SHELDON WONG AND ANOTHER v. ASHWIN KHUBCHANDANI

DCCJ6740/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6740 OF 2003

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J U D G M E N T

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1. This matter has been very concisely and well argued on both sides. The plaintiffs and the defendants were good friends. The defendant, who I think was a banker employed in Hong Kong, was paid a total of HK$600,000 by the defendants by two separate cheques, $550,000 and $50,000, 20 July and 10 August 1995 respectively. These payments relate to a prospective property development of American-style housing at Poona in India. The statement of claim pleads that the terms of the agreement between the parties was partly oral and partly in writing. The written part was contained in a written confirmation dated 20 July 1995 when the first cheque for $550,000 was made out to the defendant.

2. The document signed by the defendant was in these terms:

"I, Ashwin Khubchandani, have sold two lots in Nagar Hills to Mr Sheldon Wong and Kerry Gee (the plaintiffs). The situation of the property is in Nagar Road, Poona, India."

3. The other terms were oral and came from conversations held between the parties at the plaintiff's home at Hong Kong, the terms of which I take from paragraph 5 of the statement of claim were as follows:

"(a) the project was a land development consisting of over 150 American style houses and would be proceeded with definitely within half a year; (b) the row houses/bungalows would be constructed on the plots of land of the project including two plots of land and; (c) after completion of the development of the project the defendant would be responsible for selling the two plots of land together with the houses constructed thereon to ultimate buyers so that the plaintiffs' investment in the project could generate at least double return in about two years' time."

4. Having handed over the money the plaintiffs complain that nothing has been done by the defendant to carry out the terms of the agreement. The houses have not been built and the defendant refuses to repay the plaintiffs their money. The defendant is now resident in Singapore. In bringing this action the plaintiffs have obtained leave under Order 11 rule 1 of the Rules of the District Court to serve notice of the writ outside the jurisdiction at the defendant's address there.

5. The defendant now seeks to strike out the statement of claim under Order 18 rule 19 of the Rules of the District Court on three of the four grounds set out in his summons; firstly on the basis that the action is brought outside the limitation period for such actions as provided in section 4(i)(a) of the Limitation Ordinance, secondly on the basis that Hong Kong is forum non conveniens, the appropriate forum being India where the land, the subject matter of the action, is situated or alternatively Singapore where the defendant resides and, lastly, that as the contract relates to the sale of land there is no sufficient written note or memorandum evidencing the terms of the contract as required by section 3(1) of the Conveyancing and Property Ordinance. I propose to take these separate issues in turn.

The limitation period

6. Mr Zimmern for the defendants correctly submits that the applicable limitation period is one of 6 years as provided for in section 4(i)(a) of the Limitation Ordinance. He suggests that there are three possible periods that are available to the defendant all of which have expired. The first, on the plaintiffs' pleaded case, is based on the term at (i) supra which pleads a term that the project would start at the latest six months after the agreement, that would be January 1996, and if that was so, the limitation period expired in January 2002. The writ was not taken out till November 2003.

7. I can quickly dispose of this limb of the limitation argument now. Such a submission simply does not address the main term of the alleged contract which is that the houses would be completed within two years. I am certain that the plaintiff must be entitled to overlook the failure to start after the expiry of the six months, wait and see what happened to see how the defendant got on with the building project where completion had been promised after two years. I reject the submission that the clock would start to run after six months in the event that the project did not get going by then.

8. The next suggested period, and here Mr Zimmern is on better ground, would be after two years when completion had been promised. That would be by July/August 1997. Limitation would bite six years later, at the latest August 2003 and where the writ was not issued until November 2003 that must put an end to the matter. Mr Zimmern has also suggested an even earlier limitation period of six years from the date of the contract, this being an action for money had and received for which consideration has wholly failed. In such a case, he submits, time ran from August 1995 and would have expired in August 2001. He relies on the judgment of the late Hobhouse J, as he then was, in Kleinwort Benson v South Tyneside Borough Council [1994] 4 All ER 972 at 978J. The passage relied on is as follows:

"The six year time limit provided for in section 5 of the Limitation Act 1980 (the equivalent being section 4 of the Limitation Ordinance of Hong Kong) applies to an action for money had and received and, by analogy, to an equivalent equitable action. The cause of action in money had and received arises when the relevant money is paid by the plaintiff to the defendant. If the plaintiff has to rely upon a payment which he has made more than six years before the issue of the writ, then any cause of action based upon that payment is pro tanto time barred."

9. Miss Barbara Wong for the plaintiffs submits that this submission amounts to a misunderstanding of the nature of the action. The claim is based on a breach by the defendant of the agreement to have the houses completed no later than two years after the money was paid by which time the double profits were expected to start rolling in. In my judgment, this must be right. The cause of action could not have accrued from the moment that the money was paid. In Kleinwort Benson supra the factual basis was wholly different to this and Hobhouse J's comments need to be understood against the factual background that he was referring to.

10. This then leaves over the limitation period which started in July/August 1997 and expired in July/August 2003. Miss Wong's repost to this is that her clients are entitled to rely on section 26(1) of the Limitation Ordinance which in its material terms is as follows:

"Subject to subsection (4) where in the case of any action for which a period of limitation is prescribed by this ordinance either (a) the action is based upon fraud of the defendant; (b) any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant; or (c) the action is for relief from the consequences of a mistake. The period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.

(2) References to subsection (1) to the defendant include references to the defendant's agent or to any person through whom the defendant claims and his agent.

(3) For the purposes of subsection (1) deliberate commission of a breach of duty in the circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty."

11. A feature of this case is that after the defendant left Hong Kong contact was lost and it was not until January 2003 that contact was re-established. The plaintiffs had been leaving messages for the defendant on his voicemail which he says he could not access. But on 13 January 2003 he sent them an email (see D68) which bears repetition here.

"How are you? Reading your note it seems that you have been trying to get hold of me for a while yet this is the first time that I have received any email from you, even your attached email. I was in Hong Kong/China for five weeks and just returned to Singapore and just heard your voice messages. Please note that in Singapore over 90 per cent of external emails are quarantined through this email address since 9/11. Therefore writing to me will generally result in me getting a note that an email has been quarantined but no further details. Please write to my hotmail account ahubc@hotmail.com. With regard to your investment in the Indian real estate project please note that your two plots are there. Last we spoke in Dan Ryan's I advised that we were planning on using part of the development for an data centre. Due to the collapse of the IT sector this was scrapped. In addition you needed to advise me on the company that you would like to take your two plots in. I advise you set up a Mauritian company to hold your asset in. Please advise your company name so that I can transfer the asset to you. The resale market for land in India has been slow/poor for quite a while now. As discussed when you purchased the real estate when we talked at Dan Ryan's, if you want to build the houses I can get the construction going for you a cost breakdown of which I can send. The development of the houses can be paid in stages. It will be probably be easier to build and sell than just sell the real estate. At this point I am not developing the houses as E & Y Advisory, formerly Anderson Real Estate Advisory, the firm managing the development and Jones Lang Lasalle have advised me against it. E & Y are handling all issues related the all developments we have in India. Once they advise to develop Poona development we will. Until then unless you would like to develop there is not much to do. Immediately I would recommend that you set up your offshore company and I will ask E & Y to get the asset transferred this firm. Please email me the name of the company. You will need to sign some paperwork which I will get E & Y to send to you. Please note that I have no reason to avoid you or Kerry. You are both close friends of mine. Over the last months I have not really been talking/meeting to anyone because of the Amex HK business integration job losses, etc., as this was a sensitive point which I was involved in and for which I felt and indirectly was told I should just not contact anyone while I was engaged in this project as I know too many of the Hong Kong staff. I have emailed Kerry my contact details. Please advise how you would like to proceed. Regards, Ashwin."

12. Miss Wong says that it was only then that the plaintiffs realised that they had a cause of action, the defendant clearly indicating in that email that no houses had been built. Time ran from then and so there is no question that the claim is well within the limitation period. Mr Zimmern disagrees. He says that it was up to the plaintiffs to follow the matter up. There is no element of concealment and the defendants cannot show that they have pursued this diligently as the section requires.

13. One only needs to state the issue to realise that this is an evidence-sensitive exercise. I cannot possibly decide the matter on conflicting affirmations. The issue will need to be pleaded, the evidence heard and only then will the trial judge be able to decide the issue. This cannot be done now on this summons and on this scant and conflicting material. Consequently the limitation point must go at this stage and be decided at the trial.

Forum conveniens

14. The relevant legal principles have been helpfully set out in the current High Court practice under Order 11 rule 1, page 100 and 101. These have been extracted from the House of Lords decision of Spiliada Maritime Corporation v Consulex Ltd., The Spiliada [1986] AC 460 and applied in Hong Kong in Adhiguna Meranti v Adhiguna Harapan [1987] HKLR 904 and in the Lanka Muditha [1991] 1 HKLR 741. In my outline of the contest I have set out the principal features of the matter. It strikes me that where the contract was made in Hong Kong by parties that were then all resident in Hong Kong and that partial execution of the contract, payment of the money by the plaintiffs, had been made in Hong Kong, whilst I can see the force of the argument that India may be an appropriate forum, the defendant has failed to show, as required by the cases to which I have referred, that Hong Kong is not the natural or appropriate forum but that India is clearly or distinctly more appropriate than the Hong Kong forum. This Mr Zimmern has been unable to demonstrate on the facts with the result that the defendants' other summons which seeks to set aside service of notice of the writ must stand dismissed.

Written note or memorandum

15. I now come to the last issue. Mr Zimmern says that where there is a contract for the sale of land section 3(1) of the CPO needs to be complied with. Miss Wong says two things about this. Firstly, that the CPO only applies to the sale of land in Hong Kong and where this land is outside Hong Kong the ordinance cannot have extra-territorial effect. Mr Zimmern's response to that is that if that is so, which he does not accept, then the legal opinion from a Bombay advocate (included in the papers) clearly proves that under Indian law such a written memorandum is required. Whilst the plaintiffs have not put in expert evidence of their own I would have thought that now is not the time to be dealing with the effect of foreign law. For my part, it seems to me that Miss Wong is right in her approach that the CPO does not have extra territorial effect and it will be for the trial judge to consider the effect of Indian law in this matter should the case get that far.

16. If I am wrong on this limb of the argument then I would have thought that Miss Wong is right on her further ground which is that section 3(2) of the CPO, which makes clear that the requirements of section 3(1) do not affect the law relating to part performance, is correct so that in a case such as this where the purchase price has been paid and accepted by the defendant the defendant cannot take advantage of section 3(1). The issue on section 3(1) therefore remains sufficiently arguable for the matter to go to trial. That being so this summons as well must stand dismissed with costs and certificate for counsel for the defendant.