FAIRWING INVESTMENT LTD v. WAN SAI CHUNG WAN SAI HANG

HCA 2460/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2460 of 2014

__________________

__________________

________________________

J U D G M E N T

________________________

1. This was an application by the plaintiff Fairwing Investment Ltd (“the plaintiff”) by summons dated 29 December 2015 (“the O 14 summons”) for final judgment against Wan Sai Chung (“the 1^st defendant”) and Wan Sai Hang (“the 2^nd defendant”) (collectively “the defendants”). The plaintiff sought, inter alia, an order that the registration of a Deed of Revocation of the Power of Attorney respectively against Lot 2151 dated 11 August 2014 and a similar Deed dated 12 August 2014 against Lot 2152 (collectively “the Deeds”) be vacated from the Land Register and an order that the defence and counterclaim be struck out on the grounds that they disclose no reasonable defence nor reasonable cause of action and/or are frivolous and vexatious.

2. Two days prior to the substantive hearing of the plaintiff’s O 14 summons, the defendants applied for legal aid and filed notices to act in person.  That resulted in an automatic stay of the proceedings for six weeks pursuant to section 15 of the Legal Aid Ordinance, Cap 91.

3. The following day the plaintiff took out a summons seeking an order for the lifting of the automatic stay on the ground that the application made at this very late stage was an abuse of process.

THE PLAINTIFF’S APPLICATION TO LIFT THE AUTOMATIC STAY

4. After hearing the parties, I acceded to the plaintiff’s application and uplifted the automatic stay for the following reasons.

5. The underlying action commenced in December 2014.  On 23 April 2015, the defendants applied for legal aid.  Their applications were refused on 25 June 2015.

6. On the following day, 26 June 2015, the plaintiff gave notice of its intention to enter judgment.

7. It is to be noted that the defendants were legally represented by Tang, Wong & Chow from 10 April 2015 until 27 July 2015 when that firm was replaced by K M Cheung & Co.  Shortly thereafter, on 6 August 2015, K M Cheung & Co filed a defence and counterclaim (collectively “the defence” unless the context otherwise requires) and the requisite statements of truth on behalf of the defendants.

8. Following the filing of the defendants’ further and better particulars and the plaintiff’s reply and defence to counterclaim, the plaintiff took out the O 14 summons supported by an affirmation dated 28 December 2015 of Siu Kai Ming (“Mr Siu”), its managing director and beneficial shareholder.

9. Under the terms of the order dated 19 January 2016 (“the January order”) which was a consent order, the defendants had 28 days within which to file and serve their affirmation in opposition to the O 14 summons.  In the interim, on 2 February 2016, pursuant to the January order, the date of the present hearing was fixed by agreement of the solicitors for the parties with one day reserved.

10. The defendants failed to file any affirmation in opposition to the substantive application within 28 days or at all.  Nothing was done until their recent application for legal aid (“the second application”) made on the eve of the present hearing.

11. The defendants who appeared in person were unable to give any explanation for making the last minute second application other than that they lacked the means to have legal representation.  Allegedly, that was also the reason for making the first application a year earlier.

12. Notwithstanding that explanation, it is to be noted that a month after the first application was refused, the defendants were in a position to instruct new solicitors who not only filed the defence but also provided further and better particulars to the plaintiff and agreed the terms of the consent summons culminating in the January order.

13. The defendants were unable to identify any new matters arising since the first application to warrant the making of the second application.  All that was said was that the 2^nd defendant provided Legal Aid with “additional financial information”, namely, bank statements.  The defendants were unable to give any information as to whether documents other than bank statements had been provided to Legal Aid for the first application and professed not to know the reason why the first application was rejected.

14. The defendants feigned ignorance about everything to do with the proceedings including the nature of the plaintiff’s claim and the defence they themselves had put forward.  While they portrayed themselves as having “no idea” as to what the plaintiff’s claims are about nor what was in the defence, until 26 April 2016 (the date of their respective notices to act in person) they had legal advisers.

15. Further, they had signed the requisite statements of truth in relation to their pleadings referred to above and to each of which was attached a certificate from their former solicitor certifying, inter alia, that the contents of the relevant document including the statement of truth had been translated to the relevant defendant who appeared to understand the same and approved its content as accurate.

16. The defendants were given every opportunity but failed to provide any reason, much less a legitimate reason, why the second application was made and why it could not have been made much earlier than on the eve of the hearing, having regard to the fact that their solicitors had agreed to the date that was fixed only two months earlier.  In those circumstances, absent reasons that warranted the second application, it could not have been anything more than a last‑ditch attempt to derail the substantive hearing.  That is an abuse of process.

17. I could see no valid basis for continuing the automatic stay.  The defendants’ lack of bona fides was obvious from the stance that was adopted: they were not helping their own cause by saying next to nothing and not explaining to the court what their case was to justify continuance of the automatic stay.

18. For those reasons, the stay was lifted and the court proceeded to hear the plaintiff’s substantive application.

THE O 14 APPLICATION

Background facts

19. The defendants are the registered owners of respectively Lots 2151 and 2152 on which village type houses have been erected (“the properties”).

20. The plaintiff is a developer of small village type houses.  It claims to be the beneficial owner of the properties.

21. The claim is based on an oral agreement made on 12 February 2009 (“the 2009 oral agreement”) between the plaintiff acting through one Chau Sau Ngo and the defendants acting through their father Wan Chi Shing (“the father”) that is evidenced in part by a document in Chinese headed “Supplemental Payment Agreement” dated 12 February 2009 (“the Supplemental Payment Agreement”).

22. The Supplemental Payment Agreement was made between (1) the plaintiff (thereinafter called “Party A”) as “Payer” and (2) the defendants together with Wan Sai Pong (“the brother”) (thereinafter together called “Party B”) as “Payee”.  Clause 1 provided for payment by Party A of the balance of $700,000 in respect of the fees for the “Ding Rights”.

23. Clause 2 required Party B to attend the law firm designated by Party A and upon signing all documents relating to the lots including an authorization letter, a power of attorney, documents to cancel the “undertaking” at the Land Registry, Party B would be paid $100,000 by Party A and the balance of $600,000 would be held by solicitors designated by Party A and paid by 12 August 2009.  It further provided that if the balance of $600,000 was not paid within the specified period, the Supplemental Payment Agreement “shall be void”.

24. Clause 3 provided that upon receipt by Party B of the $700,000, the entire ownership rights to the properties would belong to Party A, that Party B may not cancel the authorization letter, the power of attorney and all related documents signed at the inception by the parties, and that Party B has no right to rent out, sell or deal with the properties nor register any documents at the Land Registry.  In other words, Party A (namely the plaintiff) would acquire all ownership rights.

25. A cheque in the sum of $100,000 was issued to the father at the time the Supplemental Payment Agreement was signed.  The signatures of the defendants, Wan Sai Pong and the father appear on a copy of the cheque exhibited to Mr Siu’s supporting affirmation.

26. The plaintiff has adduced evidence that on 27 September 2011 a further sum of $650,000 was paid by way of a cashier order in favour of the father.  The additional $50,000 was said to be compensation arising from the delay in the issuance of the letter of compliance.

27. There is no denial that a total of $750,000 has been paid by the plaintiff and received for or on behalf of the defendants.

28. The plaintiff duly completed the construction of the village type houses and obtained a letter of compliance in October 2013.

29. Meanwhile, the plaintiff had leased out part of Lot 2151 for the period from 5 August 2009 until 4 August 2015.  It had also leased out another part of Lot 2151 to another renter from 15 August 2013 to 14 August 2015 and part of Lot 2152 from 27 August 2013 to 26 August 2015.

30. In November 2014, the plaintiff discovered that the Deeds were (and are) shown in the Land Register as “pending registration”.

31. Notwithstanding repeated requests by the plaintiff, the defendants did not respond to requests to withdraw or vacate their respective applications for registration of the relevant Deed.

32. The plaintiff commenced the underlying proceedings in December 2014 seeking, inter alia:

(a)   declarations that the Deeds are null and void;

(b)   orders for the vacation of the registration of the Deeds; and

(c)   a prohibitory injunction against the defendants from selling, renting or otherwise disposing of the relevant property.

33. The relief sought by the present summons consisted of:

(1)  (a) declarations (as in (a) above);
      (b) orders (to vacate the registration of the Deeds); and

(2)   an order that the defence and counterclaim be struck out;

      alternatively to (2),

(3)   Order 14A relief.

Mr Mak, counsel for the plaintiff, informed the court that if the court were minded make the orders under (1)(b) and (2), the plaintiff would not seek the declarations under (1)(a) and it would also not pursue Order 14A relief.

34. The summons was supported by Mr Siu’s affirmation.  As already noted, the defendants failed to file any evidence in opposition despite ample opportunity to do so.

35. As the defendants’ pleadings leave much to be desired in terms of clarity, precision and completeness, the court can only proceed on what objectively is perceived to be the defence(s) sought to be advanced.  The defences that can be discerned from the defence filed on 6 August 2015 and the answers to the plaintiff’s request for further and better particulars of the defence dated 27 October 2015 appear to be misrepresentation and undue influence.

36. By way of background it is relevant to mention that on 6 May 2006 each of the defendants had executed an Undertaking registered in the Land Registry in favour of the father to the effect that any dealing with the relevant property (assignment, mortgage, charge, disposal) required the consent of the father who would be the only authorized person to act as the relevant defendant’s attorney to manage and develop the relevant property.

Misrepresentation

37. The defendants’ case appears to be that on 10 February 2009, upon the father’s request to go and sign documents relating to the management and development of the properties on 12 February 2009, the defendants and the brother came to an arrangement with the father described in §7 of the defence.

38. As I understand it, the gist of the arrangement was that they would not sell their respective village type houses to any investor or developer but that the father would have authority to make “agreement(s) with potential investor for renting [out]” the properties and that the father could retain for his own benefit the rental or other remuneration so derived for a period of five years (“the family arrangement”).

39. It was said that it was in those circumstances that the defendants (trusting the father and believing that the documents including but not limited to the Supplemental Payment Agreement they signed reflected the arrangement) signed the Supplemental Payment Agreement on 12 February 2009.

40. The misrepresentation defence is palpably bad.  The answers to the particulars requested under §13 of the defence are ambiguous.  If they are read as alleging that the plaintiff had “misrepresented and misled” defendants by Mr Siu making the oral statement that “the contents of the documents are the agreement made with father of the [defendants]”, then it defies belief that the defendants could not even recall the occasion and place where it was made.  There is also no allegation that the statement was made prior to the signing of the document on 12 February 2009.  If made after that date, it would be irrelevant.

41. Even if it were made at the time the Supplemental Payment Agreement was signed, there is nothing to suggest that Mr Siu’s “statement” is untrue.  No evidence has been adduced as to what had passed between the father and the plaintiff and there is nothing to suggest that the Supplemental Payment Agreement did not reflect the agreement between the father (acting on their behalf) and the plaintiff.

42. Further, it is not the defendant’s case that Mr Siu was cognisant of the family arrangement at the time the Supplemental Payment Agreement was signed.  In my view, that must render any defence based on misrepresentation unsustainable.  The fact that the defendants subjectively thought the family arrangement was what was being referred to would not render that mistake on their part a defence.  In passing, I note that the father witnessed the signing of the Agreement.

Undue influence

43. Undue influence is alleged in §14.  However the person alleged to have exerted undue influence over the defendants is not the plaintiff but the father who is a third party.  It is not the defendants’ case that the father was acting as agent of the plaintiff or that the plaintiff was cognisant of the father’s dealings with the defendants.  In those circumstances, the father’s influence has no relevance and the defence of undue influence cannot possibly succeed.

Conclusion on the defences

44. The defendants made no submissions in response to the plaintiff’s case.

45. In the circumstances, so far as the plaintiff’s application for summary judgment is concerned, it must succeed given that the defences raised are not viable and are bound to fail.

Proprietary estoppel

46. This matter arose from a question posed by the court on the effect of clause 2 of the Supplemental Payment Agreement stipulating that the balance of $600,000 was payable by 12 August 2009 failing which the Supplemental Payment Agreement “shall be void”.  As earlier noted, payment of the balance was not made until some two years later, on 27 September 2011, in the sum of $650,000.  The additional $50,000 was payment by way of compensation for the delay allegedly caused by the late issuance of the letter of compliance.  In that regard, I note that the consent letter was not issued until October 2013 but payment was made in September 2011.

47. Be that as it may, the plaintiff’s response (which I accept) was that the defendants have not sought to contend by way of defence and/or counterclaim that the “late” payment had the effect of rendering the Supplemental Payment Agreement void.

48. In any event, had they done so it would have been open to the plaintiff to assert that the defendants are estopped from raising such a defence in that the defendants have stood by after 12 August 2009 with knowledge that the plaintiff was expending money on completing the houses on the properties and it is not disputed that they did receive payment (albeit late), in respect of which they have received compensation.

Deeds pending registration

49. I note that the Deeds have not been registered as such in the Land Registry but are shown as “Instruments pending registration”.

50. On the question whether there is jurisdiction to order vacation of such instruments, I have considered the decision in Wong Kum Chi v Lee Tit Ying [2003] 1 HKLRD 594 at §16 and the authorities therein cited.  I agree that the court has inherent jurisdiction, in an appropriate case, to order the vacation of an instrument that is shown to be “pending registration” in the land search records.

Order

51. Accordingly, I make an order that the Deeds be vacated from the Land Register as prayed for in §1(b) of the O 14 summons and an order that the defence and counterclaim be struck out.

52. As regards costs, I make an order nisi that the defendants pay the costs of the plaintiff, with certificate for two counsel.