XCHRX SUNNY SQUARE LTD. v. ARTSLAND PROPERTIES INVESTMENT LTD. AND OTHERS

CACV 34 & 35/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 34 AND 35 OF 1999

(ON APPEAL FROM HCA 9897 AND 10428 OF 1998)

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J U D G M E N T

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Nazareth V-P:

1. This is an application for leave to adduce additional evidence at the hearing of the above appeals due to take place on 20 May. My doubts about whether it should not have been made at the hearing of the appeals were progressively reinforced during the protracted hearing of the application in which more and more ground was covered that will undoubtedly have to be retraced at the hearing of the appeal. There was also the complication that the new evidence for which leave is sought is not irrelevant to a fresh ground of appeal for which leave will be sought at the hearing of the appeals. In the end because the court time allotted to the hearing of the application would be wasted if it were adjourned to the hearing of the appeal, I proceeded to hear the application.

2. It is common ground that the appeals, although concerned with two different sale and purchase agreements, and two different flats (albeit in the same building), are identical in all material respects. They were thus heard together in the same way that the judge dealt with the applications to strike out below. To avoid unnecessary cross-references and duplication, by agreement, reference is made only to and in respect of the application in CACV 34 of 1999, which concerns Flat 22B in Royal Court, 3 Kennedy Road.

3. The facts can be outlined in the following way. The 1st respondent ("the 1st defendant") is a company engaged in property development and investment. On 18 February 1998 it advertised and offered for sale Flat 22B. The 2nd respondent ("the 2nd defendant") was an associated company in the same group as the 1st defendant, and was given the task of handling sales. The 3rd respondent ("the 3rd defendant") was the principal estate agent employed by the 2nd defendant. On the same day, Mr Sunny Yam Wing Yin ("Yam"), a director of the appellant ("the plaintiff") went to Royal Court and there after speaking with employees of the 3rd defendant, agreed to purchase the flat for HK$15,505,000, paid an initial deposit of HK$500,000 and signed a memorandum for purchase. On 24 February 1998 the plaintiff signed a formal sale and purchase agreement and paid a further deposit of HK$2.472m. There then followed developments to which I shall return so far as necessary, of both the usual and an unusual nature. On 29 May 1998 new solicitors retained by the plaintiff issued notice of rescission of the sale and purchase agreement. On 17 June 1998 they took out a writ of summons complaining of two false representations. First, that although a title document, i.e. an assignment, was missing, the title to the flat was perfectly good and marketable as the absence of the assignment had been remedied by a court declaration. Second, that during the negotiations, the 1st defendant through its agent, the sales persons of the 2nd and/or 3rd defendant, falsely represented that the useable area of the flat was 1,157 sq.ft., a representation which also appeared on a sales pamphlet provided to Yam. The plaintiff claims a declaration that it had validly rescinded the agreement for sale and purchase, the, return of the deposits, and damages.

4. On 14 July 1998 the defendants applied to strike out the plaintiff's Statement of Claim. The applications came before Yam J on 3 December 1998 and on 23 December he gave judgment for the defendants and struck out the Statement of Claim.

5. The judge held that the claims against the 1st and 2nd defendants were not sustainable because, first, the plaintiff's case was a myth and had no solid foundation; and second, that the plaintiff had long since lost the right to rescind. As to the 3rd defendant, the judge held that the plaintiff had no independent action against the 3rd defendant unless the 3rd defendant had made the pleaded representations in breach of warranty of authority. Additionally, he held that the plaintiff's claim against the 3rd defendant for breach of its agency agreement with the plaintiff was bad and unsustainable.

6. The plaintiff then appealed to this Court and, as mentioned, the appeal is to be heard on 20 May. In the meantime the plaintiff lodged the present application for leave to adduce the following additional items of evidence:

(1) The affirmation of Cheuk Nga Yan ("Cheuk") dated 12 April 1999

(2) The affidavit of Hugo Sai Keung Chan ("Hugo Chan") dated 21 April 1999

(3) The affidavit of Yam dated 5 May 1999.

7. With reference to such applications O59 R10(2) of the Rules of the High Court provides that:

"(2) The Court of Appeal shall have power to receive further evidence on questions of fact, ..., but, in the case of an appeal from a judgment after trial or hearing of any cause or matter on the merits, no such further evidence (other than evidence as to matters which have occurred after the date of the trial or hearing) shall be admitted except on special grounds."

It is not suggested that the evidence in any of the three affidavits is of matters which occurred after the hearing. The question then arises, which is in dispute, of whether there was a trial or hearing of the claim on the merits, which would decide whether the rigorous conditions in Ladd v Marshall [1954]1 WLR 1489 are to be applied in respect of these applications.

8. Sir John Swaine SC, who with Mr Victor So, appears for the plaintiff, contends that the hearing of the defendants' applications to strike out the Statement of Claim was not a hearing on the merits. However, that point was decided to the contrary in Langdale v Danby (HL(E)) [1982]1 WLR 1123 at 1132 where Lord Bridge, with whom the other members agreed, gave his reasons, leaving no doubt about the stance taken. Nonetheless, Sir John submits that the approach of a plaintiff to such an application is simply to demonstrate an arguable case and not to marshal all his evidence as would be done in a trial on the merits. That, he says, is reflected in the following passage taken from a later part of the same judgment of Lord Bridge at p.1133D:

"In the situation arising on an appeal to the Court of Appeal from a summary judgment, the application of these conditions and perhaps the conditions themselves will require some modification. It may well be that the standard of diligence required of a defendant preparing his case in opposition to a summons for summary judgment, especially if under pressure of time, will not be so high as that required in preparing for trial. The second and third conditions will no doubt be satisfied if the further evidence tendered is sufficient, according to the ordinary principles applied on applications for summary judgment, to raise a triable issue. But I can see no injustice at all in requiring a defendant to use such diligence as is reasonable in the circumstances to put before the judge on the hearing of the summons, albeit in summary form, all the evidence he relies on in defence, whereas it would be a great injustice to the plaintiff to allow the defendant to introduce for the first time on appeal evidence which was readily available at the hearing of the summons but was not produced."

9. I accept that the position of a plaintiff in seeking summary judgment under O14 or O86 is similar to that of a plaintiff here confronted with an application to strike out his Statement of Claim; that is contended for by Sir John and not disputed by Mr Denis Chang SC , who with Mr Mok Yeuk Chi, appears for the 1st and 2nd defendants, and Mr Rimsky Yuen who appears for the 3rd defendant. Sir John's submission, as I understand it, is that even if it is held against him that pursuant to Lord Bridge's dictum at p.1132, the hearing of the strike-out application must be regarded as a hearing on the merits which, in my view, must be the position, the Ladd v Marshall conditions should not apply in their full rigour to a plaintiff preparing his case in opposition to a summons to strike out his Statement of Claim. In particular the standard of diligence required of him should not be so high as that required in preparing for a trial. It can be seen from the foregoing citation from the judgment of Lord Bridge that he did not go so far as to say that a lesser standard of diligence would be acceptable but only that it may well be acceptable, especially under pressure of time. It is convenient to note here that I am unable to accept on the facts before me that the plaintiff was under pressure of time. Nonetheless, some consideration has to be given to whether a lesser standard of diligence might not be acceptable on the part of the plaintiff with reference to the second Ladd v Marshall condition.

10. I turn then to the first of the three items of evidence, i.e. the affirmation of Cheuk. It is sought to be used in the following context. Yam has already deposed in his earlier affidavits that Cheuk was the member of the 3rd defendant's staff who attended to him at the Royal Court building on 18 February. The thrust of her evidence is to confirm Yam's evidence of the representation she made that the useable area of the flat was 1,157 sq.ft. This, it is submitted, is of some importance as the judge held that the plaintiff's case was a myth because it was put forward for the first time when the plaintiff rescinded the sale on 29 May 1998; and that the only misrepresentation alleged before such rescission was the other pleaded, i.e. that the missing assignment would be remedied by a court declaration. Cheuk also deposes to having told Yam that the useable area of Flat 22C was 1,157 sq.ft. in Chinese. However, this feature and indeed the importance of her evidence has to be considered in the light of the fact that Yam had 20 years experience in the real estate agency business and was a director of the plaintiff. He may be thought unlikely to have been misled by Cheuk who does not appear to have had anything like his experience or position. Besides, he writes excellent English, which suggests that he is unlikely to have been misled by the different meanings given to "useable" and "saleable" areas in the English and Chinese texts of the sales pamphlet.

11. Turning then to the first Ladd v Marshall condition, i.e. that the evidence could not have been obtained with reasonable diligence for use at the trial, it is said that Cheuk left her employment with the 3rd defendant and was also out of Hong Kong for part of the material time, and that Yam wrote several letters to her address. Notwithstanding the lesser standard of diligence that may well be required of the plaintiff here, I do not think this can be regarded as a reasonable diligence, particularly as the reason that the additional evidence for which leave is now sought was not put in was that the then solicitors took the view that the evidence filed was sufficient to resist the strike-out application.

12. As to the second condition, it does not seem to me that if Cheuk's evidence were given it would probably have an important influence on the result given the other evidence and relevant considerations. In any case, it simply duplicates Yam's own evidence and does not go to the more pertinent question whether he was a person who would be induced by such a representation.

13. The third condition, I think, would be met in that the evidence would be credible on its face, discounting the possible effect of cross-examination.

14. The second item of fresh evidence is the affidavit of Hugo Chan. He is a solicitor who Yam knew in a social context and asked to act as an intermediary with the 1st defendant. He affirms that in early March 1998, Yam complained to him that he had been misled by a salesperson of the 3rd defendant that the title of the two flats the plaintiff had purchased had been remedied by a court declaration obtained by the 1st defendant. It is submitted that his evidence is admissible under s.48(1)(b) of the Evidence Ordinance. Counsel for the respondents did not specifically concern themselves with this submission and I am content to proceed upon the assumption without deciding that the evidence is admissible. Hugo Chan's affidavit also supports the case of the plaintiff that it was seeking a compromise with the 1st defendant, but this is a factor that is somewhat equivocal in that a party to whom such a representation is made might possibly seek enforcement of his rights rather than a compromise. However, in another respect, the judge took the view that the plaintiff's action after its requisitions in respect of the title were unsatisfactorily answered in proceeding to execute the agreement for sale and purchase amounted to waiving its rights. In this respect, it is submitted on the plaintiff's behalf that its continuing quest for compromise was inconsistent with any waiver. Turning then to the Ladd v Marshall conditions, first, even if the lower standard mentioned is conceded, I cannot see why Hugo Chan's evidence could not have been obtained with reasonable diligence for use at the trial. On the contrary, it is accepted on behalf of the plaintiff that the reason why this evidence was not adduced below was because the legal advisers of the plaintiff considered that the detailed affirmations that had already been filed on behalf of the plaintiff were sufficient to raise triable issues. Second, equally I cannot see that Hugo Chan's evidence would have had an important influence on the result of the case. And third, while the evidence appears to be such as is presumably to be believed, this does not avail the plaintiff given a failure to meet the first two conditions.

15. I turn finally to the third item of evidence, i.e. Yam's further affidavit. This supplements and clarifies his earlier affidavits. Insofar as it relates to evidence of the false representation that the useable area was 1,157 sq.ft., it takes that matter very little further. It also offers an explanation as to why he signed the formal agreement. This being that he did not notice the definition of saleable area which effectively reduced the net useable area of the flat. Moreover, that the representations continued to operate on its mind and induced the plaintiff to execute the formal sale and purchase agreement. Coming from a director with 20 years estate agency experience, this might be considered of limited force, as would be his further evidence that he did not suspect the useable area of Flat 22B was less than 1,157 sq.ft. until after the plaintiff took possession of the flat.

16. Turning to the Ladd v Marshall conditions, I did not understand it to be suggested and I do not accept that the evidence could not have been obtained with reasonable diligence at the trial, even if the lower standard of diligence mentioned were applied; second, it is doubtful whether the further evidence is such that if given, it would probably have an importance influence on the result of the case. And third, it has to be said that it may be doubted that the evidence is such as is presumably to be believed.

17. In the result, it does not seem to me, that upon the Ladd v Marshall conditions, leave to adduce the three items of evidence should be granted. That is all the more so if regard is had to the principles of finality of litigation and that a successful litigant is not lightly to be deprived of his judgment.

18. Even if I were wrong in concluding that the hearing of the summons to strike out the plaintiff's Statement of Claim was a hearing on the merits, it does not seem to me that I could properly exercise my discretion in favour of granting leave, in the light of the foregoing; nor upon the basis that there were special circumstances here, e.g. in that the plaintiff's solicitors took the view that the affidavit evidence that had been put in was sufficient to establish a triable issue, and in the evidence of Cheuk being direct evidence.

19. The applications are accordingly refused.

20. As to costs, prima facie, I can see no good reason why the defendants should not have their costs. There will, accordingly, be an order nisi that the defendants are to have their costs of the applications.