POLAR FOX LTD AND ANOTHER v. VENUS ISLE LTD

DCCJ 5612/2019

[2022] HKDC 76

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5612 OF 2019

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JUDGMENT

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A. INTRODUCTION

1.  There are 2 summonses before the court:-

(1)  the plaintiffs’ summons filed on 17 May 2021 for summary judgment; and

(2)  the defendant’s summons filed on 11 June 2021 for security for costs.

2.  The plaintiffs’ claim against the defendant (“VIL”) is for the outstanding amount of RMB470,862.77 (the “Amount”) due under a sale agreement dated 31 March 2016 between the 1^st plaintiff (“Polar Fox”) and VIL pursuant to which Polar Fox granted to VIL the option to purchase up to 1,683 shares in Lifestyle Logistics Limited (“LLHK”) (the “LLHK Shares”) for the minimum amount of RMB4,708,621.41 (the “Option Agreement”).

3.  VIL’s defence is that payment of the Amount is conditional upon the execution of a deed of indemnity by Polar Fox and the 2^nd plaintiff (“Mr Suguiura”) to indemnify certain potential tax claims which could be advanced against VIL and/or its shareholder-director, Mr James Kilpatrick (“Mr Kilpatrick”) by one Real Style Investment Holdings Limited (“Real Style”), the ultimate purchaser of certain shares which Polar Fox held (with whom VIL dealt directly).

B.  BACKGROUND FACTS

4.  The facts giving rise to the plaintiffs’ claim are largely undisputed and set out below.

B1.  Parties

5.  Polar Fox is a company incorporated in the British Virgin Islands (“BVI”). It is the investment vehicle of Mr Suguiura, and he and his wife Ms Mariza Bento Moreira (“Mariza”) are both directors thereof. Mariza is also Polar Fox’s sole shareholder.

6.  VIL is also a company incorporated in the BVI. Mr Kilpatrick is its sole shareholder and director.

7.  Prior to the events described below:-

(1) Mr Suguiura and Mr Kilpatrick (personally, and through VIL) together held shares in a Hong Kong company known as Doubleeight Doublenine Consulting Limited (“DDCL”), as to respectively 24.5% and 75.5%.

(2) DDCL in turn held 67% of the shareholding of another Hong Kong-incorporated company, namely, LLHK. LLHK in turn held the entire shareholding of a PRC company known as Lifestyle Logistics (Shanghai) Co. Ltd (“LLSH”), which is its operating arm and in the business of providing logistics services to fashion and lifestyle brands in the PRC.

B2.  Sale of the LLHK Shares

8.  On or about 29 March 2016, Mr Kilpatrick invited Mr Suguiura to sell his interest in LLHK, given that a potential buyer had approached the former about acquiring a 35% interest in LLHK. Mr Suguiura was not invited to deal directly with the potential buyer.

9.  By Mr Kilpatrick’s email on this date, he attached a draft Memorandum of Understanding (“MOU”) which referred to VIL selling 35% of LLHK. He also attached documents about a proposed restructuring which would enable the sale of 35% of LLHK’s shareholding in one single transaction by VIL to an unnamed purchaser.

10.  In view of this, on 31 March 2016, Polar Fox and VIL entered into the Option Agreement, which referred in the Recital to, inter alia, Polar Fox’s ownership of 3,683 shares in LLHK. By Clause 1, it was agreed that:-

“Option: Polar Fox grants an option to VIL to purchase up to 1,683 shares in [LLHK] for the minimum amount of RMB 4,708,627.41 that is proportional to the total amount defined in the MoU”.

11.  Clause 2 provided that the Option Agreement was valid until 30 April 2016 and conditional upon the signing of the MOU as annexed. Clause 3 provided that the agreement was governed by Hong Kong law.

12.  Around this time, Mr Kilpatrick orally informed Mr Suguiura that the potential buyer was a company known as Real Style. It was however noted that neither of the plaintiffs was intended to be a party to the MOU and/or to deal with Real Style directly.

13.  On or about 28 April 2016, inter alios, VIL/Mr Kilpatrick and Real Style executed the MOU. By Clause 2 of the MOU, the consideration of RMB19,584,310 was set out, as well as the payment schedule by five instalments (together with a RMB500,000 deposit). Mr Kilpatrick informed Mr Suguiura about the signing of the MOU by email dated 29 April 2016.

14.  At around the same time on or about 28 or 29 April 2016, Mr Kilpatrick (on behalf of VIL) exercised the option contained in the Option Agreement vis-à-vis Polar Fox, but informed Mr Suguiura (on behalf of Polar Fox) that VIL would purchase the relevant LLHK Shares, and for the LLHK Shares to be transferred to VIL personally – though the transfer took place only more than a year later as explained below.

15.  Various restructuring then took place to have the LLHK Shares be held directly by Polar Fox (instead of through DDCL).

16.  On or about 23 June 2016, inter alios, VIL/Mr Kilpatrick and Real Style executed the Sale and Purchase Agreement (the “SPA”) for the purchase of 7,000 shares in LLHK for RMB19,583,310. The payment of consideration to VIL/Mr Kilpatrick was set out at Clause 4. Again, neither of the plaintiffs is party to the SPA.

17.  Also in around June 2016, Mr Kilpatrick requested that payment payable by him/VIL under the Option Agreement be made in instalments, payable immediately after they received payments from Real Style under the SPA. Mr Suguiura/Polar Fox agreed to this. The LLHK Shares were transferred to Mr Kilpatrick by Polar Fox on 2 June 2017.

B3.  Payments under the Option Agreement

18.  On 9 August 2016, VIL/Mr Kilpatrick made payment of HK$3,204,441.65 by bank transfer to Mr Suguiura/Polar Fox.

19.  On 7 February 2018, VIL/Mr Kilpatrick made further payment of HK$810,435.06 to Mr Suguiura/Polar Fox.

20.  On 4 June 2018, Mr Kilpatrick made another payment of HK$872,830 to Mr Suguiura/Polar Fox by cheque.

21.  The balance of the consideration under the SPA was payable on 30 April 2019: see Clause 4.1(f). Accordingly, it is the plaintiffs’ case that the Amount (being the balance of the consideration for Polar Fox’s transfer of LLHK shares under the Option Agreement) was due and owing.

22.  On 29 March 2019, Mr Hart (of Messrs Hart Giles (“HG”), VIL’s solicitors) wrote to Mr Suguiura and stated that “before [Mr Kilpatrick] pays [him] the final instalment due to [him] of RMB470,862.77, [he was] required to sign and return the following Deed of Indemnity” [Emphasis added].

23.  Further correspondence was exchanged between HG and Polar Fox’s previous solicitors Messrs Vidler & Co, during which inter alia VIL was requested to identify a legal basis for requiring an indemnity before payment. HG stated was that this was “prompted by an allegation by the most recent purchasing shareholder, Real Style Limited, that tax should have been paid in respect of the amount of the purchase consideration” and that another shareholder involved in the transaction had already offered an indemnity, such that it was allegedly “entirely reasonable for [VIL] to demand the same”.

24.  The plaintiffs did not execute any indemnity. On 17 October 2019, Polar Fox commenced this action.

C.  SUMMARY JUDGMENT: APPLICABLE PRINCIPLES

25.  The principles applicable to applications for summary judgment under Order 14 are well-established. In Menfond Electronic Art & Computer Design Co Ltd v Wong Wang Tat Victor & Anor [2013] 2 HKC 259 at §61, DHCJ Lisa Wong SC (as Her Ladyship then was) said that:-

“It is for the defendant to show that there is an arguable defence or triable issue. In doing so, the defendant must condescend to particulars. The mere assertion in an affidavit of a given situation by the defendant does not, ipso facto, ground leave to defend. The defendant must satisfy the court that his evidence is capable of being believed and that on the basis of such evidence, there is a fair or reasonable probability of the defendant having a real or bona fide defence. In deciding whether there is a fair or reasonable probability of the defendant having a real or bona fide defence, the court does not isolate each factual issue and consider whether it is possible that the defendant’s story on that issue is credible. Rather, the court must look at the whole situation. In assessing the credibility of the defendant’s factual case, while the court will not embark on a mini-trial on affidavit evidence, the court is not obliged to suspend its critical faculties and assume that the defendant’s evidence is accurate. If having regard to inherent plausibility, inconsistency with contemporaneous documents and other compelling evidence, the defence is not credible, the court must say so. If the defendant’s defence is incredible in any material respect, it cannot be said that there is a fair or reasonable probability that the defendant has a real or bona fide defence.”

26.  Furthermore, in Time Rich 08 Limited v DBE (HK) Limited & Others [2018] HKCA 404, Cheung JA said (at §5.2):-

“…in deciding whether a plaintiff is entitled to summary judgment the relevant test is whether the defendant has raised credible triable issues. If there are, the matter should go to trial. If not, judgment should be entered against the defendants. In considering whether there are triable issues, the Court will not take the defence on its face value but test it against the evidence disclosed in the affidavit including matters such as contemporaneous documents, whether the alleged defence is inconsistent with the defence previously put forward or whether the defence is only recently raised despite opportunity being given to the defendant to respond earlier. The Court will also consider the inherent probability of the defence but what the Court should not do is to conduct a mini-trial on complicated factual issues …”

D.  DISCUSSION

D1.  No defence to the plaintiffs’ claim for the Amount

27.  At the outset, it should be noted that VIL and Mr Kilpatrick have consistently acknowledged that the Amount has not been paid:-

(1)  Prior to these proceedings, Mr Hart’s email dated 29 March 2019 confirms that Mr Kilpatrick would pay the Amount (“the final instalment”) to Mr Suguiura – though he says this should be subject to execution of an indemnity.

(2)  Against the backdrop that VIL accepts the contents of the Option Agreement and admits certain payments were made to Polar Fox/Mr Suguiura, in its defence VIL admitted the Amount had not been paid.

(3)  In Kilpatrick Affidavit, at §§15-16, in referring to the need for Mr Suguiura to “[bear] his share” for alleged tax liability, Mr Kilpatrick refers to Mr Riccardo Fuochi (another shareholder) offering an indemnity “in return for receiving his element of the purchase consideration”, again implicitly confirming Polar Fox/Mr Suguiura’s prima facie entitlement to the Amount (albeit, on VIL’s case, subject to the requirement to provide an indemnity).

28.  As noted in para 3 above, the only defence raised is that the payment of the Amount is conditional upon the plaintiffs’ execution of the deed of indemnity. For the following reasons, I have no hesitation in rejecting this defence:-

(1)  The Option Agreement made no mention at all of any condition precedent or clause requiring Polar Fox/Mr Suguiura to bear any tax or other liability in respect of VIL’s sale of shares to Real Style (or otherwise). VIL has not pleaded any implied term to such effect. I do not see any legal basis for suggesting that the plaintiffs were required to execute the deed of indemnity before the Amount could be paid. Nor has Mr Hart suggested any legal basis for imposing such requirement.

(2)  Neither of the plaintiffs is party to the MOU or SPA. Not being a party to the MOU or SPA, they are not party to any contractual bargain between VIL/Mr Kilpatrick and Real Style, and they did not even deal with Real Style or its representatives during the negotiation process. As such, there is no legal basis to contend that either of the plaintiffs would somehow become subject to contract terms of PRC tax regulations specific to the transaction vis-à-vis Real Style. Polar Fox was never a seller vis-à-vis Real Style.

(3)  Insofar as VIL contends that it would be “appropriate and fair” for Mr Suguiura to bear a share of the tax payable by VIL, this is not a real or bona fide defence, as the primary aim in the exercise of the powers of the court is to secure the just resolution of disputes in accordance with the substantive rights of the parties (RDC Order 1A, rule 2(2)). The exercise of the court’s powers cannot be based on some vague notion of “fairness”. In any event, I see nothing unfair in rejecting VIL’s case that the payment of the Amount is conditional on the execution of the deed of indemnity by the plaintiffs when VIL has failed to show any legal basis for doing so.

D2.  No basis for VIL to challenge the validity of the Deed of Assignment

D2.1  How the issue concerning the Deed of Assignment arises

29.  At the hearing, Mr Hart submitted that whether there is a valid assignment by Polar Fox to Mr Suguiura of its claim under the Option Agreement is a triable issue. However, this is not an issue raised in the AD at all.

30.  Pursuant to the Deed of Assignment dated 11 July 2016 (the “Deed of Assignment”)[1], Polar Fox agreed to transfer to Mr Suguiura all of the rights and benefits of the sale of the LLHK Shares, and the buyer of the LLHK Shares (VIL) is obliged to pay to Mr Suguiura the consideration in the total amount of HK$3,327,441.65.

31.  In the Statement of Claim, Polar Fox is the only plaintiff, and there is no mention of the Deed of Assignment at all.

32.  It was VIL who first referred to the Deed of Assignment in the Defence. In paras 13 and 14 of the Defence, VIL pleaded that:-

“13. By a deed of assignment (the ‘Deed’) in writing dated 11^th July 2016 executed between [Polar Fox] and [Mr. Suguiura] Polar Fox assigned to Mr. Suguiura all of its rights and benefits in respect of the sale of 1,683 ordinary shares in Lifestyle Logistics (the ‘Shares’).

14. Following the execution of the Deed, the right to receive payment of the consideration for the Shares vested solely in Mr. Suguiura, not [Polar Fox].”

33.  It can be seen immediately that Mr Hart’s submission is contradicted by paras 13 and 14 of the Defence.

34.  Following the service of the Defence, Polar Fox amended the Statement of Claim by adding Mr Suguiura as the 2^nd plaintiff and pleaded in para 16A of the Amended Statement of Claim (“ASOC”) that:-

“On 11 July 2016, a Deed of Assignment was executed whereby the 1^st Plaintiff purportedly assigned to the 2^nd Plaintiff all the rights and benefits of the sale of the [LLHK Shares]”.

35.  Paras 13 and 14 remain in the Amended Defence (the “AD”).

D.2.2  VIL is bound by its pleading

36.  In my view, VIL is bound by paras 13 and 14 of the AD. On the basis of VIL’s averment therein, which amounted to an admission that the Deed of Assignment was validly entered into and effective in assigning to Mr Suguiura all of Polar Fox’s rights and benefits in respect of the sale of the LLHK Shares, it is not open to VIL to now say that there is a triable issue as to whether the Deed of Assignment is valid. At the hearing, Mr Hart fairly accepted that VIL is bound by its pleadings in paras 13 and 14 of the AD.

37.  In any event, as explained below, there is in my view no merit in Mr Hart’s challenge to the validity to the Deed of Assignment.

38.  I will deal with Mr Hart’s challenge to the validity of the Deed of Assignment after considering the issue of whether the Deed of Assignment is a legal assignment or an equitable assignment. This issue was canvassed by the parties at the hearing. However, it is important to bear in mind that this was not an issue raised by VIL in its pleadings or affidavit evidence, and therefore VIL ought not to be allowed to raise it. In any event, determination of this issue would not affect my finding above that VIL has failed to show a real or bona fide defence. It is only for completeness that I deal with this issue.

(A) Legal Assignment

39.  In Hong Kong, legal assignment is governed by s 9 of LARCO which states that:-

“Any absolute assignment, by writing under the hand of the assignor (not purporting to be by way of charge only), of any debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to receive or claim such debt or chose in action, shall be and be deemed to have been effectual in law (subject to all equities which would have been entitled to priority over the right of the assignee if this section, section 11 of this Ordinance and sections 25 and 49 of the Conveyancing and Property Ordinance (Cap 219) had not been enacted) to pass and transfer the legal right to such debt or chose in action from the date of such notice, and all legal and other remedies for the same, and the power to give a good discharge for the same, without the concurrence of the assignor:

Provided that if the debtor, trustee or other person liable in respect of such debt or chose in action has had notice that such assignment is disputed by the assignor or any one claiming under him or of any other opposing or conflicting claims to such debt or chose in action, he shall be entitled to call upon the several person making claim thereto to interplead concerning the same, or he may pay the same into the court under and in conformity with the provisions of any Ordinance relating to trustees.”

40.  Therefore, under s.9 of LARCO, a legal assignment is effective if three conditions are satisfied:-

(1)  the assignment must be absolute and not purport to be by way of charge only;

(2)  it must be in writing under the hand of the assignor; and

(3)  express notice in writing thereof must be given to the debtor or trustee.

41.  The first condition is satisfied in the present case because the Deed of Assignment is absolute as by it Polar Fox assigned all of its rights and benefits in respect of the sale of LLHK Shares to Mr Suguiura, a fact expressly acknowledged by VIL in para 13 of the AD.

42.  The second condition is also satisfied because the Deed of Assignment is in writing under the hand of Polar Fox and signed by Moreira, Polar Fox’s director.

43.  As to the third condition:-

(1)  In para 36 of his 2^nd Affidavit, Mr Suguiura stated that in or around late 2016, he gave notice to Mr Kilpatrick/VIL of the Deed of Assignment by producing a copy of the duly executed Deed of Assignment by email. Notice in writing includes email: Bedford Investments Ltd v Sellman [2021] EWHC 799 (Comm) at §82, cited with approval in Chitty on Contracts, 34^th ed, vol 1, §22-017. This allegation is inferentially supported by the fact that it was VIL who first referred to the Deed of Assignment in the Defence and therefore must have the Deed of Assignment in its possession. At the hearing, Mr Hart accepted that VIL has the Deed of Assignment in its possession.

(2)  I note that the allegation in para 36 of Mr Suguiura’s 2^nd Affidavit has not been specifically denied by VIL. However, as the plaintiffs are unable to produce the email and without recourse to cross-examination, the court cannot be certain as to whether express notice in writing of the Deed of Assignment had been given to VIL/Mr Kilpatrick. In the circumstances, I find with some reluctance that the plaintiffs have failed to satisfy the third condition.

(3)  My finding is supported by the fact that it is the plaintiffs’ own case that as the Deed of Assignment appeared to not have been compliant with all legal formalities laid down in s 9 of LARCO, Mr Suguiura decided to commence the action against VIL in Polar Fox’s name[2].

(B)  Equitable assignment

44.  As to equitable assignment, in William Brandt’s Sons & Co v Dunlop Rubber Company [1905] AC 454 at 462, Lord Macnaghten said:-

“... the document does not, on the face of it, purport to be an assignment nor use the language of an assignment. An equitable assignment does not always take that form. It may be addressed to the debtor. It may be couched in the language of command. It may be a courteous request. It may assume the form of mere permission. The language is immaterial if the meaning is plain. All that is necessary is that the debtor should be given to understand that the debt has been made over by the creditor to some third person. If the debtor ignores such a notice he does so at his peril. If the assignment be for valuable consideration and communicated to the third person, it cannot be revoked by the creditor or safely disregarded by the debtor.”

This dicta was applied by the Court of Final Appeal in Secretary for Justice v Global Merchant Funding Ltd (2016) 19 HKCFAR 192 at §43 per Ribeiro PJ.

45.  Similarly, as also stated in Halsbury’s Laws of England (5^th ed, 2009), vol 13, §28 at p 23:-

“No form of words is required for an equitable assignment; the only thing that is necessary is to make the meaning plain. The assignment may be by word of mouth, unless in the particular case writing is required by law, and no particular form of words is necessary so long as the words clearly show an intention that the assignee is to have the benefit of the chose or thing in action. There must, however, be some act by the assignor showing that he is passing the chose in action to the supposed assignee. An actual intention not to assign an interest will not prevent an assignment being effective if the parties have contracted to do an act which in law constitutes an assignment. The assignment may be addressed either to the debtor or to the assignee…” [Emphasis added.]

46.  In the present case, the language and meaning of the Deed of Assignment is plain: as noted in para 30 above, pursuant to the Deed of Assignment, Polar Fox agreed to transfer to Mr Suguiura all of the rights and benefits of the sale of the LLHK Shares, and the buyer of the LLHK Shares (VIL) is obliged to pay to Mr Suguiura the consideration of HK$3,327,441.65. VIL is given to understand that the debt has been made over by Polar Fox to Mr Suguiura, as it expressly acknowledges in para 13 of the AD.

47.  In the premises, it is in my judgment clear that the Deed of Assignment constituted an equitable assignment by Polar Fox to Mr Suguiura of all of its rights and benefits of the sale of LLHK Shares and the right to receive the consideration of HK$3,327,441.65.

48.  In T v A [2018] 3 HKLRD 730 at §55, Chow J (as he then was) summarised the principles concerning whether an equitable assignee may sue the debtor without joining the assignor:-

“(1) The relevant cause of action is vested in the equitable assignee which is, strictly speaking, capable of being asserted by him alone without joining the assignor as a party to the action.

(2) There is, however, a long standing practice of the court that before giving final judgment in an action at the suit of an equitable assignee, the court would normally require him to bring the assignor before the court, either as plaintiff or as defendant, in order that the assignor would be bound by the result.

(3) The practice of requiring the assignor to be made a party to the action is a procedural, and not substantive, requirement.

(4) In exceptional circumstances, the court has power to dispense with the presence of the assignor.”

49.  In §58, the learned Judge explained that the procedural requirement for the joinder of the assignor is not to be taken as optional:-

“… The fact that the requirement is regarded as a procedural, as opposed to a substantive, one does not make it any less a requirement of the applicable law for T to be made a party to in the Arbitration. While is it true that the court (or arbitral tribunal) may, in an exceptional case, dispense with the requirement, that is not something which A can insist upon as a matter of legal right.”

See also: Re Chung Kong Materials (JV) Ltd [2018] HKCU; 4097 [2018] HKCFI 2588 at paras 28 and 29 per Anthony Chan J (on appeal, see [2019] HKCU 2637; [2019] HKCA 788).

50.  In this Action, both the assignor (Polar Fox) and the assignee (Mr Suguiura)have been joined as plaintiffs. In the premises, no objection can be taken against the plaintiffs suing as join plaintiffs.

51.  I now explain why I take the view that there is no merit in Mr Hart’s challenge to the validity of the Deed of Assignment[3]:-

(1)  The fact that the “Deed of Assignment” is not a deed does not affect its validity. There is no requirement whether under s 9 of LARCO or in equitable assignment that the document pursuant to which the chose in action is assigned must be a deed.

(2)  There is no basis for the contention that the Deed of Assignment is invalid as it was not supported by consideration.

(a)  As stated in Halsbury’s Laws of England (5^th ed, 2009), §34 at p 27:

“Consideration is not required to support the equitable assignment of an existing legal chose in action, provided that the assignor has done everything required to be done by him to make the assignment complete in equity”.

See also: Smith, The Law of Assignment, 3^rd ed, §13.94 where the learned author observed that the bulk of authority supports the proposition that consideration is not required for the equitable assignment of a legal chose in action.

(b)  The Deed of Assignment was entered into more than three months after the Option Agreement was made. The right to receive the consideration for the sale of the LLHK Shares is an existing legal chose in action, as “an existing contractual right to be paid money at a future date is a present chose in action” (see Halsbury’s Laws of England, (5^th ed, 2009), vol 13, §31 at p 26).

(c)  Polar Fox has done everything required to be done by it to make the assignment complete in equity. Indeed, Mr Hart made no submission to the contrary.

(3)  There is no merit in the submission that the subject to be assigned, ie, “all of the rights and benefits of the sale of the aforesaid 1,683 ordinary shares”, is not sufficiently precise. The “aforesaid 1,683 shares” clearly referred to the LLHK Shares. Furthermore, as noted above, it was not only “all of the rights and benefits of the sale of the aforesaid 1,683 ordinary shares” which were assigned, but also the right to receive the consideration for the sale of the LLHK Shares.

(4)  The fact that the “Buyer” was not named in the Deed of Assignment does not render it invalid. VIL well knew that “Buyer” in the Deed of Assignment referred to it.

52.  Finally, Mr Hart relies on §18/12/6 of Hong Kong Civil Procedure 2022, Vol 1 which states that “the statement of claim must allege an absolute assignment in writing of the chose in action, and notice in writing to the defendant of such assignment”. However, in my judgment, this passage does not assist VIL at all:-

(1)  §18/12/6 is under O 18, r 12, which deals with particulars of pleadings. It is well-established that the functions of properly particularized pleadings are to, inter alia, inform the other side of the nature of the case they have to meet as distinguished from the mode in which that case is to be proved: Aktieselskabet Dansk Skibsfinansiering v Wheelock Marden & Co. Ltd. [1994] 2 HKC 264 at 269H-270A per Bokhary JA (as he then was). In the present case, the plaintiffs expressly referred to the Deed of Assignment in para 16A of the ASOC. VIL has been fully informed by the plaintiffs the nature of the case it has to meet, as it expressly referred to the Deed of Assignment and its effect in respectively paras 13 and 14 of the AD.

(2)  There can be no serious dispute that VIL has had knowledge of the Deed of Assignment (see paras 32, 36 and 43(1) above). In the premises, I fail to see the utility or necessity of a plea of giving written notice to VIL of the Deed of Assignment.

(3)  I also accept the submission of Ms So, counsel for the plaintiffs, that the aforesaid passage applies to legal assignment and does not apply to equitable assignment. This is made clear by the phrases “absolute assignment” and “notice in writing”, which are the requirements of legal assignment but not the requirements of equitable assignment. This is also borne out by the case of Read v Brown (1888) 22 Q.B.D. 128 cited therein, which was concerned with legal assignment under s 25(6) of the Judicature Act of 1873, the UK equivalent of s 9 of LARCO.

(4)  The fact that VIL has made a request for further and better particulars of para 16A of the ASOC, asking the plaintiffs to state whether the Deed of Assignment is a legal assignment or an equitable assignment, and that in answering this request the plaintiffs simply repeated para 16 of the ASOC, does not provide VIL with a real or bona fide defence, because “[a] desire to investigate alleged obscurities and a hope that something will turn up on the investigation cannot, separately or together, amount to a sufficient reason for refusing to enter judgment for the plaintiff”: Lady Tennant v Associated Newspapers Group Ltd [1979] FSR 298, 303 per Megarry V-C; applied in Hong Kong in Wong To Yick Wood Lock Ointment Ltd v Sky Harvest Medicine Co Ltd [2018] 3 HKLRD 506 at §12 per Wilson Chan J.

(5)  Furthermore, it is not necessary to plead, and a pleading will not be taken as defective if it does not contain, the legal effect of the facts: Lo Yuk Sui v Fubon Bank Lo Yuk Sui v Fubon Bank(2020) 23 HKCFA 138 at §9 per Fok PJ; Kyocera Corporation (successor of Kyocera Optec Co Ltd) v W. Haking Enterprises Ltd & Anor [2021] 2 HKC 1 at §§44.1-44.4 per Yuen JA; CLIO Technologies HK Ltd (formerly known as Agastya Technologies Hong Kong Ltd) v Narang Chander Parkash, HCA 2498/2017 (unrep., 18 November 2020), at §5(2) per DHCJ Sit SC. It is therefore not necessary for the plaintiffs to plead the legal effect of the Deed of Assignment.

(6)  In principle, an equitable assignment is valid as between the assignor and the assignee even without notice given to the debtor:-

“As between the assignor [in the present case, Polar Fox] and the assignee [in the present case, Mr. Suguiura], an equitable assignment, whether voluntary or for value, is absolute and complete without notice having been given to the debtor or fundholder, for notice does not render the title perfect, and formerly was not even a step in the title. Moreover, notice is not necessary as against third persons who stand in the same position as the assignor, such as persons claiming under a subsequent assignment as volunteers, or a creditor who has obtained a charging order, or an order appointing a receiver, or a third party debt order, even though in the last case the judgment creditor gives notice to the trustee before the assignee, or the trustee in bankruptcy of the assignor.”

(Halsbury’s Laws of England (5^th ed, 2009), vol 13, §§40, p 33). See also Holt v Heatherfield Trust Limited [1942] 2 KB 1 at 14 per Atkinson J.

(7)  As between the assignee and the debtor, “it is sufficient to show that the debtor has had knowledge of the assignment, regardless of the source or mode of his knowledge” (Halsbury’s Laws of England (5^th ed, 2009), vol 13, §47, p 37). As noted above, VIL has had knowledge of the Deed of Assignment, regardless of the source or mode of its knowledge.

E.  SECURITY FOR COSTS

53.  As I have found that the plaintiffs succeed in their summary judgment application, the security for costs application falls to be dismissed.

F.  ORDER

54.  Accordingly, I make the following orders:-

(1)  Judgment be entered against the defendant in favour of the plaintiffs for the sum of RMB470,862.77 or its Hong Kong dollar equivalent;

(2)  Interest on the judgment sum at the rate of HSBC prime rate plus 1% from 17 October 2019 to the date of judgment and thereafter at judgment rate until payment; and

(3)  the defendant’s summons for security for costs be dismissed.

55.  I also make a costs order nisi that the defendant shall pay the plaintiffs’ costs of the summons for summary judgment and the summons for security for costs to be taxed if not agreed, with certificate of counsel. The costs order nisi shall become absolute 14 days after the date of this judgment unless application is received from either party within this 14 days period to vary the same.

56.  Last but not least, I thank Ms So and Mr Hart for their assistance.