T L IP & CO v. FUNG FUNG PING

IN THE SUPREME COURT OF HONG KONG HIGH COURT

-----------------

---------------------------------------------------

REASONS FOR JUDGMENT

---------------------------------------------------

1. On this appeal from the refusal of the Master to allow an amendment to the Defence, I allowed the appeal at the conclusion of the hearing and I indicated that I would hand down my Reasons later. I now hand down the Reasons.

2. This is a very complicated dispute involving two properties, a number of transactions and three firms of solicitors. I will give briefly an outline of the facts leading to the dispute. The Defendant owned what is called the 2nd Property which was purchased with the firm of Messrs. J. Fang & Co. ("Fang Firm") acting as solicitors for the Defendant purchaser. It will be seen later that the Defendant complained that Fang Firm was negligent in relation to the defects in the title to the 2nd Property which Fang Firm ought to have discovered. The Defendant subsequently wanted to sell the 2nd Property and buy what is known as the 1st Property. There was an agreement by the Defendant to sell the 2nd Property to a purchaser called Chong ("Chong") and the Plaintiff firm of solicitors were acting as solicitors for the Defendant vendor. That sale fell through and the Defendant alleged that the Plaintiffs were negligent in the conveyancing transaction relating to the requisition of the title by Chong. The case of the Defendant is that in consideration of the Defendant not suing the Fang Firm in respect of the conveyancing negligence relating to the purchase of the 2nd Property, the Defendant agreed with Mr. Fang of Fang Firm that Mr. Fang would purchase the 2nd Property from the Defendant for $4.5 million with $1 million to be paid as deposit. The sale to Mr. Fang did not materialise and eventually the 2nd Property was sold successfully to a third purchaser.

3. The story of the 1st Property was simpler. The Defendant agreed to buy the 1st Property and after the initial payment there was something like $900,000 which required to be paid on completion. Because of the problem with selling the 2nd Property to Chong, the completion of the purchase of the 1st Property was agreed between the vendor and the buyer to be delayed. The Plaintiff firm acted for the Defendant as solicitors for the purchaser and the Fang Firm acted for the vendor. This is where the complications came in. The Plaintiff as Solicitors for the Purchaser of the 1st Property had to pay to the Fang Firm as Solicitors for the Vendor the sum of some $900,000. It would seem that eventually money was paid to the vendor of the 1st Property. What is crucial in the Action is whether there was, and if so from where and how the money of $1 million came and on what terms did the Plaintiff receive the money. In essence, the Plaintiff said that $1 million came from Fang Firm acting as Solicitors for the Intended Purchaser of the 2nd Property and that money was received on specific Undertaking of 17th March 1994 (relating to the intended purchase of the 2nd Property by that Intended Purchaser) given by the Plaintiff as Solicitors for the Defendant to the Fang Firm which Undertaking was given with the approval and agreement of the Defendant. The Plaintiffs case is that now the purchase by that Intended Purchaser of the 2nd Property had failed, the Undertaking of the Plaintiff was called upon by the Fang Firm, and the $1 million must be repaid by the Defendant to the Plaintiff so that the Plaintiff could pay to the Fang Firm. The proposed defence of the Defendant to the claim is that:-

4. The question at the hearing of the Appeal before me is whether the Master was correct in refusing to grant leave to amend on the whole of the proposed amendments. It is to be noticed that the original defence was a bare holding defence consisting of denials whereas in the proposed Amended Defence, the real case of the Defendant was put forward. Three objections were taken to the proposed amendments, namely:-

5. So far as the first objection is concerned, it seems to me that Mr. Fang and Fang Firm played a vital role in the number of transactions which led to the present dispute and even Mr. Law in his very able address admitted that the facts pleaded in the paragraphs objected to are factual matrix. In my view, they go beyond being merely factual matrix and these are the material facts which constitute the defence of the Defendant disputing the Undertaking and the Defendant's knowledge of the Undertaking and the necessity for the Undertaking. In my view, these are not useless or irrelevant pleadings and they are certainly not susceptible of being struck out if they were set out in the original defence. In my judgment the Master ought not to disallow these paragraphs.

6. The four paragraphs said to be inconsistent and embarrassing are in relation to what might be said to be the $1 million alleged to have been paid to the Plaintiff and the disposition of such money. Paragraphs 23 and 24 are in the following terms:-

At the hearing of the appeal, upon indication from the Court on the force of the Plaintiffs argument on this aspect and with a little bit of prompting by the Court, Miss Chan sought leave to delete the words "Save that the balance of purchase price for the 1st Property was duly paid by the Defendant" from Paragraph 23 and the words "save that the defendant did receive a cheque in the sum of HK$105,520.45 representing the residue of the HK$1 million deposit after discharging the balance of the purchase price of the 1st Property" from paragraph 24 and once these are deleted the objections of the Plaintiff to these 4 paragraphs could no longer be maintained. Mr. Law was graceful enough not to say anything further in opposition to those 4 paragraphs. Accordingly on the basis of the aforesaid deletions to paragraphs 23 and 24 of the proposed Amended Defence, leave to plead these paragraphs should also be given.

7. I turn now to the question of new amendments to allege negligence. It must be appreciated that these are allegations which could be made by way of a separate Writ and that they seem prima facie to plead genuine complaints of negligence. In the circumstances, it seems to me a wrong approach for the Master to exclude this complaint of negligence from the Defendant's pleadings. Of course it is a serious allegation but solicitors should be prepared to defend allegations of negligence and as soon as possible. It will assist no one to defer the filing of this pleading of negligence when it is clear that it ought to be litigated in the same proceedings as the main dispute relating to the Undertaking. I am of the view that leave should also be given for this negligence pleading.

8. It is unfortunate that opposition of the Plaintiff to the proposed Amended Defence and Counterclaim had resulted in the wholesale rejection of the proposed amendment. A more selective and discriminating examination of the pleadings might result in most of the amendments being allowed. Apart from the Inconsistent and Embarrassing Objection paragraphs, in my judgment there is really no reason for a Court to shut out the proposed amendment. In the circumstances, the Appeal is allowed to the extent of the aforesaid changes to paragraphs 23 and 24.