LAWIN (H.K.) LTD v. OCCUPIERS OF SECTION C OF LOT NO. 154 IN DEMARCATION DISTRICTNO. 19 TAI PO,NEW TERRITORIES, HONG KONG AND OTHERS

DCCJ5205/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5205 OF 2008

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BETWEEN

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R U L I N G

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1.  I uphold the decision of the Master and I give unconditional leave to defend. Since I am giving unconditional leave to defend and the matter will have to go to trial I will not go into any length in my reasons but I have considered all the submissions which have been very helpfully submitted by both counsel, for which I am grateful.

2.  The test at this stage is actually very simple: whether there is a fair probability or reasonable grounds that a bona fide defence exists, and it is appropriate to remind ourselves of the words of Bingham LJ in Crown House Engineering v Amec Projects Ltd (1990) 6 Const LJ 141 at 154, where Bingham LJ said:

“Order 14 is for clear cases; that is cases in which there is no serious material factual dispute and, if a legal issue, then no more than a crisp legal question as well decided summarily or otherwise ... The procedure is entirely inappropriate where the plaintiff’s entitlement to recover any sum is the subject of any serious dispute, whether of law or fact.  This is not to say that a defendant with no or no more than a partial defence can cheat a plaintiff of his just deserts by producing hefty affidavits and voluminous exhibits to create an illusion of complexity where none exists.  Where the point at issue is at heart a short one, the court will recognise the fact and act accordingly no matter how bulky its outer garments but it does not mean that where there are substantial issues of genuine complexity the parties should prepare for trial rather than dissipate their energy and resources on deceptively attractive shortcuts.”

3.  Mr K.M. Chong, (Mr Michael Yan with him,) for the plaintiff, says that even accepting all that the defendants say, the defence is not viable, and this was said at the very outset, and I mention this because it is important because it seems that in Mr Chong’s reply he appears to step back a little bit from this proposition and challenges the chain of beneficial interest through which the defence claim their title.

4.  The short reply to this can be found in the Reply and Defence to Counterclaim, where the beneficial ownership of Best Star through which the defendants allegedly derive their title was admitted and also from paragraph 12 of the affirmation of Guo Qigui, who says at paragraph 12 that Cheung remained the beneficial owner of the five sections of the lot and then Best Star got their title from Cheung.

5.  Before turning to the matters in dispute in this hearing, there was a challenge as to the admissibility of the building licence in respect of the property which was sought to be relied on by Mr Chong, having been produced at a very late stage appended to Mr Chong’s skeleton argument in reply to Mr Wang’s submissions.

6.  I do not consider that the absence of an affidavit to exhibit a document which is a public record is in any way fatal. It is admissible simply on production. However, the provisions of Order 58 rule 1(4), to the effect that no further evidence may be received on the hearing of an appeal under this rule - that is an appeal from the Master - except on special grounds apply. In this case, no special grounds have been provided. The only ground which Mr Chong is able to point to is that it is a matter of public record and it is irrefutable.

7.  Now, public record or public knowledge it may be, irrefutable it may well be, but this could and should have been raised or put into evidence before the Master. To give an example, if in a totally different case a photograph would help the appellate court but it was not put in before the Master, of course, the photograph showing a public location is well-known, it is irrefutable, but by the same token, it would not be admitted unless there were special grounds for admitting it.

8.  Furthermore, Mr Wang has submitted that there is prejudice because the defendants are denied the opportunity of further investigation, although I do note that no application was made for an adjournment to deal with this late evidence. In the context of the spirit of the Civil Justice Reform where a speedy and efficient resolution of disputes is encouraged, I do not consider that the failure to seek an adjournment to deal with this matter would in any way be detrimental to Mr Wang’s position.

9.  Having got these preliminary matters out of the way, we go to the two grounds upon which Mr Chong says that the defence is not viable.

10.  The first is that Mr Hung, through whom the defendants obtained their title - Mr Hung being alleged to be an agent of Best Star - had no written authority to enter into any agreement on behalf of Best Star contrary to section 5of the Conveyancing and Property Ordinance.

11.  Section 5 of the Conveyancing and Property Ordinance is not an absolute bar. Section 7 of the same ordinance provides that “nothing in section 5 or 6 shall affect the operation of the law relating to part-performance.”

12.  In the present case, the allegation by the defence is that there was such an agreement, there was an agreement between the defendants and Best Star, and the only problem with that agreement is that Hung who entered into the agreement on behalf of Best Star was not authorised in writing.

13.  In those circumstances, I am of the view that part-performance is or may be the answer to any challenge on the formal validity, and as to part-performance, the defendants have each paid certain sums under that contract and the defendants have also actually entered into possession of the units that were sold and the fact of entering into possession is actually part-performance, they having gone into possession and taking care of the property and treating it as their own, so on that score I do not find in favour of Mr Chong.

14.  The second argument or second contention raised by Mr Chong was the capacity of Best Star to enter into any agreement to sell any property which was subject to a non-alienation clause.

15.  Without the building licence itself the terms of the non-alienation clause remain vague and unsubstantiated and so Mr Chong’s objection falls away, but even if I am wrong to exclude the building licence itself, I consider that breach of a clause of the building licence does not render the whole void but only voidable. The lessor - in this case the government - would be able to take action against the lessee, which would be the “owner” of the land for breach, and it possibly could exercise its powers of re-entry. That does not mean that Best Star had no power and no capacity to contract with the defendants.

16.  Whilst I am not pronouncing any conclusive judgment on these points, they are points which are capable of reasonable bona fide argument, and I do consider that the matter should go to trial, and I therefore order that the defendants have unconditional leave to defend.

(Discussion re directions and costs)

17.  If both parties consider that it is best to leave it at that, I will just make an order that costs to the 2nd and 3rd defendants with certificate for counsel in any event.