XCHRX LAM PING WAN AND ANOTHER v. IP LAM ON

HCA 12791/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 12791 OF 1999

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J U D G M E N T

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1. This is an appeal against the decision of Master Christie given on 15 November 1999 ordering that the 1st Plaintiff do have judgment against the Defendant for: -

(a) transfer and delivery to the 1st Plaintiff of 26,800,000 shares of Easy Concepts International Holdings Limited;

(b) payment to the 1st Plaintiff of the proceeds of sale of 3,200,000 of the said shares;

(c) damages to be assessed, with interest and costs.

The 1st Plaintiff obtained summary judgment on its claim against the Defendant before Master Christie.

2. The 1st Plaintiff's claim against the Defendant is based on what appears to be an oral agreement made on or about 15 December 1998 by the 1st Plaintiff with the Defendant for the sale of 30,000,000 shares in Easy Concepts International Holdings Limited ("Easy Concepts") at $1 per share amounting to a total purchase price of $30,000,000.

3. The sale and purchase was effected by the 2nd Plaintiff, a member of the Stock Exchange of Hong Kong. Under the agreement, the Defendant did not have to pay for the shares on delivery of the share certificates. The Defendant was given six months from receipt of the share certificates to pay for the same. There was a condition that until the Defendant did fully pay the purchase price for the shares he was not to sell or transfer any part of the 30,000,000 shares to any third party. There was also a further condition that if the Defendant should fail to pay fully the purchase price the Defendant should return the shares to the 1st Plaintiff together with the payment of $9,000,000 as agreed compensation.

4. Pursuant to the agreement, the 2nd Plaintiff effected the sale and delivery of the 30,000,000 shares in Easy Concepts to the Defendant. In essence, the 1st Plaintiff's claim is that the 30,000,000 shares were transferred to the Defendant with a delayed payment together with an option on the part of the Defendant to return the same within six months.

5. It is alleged that on 2 August 1999 the Defendant in breach of the agreement sold 3,200,000 shares of Easy Concepts at $1.23 per share to a third party. The Defendant has not paid the purchase price for the 30,000,000 shares or any part thereof.

6. The 1st Plaintiff claims, inter alia, the purchase price of $30,000,000, the transfer and delivery of the remaining shares with the Defendant, namely 26,800,000 and compensation of $9,000,000 together with damages and interest.

7. The 2nd Plaintiff also claims on what also appears to be an oral agreement made with the Defendant that the Defendant would pay the 2nd Plaintiff the purchase price within six months of the Defendant's receipt of the 30,000,000 shares. But it is, however, difficult to see what the consideration was for this agreement. It was only the 1st Plaintiff but not the 2nd Plaintiff who sought and obtained summary judgment before the Master.

8. The Defendant's case is that he does not know the 1st Plaintiff and has never made any agreement with him. He denies the agreements relied on by the 1st Plaintiff and the 2nd Plaintiff. He explains that since the middle of 1997, he came to know the Chairman of Easy Concepts, Mr Matthew Koon ("Mr Koon") and developed a business relationship with him involving mainly real estate business in Hong Kong and Shanghai.

9. As at December 1998, Mr Koon was indebted to the Defendant in the sum of $30,000,000. Mr Koon was unable to repay the debt to the Defendant and on or about 10 December 1998, Mr Koon suggested that he would give 30,000,000 shares in Easy Concepts to the Defendant in satisfaction of the debt he owed to the Defendant. The shares were placed in an account with the 2nd Plaintiff and the Defendant was asked to open an account with the 2nd Plaintiff so that the 2nd Plaintiff could transfer the shares from Mr Koon's account to the Defendant's account. The Defendant agreed. Mr Koon took him to the 2nd Plaintiff's offices where they met Mr Ng Kei Choy ("Mr Ng"), the representative of the 2nd Plaintiff who has filed affirmations on behalf of the Plaintiffs. Mr Ng confirmed to the Defendant that Mr Koon did have 30,000,000 shares held in the custody of the 2nd Plaintiff and an account was opened in the Defendant's name.

10. On 15 December 1998, the Defendant went again with Mr Koon to the 2nd Plaintiff's offices and Mr Koon requested Mr Ng to transfer the shares from his account to the Defendant's account at the value of $1 per share. After the transfer, the Defendant paid the total of $86,100.00 to the 2nd Plaintiff for stamp duty, fees and commission. The Defendant subsequently sold part of the shares and because of that the 1st Plaintiff has brought these proceedings.

11. Quite clearly, there are disputes of fact between the parties. Although there has been produced the bought and sold notes which tend to lend support to the agreement sued on, there are a number of unusual features in the 1st Plaintiff's case. It is recognised by Mr Ng in the 2nd affirmation that the transaction sued on was an unusual one. Under the agreement, the Plaintiff had to pay or return the shares within six months. The six months' period expired some time in June 1999 but on the material before me, it does not appear to have been any demand made shortly thereafter for the return of the shares or payment of the purchase price. It is, in my view, odd that no demand was made on expiry of the six months' period by either the 1st Plaintiff or the 2nd Plaintiff for payment of the purchase price or return of the shares. It was only some time in August 1999 when the Defendant sold some of the shares that the matter was brought to a head and proceedings instituted.

12. Also, the Defendant has said on oath that he does not know the 1st Plaintiff and he has never met him. Although the 1st Plaintiff has had every opportunity to file affirmations in reply, he has never denied this. Also, although Mr Ng says that there was no Mr Koon involved in the transaction in respect of which he gave evidence about, he does not deny meeting the Defendant together with Mr Koon on the occasions that the Defendant has deposed to. If indeed he did meet Mr Koon with the Defendant, Mr Ng does not elaborate on the reasons why he met Mr Koon with the Defendant.

13. The Statement of Account with the Defendant produced by the 2nd Plaintiff for the month of December does show a debit of $30,116,100 in the Defendant's account but there is no debit shown in the following month's account, the January 1999 account. Mr Ng tries to explain this in his 2nd affirmation but I do not find the explanation convincing. In any event, these are matters to be investigated at trial.

14. It is sufficient for the Court to ask whether or not the matters raised by the Defendant are credible. The issue is not whether the Defendant's assertions are to be believed. It is whether the assertion are believable (Ng Shou Chuen v. Hung Chun Shun [1994] 1 HKC 155 at 158).

15. As I have said, clearly there are disputes of fact between the parties. The matter cannot be resolved on affidavit evidence alone. There will have to be discovery and cross-examination at trial to determine the issues that have been raised. I am satisfied that the Defendant should be given unconditional leave to defend. I allow the appeal and order that the Defendant do have unconditional leave to defend in this action. I will hear counsel on costs.

[After hearing submissions]

16. I have allowed the appeal and given the Defendant unconditional leave to defend in this action. I have not, however, dismissed the Plaintiff's O. 14 summons taken out on 27 September 1999. It seems to me having heard counsel's submissions that the proper order for costs that I should make is that the costs before the Master should be cost in the cause and that the costs of the appeal should be costs to the Defendant. I see no reason why those costs should not be taxed and paid forthwith. I also add that the costs order before the Master, namely costs in the cause, should be with certificate for counsel.