LAM LAI YI v. HO WING SZE AND ANOTHER

DCCJ 2221/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2221 OF 2006

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Reasons for decision on
Plaintiff’s application for leave to appeal

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Introduction

1. On 27 May 2009, in a judgment handed down by this Court, P’s action was dismissed with costs.  P now seeks leave to appeal against the said judgment. 

2. P and D1 were friends.  D2 was D1’s boyfriend and cohabitant.  With their little experience and limited capital, they formed a company to operate a food shop.  Soon after commencement of business, P decided to discontinue and asked if D1 and D2 (“Ds”) would buy out her 30% share.  D1 and D2 expressed an intention to do so.  They engaged in negotiations.  There was a consensus that a certified accountant would be engaged to evaluate the value of the company.  As to what such value would lead to, it constituted the bone of contention.    

3. P’s case was that there was an oral agreement (“the Agreement”), as evidenced by a resolution dated 30 August 2005 (“the Resolution”), that 30% of such value, whatever it might be, would be the price that Ds were bound to pay to buy out her share.  Ds’ case was that as they (P, and Ds) had no idea of the possible value, the value would only be a reference to assist them (Ds) to think of a price that they would eventually offer. 

Gist of my Judgment

4. In my Judgment, I have identified the following issues forming the crux of the case:

(1)  Whether there was a binding agreement;

(2)  If so, what were the terms of the agreement;

(3)  Were Ds in breach of any terms;

(4)  If so, P’s remedies.

5. I find there was no binding agreement for sale and purchase of P’s shares.  There was only an agreement to negotiate the price.  Ds were not in breach of any agreement.  P had no remedies.   

Grounds for leave to appeal

6. In the application for leave to appeal, both parties have put in full written submissions.  P argues that:

(1)   I err to find that the Agreement is absurd, accordingly to prefer Ds’ evidence;

(2)   I err to rule that that was only an agreement to negotiate;

(3)   I fail to find that there was a binding agreement for sale and purchase;

(4)   I fail to find the terms of the Agreement.

7. In support of the claim that there was not only an agreement to negotiate but a binding agreement for sale and purchase where a conclusive price would be fixed by the accountant, P’s counsel now refers to the case of Foley v Classique Coaches Ltd. as referred to in Chitty on Contracts, 27^th ed., Vol I, 2-092, at p. 143.  It had not been cited to me at trial but it would have made no difference in any event.  In Foley v Classique the price was not fixed but to be agreed by the parties from time to time.  P’s counsel in his present submission does not mention a number of distinguishing facts.  Firstly, Foley and Classique had actually believed the contract to be binding.  Secondly, the contract had been acted upon for a number of years.  Thirdly, there was also an unusual arbitration clause providing for a way to determine the price in default of agreement.  The Court of Appeal held that in default of agreement, a reasonable price must be paid.  In our present case, none of those features existed. 

8. P’s counsel complains (in para. 3 of P’s submission) that I had ignored P’s evidence of offering to receive 30% of her investment, which would be “round up to be HK$100,000”.  Whilst it is trite that the Court had no duty to set out in the judgment each bit of evidence raised in the course of trial, this complaint has no support even from the Statement of Claim or P’s own evidence.  Whether or not she had had an initial intention to fix a specific price or not, she had subsequently opted for the evaluation by a certified accountant.  Her pleaded case and evidence was that the price was to be evaluated by a certified accountant. 

9. As the arguments in P’s submission are blended together, it is difficult to answer them individually.  P’s counsel’s basic argument both at trial and in the present application (as stated in para. 7 of P’s submission) has been that even if the parties did agree on something absurd, it does not mean that objectively speaking they could not or did not ever so agree.  I think our present case concerned whether an agreement for sale and purchase had been formed.  In order to determine this issue, I had to assess the parties’ evidence.  As expressed in my Judgment, I found P’s evidence of the conclusive evaluation and fixing of price absurd.  P had thus failed to prove her case.   

Test for granting leave to appeal

10. In Ma Bik Yung v Ko Chuen HCMP4303/1999, Leung JA referred to Smith v. Cosworth Casting Processes Ltd. [1997] WLR 1538 in which Lord Woolf provided the following guidance:

"1. The court will only refuse leave if satisfied that the applicant has no realistic prospect of succeeding on the appeal. This test is not meant to be any different from that which is sometimes used, which is that the applicant has no arguable case. Why however this court has decided to adopt the former phrase is because the use of the word 'realistic' makes it clear that a fanciful prospect or an unrealistic argument is not sufficient.

2. The court can grant the application even if it is not so satisfied. There can be many reasons for granting leave even if the court is not satisfied that the appeal has any prospect of success. For example, the issue may be one which the court considers should in the public interest be examined by this court or, to be more specific, this court may take the view that the case raises an issue where the law requires clarifying."

11. In my view, P has no realistic prospect of succeeding on the appeal.  Her counsel has not raised any other matters or issues which should be examined by the Court of Appeal.   

Conclusion

12. I dismiss P’s application with costs and certificate for counsel.  This order nisi shall become absolute after 14 days from today.