entitled to a lien on the Land for its deposit (together with interests thereon); and

(d) Costs.

19.  There is an affirmation of service by one Chan King Tat, a legal executive to the solicitors for EHCL, to the effect that a sealed copy of the Defence and Counterclaim herein together with Acknowledgment of Service in triplicates and directions in relation to acknowledging service as well as a copy of the Writ of Summons herein and the Statement of Claim had been served on the 2^nd defendant by counterclaim by registered post on 13 December 2013 at the usual or last known address of the 2^nd defendant by counterclaim, being No. 23, Sai Keng, Sai Sha Road, Sai Kung, New Territories, Hong Kong.

20.  There is also a further affirmation of service by the same Chan King Tat in relation to the service of the Inter Partes Summons dated 5 March 2014 and his earlier affirmation of service upon the 2^nd defendant by counterclaim. In that further affirmation of service, Chan King Tat also stated that those documents were served on LWKR, the 2^nd defendant by counterclaim at his usual or last known address being No. 23 Sai Keng, Sai Sha Road, Sai Kung, New Territories, Hong Kong. By way of exhibit marked “CKT-4” thereto was produced the certificate of posting.

21.  However, in the certificate of posting it was stated that the address of posting was No. 23 Sai Kung (instead of Keng), Sai Sha Road, Sai Kung, New Territories, Hong Kong.

Reasons for dismissal

22.  At the hearing, EHCL was represented by counsel.

23.  Counsel was firstly confronted with the difference between the address stated in the affirmation of service and that stated in the certificate of posting.

24.  After taking instructions from the solicitor (or his representative) sitting behind counsel, counsel confirmed that the correct address should be the one stated in the affirmation of service, namely, “No.23 Sai Keng”.

25.  Counsel went on to say that error in the certificate of posting can only be a typo. Be that as it may, the court still cannot be sure that the Inter Partes Summons had reached or been properly served on LWKR so that he would have knowledge of the hearing itself.

26.  In the circumstances counsel asked for an adjournment to put right that error by reserving the Inter Partes Summons on LWKR.

27.  Had that been the only difficulty with the present application, I would have acceded to that request which would only have involved costs and which could be dealt with by a proper costs order in the circumstances.

28.  However, counsel’s attention was also drawn to a second point, namely, that the purported claim of EHCL against LWKR, in so far as the pleadings are concerned, has its basis on an oral agreement. How could that satisfy the requirement of section 3 of the Conveyancing and Property Ordinance which required that a contract for land has to be in writing or evidenced by some memorandum thereof.

29.  Counsel accepted that the basis of the claim by EHCL against LWKR was based on an oral agreement as pleaded.

30.  Counsel did point to the 2004 Chinese Agreement, but as it was pleaded, that 2004 Chinese Agreement was only as between EHCL and Wellsino. Nothing in the pleadings suggest that the 2004 Chinese Agreement was signed by LWKR.

31.  No attempt was made by counsel to even remotely suggest that the payment of the deposit of $20,000 by EHCL to LWKR and which was pleaded to have been “evidenced in writing by [LWKR]” could be taken to be a memorandum which could satisfy the requirement of section 3 of the Coveyancing and Property Ordinance.

32.  Indeed as the pleading stands, that part of the pleading does not go far enough to meet the requirements of section 3 since it has not been pleaded that the written receipt of the deposit was signed by LWKR.

33.  I therefore viewed this second point as being an obstacle which EHCL would not be able to hurdle even if an adjournment was granted to them to correct the error in service.

34.  Accordingly, and for the above reasons, I dismissed the application for default judgment.

35.  The long and short of the dismissal simply means that EHCL will have to prove its case in court, if it is able to do so, as against LWKR in the counterclaim, when the original action and the counterclaim between EHCL and Wellsino goes to trial.

(A R Suffiad) Judge of the Court of First Instance High Court