HONOUR STAR HOLDINGS LTD v. FORTUNE NINE COMPANY LTD AND OTHERS

HCA 603/2024

[2025] HKCFI 3193

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 603 OF 2024

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BETWEEN

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DECISION

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I. INTRODUCTION

1.  Before me is the Summons filed by the Plaintiff on 22 November 2024 as amended today with my leave under Order 14 rule 1, Order 18 rule 9 and Order 27 rule 3 for:-

(1) Summary judgment against the 1^st Defendant, namely:-

(a) A declaration that the 1^st Defendant is obliged to cause and procure the reassignment of the subdivisions set out in the 2^nd Schedule (the “Lots”) of the Statement of Claim to the Plaintiff at its own costs and expenses; and

(b) An Order that the 1^st Defendant do cause and procure the reassignment of the Lots to the Plaintiff at its own costs and expenses; and

(2) Alternative to (1)(b) above, loss and damages to be assessed

II. PLAINTIFF’S CLAIM

2.  In its Statement of Claim, the Plaintiff claims that by a development agreement dated 24 January 2014 (the “Development Agreement”), whereby the Plaintiff, as investor, and the 1^st Defendant, as consultant, and in consideration of the Plaintiff providing the Lots for development, the 1^st Defendant shall provide consultation service and funds to develop the Lots into a village type development. The Development Agreement contained, among others, the following terms:-

(1) The Plaintiff shall transfer the Lots to persons designated by the 1^st Defendant, and should the Development Agreement terminate, the 1^st Defendant shall cause the assignees to transfer the Lots back to the Plaintiff (Clause 2.3);

(2) The Development Agreement would automatically terminate if the zoning of the Lots cannot be changed to “Village Type Development” (Clause 5.1);

(3) The Plaintiff would be entitled to terminate the Development Agreement by written notice should the government refuse application for rezoning any of the Lots (Clause 10.1); and

(4) Upon the termination of the Development Agreement, the 1^st Defendant should, within 60 days of the written notice, cause and procure the Lots previously assigned to persons designated by the 1^st Defendant back to the Plaintiff (Clause 10.2).

3.  Pursuant to the Development Agreement, the Lots were transferred to the 2^nd to the 12 Defendants herein for no consideration according to the Plaintiff, although each assignment purported that a consideration of HK$700,000 had been paid.

4.  On 7 December 2017, the 1^st Defendant applied to the Town Planning Board for rezoning, but the application was refused on 26 January 2018. No judicial review or any appeal or application was made against the Town Planning Board’s refusal.

5.  Latest by early 2020, the Plaintiff had given various notices verbally and in writing as well to the 1^st Defendant to terminate the Development Agreement. The Plaintiff also demanded for the re-assignment of the Lots to him under the Development Agreement.

6.  Alternatively, the Plaintiff claims that the transfers of the Lots were made for the specific purpose of developing village type houses and/or that the Development Agreement was not supported by consideration, and therefore, the 2^nd – 12^th Defendants hold the Lots on trust for the Plaintiff.

7.  The Plaintiff claims an order against the 2^nd – 12^th Defendants for re-assignment of the Lots to the Plaintiff.

III. NO SERVICE OF WRIT ON 2ND – 12TH DEFENDANTS

8.  Although the Plaintiff claims against the 2^nd – 12^th Defendants, Mr KM Chong, counsel for the Plaintiff, informed me upon my enquiry that the Writ has not been served on the 2^nd – 12^th Defendants. The reasons he gave are that despite the Hong Kong address of all the 2^nd – 12^th Defendants stated by the Plaintiff itself in the Writ of Summons, the Plaintiff has reason to believe that the address is not effective and all the 2^nd – 12^th Defendants are not within jurisdiction but are somewhere in Malaysia. No application for service out of jurisdiction or substituted service has been made because, according to Mr Chong, the Plaintiff has no knowledge of the whereabouts of the 2^nd – 12^th Defendants, and it would not be feasible to make such application without such knowledge.

9.  With respect, I am unable to accept any of these reasons. The Plaintiff, as Mr Chong fairly confirms, does not abandon its claim against the 2^nd – 12^th Defendants at least at this stage. The Plaintiff cannot then say that simply based on its belief (apparently contrary to its own Writ of Summons in any event), it can simply choose not to serve the Writ on the 2^nd – 12^th Defendants at all, without any attempt to apply for substituted service. It is especially pertinent here because as shall be analysed below, the relief against the 1^st Defendant is materially affecting and affected by the relief against the 2^nd – 12^th Defendants.

IV. THE 1^ST DEFENDANT’S DEFENCE

10.  The 1^st Defendant does not admit to the Development Agreement. Instead, it alleges that the Plaintiff entrusted Cheery Consultants Limited (“Cheery”) to be the consultant to complete the redevelopment of the said Lots, and the Plaintiff instructed the 1^st Defendant as the Plaintiff’s nominee to enter into a development agreement with Cheery to develop the Lots (the “Cheery Agreement”). It was Cheery who caused the Lots to be assigned to the 2^nd – 12^th Defendants, and the Plaintiff requested Cheery to cause the re-assignment of the Lots to the Plaintiff. In other words, the 1^st Defendant does not have any obligation to cause the re-assignment of the Lots to the Plaintiff.

11.  Further, the 1^st Defendant raises that it is not the registered owner of the Lots, and therefore cannot “take any legal action for specific performance against the Defendants”.

12.  For the present hearing, the 1^st Defendant’s Solicitors wrote to the Court indicating that it does not intend to oppose the Plaintiff’s application for summary judgment and does not file any skeleton submissions.

V. ISSUES BETWEEN THE PLAINTIFF AND THE 1^ST DEFENDANT

13.  Broadly, the issues are:-

(1) Whether the Development Agreement exists between the Plaintiff and the 1^st Defendant;

(2) Whether the Plaintiff requested Cheery to cause the 2^nd – 12^th Defendants to re-assign the Lots to the Plaintiff; and

(3) Whether the 1^st Defendant may cause the 2^nd – 12^th Defendants to re-assign the Lots to the Plaintiff.

VI. RELIEF SOUGHT AFFECTING AND AFFECTED BY THE 2^ND – 12^TH DEFENDANTS

14.  The Lots are now registered in the name of the 2^nd – 12^th Defendants. An order that the 1^st Defendant shall cause them to re-assign the Lots to the Plaintiff would affect them. Further, if at the end of the trial, the Court would order them to re-assign the Lots to the Plaintiff, the alternative relief of damages to be assessed against the 1^st Defendant would be unnecessary. The difficulty I have is that the Plaintiff has not served the Writ on the 2^nd – 12^th Defendants and therefore, I do not have the benefit of knowing their positions. In such circumstances, even if the 1^st Defendant does not have any credible defence, I should not enter summary judgment in terms of §1(1)(b) and §1(2) above.

15.  I should add that for §1(2) above, the Plaintiff does not seek any final relief for assessment of damages in the Writ of Summons. Mr Chong submits that the catch-all phrase “further or other relief as is just” will be sufficient. With respect, I disagree. This phrase is for consequential or ancillary directions. The Plaintiff cannot rely on this phrase as a carte blanche for any relief he can suddenly think of at any stage.

16.  In respect of the declaratory relief in terms of §1(1)(a) above, the Court would only grant declaratory relief if it would serve any practical utility. It is unusual for the Court to declare that a contractual party has certain contractual obligations, because the practical utility lies in specific performance or damages, but not in such a mere declaration. In the present case, in particular that the 2^nd – 12^th Defendants’ title to the Lots would be affected and such a declaration may be against their interest, I also refuse to enter summary judgment in terms of §1(1)(a) above.

17.  In sum, I refuse to grant summary judgment. Further, in my view, on the basis explained above, the Plaintiff should have known that there was no good basis for the Order 14 application, and therefore I shall dismiss the application.

VII. JUDGMENT UPON ADMISSION?

18.  The Plaintiff also relies on Order 27 and submits that judgment should be entered upon admission. The “admission” the Plaintiff relies on is not any admission to the Plaintiff’s case based on the Development Agreement. Instead, the admission is the contents of the WhatsApp message sent by the director of the 1^st Defendant on 7 February 2024 in a group consisting of directors of the Plaintiff (including the common director of the 1^st Defendant). To the Plaintiff’s understanding, the WhatsApp message means:-

(1) The Cheery Agreement and the Development Agreement contained identical terms in relation to the return of the Lots to the Plaintiff;

(2) The 1^st Defendant was willing to comply with the Plaintiff’s decision to seek the return of the Lots to the Plaintiff; and

(3) The 1^st Defendant had already liaised with Cheery on 23 January 2024 for returning the Lots to the Plaintiff.

19.  For the same reasons set out in §§14-16 above, whether there is any valid admission or not, I refuse to enter judgment upon admission.

20.  In any event, I cannot understand the WhatsApp message to be any admission of the 1^st Defendant to its obligation to return the Lots under the Development Agreement. Reading it in the most favourable light to the Plaintiff, it only means that the 1^st Defendant would comply with the Plaintiff’s decision to liaise with Cheery for the return of the Lots, or it is only arguable to be an admission as the Plaintiff perceives it. It is not sufficient in my view to sustain grant of judgment on such arguable admission only.

21.  Therefore, I am satisfied for the present purpose it is an admission for the purpose of Order 27.

22.  As such, I also refuse to enter judgment under Order 27.

VIII. STRIKING OUT THE 1^ST DEFENDANT’S DEFENCE

23.  The Plaintiff seeks to strike out the whole Defence of the 1^st Defendant. While I tend to agree with Mr Chong that the 1^st Defendant’s non-admission to the Development Agreement has no merits, the 1^st Defendant’s defence that the Plaintiff itself has requested Cheery to cause the 2^nd – 12^th Defendants to re-assign the Lots provides some background, and it is clear that the 1^st Defendant’s defence that the 1^st Defendant cannot cause the 2^nd – 12^th Defendants to re-assign the Lots has merits. In the circumstances, I do not think it appropriate just to strike out the non-admission to the Development Agreement. Overall, the whole Defence should stay, and therefore, I refuse to strike out the 1^st Defendant’s defence at all.

IX. CONCLUSION

24.  In conclusion, I dismiss the Plaintiff’s Summons. The Plaintiff should pay the 1^st Defendant costs. I summarily assess the costs to be HK$35,000.

25.  It remains for me to thank Mr Chong for his assistance.